When I first invested in CCP in the second half of calendar year 2014, I thought FY2015 and FY2016 would both grow by 10% year on year. This transpired to be correct for FY2015, but I have since thought CCP will grow EPS at a higher rate in FY2016, because:
Management is more bullish about the supply-side dynamics of buying PDLs that meet CCP's target profitability hurdles;
the unsecured loan business has passed the take-off point, and management is satisfied the business will perform to expectation;
the USA business has moved closer to take-off; and
the collectibles, both PDLs and Loan Book were at a record level on 1 July 2015.
On reflection, today I increased my EPS-growth expectation to 14.5% for the above reasons, which were reconfirmed by the sentiment expressed in the the recent presentation, which included the November guidance upgrade that suggested that EPS would shift from a forecast 86c-91c range to a 91c-95c range. Because CCP tends to eclipse its forecasts, I am comfortable to select 95c as the likely reality, which is a 14.5% increase on FY2015's EPS of 83c.
The increase in CCP's debt leverage suggests that management may shift its dividend payout ratio downward to be closer to 50%, and hence for the want of a number, I'll plumb for 48c – an increase of 4c compared to the 44c paid for FY2015, which is approximately a 9% DPS increase.
I have since first investing in CCP coupled it with my much larger investment in TGA – the idea being to wind back TGA and increase CCP. Recent SP reversals in TGA has kiboshed that plan proceeding as expected, so I still have less CCP relative to TGA than I would like. I also have more invested in enginering companies than I would like, so today I exited DOW at $3.50, and booked a loss, and used the funds to buy 2,500 more CCP at $9.95. I expect to hold CCP for many years. With the additional 2,500 shares, I currently hold 16,700 CCP shares. I used to value CCP at a range of $11–$13, and more recently at $12–$13, but now I am happy to make that $12–$15. For the medium term I would prefer the SP not to rise to my valuation range, because I am not yet fully invested.
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