Non executive director Tony Hales’ contrarian £95,000 share purchase at international consumer lender International Personal Finance (IPF) could signal negative investor sentiment towards the stock is overdone.

Adverse legislation in Poland through the introduction of a fee cap on loans in the country has hit IPF’s stock price hard because it earns 40% of its revenue in the country.

Shares in IPF are down 17% year-to-date after the ruling in early June, though management says it can mitigate around half the expected £30 million hit to profitability in 2016. Analysts at Liberum now forecast profit-before-tax at £117 million in the year to 31 December 2015 and £108 million in 2016. IPF’s market cap is £824 million.

‘In the last 18 months, IPF has been caught in a perfect storm - negatively impacted by forces largely beyond its control i.e. adverse foreign exchange movements and a hardening regulatory regime in some of its markets,’ writes analyst Justin Bates at Liberum, who has a ‘sell’ rating on the stock.

In our view, balance sheet strength at IPF means a big chunk of the remaining cuts to forecast profitability will be mitigated through its ongoing share buy-back programme. Earnings per share are expected to drop just 7.6% between last year’s reported result and 2016 before returning to growth in 2017.

Liberum argues there could be more EPS cuts down the line.

IPF is down 18.3% since our bullish call (Sector Report, Shares, 26 Feb) versus a FTSE All-Share return of -6% (total return).

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IPF’s strong capital position should provide enough flexibility to ride out the storm.

THE TRADE

Buyer: Tony Hales (Non-executive director)

Consideration: £94,963

No. of shares bought: 25,000

Subsequent holding: 75,000 (0.03%)