there's some other things in the report that sound really cool -g-
08:17am EDT 10-May-02 Goldman Sachs (HOTTENSEN HODES NEWYORK) ACF ACF.MS
Details: ACF (RL): A Fresh Look at Upcoming Trends.
Goldman, Sachs & Co. Investment Research
ACF (RL): A Fresh Look at Upcoming Trends.
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* We are reiterating our constructive view on ACF and $50, 12 month target*
* price. ACF appears to be tracking expectations closely and our analysis *
* of the widely tracked cash metric, cash distributed from trusts, *
* suggests a material pickup as we move through CY02. That said, near-term*
* ACF news flow is likely to prove less definitive than it has been in *
* recent months; the April securitization data (released 5/13) and that *
* from coming months is unlikely to settle questions about credit trends *
* and detail on the June quarter won't be out until August. Accordingly, *
* we are anticipating a volatile, but range bound trajectory for ACF in *
* coming months. We note ACF will be presenting 5/14 at our conference. *
***************************************************************************
Robert G. Hottensen (New York) 1 212-902-6719 - Investment Research
Michael S. Hodes (New York) 1 212-902-6772 - Investment Research
Jeremy Simon (New York) 1 212-855-9058 - Investment Research
====================== NOTE 7:43 AM May 10, 2002 ======================
Stk Latest 52 Week Mkt Cap YTD Pr Cur
Rtg Close Range (mm) Change Yield
--- ------ ------- ------- ------ -----
AmeriCredit Corp. RL 39.09 64-15 3315.4 24% 0.0%
ACF --------------Earnings Per Share---------------
EPS* (US$) Sep Dec Mar Jun FY CY
2003 FY NA NA NA NA 4.60 4.90
2002 FY 0.88A 0.91A 1.02A 1.04 3.85 4.25
2001 FY(A) 0.51 0.57 0.70 0.81 2.60 3.30
GSCOPE EPS* (US$) Sep Dec Mar Jun FY CY
2003 FY NA NA NA NA NA NA
2002 FY NA NA 1.02A NA NA NA
2001 FY(A) NA NA 0.70 NA NA NA
-Abs P/E on- -Rel P/E on-- EV/NxtFY LT EPS
Cur Nxt Cur Nxt EBITDA Growth
----- ----- ----- ----- -------- ------
EPS* FY 10.2X 8.5X 0.3X 0.3X NA NA
CY 9.2 8.0 NA NA
GSCOPE EPS* FY NA NA
CY NA NA
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* may differ from U.S. GAAP
===========================================================================
* APRIL'S TRENDS ARE LIKELY TO BE IN LINE: We are looking for relatively
stable seq. delinquency + deferment trends, higher loss levels, and cash
distributions in the $13-15mn range (see below). We view these trends as
somewhat ambiguous as they are broadly consistent with expectations and
leave plenty of clearance on cash trapping triggers but don't settle any
questions regarding credit quality or cash flow. For instance, a stable
delinquency pattern would end improvements seen in Feb and Mar and could
introduce fresh questions about the impact of recent deferments and
seasonality (delinquencies historically have improved Feb-Jun and headed
higher as we hit July).
* CASH DISTRIBUTIONS FROM TRUSTS APPEAR SET TO IMPROVE. We continue to
focus on cash earnings metrics in our analysis of ACF to avoid the
potential distortions that come with gain on sale accounting under GAAP.
Our analysis of one widely watched cash flow proxy, distributions from
trusts, indicates we will see a material increase in cash distributed
(from $55mn in the Mar quarter to about $100mn in the Dec quarter,
roughly $300mn in CY02 vs. $235mn in CY01) this year as the base of
assets eligible to distribute cash ratchets up. While this is a clear
positive as it diffuses some concerns about cash flow growth, it doesn't
imply a favorable swing in cash returns on assets. In fact, ACF's true
cash returns remain surprisingly difficult to capture and will likely be
under pressure as long as credit losses are rising (we are modeling a
peak late this year). At our conference we expect ACF to focus on cash
trends and returns. See below for more detail on our proprietary
modeling of the distributed cash flow as well as the assumptions
underpinning our analysis.
===========================================================================
A CLOSER LOOK AT ACF'S SECURITIZATION PERFORMANCE. As part of our focus on
ACF's cash earnings, we have developed a proprietary model of the company's
distributed cash flow from its trusts (1) for the remainder of 2002.
Although our modeling, which attempts to capture the prospective
distributed cash flow based on the timing and size of the trusts, falls shy
of management's guidance of $320-$340mn for this calendar year, it does
offer a solid sanity check. On fairly modest assumptions, we are modeling a
material pick-up in distributed cash flow as several larger trusts come on
line and at least three significant clean-up calls are made over the course
of the year. Below, we provide a summary of the results of our analysis
and the underlying assumtions (Tables 1 + 2). Our complete distributed cash
flow model is available upon request (email jeremy.simon@gs.com).
(1) Distributed cash from trusts represents the cash flow available to ACF
on loans that it has financed in the asset backed market. Since ACF ends
up securitizing virtually all of its loans, trust distributions are widely
watched by investors.
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Table 1: Results of Distributed Cash Flow model
Mar-02 Jun-02E Sep-02E Dec-02E
Distributed Cash Flow $55 $65-70 $75-80 $95-105
2001 2002E % Chg.
Distributed Cash Flow $235 $290-310 23-32%
Source: Company data and Goldman Sachs research estimates.
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Table 2: Assumptions Used in Distributed Cash Flow Calculation
-Wrapped trusts begin to distribute cash at month 15-16.
-Senior subordinated trusts begin to distribute cash at month 17-18.
-Distribution from Trust A equals Trust A's average distribution as a
percent of the average monthly principal balance times the specific month's
average principal balance (for trusts that have not previously distributed
cash, the average of all the trusts is used).
-Each month the EOP principal balance declines in the Trust by the previous
month's decline less 0.05%.
-Distributed cash flow during the month a trust first begins to distribute
cash is calculatd using a smaller percentage (20 bps. vs. 70 bps.).
-For trusts where an interest rate swap exists, the impact of the interest
rate swap is held constant at the average of the previous three months.
-Clean-up calls are forecast during the month when the EOP principal
balance would fall under 10%.
@@@@@
APRIL DATA TO BE RELEASED ON MONDAY (5/13). As previously discussed, we
expect the April trends to show stable delinquencies, higher losses, and
$13-$15mn in distributed cash flow. In Table 3, we have outlined ACF's
performance across several key metrics over the past three months and our
respective, rough April forecasts.
@@@@@
Table 3 - 2002 Monthly Securitization Data
Jan Feb Mar Apr(E)
Credit Losses (%) 6.35 6.04 6.21 6.40-6.60
60+ Delinquency Ratio (%) 3.71 3.46 3.18 3.25-3.35
Deferments (%) 2.20 1.52 1.85 1.80-1.90
Repo. (%) 1.10 1.30 1.10 1.00-1.10
Distributed Cash Flow ($ mn) 12.2 13.5 28.7(1) 13.0-15.0
Notes:
(1) Included $11 mn clean-up call (1998B)
Source: Company data and Goldman Sachs research estimates.
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