Lasco Financial enjoyed increased revenues but slightly lower profit in Q1.
Growth in revenues can be a good indicator to identify good future investment candidates even if profits may be moving slowly. By that measure, Lasco Financial is a good stock to watch for future growth.
The company reported strong growth in revenues but virtually flat profit results in the first quarter to June. Interest income grew a strong 42 percent to $219 million from $154 million in 2018 helping to grow overall operating income to $586 million, up 11 percent from $526 million in the June 2018 quarter. Annualized, interest earned is set to exceed the $781 million earned for the fiscal year to March 2019. Other income rose to $69 million from $28 million in 2018.
While the top line moved up well, the gains were overtaken by the faster increase in expenses. Administrative and other expenses climbed 23 percent, to $247 million from $200 million while selling and promotional expenses moved up 26 percent to $230 million from $182 million. Finance cost rose to $49 million from $41 million in 2018 while taxation charge increased to $39 million from $31 million in the 2018 first quarter.
Provision for loan losses amounting to $84 million, was made in the quarter, with none in 2018. The increase in loan losses played a major part in keeping the 18 percent rise in revenues from bettering the $101 million profit realized in the 2018 quarter and ending with $91 million.
Lasco Financial Money Gram
Excluding the loan loss provision, profit before tax would have risen by 62 percent and lead to earning per share rising from 7.2 cents to 11.7 cents or close to 50 cents per share for the full year. Loan loss provision for the 2019 fiscal year was $215 million net of recoveries and seems set to exceed this amount by the year-end with the growth in the loan portfolio.
Total assets increased year over year by $481 million to $4 billion with loans and receivables rising to $2.66 billion from $1.85 billion at the end of June 2018 and $2.37 billion in March 2019. The increase was partially funded by a reduction in cash and short-term deposits that fell to $125 million from $456 million in June 2018 and is down from $283 million as of March this year. Shareholders’ equity rose to $1.68 billion from $1.47 billion at the end of June 2018. Lasco’s borrowings rose from $2 billion to $2.2 billion over the same periods to help finance the growth in loans.
Lending is the area of growth for Lasco Financial and the pace seen the first quarter could carry through for the rest of the year and have a domino effect on revenues and profit. The company’s shares are listed on the Jamaica Stock Exchange Junior Market and last traded at $5.50 with a PE of 9 times estimated 2020 earnings.
