1pm (LON:OPM)
Market Cap £32.8m Bid/Offer 58p - 62p NMS 2,000
My Previous Article from Jan 21st, 2017.
General Comment
I first came across the company a few years ago. At that time I was not overly impressed with the 17- 20 p/e multiple which looked far too rich. Since then the share's price/earnings ratio has almost halved while revenue and profits have still been increasing. 1pm has correctly to its credit continued to change, improve and to diversify its business model.
The company has found a niche area in the SME finance sector which it can presently serve better than the banks. Personal contact with businesses for their specialised loans require local contact over a wide area. This is achieved by using a large number of external brokers. Combined with its own self-generated broker business gives 1pm group, I think a competitive advantage for providing finance. Obviously, the risks are higher for providing loans but 1pm plc gross lending margin is circa 11% above their cost of borrowings.
Initially, in 2015 I was doubtful about the first set of acquisitions the company. I waited until the acquisitions had proved to add value to the company. Today, the company is a far more balanced business in the SME financing sector and the company is both growing organically on top of its newly acquired acquisitions.
Disappointingly, for shareholders, the earnings per share have been slow to increase. A positive spin suggests this is due to the success of the acquisitions and earn-outs paid to the original vendors. The vendors were required to remain running the business to help achieve target profit and revenue levels before being paid their earn-out payments. They normally receive shares in 1pm stock which helps tie them into the overall group success.
The company's profits are growing but the earnings per share are standing still due to the large increase in the number of shares issued. At least the quality of those same earnings are improving and should provide less volatility to earnings from year to year. The company states that it applies strict lending criteria for loans and has below the industry standards for bad debts. Brokers who refer doubtful payers as customers may find their services not used in the future.
About the Company (Three Divisions)
One pm finance …
