I had two main reasons for looking at H & T Group; one a curiosity for the past, and another a curiosity for the future. Since we like to be chronologically logical - a phrase I plan to be using more in the real world as it rather smoothly rolls off the tongue - I'll start with the past. I looked at H&T Group about half a year ago, back in May, and found myself interested buT not hugely swayed. I'll copy the intro for those who don't want to click through:
H & T is primarily a pawnbroking group which has, given the rather wide-ranging changes in the macroeconomic environment in the last few years, branched out to become a provider of all sorts of more niche, non-bank financial services.
Among those niche financial services was, unsurprisingly, a good deal of gold buying. Most of my uncertainty came from that gold buying; it strikes me as a decidedly wobbly profit stream, and that's been somewhat confirmed since then. Gross margins on gold buying have come down, says the company, and that's even with gold prices still looking rather healthy at the moment. They can be expected to fall further, but they have served very one useful purpose - the management seem fully aware of the fact that the exceptional returns on gold are just that; exceptional. What the great margins have done, though, is allow the company to expand its store estate far more rapidly that it might otherwise have done. They've opened 67 on top of their existing 108 in the last 3 years, with another 25-30 planned for this year.
Anyway - the thing I was curious about going backwards. In my last post, there's a rather length discourse in the comments section between me and someone who was slightly more bullish on HAT than I was. One thing we did both agree with, though, was that H & T's listed cousins - Albermarle & Marle - were a rather similar company trading at a much higher valuation. They even have worse returns with a higher exposure to gold buying, though I should note that the differences in how they operate are rather marginal. They are very similar. In the rather short and noisy time frame, Albermarle are down about 35% and HAT are down about 8%. Still, I kick myself for not…
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