CCP Creditcorp

[winner69]

On another thread Ratkin (I think) said he had this in his stopwatch if the price was right.

A 5.03 announcement today and a profit downgrade .... a bit light on the detsil ..... ratkin might might just get his wish,

But is this just another debt collector in a long series who reach a certain size and then it all seems to go wrong ..... costs get out of control ..... ledgers get harder to collect ...... and low and behold the amortisation factors they have been using are all deemed too light and we see a large adjustement in the value of ledgers.

We'll just have to wait and see ..... but one thing Carmel will see the initial slide ain't too much

Worth while to go back on the watch list .... I see some volatility coming up here

[ratkin]

Your right Winner. Have had this on my buy list at 9.00. Never went low enough , maybe now it will.
Question will be , do i still want it?

[stephen]

Your right Winner. Have had this on my buy list at 9.00. Never went low enough , maybe now it will.
Question will be , do i still want it?

Oh, it will and it has. Ouch.

Assuming 08 NPAT of 18m we're looking at a forward PE of 15.

(Disc: still holding some CCP.)

[macduffy]

Down 42% toay and looking interesting at $6.

May have to have a nibble.

[winner69]

hey Ratkin ..... really really cheap now ..... $6 .... was nearly $13 not that long ago

Can't be true .... say the current holders

Even Carmel will be buying at this price .... even i might be tempted ..... as long as you get out before the next downgrade

[stephen]

hey Ratkin ..... really really cheap now ..... $6 .... was nearly $13 not that long ago

Can't be true .... say the current holders

Even Carmel will be buying at this price .... even i might be tempted ..... as long as you get out before the next downgrade

Can't be true? Well, it was richly priced before, so although it's a drastic drop, it's not without reason.

I sold down earlier in the year, and I bought well below this level, so I'm not too scarred by this.

[silu]

From a 20-bagger to a 10-bagger overnight. Aaaargh.

[winner69]

Can't be true? Well, it was richly priced before, so although it's a drastic drop, it's not without reason.

I sold down earlier in the year, and I bought well below this level, so I'm not too scarred by this.

Like you Stephen I sold out a while ago at over $10 .... had some regrets when it did keep going up

Reasons for selling on the old thread that i can't find .... tracking cash flows and value of the ledgers in the balance sheet something didn't quite add up ..... like they didn't seem to be amortising fast enough. I had seen the same patterns before in CLH and that was the trigger.

I also wonder if the taking over of the dog(?) Repcol ledgers has had.

Seems to be a trend here ....... Baycorp being totally overvalued and that only coming out when Data Advantage paid far too much for them and suffered the consequence .... CLH being the star of the ASX a few years ago post IPO before having troubles with their valuations collecting debts .... all stars now tainted by the same brush

And RPC .... never a star but broke now are they

[ratkin]

just bought a few

[Nimble]

Previous profit guidance was 24M, downgraded to 17-19M up drop of 21 - 29%.

Price now 599 -460 or -43% Seems excessive compared to profit downgrade. 2008 PE now below 14!

Tempting..... but then one profit downgrade often leads to another.

[winner69]

Wonder if Carmel is bailing out ....... still strong selling ..... nearly 10% of the company changed hands ..... or maybe carmel just became a bigger owner

[winner69]

Previous profit guidance was 24M, downgraded to 17-19M up drop of 21 - 29%.

Price now 599 -460 or -43% Seems excessive compared to profit downgrade. 2008 PE now below 14!

Tempting..... but then one profit downgrade often leads to another.

Drop your profit guesses by 25% to a figure less (or about the same as) than last years profit the growth premium goes as well ....... no growth so why a PE of 20 they say

So say $2.50 odd of growth premium gone (reduced PE) and add that the what the earnings impact is and you get the $6.00 ..... and what will happen next time?

[macduffy]

Still watching .......... and waiting.

[winner69]

Still watching .......... and waiting.

Good call probably ...... heavy selling at the end and closing almost at days low suggests another bad day tomorrow

Looking at the trades some big shareholders bailed out today.

[COLIN]

Good call probably ...... heavy selling at the end and closing almost at days low suggests another bad day tomorrow

Looking at the trades some big shareholders bailed out today.

And who hoovered them up?
A 47% reduction seems a gross over-reaction to a relatively modest profit forecast downgrade. No doubt the general nervousness in the market has exacerbated the situation. I would normally wait for signs of an uptick before jumping in with a "buy" order but I'm not able to monitor the market closely, all the time, so took the plunge and bought 5,000 at 560. They will possibly go a little lower yet, but its not always possible to pick the bottom of the trough in these situations.
"Fortune favours the brave". In the past I have made handsome profits by buying otherwiser sound financial services companies the likes of AMP, TWR and BCA when they were "on the ropes", and had the satisfaction of riding the recovery trail with them. I have had a quick look at the CCP story to date, and also studied the financials, and am quietly confident. Also - and surely this must be a big also - with financial conditions tightening shouldn't it be a great climate for debt recovery firms to boost their business?

[winner69]

Colin ...... prob a good call ..... I took up a few for a short term spec ..... maybe might get more for a medium term trade .... but watch those charts eh

Always an interesting question when these sorts of events happen .... Is it such an overreaction when 3 months after telling the world you are going to increase profits by +20% you say you will make less money than you made that year?

Is it an over reaction when a share valued with heaps of growth priced in (even though only 20 times forecast earnings) loses that growth aura and becomes 'reasonably' priced?

What happened yesterday was not only adjusting for the reduced earnings but taking away the growth premium as well .... so not an over reaction in this context.

I get the heebie jeebies when these sort of companies use words like 'change in portfolio mix' and 'margin declines' and have productivity problems. It seems once they get to a certain size it all turns to crap and the much touted growth seems to lead to diminishing returns.

Same words as used by RMG for years as well .... RPC said much the same ..... so did CLH but they have survived and doing quite well and their shre price is now reasonably priced but way off what it was.

Colin .... you also say that you have studied the financials .... at face value they look OK but as I have said a few times before some concerns when you track cash flows and ledger valuations over time ... doesn't seem quite right ... and seems to mirror the same trends that CLH had before they had to make some large 'adjustments'

Interesting few months ahead .... not convinced about the fundamentals ... but market sentiment is a funny thing and as long as many think this is an overreaction there is money to be made .... so why not have a go eh

[drworm]

I rode this one and sold at $9.60 for a 3.5 bagger over a couple of years. Decided to sell because growth was slowing and PEG was getting over 1 - didn't feel like the price was value for money especially considering the risks associated with ledger amortisation.

I must admit I thought it was going to rebound quickly and yesterday subsequently took a nibble, got hammered and bailed quickly with a small loss. But absolutely agree with Winner, alot of the price drop was knocking out the growth premium so it's still not scream-out-loud cheap. I'm just happy to sit on the sidelines for now.

[COLIN]

I don't think so.

[COLIN]

Interested to read a couple of updated brokers' reports on CCP - their revised target prices haven't fallen as drastically as the market plunged last week. J P Morgan has it at $7.45 and another crowd - who I haven't heard of previously - has it at $8.00

[winner69]

The sellers have gone and tried hard to breach the $6 barrier yesterday

Upbeat remarks at AGM seem to have done the trick

Time to put in a bit extra dosh for a short to medium term trade .... but the recent problems have only been solved by words yet .... the problems with staff just don't go away because people are involved eh .... so watch those charts closely becuase I don't think you want to be around for the next profit downgrade .... which is still very probable

[winner69]

Looking good today ..... on the way back after the cleansing

[winner69]

Well that was a very short term trade with no profit in it at all .... the resurgence over $6 didn't last for more than a day or two

Irrespective of how cheap it looks punters look like they have turned off ..... even Fishers don't seem to be buying

People hanging in there? or has everybody given up

[ratkin]

Im holding , back to my buy price now but have no plan to sell , or to buy more.
Lots of emotion and market noise around at the moment , in a year or so we may know if its a good well run company or a lemon.

[winner69]

Im holding , back to my buy price now but have no plan to sell , or to buy more.
Lots of emotion and market noise around at the moment , in a year or so we may know if its a good well run company or a lemon.



,,,,, good question that you ask

Whether todays action was emotion or noise we still don't know but a big fall to 515 today maybe it is a lemon

Down nearly 16% in last 2 weeks which is significant after the 50% odd fall earlier

[ratkin]

Yes , could be , such a fall on a generally good day seems rather ominous

[soulman]

True Winner, are you still in this or have you bailed out? In a strong market like today and your coy falls is a bit of a worry. Just like PPT for me today.

I am sure a speeding ticket will be issued very shortly or maybe an announcement by the coy.

[winner69]

Soulman - no not in ....... after the big fall in just below 600 with the sole intent of riding the expected recovery to whatever it was going to be (700+ some said) .... looked good for a few days but bang and out at about the same level

As stated before i have some doubts about the financials and that was why I bailed out at $10 odd several months ago ... regretted it for a while as it kept going up .... but heck 520 today does seem a bit ridiculous ...... or maybe somebody does know something sinister

Might have another go at a short term trade ..... never know might get to that 700+ figure yet and from 520 that would be pretty good.

[winner69]

Well well .... went below 500 for a while but did close at 500.

Somebody keen to sell some today as price went from highs of 536 to 492 in a few hours .... nearly a 10% fall in that time

Maybe there is something inherently wrong after all.

Real trouble for holders is that when market stars rated as a growth company get rerated down to just one of the pack (or a value stock) they seldom ever regain their old glory ... as such I feel that CCp will forever only have a PE in the mid teens .... so CCP now have to perform if the shareprice is to recover.

[soulman]

I think Winner, that's probably in sync with the market. The market did nothing but fall as the day go on. I got smash with Caltex so a terrible day for me. Actually, I got smash all over the ball park.

[_Michael]

Well well .... went below 500 for a while but did close at 500.

Somebody keen to sell some today as price went from highs of 536 to 492 in a few hours .... nearly a 10% fall in that time

Maybe there is something inherently wrong after all.

Real trouble for holders is that when market stars rated as a growth company get rerated down to just one of the pack (or a value stock) they seldom ever regain their old glory ... as such I feel that CCp will forever only have a PE in the mid teens .... so CCP now have to perform if the shareprice is to recover.
Hi Winner,

This might be stating the obvious but do you think some of the sharp high volume sell-offs that are resulting in share price over-reactions might be nothing more sinister than fund managers cleaning out the portfolio before year end? In some cases if they are US Instos for example there is probably also tax benefits in doing so as well as the psychological feeling of "pulling the weeds". I see the same going on with decent companies like PPL at the moment but am not really picking that its necessarily a relflection of terminal problems, rather a refelction of current sentiment and the supply/demand imbalance that occurs when more fundies are selling than buying... Although its an old cliche that fund managers are chasing the next six months stars and run from bad news, my obsrvations have formed my opinion that its usually true!!! Unless theyre someone like Berkshire Hathaway who greet bad news with joy and tend to mop up shares from the droves that of funds that are dumping them in search of next quarters stars....!

cheers
michael

[winner69]

I think Winner, that's probably in sync with the market. The market did nothing but fall as the day go on. I got smash with Caltex so a terrible day for me. Actually, I got smash all over the ball park.

Still in syn with the overall market today?

Below $5 not a good look really .... I am now convinced the market has thrown off the 'growth' tag and that from here on in CCP will languish just as another stock and the shareprice will only perform relative to company performance with no fancy multiples in the future.

Thats my view anyway

[winner69]

This is the sort of article that'll make it hard fro CCP to make any decent recovery ..... negative sentiment not good .......... esp if the likes of JP Morgan say things like "Given the debt-collection sector's poor track record with public companies, we do not believe Credit Corp will be able to sustain a premium valuation until it re-establishes investor confidence around earnings growth sustainability," broker JP Morgan says in a report.

CCP does seem to be following the same path as CLH doesn't it? And I do believe that CCP still have some 'valuation' issues to address

http://www.theaustralian.news.com.au/story/0,25197,22886609-23634,00.html


Debt collectors toil to stay in the red

CRITERION: Tim Boreham |
December 12, 2007

IN theory, debt collecting should be a licence to print money: consumer credit has grown at an annual rate of 10-15 per cent over the past three years, while mass-customer institutions such as banks and telcos have increasingly outsourced this work.

According to Collection House (ASX code: CLH), the purchased debt market was worth $400 million in 2006-07 and is growing at 10-12 per cent annually.

While this suggests the sector should be thriving, the listed exemplars have a poor profit history. Collection House, the second biggest debt collector, has struggled since listing in 2000.

Another, RMG, collapsed last year, despite the benefit of a big Telstra contract. RMG has now hit the rocks of a different kind, having re-emerged as a uranium explorer.

Credit Corp (CCP) this year bought the debt business of listed rival Repcol and earlier Veda Advantage's recovery division was taken over by the listed cash box Allco Equity Partners (AEP).

Now Credit Corp -- widely seen as the best performer -- has faltered. The company in November revised its 2007-08 net profit to $17-19 million, 20-30 per cent lower than the previous guide of $24 million.

In its confession to the market, Credit Corp cited the twin impact of overly zealous business expansion (buying debt ledgers) and low staff productivity because of a scarcity of trained operators. Credit Corp made the same earlier mistake as Collection House by paying too much for these rights to recover from delinquent debtors.

While ledgers are acquired at a steep discount, many still proved to be overvalued: getting dough from an "old" debtor -- or one who has changed addresses a dozen times -- is like getting a Scotsman to shout the bar.

Given debt collecting is a nuanced art of threatening and persuading, it's not hard to see how a dearth of skilled staff would exacerbate the problem.

Credit Corp has tapered back on buying a "certain type" of ledger that produced high but unsustainable short-term returns. This in itself contributed to the downgrade, but management argues it will deliver stronger revenues later on.

Collection House, meanwhile, claims to have arrested an earnings malaise that saw net profit slide to $3.8 million in 2006-07, from $6 million previously.

According to Collection House CEO Tony Aveling, the company has built up a bank of management information, enabling it to price debt purchases more accurately. "Get it wrong and it can be quite expensive," he says.

Collection House has also toned up its business by selling some non-core operations and has shelved plans to create a credit reference bureau to rival that of Veda Advantage, now owned by private equity.

While there's evidence the listed survivors are tackling their problems, in our view the sector has structural deficiencies that make it unattractive to investors.

It's a fragmented sector with lots of private operators, some of which employ collection techniques that are robust and direct, to put it politely.

"Given the debt-collection sector's poor track record with public companies, we do not believe Credit Corp will be able to sustain a premium valuation until it re-establishes investor confidence around earnings growth sustainability," broker JP Morgan says in a report.

The broker says there's a risk the banks will do a strategic about-face and take collections in-house. Rising unemployment would also hinder consumers' ability to repay debt, although we guess that could create new "clients" as well.

[Ptolemy]

OMG, it's a meltdown. I thought I had bought well at $4.50 but it has plumbed new depths to 4.10. At one stage there was one lonely buyer in the depth at $4.00.

Absolutely savaged.

[soulman]

Great buy there Ptolemy. I haven't bought anything mainly because I bought last week and yesterday (wrong timing). Today signalled panic to me. In line with the freefall in CCP, there were SMY falling to $4.02, DUE to $2.38. Fantastic if you pick near the bottom.

[winner69]

There were only 7 shares sold at 410 ....... 20,000 odd around the 445-450 on the way back up though was good buying

Must have been a very keen seller during that time

[winner69]

No matter how 'attractive' the fundamentals may look CCP is definitely not flavour of the month is it with the selling down continuing.

Take out those few hundred shares at 420 odd this is the weakest the CCP shareprice has been for zonks

Currently the environment is supposed to be favourable for the likes of CCP so things should look brighter.

Is it the large amount of borrowings they have that is making people worried .... borrowing to pay for bad debts doesn't sound like a good idea now ...... or is it something even more sinsiter like i mentioned when I sold out at around $10 .... on the way up and missing another 20%

That new indepenedent director didn't hang around for long did he .... got promoted to be a chairman of another board and could devote enough time to CCP they say .... OK I believe him

Might be completely wrong but this is looking like another Collection House CLH ..... meteoric rise post IPO and then sinking into the mire of the also rans .... but wouldn't say another RMG ..... remember them

[_Michael]

Is it the large amount of borrowings they have that is making people worried .... borrowing to pay for bad debts doesn't sound like a good idea now ......

.... but wouldn't say another RMG ..... remember them

Isn't it ironic? Hopefully their lenders will not end up sending round the collectors!

[_Michael]

Isn't it ironic? Hopefully their lenders will not end up sending round the collectors!

If there are any collectors left to send!

(Least we forget RPC, rest in peace)

Just kidding, CCP have always seemed like pretty good operators in their field.

[winner69]

...... or is it something even more sinsiter like i mentioned when I sold out at around $10 .... on the way up and missing another 20%

That new indepenedent director didn't hang around for long did he .... got promoted to be a chairman of another board and could devote enough time to CCP they say .... OK I believe him

Might be completely wrong but this is looking like another Collection House CLH ..... meteoric rise post IPO and then sinking into the mire of the also rans .... but wouldn't say another RMG ..... remember them

So has CCP finally entered the dog status

Last November guidance from $24 to $17-$18M and then three months later it is now $10-$12M .... with another $5M of restructuring costs - so hardly any profit this year ..... but the announcement has so many positives in it it'll be OK

The thing not manetioned and what has to be seriously considered when you read between the lines is the value of these of ledgers in their books ........ surely underperforming ledgers can't have the same value as few months ago

This is there second downgrade ....... whats the theory guys

Close look at cash flows v's balance sheet values didn't look too good a while ago and that's why I sold out then and thought I was wrong when the price went up another 20% ... but latest developments have prob proved my sums right.

The CCP shareprice from here on in will do what the CLH one did - have a look at the CLH chart

[winner69]

Well ... maybe not like the CLH after all ... even worse

Some effort to go from $13.00 to $1.50 in less than a year ---- almost of Centro proportions

Pretty cheap today .... Fisher Funds still think the world of it ... long term

[winner69]

Oh, it will and it has. Ouch.

Assuming 08 NPAT of 18m we're looking at a forward PE of 15.

(Disc: still holding some CCP.)

Stephen did say this in November but an update ---

Assuming 08NAPT of 10m (pre abnormals) we're looking at a forward PE of 6

Si is CCP a steal today?

Only time will tell

[winner69]

Bought some at 116 .... lets see what happens over the next few hours but if it goes up will ensure I make a few bob .......... or bail out pretty quick if it starts heading down from here

[winner69]

Bought some at 116 .... lets see what happens over the next few hours but if it goes up will ensure I make a few bob .......... or bail out pretty quick if it starts heading down from here

Bugger - got that one wrong - out for a small loss but wouldn't want to calculate the annual return on that trade

Try again later on in the afternoon --- must be some money here somewhere but if Fisher is getting out for good anything could happen - they'd go to 75 cents just to get rid of the rest ... no theres a thought

[soulman]

And to think a director of CCP just bought a few for over $4 a week ago. He's obviously not an insider.

Bad luck on the trade Winner but looks like another disaster.

[winner69]

Soulman -- and not too long after an independent director resigned ... because he had too much on his plate ........ he knew when to leave eh

Losing trade 1st time around ..... just had another go ..... I know its punting but this time I think i'm onto a winnerthis time around

[ratkin]

Wow , just noticed the carnage, had removed this from the watchlist , cant believe how far it fallen.

Had a lucky escape with this one , bought some a while ago for around five dollars but later sold out when it showed no sign of bouncing.
Do hold a few barramundi though , not sure how many fisher still hold.

[ratkin]

Dont know what they have been up to but it must be bordering on criminal. To take a stock from 11 dollars to 1.00 in eight months must involve some criminal activity somewhere.

[soulman]

CCP looks cheap. At 20 to 23 cents EPS, currently PE at 5 pre-restructuring. Did they say anything about dividends for this half? All will be reveal this coming Thursday I supposed.

Of course, short term (2 months) look safe, but as for long term, another profit downgrade?

[Footsie]

another profit downgrade is inevitable.... however

will they go broke?
unlikley
overreaction at 100

wouldnt want to be holding o/night in this market.

[winner69]

Dont know what they have been up to but it must be bordering on criminal. To take a stock from 11 dollars to 1.00 in eight months must involve some criminal activity somewhere.


Ratkin ... you did have a close shave eh .... and i would say that after todays effort and the number of shares traded Barramundi would have cut their losses and bailed out.

Actually from just under $13 last May to todays $1 - not many outfits can claim to have had 2 60% drops in a day in such a sgort term

Agree with Footsie you would have to say that $1 is pretty cheap but who would want to invest in company like this ...... many would say that even the $10m will be downgraded ... and will the retructure costs of $5m be more than that

I had doubts about their financials some time ago (I still see a writedown in the value of the ledgers still to coem but that will be a non cash item so most will disregard it etc) and thought that they weren't amortising the ledgers as fast as they should be.

Reminds me of the star collection agencies we have seen over the past few years ....

[ratkin]

So many people thought this was a very good company only months ago.
Presumably fisher and the other managers would of done site tours , talked to the bosses etc, yet surely they would of known how bad things were.

That why i think there must have been something criminal happening, even if it only accounting fraud. To have such glowing annual report followed by all these downgrades just dosent make sense

[soulman]

Soulman -- and not too long after an independent director resigned ... because he had too much on his plate ........ he knew when to leave eh

Losing trade 1st time around ..... just had another go ..... I know its punting but this time I think i'm onto a winnerthis time around

No winner here. Closed on the days low. Huge volume of more than 30% capital traded.

Holding this overnight are not for the faint hearted. A rebound maybe. Takeover also a possibility as well as management BO.

[Footsie]

I saw that KW - UGL brutal and they reported good numbers

[soulman]

It wasn't that good number Footsie. I just bought UGL last week and sold some on Friday. I saw the UGL website on Friday that they are reporting this Monday, hence kept 65% for potential upside.

Boy, I didn't have a chance today. The numbers are not good. Operating CF are low. The last year number were affected by the PPP one-off, so don't see the 51% increase as what they are. Hence, the numbers are not what it seems. EPS growth was only about 14% for the half, although UGL always flagged a stronger second half.

The numbers are not a profit downgrade but people expect more. This might be an overreaction but if it drop another $1 tomorrow, I would not be suprise.

[winner69]

Soulman .. 2nd trade was at least profitable but down slightly for the day ... things were pretty ruthless in the last half hour weren't they

Hadn't noticed UGL action - I'll put that on the watchlist with a longer term view even though PRG was my choice in that sector a while ago and that ain't done too well lately either.

[winner69]

Last accounts for CCP had borrowings at $125M (due repayment early 2009 I think) supported by shareholders equity of $66M ........ with profits (and presumably cash flows under pressure that is not a good look..

Half year accounts will make an interesting read

[drworm]

I think the question on everyone's mind is: how much are the debt ledgers on the books are actually worth? Because if the actual value doesn't cover the long term debt, and the bank(s) feel uneasy about lending a $43mil market cap (price = $1) company $125mil in loans and starts asking for some back... it's going to be in some real trouble.

[steve fleming]

Huntleys are pretty blunt with their views today:

We downgrade our recommendation to Sell and strictly advise against any speculative investment in CCP. Investors brave enough to be holding the stock at this stage should exit on market. The lack of earnings certainty and poor disclosure makes forecasts, price triggers and valuation estimates inappropriate.

We see more downside in the shareprice despite trading almost 90% below its rolling year high. Lack of confidence in management and high levels of gearing could force ledger divestments. Our main fear is a suspension in the trading of securities with investors potentially sidelined until the dust settles. Repcol (RPC) is a perfect example.

[winner69]

Huntleys are pretty blunt with their views today:

We downgrade our recommendation to Sell and strictly advise against any speculative investment in CCP. Investors brave enough to be holding the stock at this stage should exit on market. The lack of earnings certainty and poor disclosure makes forecasts, price triggers and valuation estimates inappropriate.

We see more downside in the shareprice despite trading almost 90% below its rolling year high. Lack of confidence in management and high levels of gearing could force ledger divestments. Our main fear is a suspension in the trading of securities with investors potentially sidelined until the dust settles. Repcol (RPC) is a perfect example.

Steve -- interesting they mention Repcol - it appears likely that some of the repco; ;edgers that CCP purchased might be one of the causes of the problem.

It was when Repcol got into trouble I did a very thorough analysis of CCP reported cah flows and the movement of the value of the ledgers in the balance sheet and didn't like what I saw - it was the same pattern i had picked up in CLH before they started reporting large profit downgrades.

That was the reason why I sold out at $10 and while cursing missing out on another 30% sure am happy with my analysis - it was a great ride while it lasted.

Amazing world really .... CCP floated in 2000 .... good steady earner for a few years ..... starting expanding in a big way about 2003 and 2004 ...... profits continued to grow strongly ..... market just loved them ........... shareprice gets to just under $13 a year ago ...... and it all turns to custard very quickly and back to under $1 it goes .... truely amazing

OK Steve --- I'll take Huntleys advice and won't do any gambling with the play money with CCP

[winner69]

One last comment on CCP for today

PHAEDRUS probably would have been out of CCP last June/July at around $10 .... and would never found a reason to buy after the first downgrade in November

Just thought I'd mention that

[ratkin]

Notice from fisher today . Sold lots yesterday , very ugly and they still hold over 6% of the company.
Whats worse is they were buying up bigtime in january , looks a disaster for them

I have a question , will that all be barramundi or will the holding be spread across a number of their funds?

Incidentally another of their holdings VGH looks like it is starting to tank bigtime

[macduffy]

Notice from fisher today . Sold lots yesterday , very ugly and they still hold over 6% of the company.
Whats worse is they were buying up bigtime in january , looks a disaster for them

I have a question , will that all be barramundi or will the holding be spread across a number of their funds?

Incidentally another of their holdings VGH looks like it is starting to tank bigtime

As I understand things, Fishers invest more or less the same stocks in Barrumundi and their Aust Growth Fund.
So to that extent I imagine that the CCP's are shared between those two.

Disc: Don't hold any of the above but could be tempted by CCP.

[Offshore]

I predict that with a strategic review underway it is likely the book value of non performing debt ledgers will be severley downgraded (based on the recent non performance comments), resulting in a one time huge loss for this financial year.

CCP appear to have entered what I call a growth pain cycle, where ledger aquisitions have been at to fast a pace for staff growth / training to keep up with (you can buy all the debt you want but you need experienced staff to collect it). They also appear to have mispriced ledgers and it will be interesting to see if they are the Repcol ledgers that caused their demise.

This is a business cycle Baycorp also went through and then CLH (although CLH are now through that cycle and are growing steadily again).

[COLIN]

Got back in again today. One has to have a certain amount of high-risk content in one's portfolio to make investing life interesting.
I remember making money on Baycorp in their recovery stage - hope this puppy follows suit, but who knows.

[steve fleming]

Some more from Huntleys - on what they now call Credit Corpse.....

"Despite promises, any significant turnaround now seems highly unlikely. Chairman Christopher Deane has resigned effective immediately with a strategic review likely to see more senior management departures. The review is expected to cost $5m.

CCP outlined five key problems behind the downturn in profitability. Poor purchases due to mispricing and lower than anticipated collection volumes are the two most significant. Others include excess focus on freshly purchased debt and higher infrastructure investment costs lagging revenue. Large scale recruitment and high staff turnover has seen productivity nosedive. More than 65% of the existing collection team has been employed for less than one year. In summary, the relatively young and inexperienced management team has mismanaged growth and diminished any competitive advantage built over the past few years.

We think rising interest rates are hurting collection volumes by a greater degree than previously anticipated, with the situation likely to worsen following the recent rises. Debtors will usually prioritise current commitments such as mortgage repayments and rents above delinquent loans. The downgrade is further magnified by the high level of debt, with gearing above 100% of book value.

CCP says a substantial proportion of recent purchases have failed to yield expected returns from one particularly forward flow agreement. Writing down these recent purchases could see gearing rise even further, prompting CCP’s lenders to pull their financing. CCP might even be forced to liquidate ledgers recently purchased as part of a recapitalisation process."

Not a pretty picture at all.

[soulman]

David Jones is also going gangbusters, and yet its share price is at a 52 week low.

Anticipation of a recession is worse than the experience of one, so we must be getting close to the bottom when the market slashes and burns even the companies that are outperforming.

I think the problem with DJ is the interest rate rise forecast by the RBA. JBH announce a great set of result and doubling of dividends and their shares got smash. The market is one interesting beast ATM. I guess high PE coy are being punished for underperforming. COH, JBH and UGL.

[silu]

I was a long-term cheerleader for CCP and luckily I was free-rolling after I sold a few at $6.50 a while back.

I have sold out completely at $1 yesterday. There is so much uncertainty about this stock that I don’t even feel comfortable holding free shares anymore.

Picking a bottom on this one is like foreseeing the future in tea leaves. My guess is that it will be closer to 50 cents soon.

[winner69]

Amazing that after the meltdown on Monday and a pretty solid recovery on pretty high volumes on Tuesday (hit 120) the share price collapsed again yesterday to finish at 89

Obviously only for the brave, even for the day traders

Colin -- long term you might be OK ... good luck if you get throught he next few days unscathed ...... could be back to 120 again today

[Offshore]

Interesting a "change of directors interest notice" has appeared showing CEO Geoff Lucas's family trust has had 235,000 shares sold via "on market trade by margin lender".

[winner69]

Half year accounts out ...... to me no real increase in amortisation rates of ledgers .... potential for some large writeoffs still exist in my opinion

And debt now $144M -- thats huge on shareholder equity of $69M .... and market cap at $38M .... I'd be worried if I was the bankers even though NTA is reported at 4140 odd

Just my opinion

[shasta]

Half year accounts out ...... to me no real increase in amortisation rates of ledgers .... potential for some large writeoffs still exist in my opinion

And debt now $144M -- thats huge on shareholder equity of $69M .... and market cap at $38M .... I'd be worried if I was the bankers even though NTA is reported at 4140 odd

Just my opinion

I got an email from ASB Securities mentioning the changes to there margin lending stocks, see below...

Margin Lending: Advice of lending suspensions




As a courtesy, we wish to advise that we have suspended lending against
the following equities listed on the ASX:



1. AED Oil Ltd (AED)
2. Allco Finance Group (AFG)
3. Credit Corporation Ltd (CCP)



The suspension is effective as at the date of this advice and will
remain in place until further notice.



As a result, there will be no further lending provided against any
purchases in the above companies. We will however, continue to provide
lending against any holdings acquired prior to the effective date. This
lending will remain in place until such time as the holding is sold.

[suntboy]

Just had a quick look at MacQuarrie and they have underperform with a 12 month price at 50 cents.
Dont know anything about them but it makes for damning reading.

[winner69]

Was a brokers report that ended with the comments that suspension could be on the cards so 'SELL at current levels' ...... and some seem to be doing that today

[winner69]

The only positive that could be taken out of todays action is that the shareprice didn't go down into the 60s

Maybe punters taking that analyst advice in case they wake up one morning and CCP is no longer trading

Then again there was a poster on an aussie forum who has never never never seen a company making $10m valued at $30m

At that price if i was Fishers i would average down big time and buy the lot --- maybe thats what Warren suggested ... ha ha .... but they might have a battle with Investors Mutual or something who are building their stake

Isn't is amazing how sentiment changes so quickly ....... a great well run company with a fantastic growth strategy and it becomes a share market darling ......... and then it all turns to custard and nobody wants to touch them ..... the heros are villians ....... the halo effect worn off

And to think I once thought it was a great company too but saw the light of day and stuck with what my fundamental analysis said and sold out 20-30% before the top of their meteoric rise to fame.

Obviously priced for some impending massive writedowns of those ledgers .... if that happens then the directors and management should be shot because the writing has been on the wall for a while and they obviously have been living in hope.

[winner69]

Clime took a large loss on CCP and sold out completely a while ago ... Fishers say in their latest newsletter they don't want to sell at these low prices .... and crystalise a loss

I did say a year ago (and sold out) I was uneasy with their reporting (esp around ledger valuations) and things didn't just stack up.

Clime had faith until recently ..... heres what they said in a recent report to their shareholders -

http://www.clime.com.au/ann_pdfs/080226CAMHalfYearResult.pdf

If still in CCp or intending to get in have a read

[winner69]

Isn't is amazing how sentiment changes so quickly ....... a great well run company with a fantastic growth strategy and it becomes a share market darling ......... and then it all turns to custard and nobody wants to touch them ..... the heros are villians ....... the halo effect worn off



....... and still nobody wants to touch them ......... another all time low today with a close of 45.5 cents

[Stranger_Danger]

At the risk of soon looking like a fool, I am buying, slowly and on weakness. Not going overweight though and definitely risks here - however, I prefer risks I can "see", rather than the "riskless" purchases people were making at $10 or whatever it was when the future was "rosy".

Disc : CCP

[winner69]

Good luck Starnger

What has happened and happening to the CCP shareprice mirrors what happened to the another high flying credit collection company in CLH

CLH couldn't do no wrong post IPO .... one year it was the highest rising stock on the ASX and then valuation problems and a series of downgrades and the share price started to slide ... and 5 years on is still trending down ....chart http://au.finance.yahoo.com/q/bc?s=CLH.AX&t=my

Same sort of business ... same hype in its infancy as a listed company .... realisation that utterly overvalued ..... shareholders desert the sinking ship .... and never return .... the company just gets on and makes 'normal' profits (not pie in the sky forecasts) .... and the the comapny is valued accordingly ... generally based on yield and nothing else

CCP could be different but I doubt it ..... seen it all before

[Stranger_Danger]

Oh, you don't need to tell me about CLH, I'm far more fond of it than CCP lol.

I agree about CLH's history - you should evaluate today though, pretend you've never heard of it before. Look at it fresh at todays price in todays environment. You might get a surprise, or, alternatively, I'm a moron!

Disc : CCP, CLH

[winner69]

Yeah i know that they are track to report $10m this financial. At eps of 23 cents current price 50 cents is so cheap isn't it

So looking forward it all should be OK

However investor behaviour (sentiment) appears to drive share prices more than anything else. History shows that once investors are turned off (or been burnt) by richly valued companies which didn't perform to expectations (even though expectations were outrageous) that compan in the future will always be 'cheap' .... they hardly ever become 'over valued' again.

So why fight investor sentiment is my motto .... look for something good and that investors get excited about.

I have maintained my financial models of CCP up to date mainly to see whether the projections i made about their future impairment costs (or additional ledger writedowns) would come to fruition. To some extent they have but I still consider their assumptions around their ledger valuations (ie amortisation rates) to be on the optimistic side. The projections made for CCp were based on what happened to similar problems in CLH and it is uncanny how things are slowly unfolding

Just a rave ..... looking forward CCP currently at a PE of not much than 2 probably has plenty of upsides ..... and probably you will do oK Stranger ..... all the best

[Stranger_Danger]

Winner - still keeping half an eye on this one?

Any change of view? Regular director buying too....

Disc : CCP

[COLIN]

No comment on this one, for some time. Has everyone forgotten it? Well, let me gently point out that it has gone up all the way from a low of 39c to today's 205c, within the last 12 months - that's a gain of over 400% for anyone who was fortunate enough to have bought at that price. Its not only the oil and gas sector where spectacular gains can be made (sometimes spectacular losses).
My own little story: I tried to "catch the falling knife" and suffered accordingly (those were in the days before I became a disciple of "Phaedrus wisdom"!) However, I held on grimly, and am now enjoying some gain for all the pain. It feels good.
A search for "recovery stocks" can prove most rewarding.

[drillfix]

However, I held on grimly, and am now enjoying some gain for all the pain. It feels good.
A search for "recovery stocks" can prove most rewarding.


Way ta Go there Colin. Congrats on your intuition mate.

You gonna take your money back on that now or let it run?

The trend from march onwards on this is great.

[COLIN]

Way ta Go there Colin. Congrats on your intuition mate.

You gonna take your money back on that now or let it run?

The trend from march onwards on this is great.

Will let this one run, for sure. (And I'm also sure that my guru, Phaedrus, would approve!)

Cheers.

[Stranger_Danger]

Frankly, I prefer CLH to CCP but the latter has performed better share price wise.

I have a nagging feeling of risk with CCP that I don't have with CLH, but happy to enjoy the ride.

[ratkin]

Do barramundi still hold a huge amount?

[ratkin]

To answer my own question , they do still have some , they make up 3.1% of Barramundis portfolio.

They took a big bath on these , but maybe they will get out of jail

[mark100]

CCP making new highs and still trading at <10x forecast FY11 earnings. ROE back over 20%. To think they could have gone under a few years ago. I'm always a bit wary of debt collectors but got a few on the recent pullback under $3.60

[drworm]

Got in at around the same price as yourself mark.

As well as a low p/e I also have a feeling that they're under reporting profits. Also for a capital intensive company that's about to hit debt free in not too long speaks volumes...

I rode this company for a 3 bagger back in the day and have only recently got the confidence to buy back in

[mark100]

CCP is trending nicely leading up to the interim results. They have already upgraded forecasts so I expect an upbeat report which hopefully keeps pushing it along

[COLIN]

No comment on this one, for some time. Has everyone forgotten it? Well, let me gently point out that it has gone up all the way from a low of 39c to today's 205c, within the last 12 months - that's a gain of over 400% for anyone who was fortunate enough to have bought at that price. Its not only the oil and gas sector where spectacular gains can be made (sometimes spectacular losses).
My own little story: I tried to "catch the falling knife" and suffered accordingly (those were in the days before I became a disciple of "Phaedrus wisdom"!) However, I held on grimly, and am now enjoying some gain for all the pain. It feels good.
A search for "recovery stocks" can prove most rewarding.
(Quote posted 23/9/2009)

Am still enjoying the steady ride back to the summit again - hope I can recognise it when I see it this time!

(I should clarify that I did pull out for about 6 months, last year, when there was a period of weakness)

[slooi1]

(Quote posted 23/9/2009)

Am still enjoying the steady ride back to the summit again - hope I can recognise it when I see it this time!

(I should clarify that I did pull out for about 6 months, last year, when there was a period of weakness)

Colin,
More importantly is the outlook. I'll be very interested to see how CCP sees this panning out. I'm a glass half full person - so I see storm clouds with rising interest rates, a slowing economy (ex resources), and perhaps lower credit growth. Hopefully there's a silver lining somewhere.

I've been in CCP for a long time - rode it up from a low base all the way to the peak only to see it collapse! The rise from the ashes has been good though - the financials coming through point to a lesson learnt - hopefully!

slooi1

[Stranger_Danger]

This baby is now a ten bagger on my original purchases, though I subsequently averaged up a few times so up 6 fold overall. Nice.

If you believe their projections, multiples are still not demanding.

In the back of my head though is "history repeating" but thats a problem for a little later I think.

[mark100]

Well done SD. Yes all looks good for the short-medium term future but I'm wary of what happened last time

[COLIN]

Well done SD. Yes all looks good for the short-medium term future but I'm wary of what happened last time

"The price of (financial) freedom is eternal vigilance."

[mark100]

Nice result although not so keen on the 'expansion into new segments'. I still hold

[Stranger_Danger]

I'm not keen either. Haven't sold any yet, but I'm closer to selling than buying right now.

[mark100]

Nice upgrade from CCP today. Bought a few back recently although $4 is proving strong resistance

[drworm]

Although they revised up their guidance today, it's still conservative and a further upgrade between now and the final results is likely.

If they keep up the momentum of the first 4 months, they're running at a rate of EPS 60c (revised guidance is 50-55c)

[mark100]

Starting to look good in the chart. Profit forecast has been confirmed and that pesky shareholder litigation is out of the way for a non-material cost. If the market can stay calm for a few weeks CCP could go ok

[Stranger_Danger]

Chart is looking very nice isn't it? Haven't bought any, haven't sold any. Happily holding, especially with the chart looking perkier.

[born2invest]

Anyone else on Share Trader look into or hold this company?

The growth into the US looks promising.

[born2invest]

Anyone else on Share Trader look into or hold this company?

The growth into the US looks promising.

[silu]

Ahhh. CCP. My first and only 10-bagger. Sorry can't add as I sold it all a while ago. Just silently bragging ;)

[born2invest]

Ahhh. CCP. My first and only 10-bagger. Sorry can't add as I sold it all a while ago. Just silently bragging ;)

You must have bought soon after it declined 90+% ??

[silu]

You must have bought soon after it declined 90+% ??

Was many years ago (early 2000?) when I loaded up between 70-80c and sold them all at around $8.50 in 2006. Needed it all for a business venture.

[winner69]

Was many years ago (early 2000?) when I loaded up between 70-80c and sold them all at around $8.50 in 2006. Needed it all for a business venture.

Those were the days eh mate .....CLH was another one .... that was the top performer on the ASX one year

And remember our friend stolwyk .....didn't he get accused of ramping and even more ramping ....even I got accused of being partner in crime ......but boy CLH went up up and up ....and then came tumbling down ..like most of the other collection houses.

That was the sector to be in .....even a outfit called RMG did ok ....ha ha

[winner69]

For you silu the CCP chart of old

[winner69]

and the CLH one .... massive rise in first six months .... everybody loved collection companies and then they all tumbled down

[winner69]

and while we have fun another who thought buying ledgers and making a fortune was easy .....RMG

Now a mining company by the looks of it

[silu]

Thanks for the memories Winner. I have very fond memories of most collection companies I bought over the years. I bought CCP on the advise of a, at that time, very young student who posted here and then got picked up by a broking house. I can't remember his name though.

And stolwyk! WHo can forget him. But as far as I remember he was in his 80's back then right?

But back to CCP. Yes at first I was a little upset that I had to sell my shares when I saw they hit $10. Luckily I did because I did buy a business and later some cheap CLH shares.

The less is said about RMG the better ;)

[winner69]

The student was Dimebag .... last heard off at Macquaries .... might try to find out where he is now.

Stolwyk passed away in 2007. Even to the end he was extolling the virtues of his stock closest to his heart at the time .... the last one was a nickel play Dominion Mining

RMG was a laugh a plenty eh .... even Eric Watson couldn't resit the hot new sector eh .... whose Eric Watson I hear people ask

[Stranger_Danger]

I still have 85% of my holding.

Not keen on the current chart and director selling. Decision time may be coming uP/

[winner69]

Silu ... Dimebag at macquaries in Sydney as an equities analyst

Suppose he hasn't changed and everything is still a buy ....even some of the losers he liked on sharetrader

[percy]

Silu ... Dimebag at macquaries in Sydney as an equities analyst

Suppose he hasn't changed and everything is still a buy ....even some of the losers he liked on sharetrader

I guess he will never live down his Bridgecorp posts.??? !!!!

[winner69]

I guess he will never live down his Bridgecorp posts.??? !!!!

He loved that finance house in Brisbane that went bust as well

And he reckoned renting was far better than buying and had several disagreements with Duncan about that ....but now he a guru analyst at the millionaires factory I suppose he has a Mossman apartment or something and a posh weekend home up in Hunter Valley

[percy]

He loved that finance house in Brisbane that went bust as well

And he reckoned renting was far better than buying and had several disagreements with Duncan about that ....but now he a guru analyst at the millionaires factory I suppose he has a Mossman apartment or something and a posh weekend home up in Hunter Valley

Forgot about the Brisbane finance house.
Yes he was very clever and a fast learner,so I think you are right he would have become a fast earner at the millionaires factory.

[born2invest]

Those were the days eh mate .....CLH was another one .... that was the top performer on the ASX one year

And remember our friend stolwyk .....didn't he get accused of ramping and even more ramping ....even I got accused of being partner in crime ......but boy CLH went up up and up ....and then came tumbling down ..like most of the other collection houses.

That was the sector to be in .....even a outfit called RMG did ok ....ha ha

Why were debt collectors so popular in the early 2000's?

It wasn't as if they were new technology.

[winner69]

You forgot the Big Daddy of them all - Baycorp Advantage. From $7.50 to 95c in 18 months. Followed by a takeover offer from Allco. Ahh those were the days - I think I lost a ****load of money - shame I didnt learn my lesson about not catching falling knives because I went on to do it again (and again). Bit thick I am - took a while to sink in!

ter BThat was after Data Advantage get sucked into buying Baycorp at 12 bucks plus (25 times sales or something) and calling it a merger and forming Baycorp Advantage

That was confirmation that when things get ridiculously priced the best deal for shareholders is for somebody (greater fool) to take over the company.

A bit like today eh .... how many stocks on 10, 20 or 30 times sales

[winner69]

Why were debt collectors so popular in the early 2000's?

It wasn't as if they were new technology.

Good old days debt collectors collected debts in a fee based/commission basis. No collection no fee sort of agreement. The debt stayed with the lender.

Then along came financial engineering and all that. Banks would sell their distressed ledgers at a discount and the debt collection houses would buy them ......on the pretence that what they collected over time was more than hey paid for the distressed debt. Technology also made this a much more efficient process.

Heaps to be made ...so much you could even afford to borrow to but distressed debt. Get the picture .....great profits would flow

A bit of dodgy accounting (amortising the purchased debt in particular) and things looked really honky dory ....eps growth ...shareprices go up .....but one day not as much came in as assumed and huge write downs .......and share price tumbles

Whether they more responsible today I don't know. Banks would sell their distressed to the highest bidder and in the foray to be the biggest they paid over the top. But one should look at th accounts of the cup to see whether amortisation rates are in line with collection rates and that sort of thing ...or else surprises in the future.

Lesson ....money to be made in flavours of the month as long as you follow those charts closely .....even if the dynamics of the industry don't make much sense
/

[winner69]

Why were debt collectors so popular in the early 2000's?

It wasn't as if they were new technology.

Good old days debt collectors collected debts in a fee based/commission basis. No collection no fee sort of agreement. The debt stayed with the lender.

Then along came financial engineering and all that. Banks would sell their distressed ledgers at a discount and the debt collection houses would buy them ......on the pretence that what they collected over time was more than hey paid for the distressed debt. Technology also made this a much more efficient process.

Heaps to be made ...so much you could even afford to borrow to but distressed debt. Get the picture .....great profits would flow

A bit of dodgy accounting (amortising the purchased debt in particular) and things looked really honky dory ....eps growth ...shareprices go up .....but one day not as much came in as assumed and huge write downs .......and share price tumbles

Whether they more responsible today I don't know. Banks would sell their distressed to the highest bidder and in the foray to be the biggest they paid over the top. But one should look at th accounts of the cup to see whether amortisation rates are in line with collection rates and that sort of thing ...or else surprises in the future.

Lesson ....money to be made in flavours of the month as long as you follow those charts closely .....even if the dynamics of the industry don't make much sense
/

[silu]

Winner basically said it all. The way to positive return rate expectation from purchasing debt ledgers and some creative accounting made for a mighty fall from grace. Stayed away from Baycorp, lost money in RMG, made heaps with CCP, more than doubled CLH. Also I hold PRAA on the NASDAQ for a nice return.

I've lived by the rules that collection always worked best in a growing economy with growing wages and that the quality of the debt is of utmost importance. You just can't wring water from a stone.

As a business owner collecting debt is a major drag on your cashflow. If things are tight you sell your major debts at a big loss but at least you get paid straight away so the collection business is here to stay

[born2invest]

Bought in today at $8.64.

Added to the current holding in my portfolio, about 30% of my investment money is now in CCP.

The rest is in SNL and a small cash holding.

[silu]

Good Luck. I'm not aware of your reasons for buying but just looking at the chart it has been trending pretty much downwards for 8 weeks and broken through a longterm support level.

discl. I used to know this company inside & out but am completely out of the loop now. Still hold parcels of CLH.AX and PRAA.NASDAQ

[winner69]

Good Luck. I'm not aware of your reasons for buying but just looking at the chart it has been trending pretty much downwards for 8 weeks and broken through a longterm support level.

discl. I used to know this company inside & out but am completely out of the loop now. Still hold parcels of CLH.AX and PRAA.NASDAQ

Probably born2's ddm on growth of 20% plus 50% dividend pay out has it returning well in excess of the 15% pa returns he is after

They reckon they are collecting more of the ledgers than they assumed ..... collect the assumed amounts and good profits ..... collect more and you have super profits

[born2invest]

Good Luck. I'm not aware of your reasons for buying but just looking at the chart it has been trending pretty much downwards for 8 weeks and broken through a longterm support level.


My reasons are that I think of my investments as investing in a business and not following a squiggly line on a screen.

[born2invest]

Probably born2's ddm on growth of 20% plus 50% dividend pay out has it returning well in excess of the 15% pa returns he is after

They reckon they are collecting more of the ledgers than they assumed ..... collect the assumed amounts and good profits ..... collect more and you have super profits

Bingo.

Only have to look at the amount of debt purchasing they have made over the past 2 years compared to the past and the positive news coming out of the USA and their personal loan division.

[silu]

My reasons are that I think of my investments as investing in a business and not following a squiggly line on a screen.

I'm not a TA guy either but I've learned the hard way that no matter how well run a company is it's really hard to swim against the trend.

[born2invest]

I'm not a TA guy either but I've learned the hard way that no matter how well run a company is it's really hard to swim against the trend.

I understand what you are saying but technical analysis just doesn't run through my mind at all when I make an investment decision.

I've bought companies in the past that soon after buying have gone down 10-15% but I knew my company analysis was sound so I knew the strength of the business would prevail and the share price would follow.

[born2invest]

For those interested in my analysis of the company as I know people like to learn and ask questions on ShareTrader.

Assumptions:
- I want a 15% p/a return after tax over a 7 year period
- Over the 7 years, I assume the EPS will grow at 9% p/a on average (higher over the next few years but dropping progressively as the years go on. This is conservative since the EPS has been growing consistently around the 20% mark.
- Dividend payout ratio of 54% will continue for the 7 years (the payout ratio will most likely increase as the company becomes more mature)
- The stock will be valued at a PE of 16 in year 7. This is based on valuations of other companies in similar industries.
- I pay 30% tax on my dividend since it is an ASX company and there are no imputation credits on the dividends
- I pay no capital gains tax when I sell (I think 7+ years is enough to consider myself a buy and hold investor rather than a trader, I only make a few transactions per year, so I'm sure IRD would consider me a buy and hold investor also)
- I look at management, the industry, it's future growth plans, etc also but I look at these before I run them through this Dividend Discount/Gordon Growth model.









16
Sale PE 7 Year



1.15










1.09









year
eps
div
price+div
price
sum div
compounding




0
69.80
26.38
1143.18
1116.80
26.38
876.00
1
12.55


1
76.08
28.76
1272.46
1217.31
55.14
1007.40
1



2
82.93
31.35
1413.36
1326.87
86.49
1158.51
1



3
90.39
34.17
1566.95
1446.29
120.66
1332.29
1



4
98.53
37.24
1734.36
1576.45
157.90
1532.13
1



5
107.40
40.60
1916.83
1718.34
198.50
1761.95
1



6
117.06
44.25
2115.73
1872.99
242.75
2026.24
1



7
127.60
48.23
2332.53
2041.55
290.98
2330.18
1



8
139.08
52.57
2542.46
2225.29
317.17
2679.70
FALSE



9
151.60
57.30
2771.28
2425.57
345.71
3081.66
FALSE



10
165.24
62.46
3020.70
2643.87
376.83
3543.91
FALSE















Buy below









$8.76










12.55 PE

[silu]

Thanks for sharing. I'm definetely interested in CCP even if it's just for old time's sake. I'm a little lazy here but have they suspended the Dividend Reinvestment plan indefinetely?

[born2invest]

Thanks for sharing. I'm definetely interested in CCP even if it's just for old time's sake. I'm a little lazy here but have they suspended the Dividend Reinvestment plan indefinetely?

They haven't said it specifically but I wouldn't count on it coming back.

[Wolf]

Hey born thanks for sharing you analysis i have a couple questions

Why do you use a pe of 12.55 x eps to get price?
Why do you only invest for 7 years?
Tax wise i was under the impression that the dividends were 100% franked, so wouldn't the tax only be NZ income tax?
http://shares.intelligentinvestor.com.au/company/Credit-Corp-Group-Ltd-CCP-249284/dividends/

[born2invest]

Why do you use a pe of 12.55 x eps to get price?


The P/E of 12.55 is the P/E I need to buy the stock under in order to make 15% p/a after tax if the EPS increase 9% per year and it is valued at 16 P/E after 7 years time. So it is the other way round to your question. I get the P/E of 12.55 because $8.76 is the price I want to buy under.


Why do you only invest for 7 years?


I read a book that most people use either 5 or 10 years for DDM/Gordon Growth. But this is a bit silly as business cycles are generally 7-11 years long from various research. I think the term is called Juglar cycle. Google "Juglar cycle" or "7 year business cycle" and there is info on it.


Tax wise i was under the impression that the dividends were 100% franked, so wouldn't the tax only be NZ income tax?


They are franked if I was an Australian resident. But since IRD doesn't allow franking credits on overseas income, I pay tax on it from New Zealand. We (my fiance and I) own our shares through an investment company so we pay tax on dividends. Therefore, high dividend stocks from Australia are not my primary focus, the lower the dividend payout from management, the happier I am if they use the funds wisely to grow the share price.

The model I use isn't perfect, but it has worked well for me so far. The main reason I use it was because I'd read books on terms like "intrinsic value" "margin of safety" etc and there was never a real example of how to value a business. I looked at discount cashflow models, book value models, etc but the dividend discount model made the most sense. All I had to come up with was a forecast on the growth in EPS and a fair P/E ratio for the company to be valued at if I were to sell it in 7 years. I keep the dividend payout ratio the same as what it is currently to simplify things and assume all NZ stocks have 100% imputation credits and AUS stocks have none.

It sure beats trying to guess and let my emotions control my decisions. I have solid reasoning that gives me a number to buy the shares below. If it is below that number I buy. If it isn't I won't do anything.

[Wolf]

Cheers Born, i agree that DDM seem's to make the most sense. I used to use the Graham model which i still believe is good but i disagree with a number of things and it has never really suited me. I'll have a good look into the Juglar cycle.

Thanks for clearing me up on tax, its a shame i wish IRD would allow them.

I have built myself a similar DDM model in excel. Do you have a specific formula for calculating compounding? I'm assuming the difference in year 7 between price+div (2332.53) and compounding (2330.18) is due to rounding/ formula.

I currently use price+div/(required rate (15%)^years

I haven't done too much research into CCP but agree with your Fair PE value of 16 as similar Debt Collection companys on the US Market trade at that although there are some with crazy PE's.

[born2invest]

I looked at the Graham method also, but it was all about "cigar butt" type investing getting one last puff out of the company and selling it once it had gone up in price. I prefer to make one good decsion and hold onto the stock for many years. Personally I think it is easier to make one good decsion every few years than trying to make several good decsions each year and limit my upside by having to sell these pure value type purchases once the price goes up.

The 2332.53 figure is (EPS x 16 PE) + the sum of dividends for all the years I'd hold the company where the 2330.18 figure is 876 x 1.15 each year for 7 years. All this calculation does it make sure that the figure in the compounding column is lower than the price+div column after 7 years which ensures I'll make 15% p/a after tax per year.

If you PM me your email I can send you my excel spreadsheet through.

I'd quite like to see yours too if you don't mind swapping.

[mark100]

Nice result from CCP. At $9.30 its only trading at 12.5x FY14 guidance and they seem bullish on FY15 for the time being

[Joshuatree]

$9 atm.A down grade by competitor , change in lending regs and maybe 2 Instos still selling out if not already out. Caught out quite few holders (including me in the low $9's)and where is the bottom.

[Joshuatree]

Im also hearing Baycorp was bought up and new owners are undercutting CCP ,CLH etc.S/P $8.72 today."Thems the brakes".
https://media.giphy.com/media/KOEc8ca7DELmw/giphy.gif

[Joshuatree]

WooHoo! CreditCorp upgrades Full Year 2016 Results. S/P up re 15% $1.28 to $9.93:).

Reassurance re Baycorp threat affect and Govt regulation having minimal effect.

PDF (http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01681905)

[Joshuatree]

Up another 90c (finished at $9.57 yest) to $10.30 atm on broker upgrades. Love it when the mkt is inefficient. Expecting another drop back; profit taking by days end.

[Buffett Jr]

Up another 90c (finished at $9.57 yest) to $10.30 atm on broker upgrades. Love it when the mkt is inefficient. Expecting another drop back; profit taking by days end.

Why not hold?

I've owned since $5.90 and still think it is a good company.

[Joshuatree]

Hi Buffett yes i bought some days ago and holding tight not trading it. Agree with you there.Just think some may push it down a bit by days end making quick buck but as i look now its $10.50 at the mo and strong! . Great long term hold for you congrats. Its the sitting some people find the hardest eh:).

[Joshuatree]

2 things I'm aware of that may have helped cause it. Baycorp , a competitor was bought up(privately i think) and the the story is /was, that the buyer would use that vehicle with an aggressive discounting approach undercutting others margins and ,Govt regulations threatening the lenders but it turning out to be only a very small portion of CCP's operations, if at all. Yes, could still be some volatility around the non bank lenders.

[Joshuatree]

Mkt likes the 6 month result and div; up re 7.5%, $10.64 was over $11 briefly.

[Joshuatree]

A good run from $10 to re $12.34 in the last 10 days. Have taken profits . Chart looks good but I'm putting the funds elsewhere.
Re a 32% gain for 6 months or so plus any divs.S/P was pretty volatile but my margin of safety entry helped my stickiness on this one.

[kiora]

Big brother could be watching you.Ouch!
http://www.stuff.co.nz/business/money/81232174/nab-tracks-disloyal-business-customers-going-to-other-banks

[winner69]

One of Sharetrader old favourites reaches new highs

Hope you still riding this Joshuatree

Folklore says there was once an investor who said he would never invest in CCP because he deplored everything they stood for and their human rights record.

From SMH

Credit Corp shares jump

Credit Corp shares have hit the highest level on record, reversing the losses seen yesterday after the release of its preliminary profit result.

They currently trade at $34.95, up 6.6 per cent from where they closed on Tuesday. This is the second highest-gains on the S&P/ASX 200 behind Virgin Money UK, which is up 13.4 per cent to $3.63 after it released a first-quarter trading update in London last night.

A raft of price target upgrades from several brokers has undoubtedly contributed to the rebound in Credit Corp shares seen today.

JP Morgan lifted its price target to $30 while retaining a neutral rating. Canaccord Genuity also lifted its target to $35, keeping the company as a buy. Macquarie is also bullish, keeping its outperform rating and price target of $35.60 unchanged following the company’s half year results.

[silu]

I had lots of shares bought for around 70c which I sold in the $4 range. I don't like thinking about it.

[winner69]

I had lots of shares bought for around 70c which I sold in the $4 range. I don't like thinking about it.

I did OK years ago as well but somehow they drifted off the radar

Maybe one should just buy a stock and then forget it and come back and have a look every ten years or so.

[silu]

I did OK years ago as well but somehow they drifted off the radar

Maybe one should just buy a stock and then forget it and come back and have a look every ten years or so.

Hmm I think if I remember correctly I did this with my first marriage that's why I had to sell them.