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goeasy Ltd EHMEF


Primary Symbol: T.GSY

goeasy Ltd. is a Canada-based company, which provides non-prime leasing and lending services through its easyhome, easyfinancial and LendCare brands. The Company's segments include easyfinancial and easyhome. The easyfinancial segment lends out capital in the form of unsecured and secured consumer loans to non-prime borrowers. easyfinancial’s product offering consists of unsecured and real estate secured instalment loans. The LendCare operating segment specializes in financing consumer purchases in the powersports, automotive, retail, healthcare, and home improvement categories. The easyhome segment provides leasing services for household furniture, appliances and electronics and unsecured lending products to retail consumers. Its customers can transact seamlessly through an omnichannel model that includes online and mobile platforms, over 400 locations across Canada, and point-of-sale financing offered in the retail, powersports, automotive, home improvement and healthcare verticals.


TSX:GSY - Post by User

Post by retiredcfon May 08, 2024 1:27pm
79 Views
Post# 36029327

RBC Raise Target

RBC Raise TargetTheir upside scenario target is also raised to $245.00. GLTA

May 8, 2024

goeasy Ltd.
Solid Q1/24 results. Increasing target to $225

Our view: While normalized EPS was largely in line with our forecast and consensus, we think the notably better-than-forecast revenue yield was a positive sign. Big picture, we think GSY continues to deliver strong results, driving profitable growth with positive credit performance. We think an investment in GSY offers investors exposure to a part of the Canadian financial services industry that could generate attractive investment returns over the medium- to long-term. We view the shares as attractively valued and increase our target to $225 (was $201) and maintain our Outperform rating.

Key points:

Q1/24 normalized EPS of $3.83 was largely in line with our $3.87 forecast and $3.81 consensus (range of $3.66 – $3.88). The slight variance to our forecast reflected higher-than-forecast bad debt expense mostly offset by higher-than-forecast interest income as the total income yield of 35.0% was solidly better than our 33.9% forecast.

In terms of other key metrics from Q1/24: (1) originations of $686MM were slightly below our $701MM forecast; (2) gross consumer loans of $3.85B were in line with our $3.84B forecast; (3) net charge-offs of 9.1% of avg. consumer loans were in line with our 9.0% forecast; and (4) bad debt 11.2% of avg. loans were worse than our 10.0% forecast, primarily due to Q/Q changes in forward looking economic conditions as opposed to deterioration in credit performance.

Other takeaways: (1) For Q2/24, GSY is guiding to gross consumer loans to be up +$250-$275MM Q/Q, total loan yield (including ancillary products) of 34.0% – 35.0% and net charge-off rate of 8.5% – 9.5%; (2) Q1/24 was a record quarter for new customer application volume of 613,000 +41% Y/Y with 40,400 new customers acquired +17% Y/Y; and (3) while GSY’s guidance remained unchanged, the Company is now guiding to 2024 year- end gross consumer loans to achieve the high end of guidance, so at least $4.55B (guidance range of: $4.35B – $4.55B).

Increasing our 12-month price target to $225/share (was $201) and maintaining our Outperform rating. The higher target is due to higher financial forecasts and a slightly higher valuation multiple (11x P/E, was 10x) reflecting our slightly higher ROE forecasts. Conference call today at 11am EST; webcast link available on goeasy website or dial-in 1-888-664-6392.


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