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22/09/17
16:41
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Originally posted by SteveSage
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Madtrader
I would agree that there are a number of issues all coming together that is impacting cashflow:
- reduced PDL purchases, which impact collections down the track....multi year issue
- more conservative approach on PDL collection recognition, as well as improved quality on PDLs both point to reduced income from larger PDL balances
- increased contribution from services (lower margin compared to PDLs)
As you suggested, I suspect we may see further constraints on cashflow (and ~50-60% payout in dividends does not help), but long term it will mean better quality book and less dependency on balance sheet. If we are looking at 3-5 years, then there may be huge runway with this business if financial stress increases with increased interest rates.
So still 12-18 mths turnaround needed I believe (although with 18-19c EPS projected, you have to wonder where the share price is not going to start improving beforehand if they can deliver on this)
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I agree with those views assuming strategy implementation is successful. The challenge for holders will be whether earnings can sufficiently support the share price in the shorter 1-2 year time frame.