Broker snap: Good funding news at Provident

13th Jan 2011 12:49

Panmure Gordon says that even though Provident Financial shares have had a good run as of late, recent funding news means that there is further to go in the near-term for the sub-prime lender.The group announced Thursday it had secured a 10-year facility of £100m from its M&G Investments UK Companies Financing Fund. "This is important for sentiment and should resolve much of the market's concerns over Provident's funding situation, though we estimate the business needs to raise an additional c£65m of new funding this year to maintain 20% headroom on its facilities and assuming existing banking lines are rolled over," said analyst Vivek Raja.Consensus pre-tax profit for 2010 is £141m, and so the broker said that its forecasts of £138m will be nudged up around 4% as a result.A 'buy' is retained, along with a 980p target price, as the broker says "The business model affords good visibility over capital generation, underpinning our confidence in the dividend."