Pepper Money will acquire 65% of the car and asset finance broker Stratton Finance for -$78m, by utilising existing cash and its corporate debt facility. The balance of 35% is exercisable by put or call at a base price of -$42m.
The analyst likes the potential growth in Asset Finance and sees a sound strategic rationale though notes the transaction is not material.
Separately, a trading update revealed run-rates ahead of the broker’s expectations for mortgage originations and assets under management (AUM).
The Outperform rating and $2.95 target are maintained.
Sector: Banks.
Target price is $2.95.Current Price is $2.31. Difference: $0.64 – (brackets indicate current price is over target). If PPM meets the Credit Suisse target it will return approximately 22% (excluding dividends, fees and charges – negative figures indicate an expected loss).
