Pawnbrokering isn’t a bad idea in these troubled times — and this company is getting it right

Pawnbrokering isn’t a bad idea in these troubled times — and this company is getting it right

The first is pawnbroker H&T. Shares are already up nearly 40 per cent since our first pick in August 2019, with dividends on top of that, and the £199m stock still ticks many of the right boxes: a strong competitive position as a leader in a fragmented market; ongoing investments in this competitive position in the form of new store openings and a new IT and point-of-sale system; a solid balance sheet; good interest and dividend coverage; and an undemanding valuation, with shares trading at 13 times forward earnings and yielding 3.3 percent.

H&T’s pawnbook continues to grow, as you can expect in these troubled times. A trading update last week reported a 47 per cent rise to £99m in 2022 and said there was strong demand again in January, helped by last year’s £16.9m fundraising at 425p a share.

Meanwhile, December brought record sales for the retail business, which sells high-quality new and used watches and jewelry. H&T has also added a new foothold with the acquisition of watch repair and maintenance specialist Swiss Time Services.

Gold purchases make up a much smaller portion of the overall business, so the precious metal’s price volatility is less of an issue, while the company’s exit from unsecured lending a few years ago seems well-planned given the additional regulatory scrutiny of this sector by the city’s regulators. However, tighter regulation of small loans could drive more business to the pawnbroking space over time.

The company’s next scheduled update is March 7th in the form of full-year results through December. We’re staying with H&T. Stop.

Questor says: Stop

Ticker: HAT

Share price at close: 454p

Update: Derwent London

The FTSE 250’s Derwent London is more of a play on better days ahead, particularly in the form of lower interest rates, as lower cash yields (and falling bond yields) could tempt investors to look to other sources of return, including real estate investment trusts ( riding).

This column has no indication that inflation has peaked, but given the level of government debt, the Bank of England is likely keen to cut interest rates if it can (although doing so risks secondary and tertiary waves of price hikes ). ).

That could draw attention to Derwent London’s projected return of 3.2 percent for 2023 and also to its prime portfolio of London assets, which was valued at £40.23 per share in the first half of 2022.

Shares are trading at a discount of 36 percent to that figure, which seems excessive even when factoring in the rise in home working and hybrid arrangements, a view seemingly offset by the sale of a property in EC1 last week for a minor Discount on the asset has been confirmed.

The fundamentals still look solid at Derwent London. Stop.

Questor says: Stop

Ticker: DLN

Closing share price: £25.56

Russ Mold is an investment director at AJ Bell, the stockbroker

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