It was a record-year for sub-prime auto lender Axis Auto Finance Inc. (TSX :V.AXIS, Forum). The publicly-traded financeCompany recently released it’s 2018 financial results, recording, among other highlights, a 131% increase in revenues of $15.8 million, up from $6.8 million the year before.
Fiscal 2018 Q4 revenue equated to an annualized revenue run-rate of $31.9 million. Adjusted earnings for Q4 2018 were $1.4 million, which represents a seven-fold increase compared to Q4 2017’s $0.2 million.
For the fiscal year ending June 30th, 2018:
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Record net finance receivables of $109.1 million, compared to $21.9 million in 2017 (a 398% increase)
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Successfully raised more than $43 million in equity and convertible debentures
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Adjusted earnings of $2.8 million in 2018 compared to $0.9 million in 2017
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Record originations of $30.2 million up 60% from $18.9 million for 2017
Also of note in Axis’ report is its annual loss rate for 2018, which was reported at 7.2%, down from 8.8% in 2017 and reflecting an 18% year-over-year improvement. Management expects annual loss rates to trend down even further in fiscal 2019, as a result of PPA and losses on the acquired portfolios are netted against the revenue stream.
Management reflected on 2018 as a “transformational year”, pointing specifically to two acquisitions that were closed:
Cars on Credit Financial Inc. - Bought for $11 million and nearly doubled Axis’ portfolio to roughly $55 million, while also giving it entry into the Maritime market and a loan product to supplement its existing lease product.
Trend Financial Corp. - Bought for $29.3 million and doubled Axis’ portfolio once more to around $110 million and eliminated its biggest direct competitor in the massive Ontario market.
Axis CEO Todd Hudson highlighted that bringing the two acquisitions home laid out a clear path for national growth.
“We have told investors that the acquisitions will be immediately accretive to adjusted earnings and that's exactly what has happened. This represents another step forward towards the roll out of our leading national sub-prime automotive finance platform.”
Axis is at an inflection point in its development after the two completed acquisitions have resulted in the creation of a superior sub-prime auto finance platform. The platform allows Axis to accelerate its organic growth as well as lower the cost of on-boarding potential portfolio purchases. What’s next for the Company? Canada wide expansion, lowering its borrowing costs and TSX senior board listing are all on the agenda for fiscal 2019.
The Company’s current book value is $0.42, it therefore currently trades at roughly 1.2x book value. The only true comparable in Canada was Carfinco (purchased by Banco Santander in 2014) that over the last decade traded at an average multiple of 4.1x book… seems there is plenty of upside in the Axis story.
www.axisautofinance.ca
FULL DISCLOSURE: Axis Auto Finance Inc. is a paid client of Stockhouse Publishing.