RE:RIFCO Acquisition Closes Fridaygood points. thanks.
although with this new chw ceo, and how good they seem to be managing balance sheet and broadening funding sources (still surprised that chw could get such a large abs done at less than 2%), think chw see THEMSELVES as the "larger buyer" of smaller firms at some point in the future. seems like they just getting started. balancing leverage, profit margin and asset turnover to drive return on equity higher and make sure biz performs well thru a credit cycle. something previous team did not seem to optimze and lack of funding sources meant chw was very vulnerable to downturns. now, higher roe and less volatility = greater multiple to book and easier to further diversify funding sources. the higher multiple of book will allow the stock to be used as currency in consolidating smaller companies in accretive way. these kinds of stocks can go for farther and longer than many think. i like commentary from last earnings report below. sounding more like an asset manager than historical small cap equipment lender, which think is the goal. allocate capital to optimize risk-adjusted return and re-balance as environment changes. big valuation difference in public markets between asset managers and equipment leasing firms. if successful, maybe multi-bagger over coming years.
"There are several benefits of an improving credit mix, the effects of which are more predictable and less volatile operating results. As Chesswood’s portfolio grows, our team is focused on managing asset turns, profit margins and leverage, with the goal of providing enhanced returns on equity for our investors. The growth of our prime receivables requires increased emphasis on asset turns and the management of leverage to generate strong returns on equity. This contrasts with our near prime portfolio, where we focus primarily on credit margins. Our team’s ability to assess credit across the full spectrum from prime to non-prime allows us to optimize the use of balance sheet equity and achieve our targeted return on equity. We believe this capability will serve us well over a credit cycle where opportunities across tiers of credit fluctuate."
chw +$20 by end of 2022 imo.