MCAN is a Mortgage Investment Corporation (MIC) traded with symbol MKP on the TSX. Its mortgage portfolio contains a mix of construction loans and single family mortgages. According to their most recent investor update the loan portfolio is worth $919 million, with $580.5 (63%) in construction loans, and $338.5 (37%) in single family mortgages. The construction portfolio is basically half in Ontario, 40% in BC and 10% in Alberta. The single family portfolio is 61% in Ontario, 18% Alberta, and 10% in BC. MCAN’s stated goal is to focus more on funding single family home loans.
In times when real estate prices fall, MCAN will be more risky because their construction loans will sour at a higher rate than single family loans (especially insured single family loans). So investors need to keep in mind that when real estate prices fall, MCAN will feel the impact more than most.
But what investors should be more concerned about is the recent departures of both the CEO and the CFO. Rumour has it that these departures are unrelated, but investors should be very concerned about the specific reasons. MCAN has appointed an interim CEO, Karen Weaver, who is an experienced and respected leader. But otherwise MCAN has not provided much explanation to shareholders, and so the share price of MCAN has dropped sharply since the CEO departure was first announced.
At the time of writing, MCAN shares are trading a bit above book value, with a forward yield of 9.14% which is very high, so investors should wonder whether this is a trap rather than a chance for good value.
MCAN is scheduled to release quarterly earnings in the coming days, and if any reader has more information on MCAN, please leave your comments to this post.