Without fanfare, CCP has entered the USA unsecured loans business via Wallet Wizard – an option I that I have always expected Management to pursue, but I had no inkling it would be now. Management had mentioned it was looking at BNPL, but again it entered the field via Wizzpay without further ado, and confirmed it now in a low-key manner.
I think Wizzpay is going to be different to the run-of-mill BNP newbies we see popping out of the woodwork, but I have not developed my thoughts to the point of having a cogent point of view. CCP has ingredients that some competitors do not have. It has significant financial headroom; significant inflows of cash; an outstanding analytic facility; and a very strong collections facility.
Guidance has improved only in the sense that PDL investment now has a higher level of certainty – the lower guidance limit was lifted from $200m to $220m. I suspect the top-end will be either uplifted later, or eclipsed, or both.
CCP has a policy of targeting a profit level for PDLs, and it does not want to do better than that, because it wants to keep PDL suppliers happy to trust CCP. There have been cases where they have bought at a low price because of a pessimistic outlook, and returned money to the seller when things transpired to be better than expected. This can be made to be a compelling reason for suppliers to trust CCP, and thus allay fears of its near-monopsonic PDL-buying position. The Chairman's address states, "Credit Corp’s leadership in responding to financial hardship provided several major credit issuers with the confidence to resume sale and award their entire volume to Credit Corp."
That fair-dealing mindset also has the advantage that competitors respect, making CCP the go-to company if they wish to liquidate their position. CCP has purchased five sets of PDLs that I am aware of by either buying the entire operation at substantially the value of the PDLs, or as happened in respect of Collection House, it bought only the PDL book.
As has historically been the pattern, shareholders can work off the top of the guidance ranges, and have high hopes of doing better.
The market has responded favourably to the report.
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