We seem to be the only ones thinking about additional capital to continue the rapid growth. VIC is silent on the capital, but does recognize the 22% growth. It is hard to find growth stocks trading at such discounts.
12/21/11 06:21 PM
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10K, fiscal year results
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CASH finally reported its fiscal 4th quarter.
As typical, there was some noise, but in general things are going well, the balance sheet is clean, and the company is trading at 60% of tangible book, and is earning about 4.50 per share, putting the trailing PE at 3.4 times.
The noise was related to a previously disclosed class action lawsuit related to fraudulent activity in 2007 by an employee. The previous estimate of loss was $0.4 million, but in Q4, it was $1.6million, $0.9 million. This is quite possibly the worst-run small bank (segment) in the country. It is amazing how incompetent they are.
Fortunately, the payment division continues to do well and grow fast. There are problems comparing to previous years because of the regulatory termination of the iadvance program, but the other parts of this division are doing well. Most importantly, low and no-cost deposits are 89% of CASH's deposits. Core deposits grew 22% year-over year. This division earned $2.1 million in the quarter, on pace to earn well over $8 million in fiscal 2012
I think CASH eventually gets sold. The payment division is worth at least 10 times earnings and probably more like 20 times. The value and profitability is being masked because of the low interest rate environment, but this could be an extremely valuable business in 3 years or so, in a more normalized rate environment.
At $15, the risk-reward for CASH is compelling: 10-20% downside vs. 100-300% upside over the next few years.
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