Using the info provided in the latest update earnings at CLH have slowed partly due to 'inability to locate debtors'. If you can't find em they you can't get money off em. But the new ATO contract starting in just 8 days time will be a whole new ballgame.
Here CLH will chase money from people who have earned an income but haven't paid their tax. These folk are far more traceable and (almost certainly) far more likely to be able to make repayments. This is CLH first contract with ATO and i see their expertise re finding and collecting debt coming into full play here.
Management figures indicate 2HFY16 (also starting in 8 days) to be 11c. This is highly likely to increase during FY17 (starting 1st July) and i now estimate FY17 eps at 24c.
With SP at $1.82 (that's 6c above current SP)... 24c eps = PE ratio of 7.58!! Where else do you get a $220m company with ROE 16% on such a low price? Especially when future earnings have far higher visibility than period just finishing. Assuming 10c div next FY at SP of $1.82 that's worth 5.5%.
But best thing about new ATO contract is that CLH don't buy the debt and wear the risk! Instead they take a cut from each dollar they collect for ATO.
Its a whole new paradigm. Lower risk, traceable debtors (ATO will have their details just don't want to do the dirty work) all spells higher returns. Buy at/below $1.82. Better days ahead. Total over-reaction to update triggered stop losses, margin calls etc. I have bought a reasonable swag. Should have gone in harder. Fear that Greece et al will default keeps me from going whole hog. dyor.
CLH Price at posting:
$1.76 Sentiment: Buy Disclosure: Held
