Carfinco – Q2 Results Reported With Record Loan Originations

Carfinco has just released its second quarter results and reported loan originations have reached a record $54 million, up nearly 20% from the first quarter of 2014.  This significant increase is attributed to a heightened focus on customer service to its dealership partners as well as expanding the financing products available to those dealerships as well as the addition of its U.S. operations.

HIGHLIGHTS FOR THE SECOND QUARTER OF 2014

• Earnings per share for the quarter of 20 cents;
• Dividends to shareholders of 12 cents per share;
• Return on shareholders’ equity of 30.1%;
• Return on portfolio assets of 8.7%;
• Revenue of $24.3 million;
• Record loan originations of $54.0 million;
• Record finance receivables of $252.1 million; and
• 31+ day delinquent accounts for the second quarter of 2014 were 3.5%.

Net earnings and revenues also increased over the same period in 2013 while the annualized loss rate decreased from Q1 to 14.6% from 15.2%, in line with the Company’s expectations, which range between 13%-16%.

A live conference call will be held today, Wednesday, August 13, 2014 at 11:00am MT (1:00pm ET) and will include a discussion by management about Carfinco's second quarter results followed by a question and answer period. Participants can access the conference call by phone within Canada and the U.S. by dialing the following numbers:

North America Toll-Free:                1-866-233-4585

Internationally:                             1-416-640-5946

Callers should dial in five to ten minutes prior to the scheduled start time.  An audio replay may be accessed through the Investor Relations section of our web site at www.carfinco.com shortly after the conclusion of the conference call.

To view full news release, please click here.

Canadian Business Names Carfinco As A Best Growth Stock Of 2013

CFN:TSX

Carfinco has been recently showcased in the June edition of Canadian Business magazine as one of the top Small Cap Companies in Canada and, as well, listed as one of the Top 10 Best Growth Stocks in 2013. 

The monthly national magazine publishes its annual Investor 500 special issue where Carfinco placed 195 out of 300 on a list of Canada’s top Small Cap Companies, and placed 1st in the Return On Equity (ROE) column with 36% from the Best Growth Stocks of 2013. 

The electronic version of the magazine is a subscribe only to view and can be linked by clicking here.

Carfinco Increases Net Earnings & Finance Receivables

CFN:TSX

Carfinco announced its Q1, 2014 financial results today showing a 5.5% increase in net earnings while growing its finance receivable portfolio $1.1 million over the previous quarter.

In the release, Management noted that while Canadian competition has increased, Carfinco remains focused on long-term growth and structures its credit policies and programs in that regard.  It was mentioned that management continues to add financing programs that are beneficial to both its dealership network and its business strategy designed to retain valued customers that have established a positive payment history.

Carfinco continues to provide a strong return on shareholders equity at 30.8% and a low debt-to-equity ratio of 2.14:1, far below the 3.50:1 its credit facility allows for.

HIGHLIGHTS FOR THE FIRST QUARTER OF 2014

• Earnings per share of 20.0 cents;
• Dividends per share of 12.0 cents;
• Return on invested capital of 22.3%;
• Revenue of $24.0 million;
• Loan originations of $45.2 million;
• Loan originations have now reached over $1 billion since commencement of operations;
• Record finance receivables of $245.3 million; and
• 31+ day delinquent accounts were 4.0% at the quarter end.

A live conference call will be held today, Wednesday, May 14, 2014 at 11:00am MT (1:00pm ET) and will include a discussion by management about Carfinco‘s first quarter results followed by a question and answer period. Participants can access the conference call by phone within Canada and the U.S. by dialing the following numbers:

North America Toll-Free: 1-888-389-5988
Internationally: 1-719-325-2177

Callers should dial in five to ten minutes prior to the scheduled start time. An archive of the conference call will be posted in the Investor Relations section of the Carfinco website (www.carfinco.com), as soon as available from the provider.

To view press release in it's entirety, please CLICK HERE.

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Shares Outstanding: 26.4 million
Shares Fully Diluted: 26.4 million

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Carfinco Tallies Year End

TSX:CFN

Carfinco announced its year end results late yesterday, along with a summary of key accomplishments that took place over 2013 including:

• Introducing new finance programs in Canada offering a wider range of products.
• Entry into the United States through the acquisition of Persian Acceptance Corp.
• Earnings per share of 78 cents.
• Distributions to shareholders of 48 cents per share or $12.5 million.
• Return on shareholders’ equity of 36%.
• Record loan originations of $171.6 million.
• Record principal balance of finance receivables of $271.2 million.
• 31+ day delinquent accounts of 4%.
• Net earnings of $5.1 million for the fourth quarter of 2013, an increase of 17.9% from the $4.3 million for the third quarter of 2013 and an increase of 1.7% from the $5.0 million for the fourth quarter of 2012.

A conference call will be held today, Friday, March 21, 2014 at 11:00am MT (1:00pm ET) and will include a discussion by management about Carfinco‘s year end results, followed by a question and answer period.

Participants can access the conference call by phone within Canada and the U.S. by dialing the following numbers:

North America Toll-Free:            1-888-400-3310
Internationally:                         1-416-850-9144 

Callers should dial in five to ten minutes prior to the scheduled start time.  An audio webcast may be accessed through the Investor Relations page on Carfinco‘s web site at (www.carfinco.com). Audio replays will be available on the web site shortly after the conclusion of the conference call.

Full news release can be viewed by clicking here...

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Shares Outstanding: 26.4 million
Shares Fully Diluted: 26.4 million

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Cormark Securities - Carfinco A BUY

TSX: CFN

On February 20th, Cormark analysts Jeff Fenwick and Gavin Fairweather initiated coverage on Carfinco recommending it as a buy with a target price of $14.00.

We do not have permission to post the report but some highlights include:

• Carfinco is a leading player in subprime auto finance
• Subprime is a large and lucrative business
• Managing risk is key in deep subprime – a combination of pricing, processes and technology
• Sound underwriting practices supported Carfinco through the downturn
• Strong growth has translated into solid bottom-line performance
• Industry and economic factors all positives for Carfinco
• Seeking Growth in the U.S. with potentially more M&A south of the border
• The U.S. offers up a big potential market
• ROE will remain very high, although gradually tapering
• Dividends will continue to provide incremental returns for investors
• The $14 target is based on 13x 2014’s projected earnings per share of $1.06

Cormark is the 6th Canadian firm to pick up coverage of the solid performer where the target price ranges between $13.00 and $14.50.

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Shares Outstanding: 26.4 million
Shares Fully Diluted: 26.4 million

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Carfinco Continues To Look For U.S. Acquisition

TSX: CFN

On November 1st this year, Carfinco announced that it was the stalking horse bidder looking to purchase Western Funding Incorporated and Global Track GPS, two companies that were in Chapter 11 bankruptcy in Nevada.

Today it was announced that bidding went beyond what management felt the businesses were worth and has backed out from the bidding process altogether.

It was noted in today’s news that Carfinco will actively continue to pursue other potential acquisitions throughout the United States and Canada.

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Shares Outstanding: 26.4 million
Shares Fully Diluted: 26.4 million

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Carfinco Featured On BNN’s 'The Street'

TSX: CFN
Shares Outstanding: 26.4 million
Shares Fully Diluted: 26.4 million
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Mr. Tracy Graf, President and CEO of Carfinco, was a featured guest on BNN’s The Street this morning with anchor Paul Bagnell.

In the interview, Mr. Graf discussed:

• The recent acquisition of PAC in the U.S.
• Stalking horse bid for Western Funding and it having a similar business model to Carfinco.
• Annualized loss rates similar to 2005 levels.
• Becoming more selective in underwriting loans in specific geographic regions.
• Use of GPS starter interrupt.
• Pricing of used cars and its significance to risk profile.

Today’s segment can be viewed here...http://watch.bnn.ca/#clip1058975

Carfinco Gets Further Media Attention & New Analyst Coverage

TSX: CFN
Shares Outstanding: 26.4 million
Shares Fully Diluted: 26.4 million
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The Globe and Mail published an article today titled, “Four Stocks Under The Bulls’ Radar”, in which Carfinco was mentioned alongside some much larger companies such as Oracle Corporation.

The Globe’s Tim Shufelt noted that the U.S. automobile manufacturing sector is firmly in recovery mode and that one dark horse candidate for playing the U.S. auto boom could be Carfinco.

Carfinco entered the fast growing U.S. car loan market earlier this year. “The geographic diversification comes at a seemingly opportune time, as overall levels of non-prime auto loans are on the rebound, fully recovering from mid-2011 lows,” said a report by Dylan Steuart, an analyst at Jennings Capital.

Mr. Steuart is no stranger to Carfinco, as he had covered the company while with Stonecap Securities. Now recently employed by Jennings Capital, Mr. Steuart is the 5th analyst to cover Carfinco and he offers the most robust price target at $14.50.

At this time we do not have permission to publish the Jennings report.

To read the Globe and Mail article, please click here...

Mr. Tracy Graf, CEO of Carfinco, is expected to be a guest on BNN’s morning show, “The Street” with Paul Bagnell, either tomorrow or Friday - so please stay tuned!

Carfinco Breaks Further Records In Q3 – Hosting Quarterly ConferenceCall

TSX: CFN
Shares Outstanding: 26.4 million
Shares Fully Diluted: 26.4 million
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We would use the term, “understatement” to describe a line in today’s news release that it’s been a “busy and productive quarter”.

As the third quarter came to a close, Carfinco recorded record revenue, record loan originations, record finance receivables, has expanded into the United States with the acquisition of PAC and is also bidding on another potential U.S. acquisition.  

HIGHLIGHTS

• Earnings per share for the quarter of 17 cents, 61 cents year to date;
• Dividends to shareholders of 12.0 cents per share;
• Record revenue of $21.4 million;
• Record loan originations of $46.5 million;
• Record finance receivables of $240.9 million; and
• 31+ day delinquent accounts for the third quarter of 2013 were 3.3% combined (2.6% for CAR, compared to 2.5% for CAR in the second quarter of 2013).

Growth is not inexpensive and net earnings in Q3 reflected the costs associated with the recent U.S. expansion.  Net earnings for Q3 were $4.3 million compared to $5.6 million in Q3, 2012.  Carfinco incurred substantial professional fees during the quarter and only benefited from a partial month of earnings from PAC in the U.S..

Management will be hosting a conference call today, Friday November 15th at 11:00 am MT (1:00 pm ET) to discuss Q3 and will offer a Q&A session. Participants can access the conference call by phone within Canada and the U.S. by dialing the following numbers:

North America Toll-Free:     1-888-241-0326 using Conference ID #97962451

Internationally:                    1-647-427-3411 using Conference ID #97962451

Callers should dial in five to ten minutes prior to the scheduled start time.  An archive of the conference call will be posted in the Investor Relations section of the Carfinco website (www.carfinco.com), as soon as available from the provider.

Today’s news release can be read by clicking here...

Carfinco Receives Top Grade From Financial Guru Peter Lynch

TSX: CFN
Shares Outstanding: 26.4 million
Shares Fully Diluted: 26.4 million
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Carfinco has been in the news twice in the last 24 hours, once in the Globe and Mail and again on Bloomberg.

In the Globe and Mail article from Validea Canada entitled “Auto Financer Carfinco Gets High Marks Using Peter Lynch Stock Strategy”, Carfinco receives a top grade from the Peter Lynch based financial model for a price/earnings or P/E growth investor, with a score of 93% in his investment strategy.

Peter Lynch is known as the best producing 20 year mutual fund manager of all time, and has written three well known books on investing.

Peter Lynch is known as the best producing 20 year mutual fund manager of all time, and has written three well known books on investing. 

The article can be read by clicking here...

Late yesterday, Bloomberg writer Jen Skerritt from Winnipeg, published a well rounded article entitled, “ Carfinco Trades At Record On U.S. Loans Growth.”  In the article, Skerritt discusses Carfinco and its growth into the U.S. with its recent acquisition of Persian Acceptance Corp., as well as the Company’s plans to purchase Western Funding, which has a licence in 30 states and is in Chapter 11.

Ms. Skerritt also interviews Tracy Graf, CEO of Carfinco, along with two analysts currently covering the company. In the article, it is discussed that Carfinco plans to grow its U.S. portfolio by 20% next year and that the Company may double its loan portfolio within three years while tapping into the U.S. market.

This article can be read by clicking here...

Carfinco To Significantly Add To Bottom Line – “Credit Where Credit is Due”

TSX: CFN
Shares Outstanding: 26.4 million
Shares Fully Diluted: 26.4 million
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Today, Carfinco announced that its bottom line will be positively impacted as its senior credit facilities have reduced the interest rate charges for both Carfinco and its newly acquired U.S. group, Persian Acceptance Corp, (PAC).

Effective November 1, Carfinco ‘s Bankers Acceptance Rate margin was reduced 50 basis points from 3.25% to 2.75% and Prime Rate margin was reduced from 1.75% to 1.50%.  PAC had its Libor Rate margin reduced 30 basis points from 4.45% to 4.15%.

If one were to look at the impact this has on the bottom line based on October finance receivables, the new reductions increase profitability by approximately $61,000 per month or roughly $730,000 annualized.

To read full news release click here…

Carfinco Closes In On Second U.S. Acquisition

TSX: CFN
Shares Outstanding: 26.4 million
Shares Fully Diluted: 26.4 million
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Carfinco has just announced that it is the stalking horse bidder for an acquisition of all the interests in Western Funding Incorporated (WFI) and Global Track GPS out of Las Vegas, Nevada after the two companies claimed Chapter 11 bankruptcy in the courts earlier this year.

Investopedia defines stalking horse below:

Definition of 'Stalking-Horse Bid'

An initial bid on a bankrupt company's assets from an interested buyer chosen by the bankrupt company. From a pool of bidders, the bankrupt company chooses the stalking horse to make the first bid.

Investopedia explains 'Stalking-Horse Bid'

This method allows the distressed company to avoid low bids on its assets. Once the stalking horse has made its bid, other potential buyers may submit competing bids for the bankrupt company's assets. In essence, the stalking horse sets the bar so that other bidders can't low-ball the purchase price.

Carfinco is in a “no lose” situation. Should it lose the bid to another party, having qualified as a stalking horse, it is seeking a court order to be reimbursed any expenses, legal and other, incurred for the bid.

The purchase price which will be a cash offer by Carfinco, acquires 100% of the shares and all encumbrances of WFI for a cost equal to 70% of the net finance receivables at time of closing plus up to $200,000 to cure monetary defaults assumed in the bankruptcy process which will all be confirmed on or about December 20th this year.

Carfinco expects the net finance receivables to be in access of $30 million and will pay for it through cash raised in the bought deal financing back in April this year.

This deal lands on the heels of Carfinco ‘s recent expansion into the north eastern U.S. though its purchase of Persian Acceptance Corp (PAC) in September this year.  It also proves that the Carfinco is serious about acquiring key companies in the U.S. with similar business models to its own allowing it further growth and expansion in a massive market.

To view the news release.....please click here...

Another Target Price Increase For Carfinco – Industrial Alliance Provides Update

TSX: CFN

Shares Outstanding: 26.4 million

Shares Fully Diluted: 26.4 million

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Just a month after releasing its $12.50 target on Carfinco, Industrial Alliance has increased its target price to $13.50. 

 

The increase is primarily the result of Carfinco’s recent acquisition of Persian Acceptance Corp. (PAC), an American auto finance company, as well as the addition of PAC’s president, Peter Miller, to Carfinco’s Board of Directors. With 19 years of direct experience in the U.S. sub-prime auto lending industry, the report suggests that Mr. Miller’s knowledge and support will allow Carfinco to penetrate the U.S. market with less risk.

Industrial Alliance analyst, Fred Westra, increased the 2013 and 2014 EPS to $0.92 and $1.15 from $0.91 and $1.08, thereby increasing the target price to $13.50 based on a multiple of 12x the 2014 EPS and an expected total return of 39.2% of warrants.

Mr. Westra describes Carfinco as “a phenomenal Company with sustainable 15-20% loan growth; one of the best efficiency ratios in the lending space; superior capital allocation with an ROE of 41.8%; solid risk management; and a 5.3% dividend yield (48.4% distributable cash payout).”

To view the report in its entirety, please click here....

 

Additional Insight Into Carfinco’s U.S. Acquisition – Financial Post & Analysts

TSX: CFN

Shares Outstanding: 26.4 million

Shares Fully Diluted: 26.4 million

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On Wednesday, September 4^th , Carfinco announced its expansion into the U.S. through its acquisition of Persian Acceptance Corp. (PAC).  It has been a wild ride since that announcement, as the phone lines have been lit up, there have been analyst updates, the stock price and volume are up, and one of Canada’s national newspapers, the Financial Post has written two articles about Carfinco ‘s game changing  news.

Barry Critchley of the Financial Post wrote an article yesterday mentioning Carfinco ‘s stellar performance regarding its stock price and its 3,260% total gain taking place in the last five years.  The article discusses Tracy Graf, CEO of Carfinco, and his deep roots in the U.S., as he is a member of the American Financial Services Association as well as a director of the U.S. based National Automotive Finance Association, and has been for many years.

In the article, Mr. Graf commented that organic growth was the only option in Canada since no potential acquisitions exist here.  It was also mentioned that a number of non disclosure agreements with other potential auto finance companies in the U.S. were signed.  Of note, Carfinco raised $22 million in late March this year and has only spent $9 million of cash available to purchase PAC, leaving opportunity for further expansion.   

Read the Financial Post article here...

A second Financial Post article by the same writer was published in the Street section and it provides a little more depth and background on the husband and wife team of Peter and Jennifer Miller who founded PAC in 1998, and how Mr. Graf views the working relationship with the Millers going forward.  Because the Millers have agreed to stay on and take advantage of the funded growth Carfinco brings to the table, Mr. Graf believes that they can expand into a number of other states and grow the portfolio of loans further than PAC was capable of while self funding in the past.   

Read the second article here...
 

We also spent time with management to discuss what this means for the company going forward. We wanted to ensure our readers understand that management is adamant that there are still years of continued growth ahead for Carfinco in the Canadian market, and that the forecasted 15-20% yearly growth can take place north of the border for years to come.  The U.S. expansion through PAC allows for the strong synergies between the groups to do what they do best - grow.

Analyst Fred Westra of Industrial Alliance has increased his Strong Buy target to $12.50 from $12.00, mentioning that he will formally adjust his modelling in the coming days, once the specific details of PAC are made public.  His new target price adds in his estimate of $0.06 earnings per share in 2014 from PAC, mentioning that he could see further acquisitions of this nature in the future. 

Analysts Steven Boland and Robert Marck of GMP Securities are also waiting for further details from Carfinco management on the financial details, but believe the impact of the deal is positive and offsets the dilution from the equity issue earlier this year.

Management plans to release further financial details of the acquisition of PAC next week.

Carfinco Makes Strategic Entry Into The U.S. Market

TSX: CFN

Shares Outstanding: 26.4 million

Shares Fully Diluted: 26.4 million

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In late March of this year, Carfinco had investors speculating as to why the Company would raise $22 million through a bought deal common share financing when it was mentioned in the news release that the proceeds of the Treasury Offering could be used for potential future acquisitions.

Today, things became clearer as Carfinco announced its expansion into the U.S. market through the acquisition of Persian Acceptance Corp. (PAC).  PAC was founded in 1998, is headquartered in Wakefield, Massachusetts, and is also doing business throughout New Hampshire, Maine, Connecticut and Vermont, with 362 automobile dealers and $42.7 million (USD) in finance receivables.

The deal, which was based on PAC’s book value and past earnings, was for $9.5 million (USD).  This was broken down to payments of $9 million cash and 500,000 in Carfinco common shares priced at $9.45 (CDN) or 55,223 shares.  There is the potential for PAC to earn up to $2 million (USD) if it reaches performance targets over the next two years.  Key members of management, including Founder and President, Peter Miller, will stay in place.

In speaking with management, Carfinco believes PAC is an excellent target and provides the company with a solid beachhead into the U.S. market. Tracy Graf, CEO of Carfinco, stated in today’s news that, “We believe the acquisition adds value to our shareholders. Importantly, PAC’s growth strategy mirrors Carfinco’s, by increasing loan originations and earnings in a controlled and structured manner.”

To view today’s news release, please click here.

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.