Key Highlights

  • The Canadian government has made significant announcements to combat COVID-19, including three interest rate cuts, and a $145 billion stimulus package.
  • In order to help borrowers, Canada’s six largest banks announced plans to allow mortgage payment deferrals for up to six months. We feel that the Mortgage Investment Corporations (“MICs”) will likely offer a similar deferral plan to its borrowers. TF is focused on cash flowing multi-residential and commercial buildings. Within these sectors, smaller landlords of multi-family buildings and businesses will be impacted and therefore, TF will also likely offer payment deferral plans.
  • Although the number of new cases in the U.S. continues to rise, countries hit earlier by the virus (China, Italy, Spain, and Iran) are experiencing a decline. We speculate that rest of the world will also experience a spike in cases, but will be able to contain the virus in the coming months.
  • In 2019, Timbercreek Financial (“company”, “TF”) generated $99 million in revenues (up 5% YoY), and $55 million in net income / EPS: $0.66 (up 3% YoY). Distributable income was down 1% YoY to $59 million ($0.72 per share), but beat our estimate of $58 million (EPS: $0.70). The 2019 dividend was $0.69 per share, exactly in line with our estimate.
  • We are lowering our 2020 dividend estimate to $0.61 per share, down from our previous estimate of $0.70 per share. We are speculating that TF will offer principal + interest payment deferrals for three months to 20% of its borrowers. We are introducing our 2021 estimate of $0.69 per share.

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