Thorn Group Ltd
Weak Trading Update due to weak underperformance of the consumer leasing division: Thorn Group Ltd (ASX: TGA) stock plunged 10.2% on March 22, 2018 after the company’s trading conditions in its consumer leasing division was flagged to be deteriorating.
This has significantly affected the company’s future financial results in terms of the guidance downgrade. TGA had earlier expected the FY 18 cash profit after tax to be in the range of $17m to $20m. TGA now expects the cash profit after tax for the 31 March 2018 year end to be around the lower end of this guidance. The performance of Radio Rentals has continued to fall, and trading conditions will be difficult in the medium term. In the first half, Radio Rental’s installation volumes were 27% lower than the prior period.
The results have been further impacted by the adverse publicity from Thorn’s settlement with ASIC and the ongoing class action. Moreover, TGA’s profits next year will be significantly less than the year ending March 2018. As a result, TGA stock has fallen 9.49% in one month as on March 21, 2018 and is trading at an exorbitant P/E. While the group has reduced its corporate loan balance, the above aspects indicate a weak performance going forward. Based on the foregoing, we believe it is best to avoid the stock and we give an “Expensive” recommendation at the current price of $0.063
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