Post by
419lornestreet9 on May 06, 2021 9:27pm
CHW Q1/F21 Earnings Release
I am inclined to view the release modestly positively, though I am not sure how to process the new dividend guidance.
The origination guidance was maintained and CHW originated $130MM during the quarter. According to the MD&A, originations improved month-over-month and into Q2. They will need to do about $175MM per quarter for the remainder of the year to achieve this.
Pawnee/Tandem portfolio grew 10+% Q/Q in USD. This is great and revenue should grow in line with portfolio growth going forward. I believe they mentioned that originations were a greater percentage of prime than anticipated (75%). Canada was not good this quarter, but we know the merger has happened.
Expenses were a little higher compared to my model, but guidance mentions operating leverage going forward, so not too concerned.
As we have said on the board in the past, the longer they hit their origination guidance the better for the stock. This quarter was positive for that thesis. They also have about $USD 200MM in borrowings outside of securitizations so I think that could be a catalyst this quarter or next (fingers crossed) if they can do another securitization. I am also looking forward to seeing the new merged business.
I would say nothing in this release altered my projections for CHW's FCF going forward. I think $30 million is conservative for F22 and achievable, but they could do up to $40 million if the economy stays strong (USDCAD is not helping us though). However, my projections for dividends have to go down. I am not sure how to square those two things and I have no idea what the market was expecting for dividends going forward. I think it is possible that the stock could give back some of the recent gains tomorrow. It is really hard to say. I am inclined towards growth, but not sure what other shareholders are thinking. I have honestly never encountered a company drastically altering its dividend policy like this. Guess we will find out tomorrow.