We retain our Neutral recommendation on
DFC Global Corp.
), following its third quarter results. DFC Global's fiscal
first-quarter 2013 earnings lagged the Zacks Consensus Estimate
as well as the year-ago earnings due to a substantial increase in
operating expenses, which managed to offset revenue growth.
DFC Global has been diversifying in both the sectors of products
and geography for years. It has completed several acquisitions
consistent with its objective to expand upon and diversify from
its core retail financial services business in Canada, UK and the
U.S. Its latest acquisition is 10 pawnbroking stores in the
United Kingdom for $6.4 million. Also, during the quarter,
it opened 23 new de novo stores in U.K., Canada, Spain and Poland
to widen its store base.
In an effort to solidify its footprint in the pawnbroking
business, DFC Global will buy 10 pawnbroking stores in the United
Kingdom for $6.4 million. The purchase is anticipated to be
immediately accretive to its earnings. These stores are located
where ALICE and ARTI population is high, across northern and
The company also scores strongly with the credit rating agencies.
On the flip side, the company's revenues from fees associated
with check cashing have been declining steadily, which further
dipped by 11.8 million in the fiscal first quarter. This is a
matter of concern as it is an important contributor to the
company's total revenue.
Also, the company's debt-to-capital ratio is higher than both its
peers, Cash America International Inc. (CSH) and SS&C
Technologies Holdings Inc. (SSNC). Its interest coverage ratio is
also lower than that of its industry average and some of its
The Zacks Consensus Estimates for the second quarter of fiscal
2012 and 2013 is currently pegged at 54 cents and $2.45 per share
respectively. It represents a year-over-year increase of 5.3% and
13.5% for the respective periods.
DFC Global carries a Zacks #3 Rank, translating into a short-term
SS&C Technologies Holdings, Inc.
), which closely competes with DFC Global, carries a Zacks #1
Rank, translating to a short-term Strong Buy rating.
DFC GLOBAL CORP (DLLR): Free Stock Analysis
SS&C TECHNOLOGS (SSNC): Free Stock Analysis
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