CIBCEQUITY RESEARCH
December 6, 2021 Earnings Update
ECN CAPITAL CORP.
Resuming Coverage Following The Sale Of Service Finance
Our Conclusion
We are resuming coverage of ECN Capital following a period of research restriction related to the sale of the company’s largest operating subsidiary, Service Finance Company (“SFC”), to Truist Bank. We believe that the divestiture was partly motivated by a changing competitive landscape in the home improvement consumer loan space. The exit represented a 6.5x multiple of capital in just over four years. We believe that the market-implied value of the stub appears reasonably conservative, and that the company has lined up a solid growth outlook for 2022 and beyond. We are reiterating our Outperformer rating and revising our price target to C$6 (which,
combined with the $7.50 special dividend, reflects a total return of ~20%).