Cash America: Spin-Off Of Its E-Commerce Business Should Unlock Substantial Value
- Cash America is an alternative financing company that operates through two main segments. A traditional pawnshop business and Enova, an online provider of non-secured consumer loans.
- Cash America plans to spin-off Enova by early 2015. This provides a clear catalyst to unlock the value of the two businesses, currently not fully reflected in its valuation.
- Based on comparable multiples, we estimate the two businesses will trade at a 40% plus premium to Cash America’s current market capitalization post-separation.
- We think the downside is limited. Most of the bad news covering regulatory risks, suppressed gold prices and consumer confidence are well-known and most likely already priced in.
- This is a medium-term trade. Around six months for the spin-off to unlock substantial value, then a series of further value creating catalysts could unfold over the next few years.