Stockbroker Shore Capital expects to upgrade its forecasts for UK pawnbroker H&T Group PLC (AIM:HAT) once it updates the market with its next interim financial results next month.
Shore Capital analyst Gary Greenwood, in a note, pulled out some of the highlights from what he described as a positive first-half trading update.
Greenwood reckons a newly announced acquisition of watch business Swiss Time Services Limited will be immediately earnings enhancing, and, noted that the brokerage now expects these new developments will “put material upside pressure on earnings forecasts”.
In the pawnbroking business, Greenwood says “there is no sign of momentum slowing with volumes at record levels and c.40% above pre-pandemic levels, while loan-to-value ratios and average loan sizes having been maintained.
“This strong demand, in our view, reflects the impact of the cost-of-living crisis as well as the withdrawal of competition from the unsecured high-cost credit space, including through the recent closure of two of the leading home-collected credit firms.”
The analyst added that retail sales have been consistently strong, the gold purchasing business is buoyant, whilst foreign exchange revenues have more than doubled as international holiday travel returned.
“We expect the continued impressive performance of the business combined with the acquisition of Swiss Time Services to put pressure on our earnings forecasts for the current year (provisionally a 15-20% increase)," the analyst added.
Shore Capital noted that H&T shares presently offer some 34% upside to the broker’s view of the company’s current fair value of 430p.