Td 3 Q. update $7.00Event ECN reported Q3/20 adjusted operating EPS of $0.10 (our estimate/consensus $0.09), up 27% y/y. Originations of $842mm increased 32% y/y and were higher than our estimate of $782mm, reflecting strong results in HI. All figures in U.S. dollars, unless noted. Impact: POSITIVE HI earnings were down 4% y/y (higher than our estimate). The drop reflects lower servicing margin (servicing revenue to average managed assets), which fell to 134bps (254bps last year), reflecting the temporary reduction in servicing fees for 2020 to compensate funding partners for the higher credit risk associated with COVID-19. In return, ECN received accelerated funding commitments from its partners. Service margins are expected to return to normal in Q1/21. Strong originations, up 37% y/y, reflect momentum in HVAC, windows, doors, and roofing. HI continues to take market share (new agreements with Service Titan and Panasonic in Q3/20) from peers. ECN added new funding partners, expanded funding capacity, and renewed funding commitments into 2021 in advance of contractual maturities. MH earnings were up 15% y/y (in line with our estimate), reflecting growth of 18% y/y in originations and mostly stable margins. The gain on sale to originations margin did decline materially y/y, reflecting the origination of loans on behalf of recently signed partners. These loans will be sold under a portfolio sale agreement rather than through the normal course. Loans of this nature increased to $57.7mm in the quarter, up from $31.2mm last quarter and $16.6mm last year. Management indicated that $10mm of this portfolio was sold subsequent to quarter-end. TD Investment Conclusion Our C$7.00 target price is based on a P/B approach to valuation. We apply 1.8x P/B, an appropriate multiple in the context of the forecast ROE and the balancesheet-light business model. Our BUY rating is supported by the upside to our target price, a reliable funding model, the resilience of HI and MH, and improving origination momentum, particularly in HI. While the capital-light model supports valuing the stock on a P/E basis, we are hesitant to do so until we see consistent book-value growth and fewer non-core charges.