Scotia outperform $18.50Element is expected to report on May 13. We are forecasting Q1/14 op. EPS of
$0.10, slightly below consensus of $0.11.
With a tight range of analyst EPS estimates ($0.10-$0.12), we are not expecting
big surprises in Q1. Investor focus in the quarter will likely be on EFN's NIMs
given the shift in portfolio mix.
For Q1, we are expecting originations of $1B up from $296M in Q1/13. We are
expecting originations from Fleet management to increase by 109% YOY and
Commercial & Vendor volumes to rise 47% YOY, while Aviation Finance is projected
to rise by over 70% YOY. That said, originations from Aviation Finance tend to
be volatile.
EFN's outlook for 2014 remains robust, with growth expected to benefit from
increased demand from its U.S. business, with roughly 50% of annual origination
volume expected to be generated south of the border.
Following a strong 2013 when Element traded at an average P/BV premium to its
peer group of just under 22%, valuation has narrowed considerably with EFN
currently trading at 1.9x book value, a premium of only 4% compared with its
peer group despite its more favorable growth profile.
Maintain SO rating and $18.50 target. We continue to believe Element is a unique
investment prospect and one of few true growth stories left in the Canadian
financials space.