H&T Group PLC (AIM:HAT) full year trading update was reassuring said house broker ShoreCap with the pledge book growth recovering more strongly than expected.
While this has minimal impact on this year’s results, it presents risk to the upside for 2025, suggests the broker.
This growth also highlights both the strong underlying demand for the product, which has increased post the Budget, as well as the inherent seasonality of the business, with redemptions tending to spike during springtime.
Growth was particularly strong in plus £5,000 loans, with the proportion increasing to 18% of the pledge book and partly due to the acquisition of Maxcroft in February, which has seen its loan book rise by 9%.
H&T’s shares have fallen by 21% over the past year, notes the broker, which has left them trading on a forward 2025 PE ratio of just 6.3 times (versus a 10-year average of ten) and with a dividend yield of 5.7% (covered 3 times by earnings).
“Our current fair value of 475p implies 41% upside and equates to a 2025 PE of 9 times and dividend yield of 4%.
“The share price weakness over the past year has created an attractive entry point for a stock, in our view.
“We believe the group has the scope to deliver sustainable earnings growth, with underlying upgrade potential, underpinned by continued strong demand for its core pawnbroking product.”
Shares were up 0.3% at 337p.