future and dividendswith vault assets and given stated goal of CHW to write over $650M in leases and loans in 2021, what wud CHW look like with loan book of $1.25B as look out to 2022?
as co has moved more into prime over past few years, average yield has fallen, but so should PCLs due to better credit quality of customers (and better economy post covid) . PCL/ending loan balance has been between 2.8-4.1% since 2016. funding costs are falling due to use of securitization. US economy could have good 2021 and 2022 as emerges from covid and US govt spending. on $1.25B in loan book, finance margin higher than $80M could be in ballpark. that $80M wud be 6.5% of $1.25B. in past 4 years, finance margin/loan balance has varied from 7.3%-10.7%, but is 6.5% reasonable? seems so.
personnel and other expenses have been rising, even as total loan book has not. that is something to watch. in 2018, personnel and other expenses was $29.2M on ending loan book of $729M. in 2019 and 2020, those expenses was $37M and total loan book at year end 2020 similar to 2018. if management is disciplined on expenses as it increases size of loan book (more automation/technology?), then operating income (before depreciation and amortization) could be +$40M. in the past 5 years, free cash flow (which is used to determine dividend payouts) divided by operating income (as defined above) averaged 84%.
$40M times 84% = $33.6M. dividends and/or repurchases paid cannot be greater than 90% of the company definition of free cash flow, so that would be $30M ($33.6M x 90%). with shares outstanding at 16M, this is why I interested in CHW. could be paying out $1.50 in dividends at some point in next couple of years