Tuesday, 10 November 2009

Carfinco Drives Record Earnings In Q3

Carfinco Income Fund
Units issued - basic & fully diluted - 23.3 million
Current monthly distribution: $0.015
Current annualized yield - 9%


The market obviously liked what it heard yesterday as it moved up about 15% on the heels of news that the Carfinco Income Fund had a milestone third quarter. The fund hit several records with its highest finance receivables, revenue and net earnings in its history.

Net earnings for the nine months ending Sept/09 were $4,733,349 or $0.20/unit vs the comparable period in 2008 that saw a loss of $1,427,445 or ($0.06)/unit.
It also matched its highest per unit earnings at $0.09 or annualized $0.36 per unit, which represents a multiple of 5.5 based on today's $2.00 close.

The company also announced November cash distributions for unit holders of record as of the 20th of this month with those people to receive $0.015 per unit at month end. This brings the year to date cash distributions to $0.06 in 2009. Annualized, $0.18/unit equals a 9% yield with the $2.00 close.

The key to the success of the company lies in the management and board of trustees recognizing a storm on the horizon in late 2007. Gas prices were sky rocketing, auction prices for used cars due to a low Canadian dollar were falling and unemployment was on a steady rise in North America.

Carfinco was proactive early and decided to halt cash distributions in April 2008. The company tightened its credit standards and increased its allowance for credit losses knowing the financial storm was now becoming a full hurricane. Carfinco raised $2.3 million in non-convertible, non-redeemable debt and invested heavily in technology ensuring reduction of G&A and maximizing operational efficiencies.

Fast forward to Q2/09 when the company started to benefit from its sagacious insight and was able to reinstate its cash distributions in August of this year. The unit price started its ascent from the mid $0.50 range.

While the units are up smartly from the summer, they still are a far cry from the $4.50 range in mid-2007. At that time distributions were $0.027 per month compared to the current $0.015 per month.
However, with the news of record earnings the market should start considering whether or not distributions might increase in the near future?

Click here to see Q3 news results.............