RE: Q1 Adjusted earnings were only up 16%. Within guidance but pretty weak compared to the historical performance of HCG. Still pretty good for a stock with PE of about 7.5.
Gerry is very cautious about it but he spent a lot of time on the CC highlighting that they may have found a solution for the accelerator program. They've had to scale it way back (down to only 172 MM in Q1) because under IFRS they have to keep it on the balance sheet resulting in an assets to capital ratio that is too high for the regulators. They've found a couple of ways to move some of it off balance sheet within IFRS rules, one way would be selling the income strip and they're waiting for regulatory approval of this approach. They're optimistic because apparently, similiar proposals have already been approved. This could give a big, low risk, income kick next year - I'm assuming it will take a few quarters to ramp the business back up and develop a market for the strips. There's about 2B in MBS already on balance sheet now and they could also apply it to some of that as well (doesn't apply to the Canada Mortgage Bond program). Listen to the CC including the Q&A for a better explanation than I can give.
Every single Toronto newspaper and all the major networks have done multiple bubble stories recently. Everybody and his dog is now sure that the Can. housing market is doomed to collapse (and they're probably right on certain sub-markets such as Toronto Condos) so I expect the PE ratio to continue to stay low for some time. I don't think the popping of those supposed bubbles will have a huge affect on HCG but it will be years before the issue is decided. Meanwhile, we now have a 2% yield to collect while we wait, as well as 15 to 20% earnings growth.