third quarter surprise to get the 25% dividend bump, second increase in a year. makes sense, since just in 9 months ytd, fcf is $43 million ($2.40 per share) and chw allowed to payout maximum of 90% ($38.7 million). in ytd, chw paid out $3.1 million buying back stock and $6.39 million in dividends = $9.5 million, or just 25% of allowable. still, w/backdrop of recession, good signal of confidence in biz resiliency. and if chw slowing originations, cash flow explodes and wud be quickly overcapitalized. giving back to shareholders w/div and buyback good thing imo.
us biz performing well (pawnee/tandem split 61/39, so tandem gaining as pct of total). pcls in us up only $200k, and >30 day up from 0.9% to 1.37%, but all still looks fine. 64% of book prime. us equipment financing segment much more efficient than canada, net lease up from us$823 million at dec 31 to $981 million at sep 30, and employee count only up from 153 to 157. still chw best biz imo.
can equipment segment way less efficient. employee count up from 137 (dec 31) to 175 (sep 30), and total net receivalbes (on fx equilvalent basis) of $687 million at sep 30 vs $1.3 billion for us equipment segment, and canaada biz ended quarter with 175 employees (us had 157 employees). so with higher overhead, has predictably lower profitability. maybe they growing into infrastructure. if not, need to fix...
rifco (can auto) going well , gnerate $5 million in op income last six months. credit looks fine w/backdrop of higher risk book and >18% interest yield. i think they only paid $25 m for this biz. so far, really good return.
most interesting is asset management division. paid only $3.6 million for wapointe . also includes the third party deal with us private equity firm (where chw receive sourcing and servicing fee). last two quarters, asset mgmt has generated $2.2 million in q2 in op income, and this q, $2.5 million. hard to extrapolate (cuz not sure what is behind this) , but if chw has biz w/no credit risk which run rate at $10 m op income, that alone worth a few dollars per share. littl wonder there is focus to grow this.
liquidity strong - $0 drawn on large us warehouse loan facility and lots of room on other facilities. getting abs done good sign. clearly buying back stock . lots of flexibility to shrink balance sheet if conditions warrant.
commentary from mnaagement at end encouraging:
"Our teams are working diligently to adjust pricing to reflect the impact of rising interest rates. At the current levels of inflation, it is difficult to determine when the interest rate hiking cycle will end. We are therefore fixing funding costs along with new originations to manage profitability. If history is any gauge, a recession is almost certain to occur as central banks continue to increase interest rates. Our teams have considerable experience navigating these difficult environments successfully. First, our average portfolio term is short, thereby producing significant cash flow during periods where origination volumes decline. Second, most of our funding is fixed, reducing the overall impact of rising rates. Lastly, our portfolio of receivables is largely made up of prime borrowers with strong credit profiles. Based on previous cycles, we expect that funding markets will become progressively more challenging as evidenced by recent activity. We therefore believe the decisions made during the third quarter position our businesses to capitalize on opportunities going forward."