Monday, 12 August 2013

Two More Analyst Comments on Carfinco








TSX: CFN
Shares Outstanding: 26.4 million
Shares Fully Diluted: 26.4 million
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With price targets ranging from $11.75 to $13, analysts from Stonecap Securities and GMP Securities have released updated research on the basis of Carfinco’s second quarter results.
Stonecap analysts, Dylan Steuart and Brad Smith, increased the target price to $13 from $12 based on a multiple of 13x estimated 2014 EPS of $1.03. We note that their conclusion comments on the potential for an acquisition.

Conclusion:
We are introducing our 2014 EPS estimate of $1.03, generating a 14% expected EPS growth over 2013. We expect risk-tiered pricing to continue to drive growth in the near term, with lower realized margins on loans offset somewhat by continued moderation of underlying credit metrics of the loan book. While our forecasts are purely based on organic growth, the chief near term catalyst to valuation continues to be the successful closing on an acquisition made possible by the capital flexibility of the firm.
To read the Stonecap update, click here.
In our blog this past Friday, we wrote about Industrial Alliance analyst, Fred Westra, who increased his target to $12 and also commented on the potential of an acquisition.
Steve Boland of GMP Securities has set an $11.75 price target based on a multiple of 11x estimated 2014 EPS of $1.06.
He wrote:
Loan growth solid – maintain BUY
Overall, loan growth in Q2/13 was solid and originations were encouraging.  The portfolio YTD has grown 19.5% year over year, and management believes receivable growth of 15 to 20% for fiscal 2013 is still achievable. The closing of the treasury offering should help fund any growth opportunities and reduces balance sheet risk.  Entering the quarter we believe growth objectives of 20% and a decline in losses were the main issues. We believe these results should alleviate any investor concerns regarding growth and credit.
As Q2/13 was in line with our expectations, 2013 and 2014 estimates remain largely unchanged. Our valuation is based off 11.0x multiple to our F14E EPS of $1.06, which produces our target price of $11.75, unchanged. CFN has built an impressive two-year record of growth, reporting a high ROE. There are few lenders with this high an ROE and ~20% growth. Additionally, with the remaining monthly dividends and possibility of a year-end special dividend, a 5% to 7% annualized yield is possible.  We continue to rate the shares of CFN a BUY.