GSY: Still more wood to chop before it gets easier

Research evidence excerpt

GSY: Still more wood to chop before it gets easier

goeasy Ltd.

Target/Upside/Downside Scenarios Investment summary

We rate goeasy Underperform as the recent credit reset andgoeasy Ltd.

balance sheet pressures materially change the company’s

250 125 Weeks 21DEC23 - 13MAY26 growth outlook. In our view, GSY's near-term outlook is

challenged by liquidity constraints, remediating issues in the

200 LendCare portfolio, and elevated charge-off rates. We do

150 not expect management's 3-point action plan to take hold

100 until 2028+. As a result, we see downside risk to valuation

as investors reassess the durability of book value and the

50 TARGETTARGET 30.0030.00 CURRENTCURRENT 29.4229.42 company's ability to stabilize credit performance.

15m Key potential catalysts include the following:

10m

5m

2024 2025 2026 1. Business results stabilize and the company re-instates

D J F M A M J J A S O N D J F M A M J J A S O N D J

F M A M guidance once better visibility around the growth GSY CN Rel. S&P/TSX COMP IDX MA 40 weeks

Source: Bloomberg and RBC Capital Markets estimates for Target trajectory is provided.

2. Absence of a recession or a deteriorating macroValuation

environment should improve the trading multiple.Our 12-month price target of CAD $30/share is derived by

applying a 0.65x P/BV multiple on our forward BV forecast. Our Risks to rating and price targetprice target implies ~0.8x P/TBV. Key potential risks include the following:

Our P/BV multiple is in line with the company's historical 1. Recession with high unemployment rates driving credittrough valuation reached during GFC, reflecting an elevated deterioration though goeasy’s shift towards securedrisk profile driven by LendCare (~40% of GSY's loan book). lending should drive outperformance vs. prior cycles

2.