TSX:GSY - Post Discussion
Post by
retiredcf on Nov 14, 2022 8:36am
TD Raise Target
Bump it by 5 bucks to $200.00. GLTA
goeasy Ltd.
(GSY-T) C$128.77
Q3/22: Record Sequential Loan Growth; Credit Stable Event
GSY reported Q3/22 adjusted EPS of $2.95 (up 9% y/y) vs. our estimate of $2.81 and consensus of $2.79. Relative to our estimates, loan growth was stronger-than- expected and net charge-offs were lower-than-expected.
Impact: POSITIVE
Key takeaways from the quarter include:
Loan Growth: Loan growth was a record (organic) sequential increase of $219mm, outperforming our estimate of a $183mm increase (guidance $180mm- $200mm). The robust growth was driven by record originations of $641mm, up 47% y/y, with healthy demand across products and channels. Many of the company's recent investments are starting to gain traction. Home equity originations increased 125% y/y; powersport originations +37% y/y; and auto financing originations +144% y/y. Management is guiding to $175mm-$200mm of growth in Q4/22E and an ~50% increase in the portfolio by Q4/24E. Importantly, this guidance assumes only domestic organic growth with the current product suite.
Credit: Net charge-offs were stable sequentially at 9.3%, but up from 8.3% in Q3/21. This was lower than our estimate of 9.8% and near the mid-point of guidance (9.0%-10.0%). The prior-year comparable reflects pandemic-related government support and consumer expense reductions. We expect credit losses to move modestly higher next quarter, but remain within the guidance range (guidance for 9.0%-10.0% in Q4/22E). Management targets a net charge-off ratio of 8.5%-10.5% on an annualized basis in 2022E and 2023E (our forecast: 9.3%/9.5% 2022E/2023E). The allowance ratio continues to trend lower, down 10bps q/q to 7.58% as the portfolio continues to be high-graded.
TD Investment Conclusion
We like goeasy for five primary reasons: 1) the company's unique position within the Canadian financials space in that it is a growth company exhibiting a superior ROE; 2) the significant opportunities for continued growth in its current market and new verticals and potential geographic expansion; 3) credit risk is well-managed; 4) potential for additional acquisitions to further boost growth; and 5) track record of rewarding shareholders via dividend increases. Additionally, management has a strong track-record of meeting or exceeding guidance; substantially all of our estimates fall within guidance ranges.
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