Another positive I feel is the combination/diversification of the 3 business segments, US PDL, AUS PDL & AUS lending, will help the stock re-rate further over time as the market tends to bid up increased earnings certainty, offshore themes and diversification. They also have a pilot low doc auto lending brand, Car Start, that is at the beginning stages, and this could further grow the lending segment, which in terms of personal loans is apparently very mature. The ability to pivot capital to these various opportunities is a growing source of competitive advantage in my opinion, on top of the 'analytics' advantage CCP have built in the core PDL business.
The biggest risks? Surely has to be a protracted recession right after CCP gears up for the purchase of debt ledgers and lending before a lot of those account holders face job losses and under-employment. But, CCP's gearing is low at this time and current management saw how the business nearly went under in the GFC, hence the uncharacteristically, for the industry, disciplined approach to PDLs. In terms of lending, CCP also expense a large percentage of loans for the provision of bad debts upfront, I remember reading it is about 20%, but happy to be corrected on that. However, If you were going to be really negative, you could argue that current management, and the new lending and US PDL businesses are not thoroughly tested 'through the cycle' to make a really clear judgement on the sustainability of CCP.
Ultimately, how does CCP's revenues and profits(losses) behave in a recessionary environment with these new business added on in the last few years, and can some or all of this downside be offset by the opportunities of cheaper PDLs and less mainstream lending in the market? Does any investor really know the answer to this?
Change in leadership and erosion of the current culture around risk could also be a future downside.
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