inmw
If I want to have a shower, the outflow of a normal domestic water pipe suffices – nothing would be gained contemplating how I could increase the flow. Similarly, when I have tossed SPs of $15 and $20 about, they were sufficient for my decision to buy 4,750 CCP shares recently at $11.28, and to apply for the maximum allowed by the SSP at $12.50. I do not have the funds, or credit facility, to buy more, so the need for a higher valuation was unnecessary. In fact, I sold 300 CCP on Monday at $15.77 to have cash in my SMSF to subscribe for $30K's worth of shares, but I expect a scale back.
There was also the matter of being credible. Had I, for instance, mooted $30, many would have dismissed that as the product of an addled brain. Because I am retired, and have the time, I have started to build a case for valuing CCP based on metrics to get some idea of when I should sell some CCP to rebalance my SMSF portfolio.
On Mr Market, accept that others listen as though Mr Market were the Prophet of Omaha – Mr Market is good for trading, but not investing, other than helping with the timing of transactions. On 23/03/20 Mr Market told us: High $8.60 .. Low $6.01 .. Close $6.25.
Roy98
The interview at disallowed link/investment-news/debt-ledgers-credit-corp-group/145441 makes it clear that the GFC was not a problem for CCP. The problem CCP had was self-inflicted by growth exuberance, coupled to a lack of self-discipline, especially in respect to matching purchases to an ability to collect on them. With that experience seared in mind, Thomas Beregi is not going to use the CR funding to hurtle into a turbo-charged future, and forget that CCP needs X many people at Y level of competence to handle the workload. As an aside, poverty stocks did fairly well during the GFC.
On upfront of provisioning loans, I do not know what accounting standard applies to provisioning for bad debts, other than it would be prefixed AASB. Neither do I know what the actual debiting and crediting steps are. I am not a qualified accountant, but my understanding is that the concept of valuing assets at so-called “fair value” (FV) is all the rage. CCP is inclined to twist what is allowed into conservative accounting, and argue that it complies with FV. If CCP were dishonest, it could inflate FV, and shift profit recognition forward (perish the thought). The FY19 Annual Report states:
Note 10: Consumer loans receivables
Consumer loans are initially recognised at fair value of the loan written and subsequently measured at amortised cost using the effective interest rate method, less provision for expected credit losses. Given the nature of loans written, a lifetime expected credit loss provision is taken up upon initial recognition of a consumer loan receivable. The loan balance is categorised into current and non-current consumer loans according to the due date within the contracted loan terms. Amounts due within 12 months are classified as current assets, with the remainder classified as non-current assets.
Provision for expected credit losses is recognised based on expected life of loan loss rates derived from static pool analysis of the performance of loan products. These estimates are updated on an ongoing basis.
The estimation techniques used in this period are unchanged.
On legislation, I do not think it is a big issue for CCP. Debt collectors who routinely garnish wages and the like may have a harder time, but this is not CCP's collection style. In Australasia, 80% of PDL collections are from agreed payment plans, and 73% in the USA. If such debtors have problems sticking to the repayment plans, they can contact CCP, and agree to a new repayment plan, which could include moratoriums. CCP rarely, if ever, uses bankruptcy filings, as a collections technique, unlike CLH who recently got into bother because of the large number of bankruptcy filings it routinely made.
On ROE, off the top of my head, the early years of running the Lending business would have been a drag on ROE because there was insufficient volume to which fixed costs could be attributed, and similarly for thePDL business in the USA. Later, when PNC ran amok with a bag of cash, PNC outbid CCP for PDLs, and CCP did not respond by increasing what it was prepared to pay. On the Lending business, CCP had a spat with Peter Kell of ASIC on what was a Payday Loan, and what was not, and CCP responded by withdrawing from Small Amount Credit Contracts (SACCs) as a protest – see https://www.creditcorpgroup.com.au/media/1238/20151023_ccp-withdrawal-from-sacc-lending.pdf. CCP offered the lowest effective interest rate for SACCs, so ASIC did more harm than good, as is the wont of dogooders.
The reason for the lower ROE would collectively be covered by the above, although some may be insignificant. If you read the Chairman's Addresses sequentially with ROE in mind, you should be able to flesh out what I have written above.
(20min delay)