ECN Capital Corp T.ECN.PR.C

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Their upside scenario target is also raised to $12. GLTA

February 4, 2021

ECN Capital Corp
Key takeaways from investor day

Our view: ECN’s investor day reaffirmed our positive view on the stock. Furthermore, there are organic growth opportunities which we think could see the shares have amongst the highest total return within our coverage in 2021. For example, Service Finance said it could announce later this month a new “big box retailer” relationship (not included in guidance). ECN trades at P/E’s of 11.9x our 2021E and 9.1x our 2022E EPS, yet we forecast ROEs of 16% and 19%, respectively. We raise our price target to C$10 (from C$8) and maintain our Outperform rating.

Key points:

• Financial forecasts tweaked; ECN’s guidance largely in line with our prior forecasts. ECN gave 2021 EPS guidance of US$0.46–0.51 (RBCe: US $0.48) with 2022 “growth potential” of US$0.55–0.64 (RBCe: US$0.63), implying EPS growth rates of +53% and +21%, respectively.

• Service Finance (SFC): We see SFC as well positioned to capitalize on numerous growth opportunities in 2021: (1) organic growth from existing relationships (e.g., adding new dealers, growth with existing dealers; (2) growth from recently announced new vendor relationships (e.g., Service Titan, Panasonic); (3) newer products (e.g., Multi-lender program, Commercial); and (4) new vendor wins (e.g., aforementioned big box retailer opportunity, but SFC mentioned numerous potential opportunities in the next 18–24 months).
  Kessler: We think Kessler is poised to benefit from potential key drivers for 2021: (1) stronger credit card M&A activity; (2) recovery in risk- based marketing spending (including expansion to target non-financial institutions); (3) new third-party asset management mandates; and (4) 2019 growth in credit card spending.

  • Triad Financial: In addition to its core manufactured home loan origination business, Triad outlined a number of other opportunities to drive growth in 2021: (1) Land Home mortgage product; (2) Bronze 2019 program (selling rejected loans to funding partners willing to underwrite the credit); and (3) Commercial.

  • ESG: ECN provided initial data points regarding its ESG reporting, including: (1) committed to females representing 30% of Board Directors (29% now) and C-Suite (not disclosed); (2) SFC and Triad loans are normally for energy efficient products; and (3) follow SASB guidelines for the consumer finance industry.