Nicholas Financial
NICK reported very good results for the 3rd quarter ended December 31. Net income for the 3 months ended was $2.23 million compared to $2.77 million for the comparable period last year. For the nine months ended NICK made $7.6 million compared to $8.6 in the period last year. Net income was lower due to an increase in the provision for losses. The provision for losses increased to 3.7% of average finance receivables, for the nine months ended compared to 2.24% in the period last year. For the three months ended the provision rose to 5.1%. The net charge of rate increased to 9.5% for the three months ended compared to 7.4% in the period last year. Note that new dealer discounts also offset credit losses. The reserve for credit losses remains very strong at $19.3 million at December 31st compared to $19.9 million last year. NICK’s pre-tax yield as a % of average finance receivables remained healthy at 7.5% for the three months ended compared to 10.3% for the period last year.
NICK’s assets remained strong enough for them to sign a credit line increase from $110 million to $115 million on November 14. NICK’s losses as a percentage of liquidation increased from 6.91% for the nine months ended to 8.77% for the period last year. The Company anticipates losses as a percentage of liquidation will be in the 8-12% range during the remainder of the current fiscal year. I think NICK’s pre-tax yield will stay at around the 7% level for the 4th quarter and the rest of next year. Based on that NICK will earn about $10 million in 2007 and around $9 million in 2008.
Once charge offs return to normal in 2009, at the earliest, and pre-tax margins return to around 10.5% NICK will be earning $12.5 million without considering any growth in their receivables base. NICK is also trading for slightly under 90% of book value. With a multiple of 12x (1.9x book) NICK is worth between $15 per share vs. a current price of $6.9.
I am still waiting on Freightcar America’s 10K to be released. When it is released I will post and update on their earnings.
