News: CCP Credit Corp Group Looks To Raise Up To A$150 Mln, page-51

Joegambler

I expend very little effort looking at Encore, so I cannot answer your question off the top of my head, but I did gain the impression that Encore amortises PDLs at a lower rate than CCP does, as others in the sector do too. That suggests that relative to CCP, the carrying value of CCP's PDLS was undervalued, or Encore's is over valued. This makes any comparison of impairment to carrying value fraught with doubt. However, that is a plus point for CCP's intrinsic value. There may be less of an impairment risk for CCP in intrinsic terms, but that does not mean that CCP would not seize the opportunity to impair generously for other reasons.

Another comparison that may be fruitful to consider is the percentage of PDL impairment to collections, and if I understand things correctly, Encore impaired 20% of its quarterly collections. If CCP did that, the impairment would be fairly low.

Anyhow, I'll look at the matter in coming days when I have time to kill. It may well be that after thinking about the issue further, I will uplift my stab in the dark valuation of CCP of $20, but from my parspective, so what – I am not going to buy more – I have too many CCP shares already from a portfolio-balance perspective.

I certainly would not invest in Encore. It may well be in deep trouble, and CCP would know this. Remember, the recent CCP acquisition of Baycorp arose because Enron wanted to sell it – perhaps to get their mitts on much-needed cash.