H & T (LON:HAT)
Ramsdens Holdings (LON:RFX)

Some interesting reading recently on HAT and RFX with various announcements. Should I buy either/or ?

To compare:

Well done H&T for buying the Money stores, paying 10.6m for 9.9m revenues. Additional 4m in working capital to make them operational. The stores are in a bit of a state from what I’ve seen but H&T should know what to do with them.

The catch of course is debt. Last reported net debt was 13.6m add another 8.6m brings the total up to 22.2m. Compare to market cap of 119m and EBITDA 16.8m (plus maybe 2.8m from the new stores) the debt looks manageable.

Compare to Ramsdens which is in a similar business line.

Ramsdens has a smaller market cap at 56m but has only 5.2m debt and 13.4m cash so net debt is cash positive 8.2m.

Both companies are in an ok market. The demise of pay-day lenders must be sending more business their way.

In terms of business focus, comparing the two:

Reported Gross Profits (m)

H&T:
Pawnbroking 30.9 (after 10.4m impairment)
Jewellery 13.2
Personal Loans 7 (revenue less impairment)
Metals 5.2
Other 6.1

Ramsdens:
FX 11.6m
Pawnbroking 7.6m
Jewellery 4.9m
Metals 4.9m
Other 1.5m

The difference being Ramsdens make considerable revenue from FX and in turn H&T are expanding their personal loans business.

My view, it will be hard for Ramsdens to grow FX revenues much as the on-line and app FX firms are getting good (e.g. Transferwise). Sure there will be a segment of people which deal in cash only but I question growth long term. Also with a store count of 156 can they grow further? H&T have 182 stores plus the 65 purchased.

H&T are more focused on lending operations through pawnbroking and expanding personal loans, which are scalable on-line.

Neither has a very demanding PER around 10x and good dividends around 4%.

Overall, Ramsdens looks the safer bet with a stronger balance sheet and good history of steadily growing EPS. With payday dead their business should tick…

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