Fairpoint and H&T Group

Continuing with my very brief analysis of the value portfolio, I shall take a look at Fairpoint and H&T. Please note that this is not intended to be in-depth research, merely a snapshot based on the current financials of each company.

Starting with Fairpoint. The company describes itself as :- "The leading provider of advice and solutions to financially stressed consumers".

An initial glance at the figures reveals that the company is currently trading on a P/E ratio of less than 7, and yields a 4.3 % dividend which is covered more than three times by earnings. The company appears to be highly cash generative. Net cash at the June interims was £2.8m vs. net debt of £2m at the same period in the previous year. The current market cap. is around £54m. They operate a progressive dividend policy, and increased the dividend by 10% at the interim stage to 2.15p (2012: 1.95p).  Basic EPS was also up at the interim stage by 21%. Their outlook statement indicated solid progress.

Based on the financials and outlook it certainly appears to be an attractive investment, and probably undervalued? We shall see.

H&T Group has had a decent week, and the shares are up around 5%. They released a trading statement on 7th January confirming that full year profit will be in line with management expectations. The trading statement also mentioned that they had reduced net debt by around £7m to around £20.8m, although they mention that market conditions are challenging.

H&T are a pawnbrokers, and based on last year's earnings the historic p/e ratio is less than 5 and the dividend around 7.7% covered more than three times by earnings. It should be noted however that at the interim stage the dividend pay out was reduced from 3.8p to 2.1p in light of the challenging trading environment. EPS (interim) had fallen from 14.5p to 9p. If you strip out goodwill and intangibles from the balance sheet then tangible NAV is around £68m against a market cap of £56.5m.

This is one of those stocks where most of the bad news could already be priced in? Again only time will tell.

It's probably not too surprising that both of these companies have appeared on the value list given the nature of their businesses. Certainly, investors would perceive (possibly) that their prospects are inversely proportional to the health of the economy, and all indications point to a growing recovery.