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Bond of the Week: 28 February 2014
Bond of the Week : 28 February 2014
This week an old favourite International Personal Finance has released positive results to the market and warrants a further mention. The bond first listed on ORB in April 2013 with a 6.125% 2020 coupon and then again through a second tranche in November 2013, both have been covered previously here and here. There is also an active discussion thread in our bond forum covering IPF which is always worth reading for user insight. When the bond first launched it was at a time when all other bonds on ORB were trading above (and in some cases significantly above) par and as such was very well received, highlighted by the fact that the price quickly traded up to near 104. When the second issue was added in November at a net price of essentially 100.75 it provided another opportunity for yield hunters to take up one of the highest yielding bonds on ORB (the current yield is around 5.9%).
Regarding the recent set of results that pushed the share price 10% higher, Chief executive Gerard Ryan said:“2013 has been a year of significant progress for our business with consistent delivery against our Strategy for Growth, a strong trading performance and robust profit growth. In addition to maintaining very good portfolio quality, we entered two new markets, developed our product range and made good progress in our funding objectives. Although we saw heightened regulatory challenges and increased competition we are confident that our strategy and business development will continue to deliver further growth in 2014 and beyond.”
The key points from the results are listed below:
Record full year profit up 24%
Strategy continues to deliver growth
Robust balance sheet and delivering good returns to shareholders
As far as the underlying company is concerned the analyst recommendations are generally favourable.
The stock itself has significantly outperformed the market over the last two years, but is currently overbought and showing relative resistance to the FTSE100. This suggests the next short-term move for the share price maybe to the downside before long-term fundamental growth may prevail.
When the bond market came off over the summer it was slightly more resilient than the ORB market overall. A leading factor in this may have been the high premium of which most bonds were trading at the time, so IPF did not have as much to give back. For those that did not see the previous bond of the week on adding multiple bonds to charts you can see it here.
As the bond is still trading around par and the company’s strategy of low risk long borrowing and short lending is continuing to perform well in line with geographical expansion into Mexico it could be worth tucking some of this away near par for capital appreciation and a high yield. There are of course worries regarding regulation as the short term lending market is still under scrutiny. However, IPF distances itself from the new breed of payday lenders by being slow to develop their web presence and focussing on the personal relationships between their borrowers and door stop agents. It may be this lack of innovation that in the long term helps the company avoid the inevitable increased regulatory burden to online short-term and payday lenders.
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