‘Doomsayers’ in retreat as these two stocks surge

Shares in finance firm S&U and FTSE 250-listed 4imprint are flying today as their trading updates buck the doom-laden forecasts for the UK and US economies.

The ‘doomsayers and cliff-edge addicts' predicting the demise of UK residential property were among those in the sights of S & U (LSE:SUS) after a better-than-expected trading update today.

The specialist motor and property bridging lender added that stock market commentary and valuations were being dominated by “uncertainty and pessimism” and that this failed to take into account performance or its own prudent planning.

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Chair Anthony Coombs said: “That pessimism is not shared by S&U. We believe that realistic underwriting, good products, and supportive and sensitive customer relations will enable us to make further significant and sustainable progress.”

Investors took note of his comments as S&U’s shares jumped 180p to 2260p, although they remain well short of the 2,800p seen last autumn. Analysts at house broker Peel Hunt are not among the pessimists after they reiterated their “buy” recommendation and target price of 3,314p, having seen S&U report receivables growth of 14.6% in the first half. 

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Peel Hunt said: “Economic deterioration may exert future pressure on operating expenses, impairment and finance costs but the top line performance is tracking ahead of our estimates and the good momentum highlights the attractive valuation of the shares.”

S&U reassured on debt quality after seeing strong collection rates and low levels of default at Advantage, its motor finance business, and at property bridging lender Aspen.

At Grimsby-based Advantage, applications for motor loans remain robust in a buoyant used car market. This has meant growth in transactions of nearly a quarter on last year and an increase in net receivables to £280 million in July against £268 million in May.

S&U said Aspen’s growing reputation and introduction of new products had enabled it to attract more experienced and expert borrowers, with receivables up to £90 million against £72 million in May.

The company added: “Despite some doomsayers and “cliff-edge” addicts who have commentated on the UK’s residential property market, the real world has allowed Aspen to continue its growth in serving its niche developer and investor market.”

Another company defying the gloomy economic forecasts has been US-focused corporate merchandise firm 4imprint (LSE:FOUR), which jumped 505p to 3,855p at the top of the FTSE 250 index.

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The Manchester-based business, which supplies branded products ranging from basic giveaways such as pens and mugs to embroidered apparel and trade show displays, had been as low as 2,330p prior to a material upgrade to City guidance in an update in mid-July.

Its revenues of $515 million (£422 million) in today’s interim results were in line with the recent trading update, with both order values and volumes improving 14% versus 2019.

However, Peel Hunt said the operating margin expansion to 8.5% was impressive.

The broker added: “This is the highest margin achieved in the last decade, driven by a step-up in productivity of marketing spend as a result of stronger emphasis on brand marketing.” 

Peel Hunt increased its earnings-per-share forecast for 2022 by 10%, its third upgrade this year and lifted its target price to 4,300p from 3,900p.  It added: “While management’s outlook continues to be cautious, business is clearly booming for 4imprint.”

Liberum, which had a 4,000p target prior to today’s results, was also impressed and said the case for a special dividend payment had increased. The company declared an interim dividend of 40 cents (32.8p) a share, representing growth of 167% over the prior year’s award.