I do realise that investors may well find the background of the ASA International Group (LON:ASAI) as somewhat unexciting – however, I take the view that buying into a company whose earnings are predicted to grow at 32% per annum, is really quite an attractive situation.
The Business
ASA International provides small socially responsible loans, bank accounts, savings and other financial services to start or grow businesses.
ASAI is one of the world’s largest international microfinance institutions, with a strong commitment to financial inclusion and socioeconomic progress.
The business, which has over 2,016 branches, across 13 countries, handling its 2.3m clients, operates in Pakistan, India, Sri Lanka, The Philippines, Myanmar, Ghana, Nigeria, Sierra Leone, Tanzania, Kenya, Uganda, Rwanda and Zambia.
The company provides small, socially responsible loans to low-income, financially underserved entrepreneurs, predominantly women, across South Asia, South East Asia, West and East Africa.
Recent Management Comment
At the time of announcing its Interims at the end of last month, CEO Karin Kersten stated that:
“H1 2024 saw both operational growth as well as importantly increased profitability. The overall operating environment across most of our markets improved during the first half of the year.
Encouragingly, demand remains high for our products from clients as economic conditions, while still challenging, have eased when compared to the same period in 2023.
Clients and staff continue to demonstrate their resilience in these economic circumstances.
In particular, we have demonstrated improved performance in our major operating countries – Pakistan, the Philippines, Ghana, Tanzania and Kenya – almost all of which recorded excellent portfolio quality, client and OLP growth, and profitability.
The improved performance in our major operating markets was slightly offset by FX movements in certain markets.
Currencies in most of our markets have been relatively stable against the USD in H1 2024.
Away from the clear operational impacts, the effects of inflation, including hyperinflation accounting, other currency movements, are expected to continue to dampen financial performance in USD terms in 2024.
However, given the improved operating developments we have already seen in 2024, we are confident of being able to continue our strong performance for the remainder of 2024.”
Yesterday on presenting an update on its business operations for the three-month period to end-September, the company reported that its Outstanding Loan Portfolio had increased to $420m – which was 6% higher than at the end of its first half and 16% higher than at the same time last year.
All of the group’s operating subsidiaries achieved collection efficiency of more than 90% in Q3, with 12 countries achieving more than 95% reflecting continued normalisation of the business.
Analyst View
Stephen Barrett at Cavendish Capital Markets has a Price Objective out on the shares at 148p, compared to the current 67.50p.
His estimates for the current year to end-December are for revenues of $168.2m ($148.2m), with adjusted pre-tax profits of $53.4m ($38.0m), earnings of 23.2c (15.0c) and paying out a 4.6p a share dividend (nil).
For 2025 he looks for $183.4m revenues, $56.6m profits, 27.5c earnings and 5.7p per share dividend.
The 2026 year is expected to report around $201.3m in revenues, $64.2m profits, 34.4c earnings and a 7.7p dividend per share.
In My View
The above estimates really do it for me – this really is an undervalued situation that needs to be followed.
Its shares at 67.50p, offer at least a 50% uplift in the short-term – it just takes other investors to realise!