Key Highlights

  • At the end of Q2-2019, Timbercreek Financial Corp. (“TF”, “company”, “MIC”) had $1.22 billion in mortgage receivables (net), down 1.6% QoQ, and 0.2% YTD. Originations dropped in Q2 due to a sustained competitive environment for mortgages on cash flowing commercial real estate. Receivables had also dropped in Q2 2018 (by 6% QoQ), but picked up the following quarter (by 4% QoQ).
  • We expect reasonably strong markets for commercial / multi-family mortgages in Vancouver, and commercial / multi-family / residential mortgages in Toronto.
  • We believe that TF portfolio’s risk has decreased in Q2 as first mortgages increased (92.8% to 93.8%), Loan-to-Value (“LTV”) declined (68.1% to 67.4%), and the weighted average remaining time to maturity dropped from 1.2 to 1.1 years.
  • In Q2-2019, TF generated $25 million in revenues (up 7% YoY), and $14 million in net income / EPS: $0.16 (up 9% YoY).
  • We are maintaining our 2019 dividend estimate at $0.69 per share (payout ratio of 98.5%), and our 2020 estimate at $0.70 per share (payout ratio of 96%).
  • TF’s share price is up 13% since its lows in December 2018. Despite the price run-up, TF’s valuation metrics continue to be lower than comparables.

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