Ramsdens a solid long bid on pretty stellar numbers (RFX)

By James Moore


When you spot a company generating revenues that exceed its market cap, you might have found a really good buy. In essence, it means investors are paying less than £1 for £1 of sales. That’s certainly the case with Ramsden Holdings (LSE:RFX).

At a share price of 150p, RFX has a market cap of £47 million.

Results out on 27 May for the year ending 31 March 2020 showed it produced £59.5 million in revenue, up 27% from the year before. Earnings per share were up 28% to 21.4p.

Before we get into the nitty gritty of what it does and how it does it, I’d just like to point out that RFX is ticking a lot of boxes.

It is improving revenue and profits at a fair old clip, it has £11.1 million of net cash, and its balance sheet looks healthy.

Return on capital is a decent 21%. Price to book value of 1.3 is a little over the traditional undervalued metric of 1, but I’d be keen to explore RFX as a long bid even so.


Ramsdens said in FY 2020 that underlying profits before tax were up 19% to £8 million, while it continued to grow revenue. Foreign currency exchange income was up 13% to £13.1 million, jewelry retail was 28% higher at £12.6 million and pawnbroking was up 19% to £9 million.

Net assets were £4.1 million more at £35 million and its £10 million revolving credit is undrawn.

In line with around 50% of FTSE listed companies, RFX bosses are focused on preserving cash and said they won’t declare a second interim dividend.

CEO Peter Kenyon called attention to another year of growth and increased profitability, “underpinned by our diversified income streams, outstanding value for money proposition and increasing footprint”.

Across the year, Ramsdens opened ten new stores. This included four acquired from The Money Shop.

Kenyon added that he was preparing for further expansion when Covid hit, and expected to continue once the UK reopening is in full force.

The board is confident that Ramsdens is well-positioned to navigate these unprecedented times, supported by our strong balance sheet, good cash position and an ability, if needed to quickly convert jewellery stock into cash.

The trade

Since late April, RFX has broken out of a significant area of resistance around 130p, but was beaten back from a recent intraday high of 177p.

Broker Liberum Capital has RFX as a buy, but last week cut its price target from 180p to 162p. That seems a fair short-term effort given the resistance level.

Liquidity appears decent for a microcap, and aside from speculative punts, its market cap is in the lower range of a share I’d bet on to go long.

I would be looking for an entry point on a little pullback below the 50-day EMA of 144.8p, in the region of the support level near 130p. Then, in the short term, I’d anticipate a 10% to 20% gain, probably top-slicing on the way up. 

Longer term, the outlook seems positive, and I’d be tempted to hang on for a post-Covid bump as stores re-open.


This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Sign up for Investing Intel Newsletter