DH Corporation (DH.TO)

This stock was a real tick bomb when they released their earnings last week. They were in the cheque printing business and now people don’t write cheques. They made a concerted effort to diversify themselves away from the legacy business by buying a series of fin-tech businesses. The problem is that those industries are hyper competitive. The market is expressing a concern that DH-T may have gotten into something they don’t understand.

(Top Pick Oct 1/15, Down 52.79%) He bought more after the fall. Their numbers have come down substantially for next year. One of the issues he has is that they are in a good industry but the market is implying that they will cut their dividend. He thinks they should cut it. The Heartland acquisition was a good one and they integrated it well. The acquisition for Funtech was too expensive and they are being squeezed on the debt side. With the election in the US, on the banking side they are not sure what things are going to look like.

Down around 40% today, which seems a little extreme. Most analysts thought the quarter wasn’t going to be great. It is now going to be in a “prove it” mandate where they have to prove to shareholders that they can execute on their plan. The tone from management going into next year was not great. He wouldn’t be a buyer, but if you own he would hold and hope it would bounce back again.

Had owned this in the past. The stock had a pretty dramatic drop today. He has always had a lot of respect for management. As cheque writing started to decline, they got into the electronic business. They’ve had some hiccups here. At this point, he would probably just want to watch. It would mean giving up some returns, but he would like to see the next quarter turn around and that the worst is behind them.

Last quarter, their US lending wall which improved from Q1 was still sluggish. Their FinTech segment last quarter was up about 7% year-over-year, but still kind of soft. Also, had pretty squeamish guidance about it, due to delayed spending on BREXIT concerns. As a result, he models pretty flat growth over the next 6 months or so. What is good is that their longer-term thesis is still very much intact. They have done some cost cutting which has helped. Trades at a real discount to its FinTech peers. There could be a catalyst this quarter in terms of a return of growth in their US segment LaserPro. He likes names that have a real FX tailwind, and 60% of their earnings come from the US. Dividend yield of over 4%.

He isn’t a big fan of this name. It is essentially a payments company with a variety of potential solutions for institutions. They made a large acquisition in 2005, and paid a very hefty multiple for it. The company got a consent order, a slap on the wrist, from the US banking regulators. If you are a financial institution, and are thinking about buying software and your provider has had a slap on the wrist, you would not be too interested in using that software. This is going to be a very tough slog for them to overcome.

For a long-term hold? Long-term is what you have to think of with this company. They are in the FINTECH space, mortgage processing payment area. He likes this more for income as opposed to growth. Has a fairly large debt load of about $1.9 billion, but thinks they can manage it. It is going to take a while for that leverage to come down. Recently announced a partnership with a large financial institution working on blockchain, a technology that could really transform the processing side of financial institutions.

A good quality business and likes the space they are in. The only reason he has not stepped into this has been the valuation. Dividend yield of about 4% makes a lot of sense. Too expensive for him.

He likes the company and loves what they have been able to do. They have good growth ahead of them and have made a lot of good acquisitions, but they seem to be trading in a range between the high $20 and $40. A solid company.

He passed on it last year. It was down and there were shorts reports. It is now considered technology and it is hard to understand the various businesses. The market is concerned about organic growth. It is not an easy company to get your head around these days.

They have three businesses, lending, transaction and domestic business. The lending business is hurting. The domestic business is a bit flat. Their balance sheet is quite leveraged, so they can’t acquire. It is a hold.

He bought this recently. There is still a reasonable free cash flow yield and he thinks the dividend is safe.

(A Top Pick Oct 1/15. Down 23.42%.) Their last acquisition is the one that caused them a lot of problem. Took on a lot of debt, which constrained them from doing anything. Not an expensive stock and has a good dividend yield. He can see some positives. There are better earnings and cash flow growth over the next little while which will help them bring down their debt levels. Thinks fintech is a great business. 4.4% dividend yield.

This has gone into the fintech space in the US by doing a couple of big acquisitions. The stock has done very well on the back of that, but lately have gotten into some execution issues with some of the fintech acquisitions not doing as well as originally anticipated. Thinks that over time they will come out of this. A bit of wait and see.

The problem is that acquisition. It is big. He thinks there is doubt in their strategy. The model price is $37. At $22 he would be interested in it.