I wonder if anybody pays much attention to Balance Sheet and Cash flow. If you look a CCP’s you might note that CCP’s (in) cash flow from customers (and debtors) last year was $260m. In the later months of last year they were receiving $22m a month. Only one third of this went to suppliers and employees, while half went to purchasing new debt ledgers.
Last year, they spent $11m per month buying new debt ledgers. At the end of the period they had $9.5m in borrowings. Some people might think that $9.5m is a ‘lot’, but it is not, given CCP’s monthly cash flow its virtually zero. If they had bought just 10% les debt ledgers they would have had no debt. As it stands their cash flow and borrowings situation are so strong that if another business opportunity came along they could easily borrow and spend $50m or even $100m. In Balance Sheet and Cash Flow terms they are a coiled spring. It would not surprise me if an opportunist came along and decided to take them over just to get their hands on all of that juicy cash flow and credit situation. In comparison this management is being as conservative as a bevy of bishops.
Next year it looks like their cash flow from customers (and debtors) will be close to $290m. Last year 50% of this cash flow from customers was spend on new debt ledgers. However, their guidance for 2014 is $70-$90m on new debt ledgers, which, using the $90m figure, is only 31%of projected cash flow from customers. That leaves $50m cash inflow which currently has no purpose. What will they do with all that money? I wonder.
It seems to me that they must be scratching their heads about how they can put this money to work. The US expansion looks as if it will cool for ‘the short term’ and there are limits to how fast the tradition ledger business can grow. So what to do? One obvious option is to expand the lending business. It seems to me that some people are uncomfortable about unsecured lending, which is understandable, so is it possible that management might be considering getting into secured lending?
K
CCP Price at posting:
$9.69 Sentiment: Buy Disclosure: Held
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