Element Fleet Management (EFN.TO)

(Top Pick Nov 2/15, down 11.54%) It was recommended before the split. He felt he was investing more on the fleet side and then they split up the company. He liked the fleet assets more. He sold after the split. He would get back into fleet except recent results were not great.

Down about 5% today on the back of earnings. The guidance was a bit weaker. Not a space she is particularly attracted to. Going forward, they really have to figure out a way to grow organically. She is not interested in getting into this space.

(Top Pick Nov 23/15, Down 5.24%) It includes the value of ECN. ECN is at $3.05 and that is why you get a marginal decline. He would probably sell and keep the Element Fleet.

(Top Pick Oct 1/15, Down 7.51%) He sold it. The fleet business is the best part of the business. Management did not do all the things they said they would do and he lost confidence in them to execute. The fleet business has some very good dynamics to it.

He was very disappointed that Steve Hudson broke the company up needlessly. The fleet business doesn’t have a lot of growth in it. It is a very convoluted structure, and thinks it was designed to make Steve and a bunch of other people a lot of money in the spinoff.

He is more interested in the fleet management business. The capital division is much smaller and was looking for an inflow of cash in a deal that did not work out. He does not see interest rate increase being a big issue, especially in Canada.

Recently bought this. This is the 1^st day the Element Financial shares are formally split into 2 companies. You now have ECN Capital (ECN-T) and Element Fleet Management (EFN-T). Thinks both are undervalued. This one is trading at about 10X next year’s earnings. Its group trades at about 20X. Both companies are looking to do some acquisitions which could transform things in the next couple of quarters, but both assets are attractive right now.

This is being split at the end of this week into 2 separate companies. He would stay away for now, and would wait to see what this looks like when the dust settles in 3, 6 or 9 months.

He has a small position. He thought they would be growing the one company. Time will tell if it is the right position.

The vote on the split is next week and he assumes it will be approved. He does not like the fleet business. Once it has split it may be easier to analyze and he may suddenly get interested. It is already priced reasonably for what it is.

(A Top Pick Oct 1/15. Down 15.82%.) Sold his holdings about a month ago, because he felt the company didn’t execute on some of their promises, in a clear fashion. He liked the leasing side and thought it was a good growth area.

(A Top Pick May 18/16. Down 3.34%.) The split was his thesis for recommending this, but it has not happened yet. He thinks it is going to happen in October, which will be a good catalyst for the stock. When you look at the sum of the part valuations, the fleet side should be trading at a 14 or 15 times multiple. Thinks they could generate $1.20 in earnings next year. BV is about $4 now, and even if you assume a 25% discount to Book, which he doesn’t, you are still at $3, which leads you with a lot of potential valuation in the stock.

The split coming up should unlock some value. They should soon launch their 2^nd investment fund, and if successful that could reassure investors that the business model for the ECN Capital part is working. Also, expects a dividend increase at the end of the year. Small-cap investors might not have been able to buy the stock at this stage, because the market CAP is too high, but after the split, ECN Capital will be eligible for most small-cap investors, and that is how we will see the valuation come back up. Dividend yield of 0.7%.

Very successful emerging leasing leader. After the 08/09 downturn, the historic leasing companies blew up and this company jumped into the void with a very seasoned management team. It has had a pullback on a recent earnings miss. Trading at 8X next year’s earnings. Going to split into 2 pieces, which he thinks could be a catalyst for the stock in the coming year.

Splitting into a fleet side and a finance side. In general, this is a great company, and if he owned he would stay with the fleet side, which is where it is uniquely positioned.