Author Topic: VB - Versabank  (Read 1963 times)

bigbluffzinc

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VB - Versabank
« on: September 29, 2018, 07:33:34 AM »
Versabank - A small Canadian (branchless) bank trading at less than 5.5x next years pre tax earnings, 75% of book, & a return on retained earnings going forward north of 30% (earnings growth north of 30%), running on debt to equity at around 8.5x or ~40% of the leverage other Canadian banks employ & with stronger insider buying than I've ever seen in any other opportunity I've looked at.  (All my estimates)

I think it's misunderstood as being (over)exposed to Canadian real estate when it's really a secured lender (mostly small receivables with significant holdbacks) that is unlikely to incur meaningful losses even in a Canadian downturn.

Curious if anyone else has thoughts here as my exposure is pretty meaningful and would love to hear some push back.
« Last Edit: September 29, 2018, 07:35:33 AM by bigbluffzinc »
Current Portfolio: VB, LBTYK, HWO, BAM, AGN, LNR, FB


Philbert77

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Re: VB - Versabank
« Reply #1 on: September 29, 2018, 11:14:31 AM »
So what are your thoughts on the whole VersaVault thing? I frankly am quite leery of any investing in blockchain/bitcoin ether nothingness currency.
Overall, it certainly looks like an intriguing opportunity. Then high insider purchasing is very compelling.

bigbluffzinc

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Re: VB - Versabank
« Reply #2 on: September 29, 2018, 02:35:38 PM »
Sure, so I don't think you really need to have an opinion on Versavault (at all) given the price/quality of their lending business but that hasn't stopped me from having one :)

I assumed no revenue growth from Versavault in my assumptions because I have no clue how successful/unsuccessful it will be.  Versavault is mostly an institutional product that has nothing (necessarily) to do with cryptocurrency.  I don't own crypto and have no interest in owning it but Versavault is a secure way of storing digital valuables.  It can store the naked photos you keep on your phone in a more secure way (hopefully) than traditional methods and is intended to be on par with military grade digital security.  This might be important for some people (probably no one on this forum...) & I know zero about the integrity of that claim but that is the service/product they are providing & I just assume it's a reasonable product.  Businesses requiring cryptocurrency liquidity for one reason or another that don't have an in-house system for storing it (poker sites/etc) may find the service valuable but again, that is just one use.  I haven't seen many other products marketed like this yet which is interesting and the Vault is going to be marketed to people who consider themselves to have a digital valuable and are willing to pay for security.  I don't have a view on any cryptocurrency and don't view this investment as taking a view...  Again it can serve as a storage method for celebrities who want to tuck away their naked third girlfriends photos among other things...  But I do think people will continue to have digital valuables and as a result this service/product will probably continue to have some relevance if it can gain traction.  If it totally fails that's baked into the assumptions...  If it's a winner then investors do better.  Fine with me.

I view the insider buying as reassuring that this investment is exactly what it looks like. 

The compelling part is that earnings are growing 40% year over year and they have a ridiculously long runway...  And I'm getting that earning stream at 5.5x and less than book.  That sounds broken.  I know some people are allergic to small businesses but tbh I never thought opportunities like this existed in the public markets.  Still waiting for someone to come hit me over the head and say I messed up my math.

Still very long Versabank & looking for a reason to change my mind.
« Last Edit: September 29, 2018, 03:08:54 PM by bigbluffzinc »
Current Portfolio: VB, LBTYK, HWO, BAM, AGN, LNR, FB

SnarkyPuppy

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Re: VB - Versabank
« Reply #3 on: September 29, 2018, 07:14:17 PM »
Have you found a clean and easy way of viewing insider buying for canadian companies?  I find sedi.ca so unbearable.   

siddharth18

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Re: VB - Versabank
« Reply #4 on: September 29, 2018, 08:45:08 PM »
Have you found a clean and easy way of viewing insider buying for canadian companies?  I find sedi.ca so unbearable.   

I use https://www.canadianinsider.com/node/7?menu_tickersearch=VB+%7C+VersaBank

Just sign up for a free account and you can view data beyond 6 months.

bigbluffzinc

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Re: VB - Versabank
« Reply #5 on: December 02, 2018, 07:37:19 PM »
Core earnings growth of 53% y/y for Q4 with core earnings ROCE of 13.55%.  My understanding of the company leads me to believe this growth/subsequent improvement to ROCE will continue but the stock still trades at a discount to book. 

Anyone else with an opinion?

https://www.versabank.com/wp-content/uploads/2018/11/VB-Q418-Earnings-Release_vF.pdf
« Last Edit: December 02, 2018, 07:39:35 PM by bigbluffzinc »
Current Portfolio: VB, LBTYK, HWO, BAM, AGN, LNR, FB

oracle13

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Re: VB - Versabank
« Reply #6 on: December 03, 2018, 10:48:47 PM »
For 2017:
Net Income: 19.5M
Total Executive Compensation: 4.5M

That is over 20%. Does this seem right?

bigbluffzinc

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Re: VB - Versabank
« Reply #7 on: December 04, 2018, 07:26:40 AM »
I think you need to strip out the severance package for Jonathan Taylor to get steady state executive comp, that was $878,132.  Management is still well paid here but it's not egregious.  The other thing you have to adjust for is the fact that all performance components are being met because the business is hitting out of the park.   If you compared this to a business that isn't growing margins and revenues in a meaningful way I'd view that as unfair.  If the business slows down and targets are missed you'd have as much as $1,180,000 in performance comp missing.  After taking those two together that's 50% of the comp.  I don't think that number would be excessive & I'm fine paying a premium for margin expansion and ~50% earnings growth.

Current Portfolio: VB, LBTYK, HWO, BAM, AGN, LNR, FB