Power Financial has good quarter but no acquisitions
On Novenber1 Power Financial reported it's third quarter results.Earnings were up by almost 10% but they got hit by hurricanes so ended up about 13% lower.Nevertheless earnings available to common shareholders was $463 million for 3 months and $1492 million for 9 months.However Power Financial gave $978 million of this to it's parent Power Corp.This still leaves a lot of cash on hand to dispose of;either to increase positions in it's major subsidiaries or some of it's newer startups or acquisitions. The little engine still chugs along just as in the caption below.
Power Corp. owns three main assets; 66% of Power Financial and small positions in China Asset Management Co. and Sagard Investments.Still it's earnings per share went from $1.34 per share to $2.23 per share for 9 months for 2017.This is a good increase and even better than that for Power Financial which only increased from $1.83 to $2.09 per share for 9 months.But Power Financial has greater prospects for growth.It retains earnings in Great West Life and IGM Financial plus the entire 30% of the earnings in Pargesa Holdings.It is left with an adequate cash flow after making contributions to Power Corp.Net earnings went from $400 million to $610 million in 2017 for a 50% increase just slightly less than that for Power Corp.(POW).
A good investment
Power Corp. had good earnings for the last quarter as well as for 9 months.It's earnings driver was Power Financial and it's main driver was Great West Life.But Power Financial has more assets and it's market capitalization is $23 billion to $13 billion for Power Corp. It has invested well and so owns 62% of IGM Financial as well as 30% of Pargesa Holdings a Swiss financial company. and smaller positions in two others.PWF has a good source for future income.This blog could see the benefits of divesting some assets and buying back shares from Power Corp.But Power Corp. will gradually own less and less of PWF.Both POW and PWF use the equity method of accounting for majority owned subsidiaries.So POW gets 67% of Power Financial earnings and dividends but it's dividends are used to earn back it's equity.Every year almost $1.2 billion of dividends paid out (713 shares times $1.65 dividend) by Power Financial will be used to reduce POW equity in PWF.At the same time PWF will be using their annual earnings to increase ownership in Wealthsimple and Pargesa Holdings.In 2 years POW will own only about 60% of PWF while Power Financial will be increasing it's stake in Pargesa and Wealthsimple.
Price Target
Power Financial is still tied closely to Power Corp.but it will gradually separate from it as it's dividends help to pay back equity in PWF.Over the last 2 years Power Financial has traded in a tight range around $32 to $37 per share.It is $35 now and will likely move towards the upper end of it's range as Great West Life moves away from it's hurricane damage expenses.It might hit $38 or $39 per share in 2018 but not likely $40 until the POW position in it is in the 55% range. use Blogdaleupsome for analysis of Cdn. financials Blogdaleupsome aids investment decisions
Financial Details
Power Financial is a holding company;it's chief assets are Great West Life (68%) and IGM Financial (62%).PWF also owns almost 30% of Pargesa Holdings, a Swiss holding company, valued at $7 billion, plus a share of Wealthsimple,an investment fund with $1,000 billion of assets under management.Of course, 66% of these assets are owned by Power Corp.However it is the position of this blog that Power Financial is the better vehicle for it's shareholders.Power Corp. owns three main assets; 66% of Power Financial and small positions in China Asset Management Co. and Sagard Investments.Still it's earnings per share went from $1.34 per share to $2.23 per share for 9 months for 2017.This is a good increase and even better than that for Power Financial which only increased from $1.83 to $2.09 per share for 9 months.But Power Financial has greater prospects for growth.It retains earnings in Great West Life and IGM Financial plus the entire 30% of the earnings in Pargesa Holdings.It is left with an adequate cash flow after making contributions to Power Corp.Net earnings went from $400 million to $610 million in 2017 for a 50% increase just slightly less than that for Power Corp.(POW).
A good investment
Power Corp. had good earnings for the last quarter as well as for 9 months.It's earnings driver was Power Financial and it's main driver was Great West Life.But Power Financial has more assets and it's market capitalization is $23 billion to $13 billion for Power Corp. It has invested well and so owns 62% of IGM Financial as well as 30% of Pargesa Holdings a Swiss financial company. and smaller positions in two others.PWF has a good source for future income.This blog could see the benefits of divesting some assets and buying back shares from Power Corp.But Power Corp. will gradually own less and less of PWF.Both POW and PWF use the equity method of accounting for majority owned subsidiaries.So POW gets 67% of Power Financial earnings and dividends but it's dividends are used to earn back it's equity.Every year almost $1.2 billion of dividends paid out (713 shares times $1.65 dividend) by Power Financial will be used to reduce POW equity in PWF.At the same time PWF will be using their annual earnings to increase ownership in Wealthsimple and Pargesa Holdings.In 2 years POW will own only about 60% of PWF while Power Financial will be increasing it's stake in Pargesa and Wealthsimple.
Price Target
Power Financial is still tied closely to Power Corp.but it will gradually separate from it as it's dividends help to pay back equity in PWF.Over the last 2 years Power Financial has traded in a tight range around $32 to $37 per share.It is $35 now and will likely move towards the upper end of it's range as Great West Life moves away from it's hurricane damage expenses.It might hit $38 or $39 per share in 2018 but not likely $40 until the POW position in it is in the 55% range. use Blogdaleupsome for analysis of Cdn. financials Blogdaleupsome aids investment decisions
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