DH Corporation (DH.TO)

The emerging growth driver for this company is FinTech. They made a number of acquisitions in the FinTech space and are struggling to integrate them. He would be on the sidelines until they figure out what they have acquired and digested and get the profitability back on track.

(Market Call Minute.) This has been beaten down too far. He still likes the assets and they have great management.

They’ve been able to use the cash flow from their cheque business to get into the FinTech side of things. The issue over the past year or so has been one of the large FinTech acquisitions and what it really is capable of. They’ve had to cut guidance and retrench. The street is still sceptical as to what the real margins are in their FinTech business, and the growth opportunities. Wait until after they have their FinTech day later this year.

(Market Call Minute) Expanded into ancillary services where there is more competition. There are better US companies in this space.

(Market Call Minute.) Made a big acquisition in the US, and have had some difficulties there. Feels investors are questioning the visibility in terms of the acquisition, but relatively attractive in terms of valuation.

They are going through some challenges right now. Their guidance was recently lowered. They are not getting renewals in their laser business as fast as they want. They grow through acquisition but their debt levels are high right now.

This had some issues last October. There was a US hedge fund that had a Short thesis on it. The company is a processor of financial services for banks and other financial institutions. Made a major acquisition of Fundtech. It paid about $1.5 billion, and paid about 20X trailing EV/EBITDA, which was an expensive acquisition. The Short’s thesis was that there was a consent order (?) by the US banking regulators against Fundtech. Essentially the allegation is that they engaged in unsound banking practices. As a consequence, they have had a tough time making sales out of this business. They also funded this with debt, which added to the problems. A name he is cautious on.

Technology tends to do well from October all the way through to January. This company’s chart shows a declining trend from April, and there are no signs of it bottoming as of yet. There was a large washout recently, coming into August, and it is now starting to inch higher. It is not really recouping those losses and is holding below its 20, 50 and 200 day moving averages. When you have a stock below its 200 day moving average, that is generally a warning sign. It means it is really unloved and long-term holders are cautious about it. There is support at around $29.

(Market Call Minute.) He likes this.

(Market Call Minute.) This would be a Buy for the long-term.

Have done a major restructuring, and did a major acquisition. While a solid company, you are likely not going to see the visibility, i.e., an increase in earnings related to the acquisition, for at least 12 months. He just sold his holdings. Thinks the 4% dividend yield is safe. Below $30 would not be a bad entry point.

Just came out with earnings, which he didn’t think was that good. They are going to really have to prove itself with its US lending segment Laser Pro. He doesn’t expect to see colour on that until Q3. Has a really good dividend which is really well supported. Should have some good growth in their new fintech area GTBS. The growth, investors are looking for, is being held back by global financial institutions. This is a name you are going to want to pick away at.

Has looked at this and kind of kicked the tires a few times. It’s a company that has undergone a lot of change in the last 3-4 years. He likes businesses that have long term sustainable cash flows, and sometimes it takes a while for him to see how sustainable they are. He wants to see how this financial technology business they are building starts to play out in terms of dividend and the cash flow coming in.

This has transformed itself from only cheque writing into back-office for financial companies. Made a big US acquisition last year, which was a favourable move. She is watching this, because she wants to see how the integration plays out.

(Market Call Minute.)