I know I said I'd follow up on HAT, but I'm still waiting for a few things to come together before I can post that; it's still in the pipeline! Instead, today I'm looking at a company that I came onto while looking at HAT. If you know anything about the two companies, you'll probably know why - Albemarle & Bond and H&T are extremely similar, and it goes far beyond them just being in the same industry, pawnbroking. I've written about them in comparison a couple of times, most recently here, but never in any great operational detail. In this post I'll go into a little more depth in an attempt to find some more tangible insight into the shares. After all, stocks that are very similar make for interesting trading - it hints at all sorts of interesting arbitrage opportunities.
By way of a quick background on the industry, HAT and ABM are, as far as I can tell, the two largest dedicated pawnbroking groups in the UK, and by quite some margin. The Money Shop apparently has over 500 stores, but pawnbroking isn't their main focus, and they appear to be the biggest high street alternative financial services chain. Pawnbroking itself is still quite a fragmented industry; the trade organisation, the National Pawnbrokers Association has a membership of 1,800. In HAT's 2009 annual report, they estimate that there are 500 shops in the UK, with 1,000 more where pawnbroking is an ancillary service. If that's true, in 2009 HAT and ABM between them represented about 40% of the stores. They now operate 370 between them, and the remainder appear largely to be small indies. Put bluntly - they're big players, and they've grown similarly.
Walking the same path
If you want an indication of just how similarly they've grown, take at look at the following graphs:
They've both opened more or less the same number of stores every year for the last 8, and operating assets have increased similarly. I should note one thing that I do leave out of this comparison is Abermarle & Bond's little gold buying outlets - of which they have 50. These are on short-term leases and don't engage in the pawnbroking side of things, so I've left them out of this comparison, though they…
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