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Manx Financial Group
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== Summary == [[File:MFG.jpg|200px]] Resilient, profitable and ready for growth {| class="wikitable" |+ Key information |- | Risk/return|| Medium |- | Price per share|| 7.65p |- | Asset class|| Equities |- | Industry|| Financial services |- | Country of incorporation|| Isle of Man |- | Minimum investment amount|| 7.65p |- | Maximum investment amount|| £8.74m |- | Current valuation|| £8.74m |- | Investor type|| All |- | Tax schemes|| None |- | Bid/ask spread|| 7% |- | Commission amount|| Zero |- | Market|| Public |} Manx Financial Group (MFG) offers a combination of relatively fast growth potential and low valuation. Operating income doubled between 2016 and 2020 with only a 1% decline in the pandemic year. MFG’s key assets are Conister Bank, a specialist SME and retail lender, Edgewater Associates, the largest Manx independent financial advisory business, and Manx FX, a currency broker and provider of international payment processing facilities. The ROE ranged between 12% and 17% in FY14–19 and 9% in the challenging 2020/H121. The bank is well capitalised and funded. MFG restarted paying dividends after 16 years in 2021. The shares do not have a very demanding rating at 0.49x 2020 P/BV and 5.7x depressed 2020 earnings, presenting strong share price upside potential as earnings recover. {| class="wikitable" |+ Historical data |- ! Year end !! Revenue (£m) !! PBT (£m) !! EPS (p) !! DPS (£m) !! P/E (x) !! Yield (%) |- | 12/17 || 11.5 || 2.7 || 1.8|| 0.0 || 4.0 || N/A |- | 12/18 || 13.2|| 2.7|| 1.5|| 0.0 || 4.6 || N/A |- | 12/19 || 16.5|| 3.0 || 1.6 || 0.0 || 4.6 || N/A |- | 12/20 || 16.4|| 2.0 || 1.2 || 0.0 || 5.7 || N/A |} Source: Manx Financial Group '''Weathered the COVID-19 storm well''' Conister Bank, MFG’s largest business, accounting for 78% of revenue in H121 and more than half of its earnings, has been relatively resilient and benefits from 92% of its lending being secured or government backed. Edgewater reported a FY20 pre-tax loss of £94k (FY19: £219k profit) but broke even in H121. Manx FX has remained very profitable and has benefited from a high FX trading volume due to the volatility from the COVID pandemic and Brexit. Loan impairment charges from Conister Bank were an annualised 2.1% of average net loans in the past three half-year periods, but MFG’s resilient operating margins have allowed it to report a good level of profitability: the ROE was 9% in FY20 and H121. '''Balance sheet allows for growth''' Management aims to grow organically as well as take advantage of value-creating acquisition opportunities. The bank’s balance sheet is well capitalised and with good liquidity. Management has been moving to more prime, recession-proof sectors since the 2016 Brexit vote to both protect and allow for future loan growth. MFG is also seeking a UK banking licence to further expand its business. '''Valuation: P/BV of 0.49x, trailing P/E of 5.7x''' Although there are no consensus forecasts for MFG, the strong loan book growth bodes well for future revenue. MFG is trading at a P/BV of only 0.49x, which seems quite low given its track record of delivering ROE above its COE (COE; we estimate this at 10–11%). Its trailing FY20 P/E of 5.7x does not seem demanding, especially since FY20 earnings were depressed by credit conditions caused by the pandemic led recession. MFG’s trailing valuation multiples are at significant discount to peers.
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