Element Fleet Management Corp T.EFN

Alternate Symbol(s): ELEEF

Industrials

Element Fleet Management Corp. is a Canada-based fleet solutions providers. It operates as a pure-play automotive fleet manager. The Company offers a full range of fleet services and solutions to corporations, governments and not for profits across North America, Australia, and New Zealand. Its services address every aspect of clients' fleet requirements, from vehicle acquisition, maintenance, accidents and remarketing, to integrating electric vehicles' (EV) and managing the complexity of gradual fleet electrification. It offers a range of fleet solutions consisting of cost management; driver productivity and vehicle uptime; fleet electrification, lease vs ownership, sale leaseback, and others. Its fleet types include global; government and public sector; material handling equipment; sales, and heavy trucks. It offers fleet solutions to various industries, such as construction; energy, oil and gas; food and beverage; healthcare; services; transportation, and utilities.

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Element Fleet Management Corp

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Post by retiredcfon Aug 09, 2023 8:45am

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Post# 35579115

TD Also Raise

Element Fleet Management Corp.

(EFN-T) C$21.75

Record Revenue, Earnings, and Originations

Event

Q2/23 results

Impact: POSITIVE

Q2/23 reflect record results across revenue (including record services revenue), adjusted EPS and FCF/share, and origination volumes. 2023 guidance was reiterated. We are encouraged with the solid origination volumes this quarter illustrating the order backlog shifting to vehicles under management (VUM). We have made modest changes to our estimates (we are generally at the high-end of guidance). Our target price moves up to $25.00 (from $24.00). Element is trading at 12.8x 4QF P/FCF, which is above its L5Y average (10.8x) but fair, in our view, given the strong fundamentals. We reiterate our BUY rating.

Revenue of $323mm was a record and above our $312mm forecast (consensus was $313mm). Organic revenue (constant currency) was up 8.4% y/y, with servicing fees up 12% and net financing revenue up 6%. Syndication revenue was down 27% y/y. Adjusted EPS of $0.33 was above us (and consensus) at $0.31 and up 14% y/y. FCF/share of $0.46 was well above our $0.40 estimate. However, the company reiterated FCF/share guidance and noted this quarter is likely the high-watermark for 2023.
Originations were solid with the backlog declining for the first time since late-2020. The $2.6bln order backlog is down from $3.0bln q/q. While new orders were solid at $2.1bln, originations of $2.5bln more than offset and reduced the backlog (but still elevated vs. an average $1.7bln since Q2/18). Management reiterated that the backlog may remain elevated for the next 12-18 months.
Syndication activity was soft. $0.7bln of syndication volumes were lower vs. our $0.9bln forecast. The yield of 1.65% was also below our 2.20% estimate due to 'interest rate volatility'. Guidance was fine-tuned towards $3.5bln for the year (vs. $3.0-$4.0bln previously), suggesting 2H/23 volumes should be higher than 1H/23.
Conference call is at 7:30 am, August 9, 2023. Can be accessed here.

TD Investment Conclusion

We believe the combination of commercial momentum and a healthy order backlog will continue to support the medium-term growth outlook. We are encouraged to see originations pick up, strong servicing revenue growth (capital light), and execution on securing funding (ABS issuance, expanded credit facilities, and syndication activity).