Chesswood Group Ltd CHWWQ

RE:RE:us market for chw getting better

[Nashville35]

good thoughts.

looking historically, us business pawnee (and now with tandem) has alwys been the good business with a long track record.  the canada business was up and down, and seemed lacked management focus.   

CHW has paid out a lot of dividends to shareholders in the past 15 years, and underlying business actually pretty stable,   but book hadn't really been growing, with big issue being handcuffs put on by structure of lending syndicate and capacity said syndicate was willing to provide.   so with little growth in either loan book or dividends, stock done nothing for years.  

new ceo seems to recognize this and the big securitization done in fall + moves to further diversify funding sources removes the handcuffs to a degree (explained in detail in annual report) and why company guided to at least $650 million in new leases/loans in 2021.  the vault deal re-energizes canada and maybe gives management that canada operations had been lacking.   similar to versabnk beginning to grow book a lot and investors react.  

on dividends, recognize that company has favored buying back stock, which in hindsight has been smart.   in march 2021, dividends were ~$320k and buybacks ~$1M, so total of $1.3M returned to shareholders in the month.  if chw had elected to return that all as a dividend, would be ~$0.08 per month, or $0.96 per annum (already).   i'm not frustrated at $0.02 monthly dividend, as i preferred the buyback and the gains in the share price.  

i don't think on a potential loan book of $1.25B in 2022, free cash of $35M wud be crazy.    90% of company's free cash definition can be paid back in form of dividends and buybacks.   that would be $31.5M, or $1.91 per share (on 16.5M shares).    sound wacko, but the numbers work if the loan book can be that size (which is all up to chw expanding funding sources and merging Vault's book in).  an 8-10% trading fcf yield is mid $20s in chw share price.

these small caps breaking out of multi year trading ranges can run farther and longer than many expect.   chw now trading at new all time highs, so no natural resistance from underwater investors getting back to break=even and causing supply to build up.   volume increases over past few weeks too big for the buyback so maybe small cap institutional investors starting to accumulate.  

sound like broken record, but staying long...