Olympia Financial Group (BKH:BUY) The company announced better than expected second quarter results with both revenues and earnings above our estimates.

6-SEP-18 – Olympia Financial Group (BKH:BUY) The company announced better than expected second quarter results with both revenues and earnings above our estimates. Revenue increased ~28%, while EPS was up ~58%. We remain optimistic on OLY’s growth prospects amid regulatory tailwind in Ontario and increasing demand for HSA product. The high dividend yield (~5.6%) should limit the downside risk in our view. We maintain our BUY rating and increase our target price to $51 per share.

Q2:18 Highlights

  • Q2:18 revenues were $13.1 million, up 28% from Q2:17, on account of higher service revenue and interest earned. Service revenue increased 25% to $10.31 million from $8.28 million when compared to the prior year quarter, while Interest revenue increased 45% to $2.87 million versus $1.98 million in the prior year quarter.
  • Net earnings increased 58% to $2.72 million versus $1.72 million in the prior year quarter. Basic and diluted earnings per share increased 58% to $1.13 per share versus $0.72 per share in Q2:17.
  • Olympia implemented its earlier declared dividend per share increase to $0.20 per share (earlier $0.17 per share) from June 2018.
  • The management does not provide any guidance, though company’s CEO, Mr. Rick Skauge sounded optimistic about the growth in 2018.
  • We increase our estimates based on the results and management commentary. We maintain our BUY rating and increase our target price to $51, with an implied capital appreciation potential of ~20%.

PRIMARY RISKS

  • Delay in executing new product launch or improvement offerings remains a concern
  • OLY’s profitability is impacted by interest rates. Any reduction in interest rates could adversely impact interest revenues and hence earnings.