Author Topic: EZPW - EZCorp  (Read 69081 times)

KJP

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Re: EZPW - EZCorp
« Reply #200 on: November 16, 2017, 06:55:51 AM »
Hey all:

Anybody else besides me & Ragnar watching/owning EZPW?

They came out with pretty good earnings today after the market closed.  EPS of $.21/share even with the two hurricanes and the latest quarter traditionally being one of their slower ones.  This earnings was substantially more than even the most bullish analyst predicted.

I am going to guess that analysts are going to have to revise their estimates UP for the upcoming year.

Making $1/share in the near future does not look like such a stretch now.  If they can do that, the stock is probably undervalued.

Finally, also looks like their Mexican division is doing well.

Will be interesting to see where the stock opens tomorrow.

For what it’s worth, I really like EZPW. Lots of intreresting things going on. Interesting how quickly, the bad governance practices have been forgotten.Neat business. Seemingly cheap price. Even an interesting hedge for a recession.

I still own this, but I'm always skittish about it because, as ragnar mentioned, the governance issues are still there.  So, while pawn might be an above-average business with above-average growth opportunities, I'm skeptical that EZPW deserves even an average multiple.


racemize

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Re: EZPW - EZCorp
« Reply #201 on: November 16, 2017, 06:59:27 AM »
I'm out of this recently, but here are my thoughts on the quarter:

results look pretty good
Still, adjusting for dilution (which I feel like we ought to be), I don't like the current multiple.  Let's say they can earn $1 a share, after the cuts and whatnot, which I think is potentially optimistic, but a decent estimate in the next 1-3 years.  Assuming $11 per share, they would dilute by about 15 million shares with the new convertibles.  $1 per share is $55 million earnings.  55 million / 70 million shares -> $0.78 per share.  So it's already at 14 P/E with those assumptions, and I think that's 1-2 years forward earnings. 

Of course FCFS multiple is insane, so if you put that on this, then it could trade much higher.  Absent the dilution, I probably would still be in this, but that's a huge knock to EPS going forward, and it isn't represented in the reported results.  (And I don't think they are going to pay in cash, even though they should, so there's a possibility for it being a lot better outcome).

Homestead31

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Re: EZPW - EZCorp
« Reply #202 on: November 16, 2017, 10:54:44 AM »
prior to 2024 for the convert to actually convert the share price has to be above $13.00, which is still 18% higher than it is now ($11).  Further, it is pretty rare for converts to get converted early, b/c there is option value to a convert, and you are giving up that value if you convert early.  I actually think it is unlikely that they will ever convert b/c EZPW is on their way to gushing cash.  They have ~6 years to come up with the cash, which is a long time.

FCFS is trading at 16x P/T12M FCFE, which does not strike me as insane for a company that has grown top line at 20% for a decade, is returning cash through dividends and buybacks, and is recession proof.

sell side has EZPW at 10 or 11x ~P/normalized FCF.  Sell side coverage of EZPW is also probably the worst I have ever seen, as they fail to give credit for hidden assets,  and focus on earnings when FCF > earnings, and the JeffCo analyst has even made balance sheet mistakes when calculating EV.  Sell side also bases their multiples on "financial services peers" most of which are way worse business, with way more regulatory risk.  Sell side is not paid to "think" though, so it is what it is.

you can of course rightfully argue that EZPW deserves a discount to FCFS b/c of the corporate governance issues, but i think that is short sighted.  FCFS would LOVE to own EZPW, and they will probably even tell you that if you ask.  they will tell you that they have regular dialogue.  FCFS has been a growth story b/c the last few years while EZPW has been dealing with their own internal problems, FCFS has been snatching up major players throughout the US, Mexico, Central & South America.  They have been able to pay low prices b/c they were the only buyer.  That has all changed however, b/c EZPW has operating at an extremely high level, and has moved past their problems, and has re-emerged as a potential buyer for all sizable pawn assets.  FCFS now has competition when they never did before.  thinking strategically, FCFS would be complete fools if they didn't try to eliminate their only bid-competition by buying EZPW.  For this reason, EZPW deserves a multiple on par with FCFS, or maybe a turn or 2 lower... but not 5 or 6 turns lower.

EZPW can probably do ~115M in EBITDA in a year or 2 (for 2017, the target range was $86.4 to $116.8M, so not a stretch to think they can hit the high end in a year or 2 given the additions in Central America, continued cost cutting, and continued PLO growth) and FCFS can probably realize $35M in synergies.  at 11x (FCFS CSH fairness opinion called for a range of 10-12.5x if memory serves) that gets you to a per share price of something between $25-30 depending on how you think about the convert and cash accumulation/debt paydown.

betting on a takeout is not generally an effective strategy, but betting on a recession resistant company trading at ~10 or 11x FCF and below the breakup value of the stores while operating at a very high level, that ALSO has a very good chance of being taken out in the next couple years is better than a stick in the eye in my book.
« Last Edit: November 16, 2017, 11:01:45 AM by Homestead31 »

KJP

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Re: EZPW - EZCorp
« Reply #203 on: November 16, 2017, 11:46:36 AM »
prior to 2024 for the convert to actually convert the share price has to be above $13.00, which is still 18% higher than it is now ($11).  Further, it is pretty rare for converts to get converted early, b/c there is option value to a convert, and you are giving up that value if you convert early.  I actually think it is unlikely that they will ever convert b/c EZPW is on their way to gushing cash.  They have ~6 years to come up with the cash, which is a long time.

I don't follow this. As you note, the convert holders wouldn't convert early unless forced to do so by the call feature. (And it may make sense to invoke the call feature to strip the converts of any remaining option value.)  But if the share price is above the conversion price at call or maturity, they will convert and there will be dilution.  So, what do you mean by EZPW has "~6 years to come up with the cash[.]"

One way to analyze the company is to build a pro forma balance sheet that converts the 2024s and refinances the 2019s with straight debt (their conversion price is above $16/share), so long as you believe EZPW could issue straight debt by the 2019 maturity, and then run the implied interest on the new debt through a pro forma income statement to see what the implied p/e is under that capital structure. 

The other thing you have to account for is the roughly $100 million in cash currently sitting on EZPW's balance sheet.  What are you going to do with that money?  Delever to help with refinancing the 2019s? Make additional acquisitions?  The value that will (or could) be generated by the excess cash isn't being captured by just looking at current p/e.

KJP

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Re: EZPW - EZCorp
« Reply #204 on: December 05, 2017, 06:22:11 AM »
EZCorp just bought another 21 stores in Sinaloa, Mexico:  http://investors.ezcorp.com/home?item=318

No details about the price or current profitability of the stores, other than the statement that the acquisition will be "accretive," which is essentially meaningless given that they're paying in cash that's currently earning around 0% interest. 

DTEJD1997

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Re: EZPW - EZCorp
« Reply #205 on: January 31, 2018, 03:27:38 PM »
Hey all:

Looks like EZPW will hit the $1/share of earnings perhaps even sooner than I thought?

They reported earnings of $.23/share today.  This was vs. analysts estimate of $.19/share.

This reported quarter also had some problems in the USA, specifically the hurricanes in TX.

So all in all, this appears to be very good for owners of EZPW.

Should be a lot more information after tomorrow AM's conference call.

We will see!

ragnarisapirate

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Re: EZPW - EZCorp
« Reply #206 on: May 02, 2018, 04:20:58 PM »
I really like this company. Agree with DTEJD that they should get around a buck a share soonish. AND they are improving their Latin American stores... When comparing them to FCFS, it’s interesting.

I kinda view this company as an improving one in a bull market, that deserves a higher multiple, that also has the built in kicker of “end of the world insurance.” They are based in TX too, which, all things equal, should help their tax paying status relative to other companies, from the deductibility of state taxes.

There is just a lot of cool stuff. Love the industry. I think someone on here made a comment about them getting acquired. I am not banking on it, but, this looks like a company that is prepping to sell itself to a serial acquirer (FCFS) in the industry. If not? Who cares. It seems that their governance issues are not what they had been. Never thought that the turnaround would have been like this. It’s pretty amazing that the company was in such bad shape in the last year and a half, and is now where it is!

Here’s their newest presentation.
https://s22.q4cdn.com/137492174/files/doc_presentations/Q2FY18-Conference-Call-Slides-Final_050218.pdf

DTEJD1997

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Re: EZPW - EZCorp
« Reply #207 on: May 03, 2018, 12:05:09 AM »
yo, Yo , YO:

Not too many people are watching EZPW, so I'll take that as a good thing.

The few analysts are obviously too low on their earnings estimates.

I think we get $1/share in earnings this year.

The exciting thing could be what will earnings be in the next year (2019)?  Could they go from $1 to $1.25?    That might be a bit optimistic, but we very well could get close.

I would think that EZPW very well could trade for a 16 P/E.

Got to keep an eye on the share dilution from the convertible bonds...

Good things are ahead for EZPW I think!

ScottHall

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Re: EZPW - EZCorp
« Reply #208 on: May 03, 2018, 12:27:37 AM »
I like American Carnage.
You can no longer follow me on Twitter!

lathinker

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Re: EZPW - EZCorp
« Reply #209 on: May 09, 2018, 01:07:26 PM »
 AUSTIN, Texas--(BUSINESS WIRE)-- EZCORP, Inc. (NASDAQ: EZPW) (the “Company”), a leading provider of pawn loans in the United States and Latin America, announced today that it intends to offer, subject to market conditions and other factors, $100 million aggregate principal amount of convertible senior notes due 2025 (the “Convertible Notes”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933 (the “Securities Act”). The Company expects to grant an option to the initial purchasers for up to an additional $15 million aggregate principal amount of Convertible Notes. The Convertible Notes are expected to pay interest semiannually and will be convertible into cash, shares of the Company’s Class A common stock or a combination thereof, at the Company’s election, based on a conversion rate to be determined. The Convertible Notes will mature on May 1, 2025, unless earlier converted, redeemed or repurchased in accordance with their terms prior to such date. Prior to the close of business on the business day immediately preceding November 1, 2024, the Convertible Notes will be convertible at the option of the holder only upon the occurrence of certain events and during certain periods, and thereafter, at any time prior to the close of business on the business day immediately preceding the maturity date.

The Company intends to use the net proceeds from this offering for general corporate purposes and potentially to fund acquisitions. The Company is in various levels of discussion regarding a number of acquisition opportunities in the U.S., Canada, and Latin America, and have entered into non-binding letters of intent to acquire pawnshops in Latin America. At this time, there can be no assurance that the Company will complete any of those potential acquisitions.


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Does anybody understand why they continue to fund themselves through dilutive convertible bonds? This is not the first time they are using this instrument and like last time, the market is puking on the news. I would expect them to get financing without having to extend convesrion options, so the only way this makes sense to me is that they are trying to redistribute shareholders money to the noteholders - happy to learn of another rationale though.
Also, will be interesting to see who buys the notes...