Access vs Dolla Financial

Investors chased shares in the recent Junior Market listed Dolla Financial as high as $3.60 at 18 times 2022 estimated earnings but is now priced at $2.90 at 14 times earnings. At the same time, Access Financial trades around $22 with a PE of 6.5 times this year’s projected earnings. Why the vast difference in valuation?
The above is based on projections that could vary from the actual outturn to be known in the first half of 2023. Using historical earnings, Dolla earned 7 cents per share for 2021 and now trades at 40 times those earnings, while Access earned $1.60 and trades at a more appealing PE of 14.5. Historical data suggests that Dolla could enjoy growth in profits close to 100 percent per annum for several years. projections for Access are for a 126 percent increase in profit this year as it continues to recover from the declines caused by Covid. In the year to March 2024, profit is projected to rise 70 percent and thereafter 40 percent. Notably, the stock price should increase about 1,000 percent to more than $250 per share by 2026. Projections for Dalla are for profits to rise 230 percent this year to 20 cents and 70 percent next year and 60 percent for the next two years, with the price increasing 524 percent to $17.50.
The above data suggest that investors should pay greater attention to the less expensive stock that could deliver twice the returns over the next four years.
Helped by reduced provision for doubtful loans and an adverse economic environment, Access’ profits dropped from $2.61 per share in 2018 to $1.63 in 2019 and bottomed out at $1.05 in 2021 before bouncing to $1.60 for this year to March as credit losses declined from $388 million to $282 million, these are up from $177 million in 2019, having peaked at $507 million in 2020.

Access Financial HQ

Access loan portfolio amounts to $4.5 billion compared to, Dolla is at $751 million at the end of 2021 and $917 at March this year, up from just $350 million at the end of March last year, that is rapid growth, that should continue to increase with additional funds coming from the inflows from the IPO of $250 million and more profits to come.
The high returns possible from these micro financiers provide fresh capital from profits to on-lend during the year. This is what is so attractive about them, even after providing for loan losses. But Access has an added advantage over Dolla, as the Development Bank of Jamaica accredits it to on-lend funds originating from them at rates much lower than micro lenders typically charge.
For the year just ended, loan interest income at Access grew 8 percent, but other income fell 6 percent to $142 million. Fees and commissions inched marginally from $413 million to $417 million. Other income slipped from $149 million to $142 million. Interest expenses declined 14 percent to $220 as loans received were reduced to $2.3 billion from $2.7 billion. Provision for loan losses dipped 51 percent to $145 million, staff costs climbed 3 percent to $690 million. In comparison, other operating expenses rose 5 percent to $275 million, loans written off jumped 48 percent to $139 million from $93 million in 2021 and depreciation was flat at $117 million.
Access wrote off $138.5 million in loans in 2022 for the group, with $93.4 million in 2021 and $36.6 million for the company in 2022 and $12.9 million in 2021, with the largest portion by far being for the USA segment. But the bulk of the provision for expected losses is for the Jamaica segment. Allowance for credit losses for the group was $144.7 million in 2022 and $295 million in 2021 and for the company $134.6 million versus $324.7 million in 2021.
Segment results show that in 2021, the Jamaican market had a profit of $354.7 with a loss of $13.4 million for the USA market while for 2022, the Jamaican market ended with a profit of $650 million, with a loss of $77 million for the USA market. The data suggest that future earnings could come out with lower costs in this area.
Profit ended 51 percent up at $438 million after taxation of $135 million. Dolla may be growing quickly, but as the loan portfolio grows, the growth rate could slow until it becomes more mature, but that does not seem to be anytime soon. They could be constrained by relatively small capital based for now.

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