Builders Capital Mortgage Corp. Strengthened Portfolio and Dividend Resilience

Builders Capital Mortgage Corp.

Strengthened Portfolio and Dividend Resilience

Published: May 2, 2025

Author: FRC Analysts

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*This report and research coverage is paid for and commissioned by Builders Capital Mortgage Corp. – See the bottom of this report for other important disclosures rating, and risk definitions. All figures in C$ unless otherwise specified.

Sector: Financial Services | Industry: Mortgage Finance

Ticker Symbols:  BCF – TSX

Report Highlights

  • In 2024, mortgage receivables (net) increased 31% to $43M vs our estimate of $40M. Q4 saw the bulk of receivables growth, funded by proceeds from a $7.5M bond financing.
  • Revenue was up 11.0% YoY, beating our estimate by 1.5%.  However, EPS held steady at $1.04, in line with our estimate, as higher loan loss provisions offset revenue growth. Annual regular dividends remained unchanged at $0.80/share, reflecting a yield of 9.36%.
  • We believe the MIC has lowered its risk profile, driven by a higher allocation to first mortgages. Additionally, stage three mortgages (impaired) decreased 0.9 pp YoY to 4.7% of mortgages, a notable contrast to the broader MIC sector, which saw a rise in impairments.
  • Since June 2024, the BoC has cut rates seven times (225 bp), with the potential for one or two more cuts this year, due to slowing GDP growth, high unemployment, and cooling inflation. Consequently, we anticipate BCF’s transaction volumes to rise this year.
  • While lower rates have historically boosted MIC/financial stocks, Trump’s tariff threats have negatively impacted both Canadian and U.S. equities across the board. Although tariffs will not directly affect MICs, we believe they could be impacted by a potential tariff-induced recession.
  • Given the uncertainties, we are taking a cautious stance on MIC/financial stocks. We expect Trump may reverse or soften his new tariff measures due to their potential negative impact on U.S. consumers and businesses. Should this occur, we would revert to a bullish stance on MICs.
  • We believe BCF is well-positioned to navigate economic uncertainties, given its strengthened portfolio, featuring more first mortgages, and fewer stage-three mortgages.
  • We believe BCF can sustain its $0.80/share annual dividend this year, even if lending rates drop 2%, and provisions rise 250%, underscoring its resilience and low-risk profile.

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