Web Site
Google Finance
SEC Filing
Oct 31, 2012
2013 Q1 Data
Year end: Mar. 31.
Check list:
1.Major Business.
Sub-prime used car loans. Not like QC Holdings, the company doesn't own any user car branch. Also, it gets some discount from the car dealer when initializing loans.
2.Balance sheet.
Recent Price: $13.50, Tangible book value: $11.6, Share outstanding: 12.1m, Market Cap:$163m.
Total receivable: $245m, Debt: $109m, Cash: $5m.
3.Credit facility.
$150m LOC. 30 day LIBOR+3%. Which is 4% now. $109m outstanding.
4.Financial data by years.
| 2013* | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 82.1 | 68.1 | 62.8 | 56.5 | 53.1 | 50.1 | 46.7 | 42.7 | 32.8 | 25.5 | 22.4 | 20.2 | 17.8 |
| OP Income | 32.5 | 36.1 | 27.3 | 17.7 | 7.6 | 15.6 | 18.7 | 17.0 | 13.1 | 8.4 | 6.8 | 6.3 | 5.5 |
| Income/s | 1.63 | 1.89 | 1.45 | 0.95 | 0.46 | 0.97 | 1.17 | 1.01 | 0.8 | 0.64 | 0.81 | 0.75 | 1.35 |
| CF-WC | 23.3 | 23.3 | 20.4 | 20.7 | 21.3 | 18.2 | 16.0 | 14.5 | 9.5 | 6.4 | 5.8 | 6.6 | 5.1 |
| Discount | 11.5 | 12.4 | 12.9 | 11.1 | 10.2 | 9.7 | 10.0 | 9.5 | 14.5 | 12.0 | 10.5 | 9.4 | 8.4 |
| Provision | 13.4 | 0.4 | 4.6 | 11.3 | 16.4 | 7.7 | 3.6 | 3.9 | 2.4 | 2.2 | 2.2 | 1.9 | 1.5 |
| Total Resv | 13.4 | 12.8 | 17.5 | 22.4 | 26.6 | 17.4 | 13.6 | 13.4 | 16.9 | 14.2 | 12.7 | 11.3 | 9.9 |
| Charge off | 16.7 | 12.7 | 12.0 | 16.7 | 20.9 | 15.9 | 11.1 | 7.7 | 7.3 | 8.3 | 8.1 | 6.6 | 4.6 |
| Accreted | 0 | 0 | 0.1 | 0.4 | 0.8 | 2.0 | 4.2 | 8.3 | 5.7 | 2.5 | 2.2 | 2.9 | 2.5 |
| Receivable | 250 | 242 | 230 | 202 | 187 | 179 | 164 | 140 | 114 | 97 | 86 | 76 | 65 |
| Debt | 128 | 112 | 118 | 107 | 102 | 100 | 94 | 82 | 65 | 68 | 60 | 53 | 48 |
Dividend: current 0.12/quarter, (update: at Dec. 2012, paid $2 special dividend )
5.Cost structure
Mainly credit losses.
6.Insider holding, options, Insider trading info, share buy back.
Peter L. Vosotas: CEO, Founder, 1.7m shares, 13.9%.
Mahan Family, LLC: 652k, 5.4%. Appears since the 2001 proxy.
7.Management compensation.
Peter: 430k, 667k, 554k for the past 3 years.
Ralph Finkenbrink(CFO): 366k, 426k, 348k for the past 3 years.
8.Employee numbers. Revenue/Employee. Compensation/Employee.
297 at Mar. 31. 2012.
9.Industry comparison.
Other banks or financial institutes
10.Auditor
Dixon Hughes seems ok.
11.Major events.
n/a
12.Comments.
(1) It does have a moat which is the controlling of credit risks. Although it issues sub-prime debt, its loss rate is quite low and for the past 12 years, the discounts it gets roughly equal the charge offs.
(2) Still can't understand the relationship between reserve, charge off and income accreted.
(3) Tax rate is around 38% for the past few years. Currently, the price is 6.5 times of current after-tax cash flow.
(4) The company is in U.S but registered in Canada, so the dividend will be charged 15% for us citizen while might be no charge for Canadians. (update: this has been confirmed that no tax was withheld from my account for the latest $2 special dividend)
(5) When compare Debt with Receivables, The Receivables/Debt grow steadily from 1.35 to over 2.15 from 2001 to 2012, which also excludes some dividends that had been paid. Its financial position is getting pretty strong thus enable it to pay the special dividend.
June. 28, 2013 Updated with 2013 data
(1) Use 5 years average earning its about $1.27/share. It has a base price of $19.14 now.
(2) I give it a Quality Score of 10 for its strong moat of the ability to limit its credit risk.
Feb. 17, 2016
(1)After exited my position early last year. The current price is dropped to around $10.50 level. There are quite some changes in the company since the last update. First, the company tried to sell it for $16.00/share and that deal failed. Second, Peter retired and Ralph(CFO) take over the role as CEO. Third, the company did a tender offer early last year at $14.85 and retired 38% of total shares.
(2) Except above the company's business changes very little in my opinion. However, currently, there is more competition than before and the business is less profitable. However, with a P/E of only around 7, the stock is very cheap. There is excellent writing about it in SeekingAlpha. The author is the one who wrote a good analysis of Glentel before.
Links:
http://seekingalpha.com/article/3498766-long-case-nicholas-financial-part-1
http://seekingalpha.com/article/3502086-long-case-nicholas-financial-part-2
(3) I still think the company should be worth at least $20 or more. I had a concern about the CEO retirement before but it seems the new CEO pretty much keeps the company operating the same way as before which is good.
Nov. 3, 2016
Q3 2016, Current price $9.00
I was concerned about the company's charge-off rate is close to 9% which is even higher than in the year 2009. The main reason is that there are many new players in the auto loan market driving competition up and the quality of its loan getting worse. I am not sure whether this is just a temp market issue or the company gave up its longtime discipline.
June 13, 2018
Q4 2018 Data, Price: $8.7, shares 7.9m, cap: $78m.
(1) For the past 2 years, the companies experienced the highest delinquency ratio and charge-offs. One of the reason is that there are new players in the market which make the business harder. The second reason is the company didn't control the risk well and wrote lots of questionable loans.
(2) In Nov. 2017, the company got back an old manager who worked for the company previously for quite a long time. He seems to have done a good job already for the full Q4 2018. The delinquency ratio was down in the last two quarters. Also, the balance of its loan was down quite a lot, now the loan to receivable ratio is around 60%.
(3) Currently, the company is been able to make even. If the charge-off ratio can decrease to the average number of 7%, it will add $8m pretax income to the company. It is hard to estimate the earning but it should be able to get $1 to $1.5 per share earning if the trend continues. Also, the current book value is around $13.6/share. Overall the current price is quite cheap if we can expect the good trend continues.
July 1, 2019
2019 Data, Price: $9.25, shares: 7.9m cap: $73m
(1) For the full year of 2019, the company logged losses mainly caused by bigger charge-offs. The delinquency rate is still very high. However, it is getting better in the last 2 quarters.
(2) The new origination was much lower than in previous years. At the end of the year, the receivable balance is $202m while net debt decreased to around $110m which is very good in my view.
(3) As the company is improving, it is still very hard to guess how profitable it will be in the future. If the provision rate can drop to below 10%, it is possible to generate $8m-$12m annual income in the future.
Aug. 4, 2021
2022 Q1 Data. Price 11.35. Shares 7.6m. Cap: 87m.
(1) For the full year 2021, the company logged over 8m in net income. Both delinquency and charge-off ratio around 6%.
(2) Current gross loan balance is around $180m which is close to 2007 level. It is still dropping at a rate of $4m/quarter. Auto loan is losing while direct loan balance is increasing. I estimate it should be able to make even at around Q4 2022 if it can maintain current $20m+/quarter new loan origination.
(3) Direct loan is is close to 10% of total loan balance and is continue growing.
(4) It is likely started at 2013 that the company started to wrote questionable loans. After 3 years, began in 2016, the delinquency to start to show up. The new CEO is on board at Q4 2017. It took another 3 years for the delinquency to start to drop.
(5) The company is in a very good shape. However, the current problem is that the loan balance is much lower while its SG&A is much higher. Assuming a $12m quarterly interest income, $8m SG&A, 1.8m(1%) provision, $1m interest. That just leaves around $1.2m in pre-tax income per quarter. Unless the loan balance began to regrow, we won't see the income growth. That been said, the growth potential is real and trend is good.
