Paragon Group Cos. shares rose to the highest since November 2007 in London trading after fiscal first-half earnings beat analysts’ estimates and the U.K.’s third-largest mortgage provider to landlords reported its first six-month increase in revenue since before the credit crunch.
Net income for the six months ended March 31 increased 35 percent to 28.5 million pounds ($46 million), or 9.3 pence a share, from 21.1 million pounds, or 7 pence, a year earlier, the Solihull, England-based company said in a statement today. Net income beat the median estimate of 24.6 million pounds according to four analysts surveyed by Bloomberg.
“The good news is apparent,” RBC Capital Markets analyst Peter Lenardos, who rates the stock “top pick,” said in a note to clients today. The “results exceeded both our and consensus forecasts, and in most cases by double digit percentages.”
Paragon re-entered the lending market in the fourth quarter of 2010. Chief Executive Officer Nigel Terrington today reiterated Paragon’s intention to do its first securitization since 2007 during the third quarter.
The shares rose as much as 6.4 percent to 200.3 pence, the highest since November 2007 and were up 3.4 pence, or 1.8 percent, at 191.6 pence at 10:32 a.m., lifting its market value to about 573 million pounds. The stock has gained 38 percent over the past year.
Net Interest Income
Net interest income fell 2.9 percent to 67.4 million pounds from a year earlier, Paragon said. It rose 5.3 percent from the six months ended September 30. The company forecast “strong” loan growth in the second half.
“It marks a point of inflexion,” Terrington said in an interview. “It has changed the business from one which was contracting to one that is actually growing. The next crucial point will be when the balance sheet starts growing.”
Paragon increased its first-half dividend by 12.5 percent to 1.35 pence a share.
“We see clear potential estimates beyond the level of first-half performance,” JPMorgan Cazenove analyst Paul Measday, who rates the stock “overweight,” said in a note to clients today. Measday may raise his estimate for full-year pretax profit by as much as 10 percent, he said.