Joe Gambler This post may add a dimension that opinion from...

Joe Gambler

This post may add a dimension that opinion from Firstlinks

By the way, in my last post, there is a typographic transfixing error – $1.00 = Skr 0.16” should be Skr1.00 = $0.16. The way I used it arithmetically was correct.

I am a long-term holder of CCP, so I have only minor interest in the volatility of its SP, but as it is my largest shareholding, I am interested in the health of the business, which is why I focus so much attention on it. What I post, is a byproduct of the effort I invest in following CCP, and for some weeks my interest has been on the $68.576m PDL carrying value (CV) impairment made in FY20, which intuitively I suspect is too generous. This post dwells on comparing CCP's impairment to a European company in the PDL game, Intrum.

It is impossible to decide the relative sizes of Intrum viz-a-viz CCP, because there is no consistency. By that I mean that if Intrum's collections were roughly twice CCP's, and its PDL CV were roughly twice CCP's, that is consistent enough to say Intrum is twice CCP's size. The easiest way to suggest that CCP' Covid-19-linked PDL CV impairments may be over generous is to prorate its impairment by both collections and CV to those of Intrum. This at least gives us two extremes.

Intrum's impairment was Skr636m, or x 1/16 = $39.75. CCP's was $68.576m.

Percentage of PDL Carrying Value

Intrum's PDL CV as at 30/06/20120 was Skr34,945m, or divided by 16, $2,184.063m. CCP's was $414.122m. The two companies impairments as a percentage of their respective PDL CVs is 1.82% for Intrum and 16.56% for CCP. That suggests to me that Intrum has an inflated PDL CV, and that CCP may well have over impaired.

Percentage of PDL Collections

Intrum's collections for the 12 months ending 30 June 2020 were Skr10,770m, or divided by 16, $673.125m. CCP collected $488.34m. Their impairments as a percentage of their respective collections is 5.91% for Intrum, and 14.04% for CCP. This collections-based approach seems better than the PDL CV approach. If CCP had a higher proportion of fresh PDLs, its relative percentage should be higher than for Intrum, as it is. However, how realistic is 5.91% for Intrum compared to 14.04% for CCP? The truth may lie somewhere between those two percentages.

Conclusion

Whatever the over impairment is, it will surface in future as a time-shifted profit – that is, profit shifted from FY20 to later. I may post on Enron Capital tomorrow in the same manner.