Propel Holdings (PRL.TO)

Exceptionally high ROE. Originations (new loans) slowed last August/September, but then they increased. (These are short-duration loans, and they always need to grow the loan book.) Business has been growing almost 40% a year. Expanding in UK, US, and looking at other countries. Presence in Canada is not too big.

Management are smart and capable individuals, and their own capital is at stake. Extremely well run, high quality. If you're OK with volatility, buy here and you should do well over time. Keep your portfolio position small.

Caveat: US government is imposing rules left and right. Doesn't think proposed interest rate cap of 10% will be applied to non-prime lenders, but it's unpredictable. If a cap were applied, would be devastating. This is still one of his best ideas in the space, given quality of management and the fact that UK business is growing fast.

Fintechs intrigue him. Their loss loan provisions are high, but PRL turns their loans so often that they make money. Momentum has come out of this stock. Wants to see more clarity before entering this. Likes what they do in fintech.

The space is definitely creaking, like the pipe in your house that doesn't sound good and might burst at some point (he had a plumbing issue this morning ;)  His firm is far away from this space. 

Have to be very careful about sub-prime credit. It won't be exactly like 2007-2008, but we are in some type of credit cycle. Unlikely that interest rate cuts will save us this time, because they can't be big enough. With inflation being sticky, rates won't be able to go low enough.

#1 would probably be Telus. BCE is also in there. Names like AC, MFI, PRL, GSY, WFG, and TFII. All of these stocks are cheaper than they ought to be. All things being equal, those names should be higher in January than they are now.

Short-seller report predicted a reckoning for sub-prime lenders. PRL cleaned up its book a bit, and focused a bit more on quality as opposed to growth. Market didn't like that. Thinly traded stock, so a bit of bad news can cause a big fall.

He's still modelling 35% growth, trading at 7x PE for 2027. Really good value. Just a matter of time. He did sell for the tax-loss, to counterbalance all the big wins in the portfolio. He's going to wait the 30 days and then buy back in, or choose GSY instead. Believe in the name.

They just partnered with a California bank, but will do their own banking. Doesn't know the full details. Strong growth at 30-40% yearly, and trades at 6x forward PE. Expects this to rebound nicely.

Overall, it wasn't the best quarter from PRL but they are being conservative and thinking longer-term which is what you probably want to see in this type of business.  The conference call highlighted an uptick in delinquencies in the US which caused PRL to get a bit more conservative on their underwriting. This appears to be due to factors such as student loan repayments restarting, government shutdown and potentially just a bit higher inflation eating into consumer income. Management sounds like they are simply being more proactive, which is a good thing, and once when they have a better handle on the economic backdrop, they will look to increase volumes again.
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Overall, it wasn't the best quarter from PRL but they are being conservative and thinking longer-term which is what you probably want to see in this type of business.  The conference call highlighted an uptick in delinquencies in the US which caused PRL to get a bit more conservative on their underwriting. This appears to be due to factors such as student loan repayments restarting, government shutdown and potentially just a bit higher inflation eating into consumer income. Management sounds like they are simply being more proactive, which is a good thing, and once when they have a better handle on the economic backdrop, they will look to increase volumes again.
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The big question is why is it selling off so much. There is concern about a weakening economy and the short article is an overhang. It is reporting soon and needs to prove the shorts are wrong by showing continuing growth. He liked their last report and models 30% EPS growth and 12X earnings. You could add here remembering it is a small cap. Money is starting to flow out of large caps into small caps.

Not in either of his funds, but is in some client accounts. Strong operator. Bigger player in the US market than in Canada, and stock's really come off in last 6 weeks due to target market being under stress. Tightening up on successful loan applications -- may see short-term slowdown, but it's the right thing to do. 

Long-term growth algorithm still intact.

Stock's about 40% off its highs, but sounds as though the business fundamentals haven't really changed. Might be contagion from difficulties of US sub-prime lenders. He understands that PRL's actually been tightening up who it gives credit to. If so, could have a really strong quarter.

Believes it reports first week of November. Then we'll have a much better perspective on revenue, earnings, and credit.

Scores 7 for fundamentals. The street targets 44% upside. Revenues are up 42% and net income 67%. Continue to hold and ride it out. Has a strong tech platform that's expanding to the UK. Non-prime lending is a little risky. 

Last quarter had record originations. Earnings momentum continues, up 22%. Very good loan balances. Goldilocks opportunity -- marketplace uncertainty rises, but economy weakens only marginally. Lots of people don't have access to traditional credit, and AI has really helped identify qualified candidates. 90% in the US, with growth in UK.

Reasonable multiple at 12x for 2027, growing ~31%. Doesn't get the respect it deserves. A must-own.

Undervalued. Fundamentally solid, likes it a lot. People don't like the sub-prime lending industry, so it will never get a huge multiple. Seen as a loan shark business. 

But it is a legitimate, legal business and it's doing very well. Raised dividend ~8x in past 3 years. Growing in range of 40%, and that should continue. Market share is expanding. Good control on credit. Interest rates will help.

Are growing at strong rates, compounding earnings at 40% annualized for many years to come. Top managers who have developed a global business in the US and UK. Is an organic growth and by acquisition story. Their lending as a service business taken no credit risk, but is very profitable.