03.01.2025
Half a pound of tuppenny rice,
Half a pound of treacle.
That’s the way the money goes,
Pop! Goes the weasel.
In olden days, it has been said, that ‘the weasel’ was slang for a ‘fancy waistcoat’ that would be taken down to Uncle to be pledged against a loan to cover living expenses.
In the East End of London, the term ‘Uncle’ was the Cockney slang for a pawnbroker.
The nursery rhyme ‘Pop Goes the Weasel’ is actually a 17th Century song originating in the City of London about pawning – ‘popping’ - goods.
To pawn something is to use it as collateral when you are borrowing money, so when you pawn a necklace at a pawn shop, you get cash in exchange for it, with the understanding that you can buy it back later at the same value given, plus interest.
Nowadays pawnbrokers will lend against almost anything of value, as long as the interest rates are attractive enough for the deal.
The largest such operator in the UK is H&T Group (LON:HAT), while the next of note is Ramsdens Holdings (LON:RFX) – which is due to announce its 2024 Final Results in less than two weeks’ time.
The Business
Headquartered in Middlesbrough, and from roots that can be traced back to the 1970s, the group operates from over 160 stores within the UK (including 2 franchised stores), while it also has a growing online presence.
Capitalised at some £74m, Ramsdens is a diversified, financial services provider and retailer, operating in the four core business segments of foreign currency exchange, pawnbroking loans, precious metals buying and selling and retailing of second hand and new jewellery.
Latest Trading Update
On Thursday 10th October, the group issued a Trading Update covering the year to end-September.
It declared that it had been another year of record performance and guided the market that the Group expects to report profit before tax of at least £11m (FY23: £10.1m).
What is more, it also indicated that the positive trading momentum was setting the business up well for continued growth in the current year.
Management Comment
At that time CEO Peter Kenyon stated that:
"We're pleased with the record profit performance in FY24.
All key income streams are growing and we have optimism for further progress in FY25.
This performance once again demonstrates the strength of our diversified business model which underpins our long-term growth strategy."
The Equity
There are some 31.9m shares in issue.
The larger holders include Close Asset Management (9.98%), Hargreaves Lansdown Asset Management (8.91%), Interactive Investor Services (8.04%), Otus Capital Management (4.95%), Rowan Dartington (4.27%), and Downing (2.55%).
Private investor holdings of note include Peter Kenyon, CEO (3.61%), Stephen Burton (3.37%), Michael Johnson (1.69%) and Martin Clyburn, CFO (0.66%).
Broker’s View
Analysts James Allen, Jon Byrne and Rae Maile, at Panmure Liberum, rate the group’s shares as a Buy, with a Price Objective of 305p.
After the recent guidance the analysts now look for the year to end-September 2024 to have shown a sales rise to £95.0m (£84.0m), with pre-tax profits of £11.2m (£10.1m), and earnings of 25.6p (24.0p) together with an increased dividend of 11.2p (10.4p) per share.
For the current year they cautiously go for £97.0m sales, standstill profits at £11.2m, earnings of 25.7p, but paying an increased dividend of 11.4p per share.
The analysts noted that:
“Trading has been strong across both the existing store estate, the new stores that have been opened during the year, and across all four revenue streams throughout the store network.
All four revenue streams are expected to show revenue growth year-on-year.
Precious metals in particular was strong due to the high gold price which has helped to offset some marginal weakness in Forex.
This highlights the strength of the diversification of the Ramsdens offering, whereby it’s mix of both cyclical and counter-cyclical services offer a natural hedge.”
My View
The group’s Final Results are due to be announced in less than two weeks, on Tuesday 14th January.
Based upon the analyst estimates of just 9.1 times earnings, the shares of Ramsdens Holdings, which were up to 272p in June last year before falling away to 166p in February last year, then lifting to almost 237p in late August, now look under-rated at the current 232.50p.
The shares have very good appeal at these levels, with a run upwards in 2025 to be expected to take them back to the previous 2023 High.
(Profile 07.11.19 @ 204p set a Target Price of 250p*)
(Asterisk * denotes that the Target Price has been achieved since Profile publication)
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