I had a brief squizz at the 3o June results of Encore Capital...

I had a brief squizz at the 3o June results of Encore Capital and Intrum.

As has been the case for over a year, collections are good for both companies, just as can be stated for CCP.

Overall performance for Encore was flat, but acquiring fresh PDLs is proving to be difficult for Encore, but less so for Intrum, who recorded a a small increase. A significant fillip for Intrum were two transactions with Piraeus Bank in Greece where Intrum invested 280 million Swedish Krona 280 ($44 million).

On buying debt, I suspect CCP to do relatively better in the USA than Encore, because being smaller and different to Encore, CCP may be able to do well there at the expense of many small debt buyers. And on this point, if CCP is in the top 6 US debt buyers, it should move up a rung. The sellers of debt would probably not want Encore to be too dominant, so that helps too. Anyhow, we already know that fairly good purchasing metrics are locked in for the USA.

I suspect that CCP's debt buying in ANZ is going to be ordinary, but ANZ and USA aggregated would be reasonable, relative to past years. Remember that the Baycorp acquisition occasioned a distortion to the ANZ acquisitions of PDL in FY20 and FY21. In ANZ, as much as debt sellers would prefer more buying competition, they do not have many options, and CCP's style of debt buying, and history of fair dealing, should make them less afraid.

Below is the Guidance given in August:

PDL investment $200 - $240 million
Net lending ........ $45 - $55 million
NPAT ................. $85 - $95 million
EPS (basic) ........ 126 - 141 cents

The NPAT and EPS lines tend to be very accurate, with a consistent bias towards the top of the range.No DPS line was given, but I think 72c is a good default metric.

The PDL investment can vary considerably to the upside, partly due to Management's cautious nature, partially because of opportunistic offers from sellers, and partly because of the acquisition of competitors' portfolios, but these do not happen frequently - three since September 2016: NCML, Baycorp and Collection House.

CCP has the financial liquidity and balance sheet strength (I mean undervalued assets, or specifically, over impaired PDLs) to surprise us via a Golden Goose initiative, and remember, our promise-less-and-deliver more CEO has published an ambition to have CCP in the ASX Top 100, which suggests to me moving from a capital value of $2b to $3b.

On the over impaired PDLs, remember that when Covid raised its ugly head, the fear was that collections would suffer dramatically, and they did not. However, Management never reversed impairment, preferring to let the over impairment work itself out via the lifetime of the collections.