Post by
Possibleidiot01 on Nov 10, 2023 1:12pm
Voss Capital Q3 update
4 | P a g e
ECN Capital Update
ECN has been disappointing and frustrating lately, so we felt it warranted an update. The company recently
announced a major strategic investment from Skyline Champion (SKY), the second largest manufactured housing
player in North America, whereby the two companies have created a captive finance joint venture in addition to
Skyline purchasing a 20% effective ownership stake in ECN. After several quarters in a row of lowering earnings
guidance combined with confusion around the deal structure and dynamics going forward and, from what we can
gather, aggressive price-insensitive tax-loss selling by Canadian mutual funds, the stock has become extremely out
of favor and is 40% lower than the price of the Skyline deal. Although the fledging JV has limited visibility at the
moment, we think the partnership has the potential to significantly drive earnings growth as Skyline pairs an in-
house financing option with the homes they manufacture and sell. The market is clearly less optimistic. At the same
time, Texas manufactured housing retail unit sales have quietly flipped back to positive year-over-year growth in
August (+6%), a promising sign for continued Triad loan origination growth, but there is still fear over rates and
undoubtedly weak end markets across RV and Marine. If we back out ECN's purchase price of Source 1 & IFG, their
RV and Marine origination platforms, and our estimate of their earnings contribution, we believe the core business
of Triad is being valued at ~3.5x forward earnings - an extremely distressed level valuation for a business that has
been a steady compounder and market share taker, is asset-light, and achieves >50% EBITDA margins. We can still
envision a clear event path from here, where they sell the RV and Marine business once the end markets at least
stabilize, rebrand the company to Triad and relist to the US from Canada, and then eventually sell out entirely to
Skyline or a major funding partner for a price well above the previous deal price ($3.04/share) within the next 2-3 years
Comment by
Cheeky20 on Nov 10, 2023 5:41pm
Thanks for posting. I had forgotten that the RV and Marine businesses were on the block. Just re-iterates my point around patience being required for ECN now.