Provident Financial plc (LON:PFG) was the subject of conversation when DirectorsTalk caught up with Fund Manager, Gervais Williams. We asked Gervais which companies had plenty of opportunity in light of current market conditions in The Diverse Income Trust plc portfolio.
“Provident Financial, and financial companies, in particular, sometimes, survive quite well when interest rates rise. They’re quite capital intensive. This business is really lending personal credit to nonstandard lenders – these are people who, for whatever reason, don’t have long credit histories and such like. The valuation is currently just over five times earnings, which is an unusually cheap valuation for a business which has a very strong balance sheet. As that cash is generated in the business, it’s able to pay a very good yield – it’s yield is around 6.8% (with a share price at 177.0p), quite extraordinary.
So, we are seeing not just good companies, but also in our view companies which are standing on very overlooked valuations. So, there’s plenty of opportunity for these in due course, as markets stabilise, as investors start to move beyond worrying about the short term recession or moves in interest rates, for these kinds of companies to not just recover, but to outperform going forward.”
Provident Financial plc (LON:PFG) is specialist bank for UK adults who are not served by mainstream lenders. Based in Bradford, England, it specialises in credit cards, online loans and consumer vehicle finance.
