Given the black box nature of the business and the board not...

Given the black box nature of the business and the board not currently seeing the share price as attractive enough to re commence the buyback, I’ve kept this small holding on a watch and wait list. I think if this truly is the no brainer/obvious value that it seems to be, then a meaningful buyback will be good news for all.

@Just_a_guy

In very general terms, I agree with you that a share buy-back now would make sense, given the availability of surplus cash and the low share price; that has also been acknowledged by Management, by stating that the existing programme will continue “as opportunities arise”.

As to why they haven’t “gone hard” at it yet, I can see the following possible reasons:

a) The need to reinvest to support growth in the loan pools (on the Consumer Lending side) has also been mentioned, as well as the intention to “actively look” for other lending businesses to acquire. Thus, there might simply be competing capital deployment opportunities being contemplated.

b) As we have both pointed out, the rebuilding of the Services book will require some upfront expenses. Also, the uncertainty surrounding that side of the business since the fiscal response to Covid has been unprecedented.

c) Last, but not least, Tim and Deborah already own 45% of the Company; therefore, a reduction in the share count even by just 10% via buy-backs (assuming it could be done anywhere near the current share price) would push insider ownership above the 50% threshold. I am not sure if that’s what they want to achieve, but I doubt it; if their aspirational target is to more than treble the size of their loan pools, as they have stated, I suspect they also want to keep their options open in terms of access to capital markets and don’t want to disincentivize institutional ownership of the stock.

Overall, and given their long track record of EPS growth accompanied by prudent capital management, I’m happy to give them the benefit of the doubt. So, I personally won’t take the fact they aren’t presently buying back stock as indication that they aren’t seeing enough value in it.

With that said, we seem to agree that the business, especially on the Consumer Lending side, is a bit of a black box. As far as I am concerned, the only possible line of defence against that unquantifiable risk is portfolio sizing; thus, it is unlikely that FSA will ever represent, on a cost basis, more than 2% of my NAV.

Cheers