DH Corporation (DH.TO)

He looked at this about 18 months ago. They were moving from writing cheques in Canada and into more interesting stuff in the US. Unfortunately, that didn’t work out, in the short term anyway. They took a hit and they cut their dividend. The bloom is kind of off this for now. He is not interested. Dividend yield of 5.8%.

Conceptually he loves the area they are going to, regarding the payment system, electronic banking, etc. The acquisitions they’ve done in the past 2 years have yet to prove themselves, which is a problem because there is a lot of debt on the balance sheet. Not sure about the quality of assets they acquired in the past year. He would love to see a quarter or 2 of good results.

Sold his holdings in May, when there was a bad quarter of earnings. The company did a number of acquisitions; however the acquisitions weren’t bringing the revenue in fast enough, and hence they were over levered on all of them. Q4 basically missed on all factors, and the stock fell off a cliff. They’ve been able to renegotiate their debt covenants, so that is all clean. Also, reduced distributions. The last move, from $17 to about $18, was based on the potential of an acquisition. If it does not happen, he expects the stock will decline. However, if it does happen, you could see about 20% from where we are today.

This has struggled. They cut their dividend and now are starting to refocus on their FinTech business, which is a new thing for them. It is paying a dividend, so it got hit by the Trump Dump. He doesn’t see good prospects over the next few months, especially if bond yields continue to go up.

(Market Call Minute.) Stay away from this. There is too much debt on the balance sheet. They recently cut their dividend.

The stock plummeted recently. Whenever he sees a stock fall 40%, he asks if it is a company specific problem, management incompetence or something that is more widespread. Their peer group are having similar problems, so he doesn’t think it is a company specific issue, it is basically industrywide. Also, banks and financial institutions are moving away from discretionary spending, and only spending on what they have to, which is risk and compliance. There are examples of banks now adopting more subscription base software services, where they have lower payments or an extended period of time, rather than larger upfront payments. That is going to hurt the sector. On the FinTech companies, a lot of banks are going with smaller upstarts, and not with the bigger guys. Given the secular trends that are occurring right now, he would probably wait.

Very difficult to ascertain if this is a good buying opportunity or not. He would wait until there is clarity next year, and they give a bit more of an update on the outlook.

He was definitely disappointed with the quarter, and the stock has come down substantially. It is probably at an OK level at this point.

It was in an uptrend and this year is a disaster. It is a good example of what happens when support breaks. $28 was pretty darn good support, although there were lower highs. Then they guided lower on earnings. It is the law of gravity here. Don’t catch a falling knife. It will go as low as it wants. If it stops making lower lows then it looks like it is getting healthy and you watch for a breakout.

(Market Call Minute.) This has been a bit of a disaster story. There are management credibility issues. 8.5% dividend yield. He would be watching this to see what happens next. It could get interesting.

He wouldn’t go near this. When this was in the cheque printing business, he could understand owning it. They then got into the FinTech business and started becoming a company that he didn’t understand.

He thought it had a chance of sticking around his green line ($22). If we get a positive transit then it has a chance of getting to analysts’ estimates.

(Market Call Minute.) Had a very bad quarter, and got hit in just about every business line they are in. A huge disappointment. This is at a point where it is probably worth looking at again.

He came into this earnings season with a short. It has high valuation and poor earnings momentum. They made an acquisition a while back, but the problem is that they had a big earnings miss. They are trying to transform the business, but it is not working out and now they have a lot of debt.

Not something he would buy. There is still uncertainty around earnings growth, and even direction of the business over the next 3-5 years. If you are a little further on the risk spectrum, you might want to take a half position here, otherwise wait to get a little more clarity on earnings on a go-forward basis.