Despite strong leads from overseas markets CCP has been dumped and in my view it's all about today's announcement. Increased debt is increased risk in this industry.
The returns need to be very strong indeed to justify this increase in debt. My fear is that they are loading up on US PDL's to build economies of scale. They better be pretty damned sure that they will make a good return on those if they do, break even is not close to being good enough.
The returns on CCP's recent strategy have been more than acceptable, why not try to fund growth through cash flow. It's a boring and conservative option but it's low risk. With the current problems affecting China and the rest of the world far from sorted I think loading up on debt is a bad move, and frankly, is making me nervous.
CCP Price at posting:
$9.50 Sentiment: Hold Disclosure: Held
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