Here’s the recent Barron’s article:
Medallion Financial Investors: Best to Buckle Up
By Jack Willoughby
September 17, 2016
The financier of New York’s yellow cabs cut its dividend and felt the wrath of investors. Best to buckle up and brave the bumps.
Why didn’t we just hop out at the corner? Barron’s wrote positively about Medallion Financial a year ago, after shares of the specialty lender to New York’s yellow-cab owners had been run over by Uber Technologies, the popular ride-hailing service. We argued the 65% decline in Medallion was overdone because it still had a strong base of support and had diversified beyond lending to cabbies looking to buy medallions. The shares subsequently jumped 60%, to $9.90, by March of 2016.
Unfortunately, we got a little too comfy enjoying the sights from the back seat. The stock gradually drifted back toward the price at the time of our story (“Time to Hail Medallion Financial Shares,” Sept. 19, 2015) and then last month the family-run company slashed its quarterly dividend to five cents a share from 25 cents, cutting the stock’s yield to 5% from a hefty 20%. Adjusted second-quarter earnings came in at a six-cent loss, well below expectations. The shares, a long-time target for short sellers, have since lost 50%, to $4.
It’s way too late to get out of Medallion (ticker: MFIN). Company president Andrew Murstein says the sharp payout cut was needed to grow the company’s other operations, such as recreational vehicle loans. The stock is now very cheap, trading at just 5.3 times expected 2016 earnings of 75 cent a share. Delinquencies on the medallion loans have ticked up, but remain manageable, and Murstein says losses on them run at 0.47%. With its shares trading at just 40% of book value, Medallion could attract a private-equity buyer.
And yellow cabs haven’t disappeared. They provided 146 million rides to New Yorkers last year, down 11% from the previous year. Buckle up.
Here’s the previous article referred to:
Shares of New York City’s Medallion Financial have been run over by deep-pocketed start-up Uber Technologies, now Gotham’s largest taxi operator.
The firm is a leading lender to individuals and companies seeking to own and operate yellow cabs through the purchase of a medallion, which is bestowed by the New York City Taxi and Limousine Commission and allows drivers to pick up passengers who hail them on the street. In all, there are only about 13,000 medallions available, which has at times made them a very secure…