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Amigo Holdings struggles to find friends as City broker drops lender to ‘sell’

Shore Capital said Amigo’s recent full-year results were a little better than it had expected, but looking ahead it has serious concerns over regulatory and macro uncertainties

couple in debt
Amigo provides guarantor loans of up to £10,000

Amigo Holdings PLC (LON:AMGO) was struggling to find any friends on the market on Monday after the guarantor loans provider was downgraded by analysts at Shore Capital.

The City broker dropped Amigo to ‘sell’ (from ‘hold’) after chopping its price target to 230p (from 270p) given the “uncertain” economic outlook.  

Shares fell 4% in afternoon trading to to 264p, valuing the firm at £1.2bn.

READ: Amigo vows to dispel 'urban myths' over guaranteed loans

At the end of May, the FTSE 250 company reported a 38% jump in full-year profits, which was “slightly ahead” of Shore Cap’s forecasts.

 The number crunchers were also pleasantly surprised by the 9.32p Amigo paid out in dividends, equal to 50% of the profit.

That was a higher proportion than they had anticipated, which they said reflected “strong underlying cash generation”.

But that’s all in the past, and Shore Cap isn’t too excited by what it sees going forward, with increased red tape and economic uncertainty weighing on their assessment of the stock.

Outlook hardly enthralling

“While performance was strong, the outlook is perhaps less so reflecting the increased regulatory spotlight on the guarantor lending sector and a more uncertain macroeconomic environment,” read a note to clients.

“Consequently, we have trimmed our forecasts but still see risk to the downside here. With 17% downside to our revised fair value of 230p (previously 270p), we cut our recommendation to ‘sell’ (from ‘hold’).”

--Updates for share price--

Quick facts: Amigo Holdings PLC

Price: 60.6 GBX

LSE:AMGO
Market: LSE
Market Cap: £288.05 m
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