Wednesday, 8 May 2013

Carfinco Notches Strong Start To 2013

Shares outstanding: 26.4 million
Shares fully diluted: 26.4 million

With yesterday’s release of record first quarter results, Carfinco has once again proven its ability to deliver on its business model.  Net earnings were $5 million, an 8.5% increase from the $4.6 million for Q1 2012, and finance receivables were at $187.1 million, a 20.6% increase over the $155.1 million in Q1 2012.

2013 is off on the right foot as subsequent to quarter end, the company saw April loan originations rise to a record $15.2 million.

Interestingly, management pushed hard on one particular message being that the market was not appreciating its normal annualized loan loss rate.

Following the release of the 2012 yearend financial and the fourth quarter in particular, the stock fell to the $9 range from more than $11. The concern was that the annualized loss rate was 15.1% in Q4, which was up from 12.8% in Q3, 2012. 

What management focused on in the release was that a 15% loss rate falls under its expectations of between 13% - 16%.

In the past, the company experienced a low of 11.2% in Q2 2012, but also a high of 20.7% in Q2, 2009.  Of course, there is a continued strong focus from management to minimize losses and it was noted that certain credit policies across the country have been modified to reflect geographical characteristics.

It was also mentioned that Carfinco management sees several opportunities to expand its market share and presence in Canada.  These include continued growth of its tiered financing programs, as well as potential acquisition opportunities, which could be funded from the proceeds of its recent $17 million financing.

Highlights of Q1 include:
  • Earnings per share of 20 cents;
  • Dividends to shareholders of 12.0 cents per share;
  • Return on shareholders’ equity of 44.7%;
  • Loan originations of $36.6 million, up 12.9% from the first quarter of fiscal 2012;
  • Record finance receivables of $187.1 million; and
  • 31+ day delinquent accounts for the first quarter of 2013 of 3.3%.

To see the full news release, please click here...