Taking a liking to the new Home Capital: two analysts up their target price -

Taking a liking to the new Home Capital: two analysts up their target price

Credit: financialpost.com

  • Sep 13 2017 22:48About: 2 months ago
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The first full day of trading in shares of Home Capital Group following Tuesday’s highly expected shareholder vote against the second equity infusion from Berkshire Hathaway was a bit dull. Trading volume, at least for shares listed on the TSX, was significantly lower than the previous few days and the shares reversed their previous day’s gains.

But there was at least one piece of not-so-dull news: two of the 10 analysts who cover the company, which has had its issues over the past six months, revised their price targets. Marc Charbin, the analyst at Laurentian Bank Financial, boosted his price target to $20 from $17 while Jeff Fenwick from Cormark Securities upped his target to $18 from $17.50.

In a note, Charbin said in his previous modeling of Home Capital he had accounted for the cash and dilutive effect of the second Berkshire tranche. Given that the second tranche was rejected, removing its effects leads to a higher book value per share ($22.10 vs. $19.46) and higher earnings per share.

“We continue to value HCG by applying a 0.9 times price-to-book value multiple, which results in a $20 target on our revised BVPS,” he wrote, arguing that the target price could be realized by the first quarter of 2018. (We couldn’t reach Fenwick.)

Charbin is the outlier among the 10 analysts: two of them (Charbin and Dylan Steuart from Industrial Alliance Securities) rate it a buy; seven a hold and one a sell. The price targets range from $13 to $20.

Twin Butte and disputed claims

In less than a week, there may be some more good news for the holders of convertible debentures issued four years back by Calgary-based Twin Butte Energy.

On Sept. 20, two disputed claims brought by a former executive and a former employee of the company — which went into receivership one year back and which was sold to a Chinese buyer last January — are to be heard in a Calgary court.

But if the court agrees with previous rulings, then the two claims will be thrown out and the debenture holders will stand to get their allocation of the $751,710 that has been held back by the receiver, FTI Consulting Canada.

News of the two disputed claims is contained in the tenth report that was recently released by the receiver.

The report notes the former executive originally brought a claim of $471,520 to the receiver. On July 21 of this year, the receiver issued a notice of disallowance, “disallowing the claim in its entirety,” a move that naturally enough didn’t suit the executive. So in early August, the claimant issued a notice of dispute, a matter that will now be heard next week.

The disputed claim of the former followed a similar path — with one difference: in mid-August the receiver issued a “notice of revision” that revised the claim down to $58,050 from $280,200. At the end of August the claimant issued a “notice of dispute.” And that’s where the matter stands.

There are two other more substantial disputed claims: both are for more than $2 million. In one case the receiver issued a “notice of disallowance … in its entirety,” while in the other case, the receiver revised the claim to a lower amount, which led to the claimant filing a notice of dispute.

As reported previously, debenture holders who opposed the original sale of the company to Reignwood, stand, in the initial distribution, to receive at least 66 per cent of their claim and 69 per cent of the face value of their original investment.

Financial Post

bcritchley@postmedia.com



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