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Nicholas Financial Inc. Message Board

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  • spin.vestor spin.vestor Oct 27, 2012 5:07 PM Flag

    2Q earnings

    I see 1c eps increase (46c Basic EPS) under the assumption there is no more loan loss reserve release or additions. To get higher than that there needs to be a material pick up in originations per branch or they release another chunk of reserve releases - both possible but unlikely in this competitive environment I think.

    Key assumptions:
    Purchase Volume Assumption: $610,000 / branch * 63 branches = ~38.5MM (37.2MM Last Q and 35.1MM Y-o-Y).
    Charge-off: 4%
    Dealer discount: 8.1%
    Provision Build/(release): $0

    g/l NICKers

    Spin

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    • 46c Basic EPS if you unwind the swap write-off so more or less inline with what I was expecting from a EPS perspective.

      +ves: Volume per branch was higher than I expected at 622,000 vs 610,000 I expected.

      -ves:
      - Dealer discount is down to 7.41%. This is indicative of the hugely competitive environment. I'm not sure if DD has been this low before - I'd need to check but I think 8.04% was the prior low in Q2-2007 (back to 2002).
      To get the branch volume NICK had to throw the Dealer Discount under the bus.

      -Charge-offs materially picked up to 6.39% up from 4.07% last Q. That's about 1.7MM higher $$ charge-off than I expected and I'm guessing is due to a combination of manheim index rolling over impacting recovery values + higher volume of repossessions due to the ongoing deterioration in the loan book.

      - 30+ PD now at 21MM up from 16.8MM last Q.

      g/l NICKers -- Continued tough sledding ahead imo.

      Spin

    • Unfortunately, we were BOTH WRONG.

      Earnings were DOWN by $.04/share.

      It was explained that expenses were higher, and there was a non-cash expense for a writedown on an interest rate swap.

      Hopefully, we can get earnings growing again next quarter.

      Any thoughts?

      Sentiment: Strong Buy

 
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