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ASA International (LON: ASAI) Q2 Update: The Market is missing the Forest for the Trees - MAJOR BUYING OPPORTUNITY!
Oh deary me well look at that. Another set of excellent (though not entirely flawless - more in a sec) results from ASA International and Mr Market falls completely out of bed. This is a gift and excellent buying opportunity for new investors and those who want to top up.
All right, what caused today’s puke? My guess is the spike in Group PAR>30 (Portfolio at Risk) to 2.4%, up from 2% in Q1. Remember, this is not the default rate, but simply loans beyond 30 days overdue. That’s a very tight credit leash as we’ve covered before.
The PAR blip is almost entirely driven by East Africa, where PAR>30 surged to 2.9% (from 2.0% in Q1). Management explicitly stated this was due to ‘new trade regulations in Uganda which negatively affected clients.’
Uganda is just one of the 12 countries ASA International operates in. This is just a localised regulatory friction event, not a systemic breakdown of the ASA lending model. It’s really not a biggy. Even at 2.4%, the group-wide PAR>30 remains industry-leading for frontier microfinance.
Let's now look at what the market is ignoring:
1. The India Drag is Dead We’ve been waiting for the structural elimination of the loss-making India operations. Q2 confirms the wind-down is nearing completion: Gross OLP in India is down by 86% year-on-year to just USD 4.3m, and the client base is down to a residual 10k. Management confirmed there is now a ‘minimal negative income statement impact.’ The single biggest balance sheet overhang has been cleared.
2. The Core Engine is Running Nicely Excluding India, the client base increased by 11% year-on-year to 2.72m. Gross OLP is up 12% YoY to USD 604.1m. While USD translation suppressed the top-line growth (Constant Currency growth was a very robust 17%), the underlying branch capacity utilisation remains excellent.
3. Digital Execution is on Schedule The transformation away from manual, paper-based lending is moving exactly to plan. Tanzania's digital platform is now fully live, and implementation activities have now started in Kenya and Nigeria. The transformation scales loan officer capacity and drives down the Cost-to-Income ratio, which sits at a highly efficient 56.8%. Great work management!
The Wizard’s Bottom Line: If we stress-test our H2 2026 models with a severe USD $5m credit loss haircut to account for the Ugandan friction, it only shaves about 3.2p off our intrinsic value estimate of £7 per share.
When you strip out the Net Working Capital noise the operational cash flow engine here is immense. The business generates a 39.3% Net Interest Margin and a 43.8% ROE.
Trading at an implied EV/FCF of just 3.3x under pure operating cash metrics, ASAI is pricing in a distress scenario that simply isn't present. The Q2 sell-off provides a compelling entry point into an asset where the structural upside remains vastly mispriced. ASA shares need to go up, not down, to close this gap! Meanwhile shareholders here collect a 4.4% yield and rising while they wait.
Wizard Conviction: High. Target Price: 700p.