Flash Equity Report /
United Kingdom

ASA International: FY19 trading update disappoints

    Rahul Shah
    Rahul Shah

    Head of Corporate & Thematic Research

    Tellimer Research
    25 February 2020
    Published byTellimer Research

    ASA International (HOLD, TP GBP3.50) released its FY19 trading statement this morning. Full-year results will be announced on 21 April. While key volume measures were better/ in-line, asset quality and management guidance were both worse than expected. Consequently, we now project downside risk to consensus forecasts and see limited near-term support for the shares.

    The shares are trading at 8.4x 2020f PE and 2.8x PB which is not aggressive for a business with good long-term growth potential and a sustainable ROE of 38%. But it is hard to see much fresh investor interest after this announcement.


    Management signalled that USD EPS growth is expected to be 5% in 2019, slightly below our 7% expectation.

    Management cited slower growth in India, Nigeria and Sri Lanka, plus currency headwinds in Pakistan and Ghana.

    Management indicated that 2020 USD EPS growth is expected to be mid-high single digit %. This is well below our 18% forecast, as well as the company-compiled consensus expectation of 21% and the company’s medium-term target of 20-25%.

    Currency headwinds (notably PKR and GHS) are likely to drag on H1 20 performance. The environment is unfavourable in NE India (high competition/ indebtedness) and Nigeria (weak macro and security concerns). But East Africa growth should stay strong.

    Key positives

    • Loans increased 23% yoy to USD467mn (+28% in constant currency), above our 20% growth forecast.
    • Loans per client rose 8% yoy to USD189 (+12% in constant currency), above our 6% projection.
    • Performance in East Africa was strong, with client numbers rising 44% to 348k, branches rising 30% to 316 and loans rising 56% to USD51.6mn.

    Key negatives

    • Key loan quality metric PAR>30 rose to 1.5% versus our 0.8% forecast and above the 1.0% level reached in H1 19.
    • The branch network grew 14% to 1,898 outlets, below our 17% growth forecast.
    • PAR>30 exceeded 10% in Sri Lanka.
    • Momentum in West Africa was poor (5% client growth, 2% branch network expansion).

    Key risks

    Upside: Stabilisation of key currencies such as PKR and GHS; Recovery in asset quality metrics to historical norms.

    Downside: Threat of new fintech-style entrants with superior risk-scoring/ lower distribution costs; Unfavourable regulatory changes.