Shares in pawnbroking group Ramsdens Holdings PLC (LON:RFX) continued their stonking performance since floating just two months ago, boosted by a bullish trading update and an initiation of coverage by broker Liberum Capital with a ‘buy’ rating.
In a pre-close update for the year-ended March 31, the AIM-listed firm said a strong performance has continued across the group “resulting in further revenue growth and strengthening gross profit when compared to the prior year”.
“As a result,” it added, ”the Board anticipates reporting adjusted profit before tax for the Period comfortably ahead of management's previous expectations.”
READ: Ramsdens scores premium as it floats on AIM …
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The firm – the shirt sponsor for under-pressure Premier League football team, Middlesborough FC – said the strong performance was driven by continued growth across each of its four key income streams: foreign currency exchange, pawnbroking, precious metals purchasing and jewellery retail.
It pointed out that the group’s strengthening reputation as a market leading foreign exchange brand has continued, resulting in revenue from that income stream “being significantly ahead of the prior year.”
Store expansion ….
Ramsdens said it has continued to expand its store estate, currently having 127 stores, including three franchised stores, and it plans approximately 12 store openings during the forthcoming year.
Peter Kenyon, Ramsdens CEO of Ramsdens said: “The Group's strong operational momentum has continued post IPO resulting in the Board anticipating reporting Adjusted PBT comfortably ahead of its previous expectations.”
Ramsdens started trading on AIM on February 15 after raising £15.6mln through an initial public offering priced at 86p each.
In late morning trading today, Ramsdens shares were changing hands at 120p each, up 7.6% or 8.5p on last night’s close.
Strong upside potential …
Liberum, meanwhile, set a price target of 149p a share on Ramsdens in today’s initiation note, which offers around 34% upside potential.
The broker’s analysts said: “We see considerable scope to grow the store portfolio both organically and by acquisition and to improve efficiency and profitability as the estate grows and matures.”
They added that, following today’s trading update, they have upgraded revenue and gross profit forecasts for Ramsdens by 2% for full-year 2017, with adjusted underlying earnings (EBITDA) estimates upgraded by 10% and adjusted pretax profit and earnings per share forecasts raised by 13%.
The analysts concluded: “We expect superior EPS growth, the very strong balance sheet and healthy DPS (dividend per share) to deliver strong upside for investors.“