69M Access shares offered at $32 each

Proven Investments is offering 68.6 million or 25 percent of the shares it currently owns in Access Financial Services for sale, at $32 per share starting today with the issue not expected to be open beyond today.
The prospectus suggests that the offer could be upsized if deemed appropriate but information obtained by IC Insider.com indicates that it will not be. Proven bought the block of shares mainly from Mayberry Investments on December 30, 2014, at $9 each, to become the largest shareholder. On several occasions in the past, the CEO Christopher Williams maintained the view that they had no intention of selling the shares, but that was before they bought 20 percent of JMMB Group from NCB Group in December 2018, costing $9 billion and financed by debt. With JMMB Group going back to the market to issue new shares, Proven will need to have funds to buy enough shares to maintain their 20 percent holdings if they intend to account for profits on an equity basis.
At $32, the stock is an attractive buy for investors looking for a value play investment. It is priced under 10 times current year’s earnings and could double within a year.
Access is one of the most rewarding investment for shareholders over the years, with an outstanding record of increased profits high return on equity and good and consistent dividend payments. Return on equity slipped in the past two years as interest rates and new accounting standards took effect but the company continues to grow. In recent years, growth was boosted by acquisitions of other micro-lending companies. Last year the company acquired Embassy Loans located in the Florida area in the United States.
The company realized Net Operating Income for the quarter ending June 2019 of $539 million of which the new US subsidiary Embassy Loans contributed $151 million. Interest income from loans increased by $8 million or 2 percent to $408 million while net fees and commission for the period was $153m. For the period, Embassy Loans contributed $44 million and $103 million respectively to the group’s Interest and fee income.

Christopher Williams, Proven Investments CEO.

Operating expenses for the quarter, increased by 90 percent or $179 million compared to the corresponding period ended June 2018, resulting from an increase in allowances for credit losses, based on the implementation of the IFRS 9 provisioning methodology and the inclusion of Embassy’s operating expenses for the quarter amounting to $110 million.
Net profit after tax for the quarter ended June 2019 declined 24 percent to $165 million compared to the 2018 period and resulted in earnings per share of 60 cents. Annualised earnings work out at $2.40, at a PE of 15, the value would be $36.
Access will generate cash flow from profits monthly and increase the amount available for lending, as such, earnings per share should be in the $3 region for the current year putting the likely value around $45.
The stock tends to be scarce and the potential for long term growth remains positive if a bit diminished in recent times with pressures on interest margins. Consolidation in the industry locally is to be expected and Access should be able to take over more of the smaller players going forward. It is most likely that Access will move most of the administrative functions to Jamaica with the lower cost than in Florida and therefore cut the cost of the US operations.

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