CCP - Credit Corp Group

[blaze87]

Guys
According to my latest short list data, CCP isn't even a valid shortable stock... therefore, any hedge fund foul play would be off the cards. Plus, it's relatively illiquid (except for today), I just don't think they would bother. I think todays capitulation is just about the fact that if you have 2 profit downgrades in 4 months in a bear market, you have to expect to be hammered.

Blaze, I personally would be focusing on cash flow as opposed to EPS growth with a firm like this - you can fudge the book values of their debt using mark to mark valuations, but the cash flow would be a giveaway. I haven't done the numbers myself, but the chart tells the story.... Plus, as chill states, it's the realisable value of their debt book that is an issue. Remember that these guys were aggressive in acquiring impaired loan books - do you think the value of these books has increased or decrease in the last 6 months.. what about the books prospects for the future...... I'm not saying that I think that you need to sell the stock further, but these are the questions on the markets mind.

My condolences to all who were hit by this one today, it's never nice to wake up to such a huge capitulation.

Cheers

yeah i personally think that cash flow would be a much more reliable way of valuations, however i doubt any reliable cash figure could be come up with with these new downgrade. so that's why in such cases, if i haf to guess a price, i would apply a bigger than usual margin of safety

 

[Snakey]

This stock is trading like the company is about to fold up...but I think their far from it
They have had a profit downgrade and staff issues.
My trading program says the company (at 91 cents) have a market cap of 39 million but they have asset backing of $1.42 per share.
From what I can read from reports they still have more than 100 million in assets and still turning over a profit (a very small one)..so from this I have come to the conclusion that they are over sold by panic sellers.....watching now for bounce

 

[dhukka]

What is the stockval thing? some program tell you when you buy and sell stocks ? .... and why do you use it? if that is the case

ROE,

Stockval is a valuation tool used by Clime and is available to investors by subscription. It is basically a database of more than 300 ASX listed stocks (and a few US and other foreign stocks). For each stock they include the relevant financials plus a valuation.

Although I haven't purchased any stocks that this program recommends is undervalued I get a lot of benefit out of it because a lot of the grunt work in crunching the numbers is done for you. You can also play around with the numbers if you do not agree with Climes. For example you can change parameters such as profit forecasts, and discount rates to come up with your own valuation.

 

[annalivia]

"It is not a company's earnings that are important , but the amount of invested capital requires to produce them."

Forget about the current share price.
Take a step back in time and focus on the financial year beginning in July 1 2003, when CCP's share price was 0.89c. The business began the year with $10.3m in opening shareholder’s equity . Over the following year, the employment of that capital generated $3.3m in after tax profits with $0.7m being paid to shareholder’s in fully franked dividends . This equated to a return on equity of 38.8% .
Since 2003, shareholders equity has grown from $10.3m to $42.6m through the retention of profits and new ordinary share capital - an increase of around 313%.
After Tax Profits have grown from $3.3m to a forecast of $10 - $12 million(probably minus another $5 mil) in 2007.

So the question is would you like to own a business(or part thereof) who's equity has increased from $10.3m to $42.6m and will be having a profit of $5 -$7 mill this year.

Of course you would.
And how much would you be willing to pay?

Now that is the $64 million dollar question.



AL

"You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right."

 

[dhukka]

The ASX announcement is somewhat ambiguous. I re-read it again and it could be taken either to come from NPAT or from EBITDA. Obviously if the restructuring cost came from EBITDA it would be much more favourable than NPAT. Blaze your numbers are not far wrong if they cost comes straight out of NPAT and if you assumed a margin of safety as you said of 50%. I would imagine though that for this to happen that the real restructuring cost would need to be farily significant.

My take on what they mean is that the 5 million would be applied as a expense to EBITDA in the following financial period so based on the assumption that 2008-2009 will be the same EBITDA then 80 million will in fact be 75 million and if we work on a factor of NPAT to EBITDA of 12.5% (80million/ 10million) then Net profit for the next financial year, assuming all things equal would be 12.5% of 75million = 9.375 million.

The way I read it, the restructuring charge is before tax. I would simply apply the marginal tax rate to the number to come up with a figure of $3.5m after tax. Deduct that from the $10 - $12m range and you get a range of $6.5 -$8.5m NPAT for FY08.

What a spectacular fall from grace. This stock hit a 52 week high of $12.99 not too long ago and after today has lost 93% of its market value.

 

[Buffettology]

What a spectacular fall from grace. This stock hit a 52 week high of $12.99 not too long ago and after today has lost 93% of its market value.

Yeh, really makes you realise just HOW QUICKLY a stock price can turn around! Not only that, but its not even as if bankrupcy is on the cards.

Why cant this stock in a couple years, go to the way it was a year ago? Once it gets back to the core of what its good at?

 

[ROE]

ROE,

Stockval is a valuation tool used by Clime and is available to investors by subscription. It is basically a database of more than 300 ASX listed stocks (and a few US and other foreign stocks). For each stock they include the relevant financials plus a valuation.

Although I haven't purchased any stocks that this program recommends is undervalued I get a lot of benefit out of it because a lot of the grunt work in crunching the numbers is done for you. You can also play around with the numbers if you do not agree with Climes. For example you can change parameters such as profit forecasts, and discount rates to come up with your own valuation.

Sound good, how much do you pay for such a service?
If it cost you 1K a year, wouldn't you be better off doing it yourself?
You know you can do similar calculation with excel or a simple calculators

I pick up CCP about 15 months ago when I run through my own scan, just something I come up with and keep it for myself. and I thought nice but too damn expensive and they price everything to perfection so I wait ...
then it go to $12-$13 I said nice but still expensive am I missing out?

Then the 1/2 price drop a few months ago..I said nice but bad news comes in three so I wait and look at the chart and momentum every so often....

Then comes the crash in Jan and things comes and go and stock still trending down ... thinking to myself I would come in at $3 bucks regardless of the trend so I wait.

This morning trades at $1.05..quick read of the announcement, do some a quick calculation in the head...damn look ok, so no longer wait and comes in and ask questions later.

Now close at 91 cents....still want to come in again tomorrow

And if it doesn't pay off, this will be my ****test stock ever and I may have made a precise wrong calculation on this guy rather than vaguely right but I'm hoping for vaguely right

 

[annalivia]

I'm with you ROE.
Much below a dollar and I will be buying heaps more.

"The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price" (WB)

If this isn't a bargain price then I've never seen one.

Worst case scenario........this business goes to the wall.
Best case scenario...........goes back to 10 bucks in a couple of years.

Sounds like a good bet to me.

 

[Buffettology]

I'm with you ROE.


"The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price" (WB)

Its hard to determine long-term earnings now, and hence long-term growth potential (which is a lot of what was driving up the price). Not to mention, the public loved this stock and we were in a bull market, so the stock traded well above what its "fair value" was.

Will be interesting to see it get back to its core revenue raising and sort out a few things over the year or so and see what this stock can do in its 2009 results and what its ROE can get back too. Not to mention, this will probably change up the balance sheet quiet a bit, so interesting to see what book value is as at 2008 end of financial year.

Book value, future growth, risk and ROE are really the CRITICAL factors in determining "intrinsic value" as far as I am concerned. Low debt (at least relative to NPAT, not this debt/equity rubbish), cash flow, management are then the next big factors.

Thats just my valuation method, which pretty much means I cannot get an accurate gauge on this one until it settles down, hence why I only bought a small parcel.

Cheers

 

[3MT]

I'm with you ROE.
Much below a dollar and I will be buying heaps more.

"The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price" (WB)

If this isn't a bargain price then I've never seen one.

Worst case scenario........this business goes to the wall.
Best case scenario...........goes back to 10 bucks in a couple of years.

Sounds like a good bet to me.

isn't that the worst and best case scenario of most stocks

i took a little punt late today too. my hunch is the fundies are fighting to lower there exposure in a sellers market (few stocks were spared today) with the added demands of margin calls (you can borrow on 70% of this stock with most margin brokers) weighing this thing down at the close.

I'm not as confident as some and calling this a long term bet just yet (haven't done the full fundamentals on this one), despite it being a viable and historically provened business (there's the credibility factor). But I do smell panic/frustration and forced margin calls creating a buying opportunity here.

 

[dhukka]

Sound good, how much do you pay for such a service?
If it cost you 1K a year, wouldn't you be better off doing it yourself?
You know you can do similar calculation with excel or a simple calculators

I pick up CCP about 15 months ago when I run through my own scan, just something I come up with and keep it for myself. and I thought nice but too damn expensive and they price everything to perfection so I wait ...
then it go to $12-$13 I said nice but still expensive am I missing out?

Then the 1/2 price drop a few months ago..I said nice but bad news comes in three so I wait and look at the chart and momentum every so often....

Then comes the crash in Jan and things comes and go and stock still trending down ... thinking to myself I would come in at $3 bucks regardless of the trend so I wait.

This morning trades at $1.05..quick read of the announcement, do some a quick calculation in the head...damn look ok, so no longer wait and comes in and ask questions later.

Now close at 91 cents....still want to come in again tomorrow

And if it doesn't pay off, this will be my ****test stock ever and I may have made a precise wrong calculation on this guy rather than vaguely right but I'm hoping for vaguely right

ROE,

The original subscription price is a little over 1k and then $750 per year thereafter.

I have replicated the Stockval method in excel. Anyone can do it if they get their hands on Brian McNiven's book 'Marketwise.' I often model companies that the Stockval database doesn't have.

Stockval comes in handy because somebody else updates all the numbers for all the companies. I don't have time and quite frankly couldn't be bothered to do that for 300+ companies. I know you can download financials from Comsec, however they often don't adjust figures for small things such as capitalised costs etc. That said, I often do my own screens from Comsec to spot companies with high ROE's that aren't in Stockval.

Again if I am interested in a stock that I saw in stockval, I'll replicate it in excel and run my own numbers, usually I'll come up with a variety of scenarios and valuations rather than just one number to hang my hat on. If I didn't have a day job I might do away with stockval, but for now it is worth forking out for.

 

[ROE]

ROE,

The original subscription price is a little over 1k and then $750 per year thereafter.

I have replicated the Stockval method in excel. Anyone can do it if they get their hands on Brian McNiven's book 'Marketwise.' I often model companies that the Stockval database doesn't have.

Stockval comes in handy because somebody else updates all the numbers for all the companies. I don't have time and quite frankly couldn't be bothered to do that for 300+ companies. I know you can download financials from Comsec, however they often don't adjust figures for small things such as capitalised costs etc. That said, I often do my own screens from Comsec to spot companies with high ROE's that aren't in Stockval.

Again if I am interested in a stock that I saw in stockval, I'll replicate it in excel and run my own numbers, usually I'll come up with a variety of scenarios and valuations rather than just one number to hang my hat on. If I didn't have a day job I might do away with stockval, but for now it is worth forking out for.

You know you dont need deadly accurate number
it just a number to give you an idea.... I do rough calculation only and I dont even go any where near details as many brokers...I could to some extend and I know I'm not a finance expert so I cant come up with those pretty details number any way but why waste time on something I don't think bear much differences whether you have an accurate number or some where in the ball park...

Hell I reckon most people read those reports and dont understand what the those number really mean...Brokers do it just to justified their fee and it look pretty

I doubt anyone on this planet can put a price tag on a stock. Stock price is not always about the number....it has lot of human emotion in it and who is selling and buying at the time...

that my 2 cents.. someone with financial degree shut me up

 

[Buffettology]

I doubt anyone on this planet can put a price tag on a stock. Stock price is not always about the number....it has lot of human emotion in it and who is selling and buying at the time...

that my 2 cents.. someone with financial degree shut me up

ha ha, that human emotion is called technical analysis! However, in the long-run I beleive firms always move back to "around" their intrinsic value.

However, I do agree, it is hard to precisely value a stock and hence I only do a ballpark estimate also, but like Dhukka, do a few calculations lowering the ROE if neccessary. I mean, some of these companies with a high ROE, keeping that as an average over several years, an intrinsic value calculation, will give you a highly unrealistic overvaluation.

Also, I find most of these broker price targets and valuations are WAY over their realistic value according to my own calculations.

Have to say, I took my valuation method exactly from Buffett, adapted it slightly as we do not have as long historical data and I also add in expected future growth to try and estimate an average ROE and discount more according to the risk factor. I then convert back to a present value with a 15% required rate of return.

Hope that makes sense, just my opinion.

 

[kloid]

...
Have to say, I took my valuation method exactly from Buffett, adapted it slightly as we do not have as long historical data and I also add in expected future growth to try and estimate an average ROE and discount more according to the risk factor. I then convert back to a present value with a 15% required rate of return.

Hope that makes sense, just my opinion.

Hi mate - can I ask what number you came up with when doing this? I did a similar calculation earlier today at work - I assumed that 2008 profit would be $6.5m ($10m per guidance less $3.5m for the after tax cost of restructure) giving an EPS of 15cps and that 2009 profit would be $10m (EPS of 23cps).

I then applied an (admitedly arbitrary) growth rate of 10% between 2010 and 2014 and then a growth rate of 5% into perpetuity. Assuming a 50% dividend payout ratio and a discount rate of 15% I came up with $1.50 as a valuation. Being a tad more generous with the growth rate pushed it towards $2.

Doing this makes me realise how much guesswork is involved in all of this and why the experts hardly ever predict a share price with any accuracy. That said, I am going to buy a (very) small parcel tomorrow just for the hell of it!


I'd be interested to hear more about what you came up with.

Cheers
Kloid

 

[dhukka]

You know you dont need deadly accurate number
it just a number to give you an idea.... I do rough calculation only and I dont even go any where near details as many brokers...I could to some extend and I know I'm not a finance expert so I cant come up with those pretty details number any way but why waste time on something I don't think bear much differences whether you have an accurate number or some where in the ball park...

Hell I reckon most people read those reports and don't understand what the those number really mean...Brokers do it just to justified their fee and it look pretty

I doubt anyone on this planet can put a price tag on a stock. Stock price is not always about the number....it has lot of human emotion in it and who is selling and buying at the time...

that my 2 cents.. someone with financial degree shut me up

I don't disagree with your view ROE. However sometimes I think those small adjustments turn out to not be that small, they can have significant effects on ROE and therefore valuation. I'm not after a precise number. As I said I run different scenarios to give myself a range of values.

I don't think most broking analysts understand their own numbers, particularly with respect to valuation if done using DCF's.

 

[dhukka]

Also, I find most of these broker price targets and valuations are WAY over their realistic value according to my own calculations.

Have to say, I took my valuation method exactly from Buffett, adapted it slightly as we do not have as long historical data and I also add in expected future growth to try and estimate an average ROE and discount more according to the risk factor. I then convert back to a present value with a 15% required rate of return.

Hope that makes sense, just my opinion.

As an ex-broking analysts I can tell you that price targets are a joke, Analysts are required to give them but they hate doing it because they know how arbitrary they are.

Also the industry standard for valuations are DCF's which are fundamentally flawed and notoriously unreliable. Estimating cashflows out 5 - 10 years is just nonsense. It's hard enough to forecast just one year out.

Interested to know how you copied Buffet's methodology exactly since it has never been published.

 

[Buffettology]

Hi mate - can I ask what number you came up with when doing this? I did a similar calculation earlier today at work - I assumed that 2008 profit would be $6.5m ($10m per guidance less $3.5m for the after tax cost of restructure) giving an EPS of 15cps and that 2009 profit would be $10m (EPS of 23cps).

I then applied an (admitedly arbitrary) growth rate of 10% between 2010 and 2014 and then a growth rate of 5% into perpetuity. Assuming a 50% dividend payout ratio and a discount rate of 15% I came up with $1.50 as a valuation. Being a tad more generous with the growth rate pushed it towards $2.

Doing this makes me realise how much guesswork is involved in all of this and why the experts hardly ever predict a share price with any accuracy. That said, I am going to buy a (very) small parcel tomorrow just for the hell of it!


I'd be interested to hear more about what you came up with.

Cheers
Kloid

Absolutely, I agree 100%. I actually came up with the same figure (the $1.50), but beleive it will sit lower due to fear and risk. Long-term, it should climb up and the history of the company shows it can be profitable. So like you, I bought a small parcel, but definately not dumping a lot into this one for now. I think I need to wait a year or two to see how it pulls itself together. So hard to value it since its now just thrown everything out! Complete guesswork!

 

[Buffettology]

As an ex-broking analysts I can tell you that price targets are a joke, Analysts are required to give them but they hate doing it because they know how arbitrary they are.

Also the industry standard for valuations are DCF's which are fundamentally flawed and notoriously unreliable. Estimating cashflows out 5 - 10 years is just nonsense. It's hard enough to forecast just one year out.

Interested to know how you copied Buffet's methodology exactly since it has never been published.

Yeh, no wonder!

As for Buffett, ha ha, well not HIS exact methodology, sorry, wrong words to use. I took my calculations from Buffettology the workbook and adjusted them. Not sure if that has any relevance, but either way, has worked for me. Obviously, not nearly as solid as it works for the man himself!

 

[bigdog]

http://www.news.com.au/heraldsun/story/0,21985,23196423-664,00.html

Debt specialists can't turn a dollar
Article from: Herald Sun
Nick Lenaghan

February 12, 2008 12:00am

CREDIT Corp chairman Christopher Deane resigned yesterday as the debt specialist slashed its full-year profit forecast in half and its shares fell 77 per cent.

The profit downgrade, the second in three months, comes as Credit Corp struggles to lift productivity after a hiring spree.

As well, the debt management firm blamed the downgrade on flagging short-term revenues following a reduction in its new debt purchases.

Those issues will be scrutinised in a strategic review also announced by the company yesterday.

Credit Corp downgraded its full-year net profit forecast to a range of $10 million to $12 million.

Last August, the company delivered a net annual profit for 2007 of $19.63 million and forecast a 2008 profit of $24 million.

Its earnings before interest, tax, depreciation and amortisation forecast has been pulled back to a range of $83 million and $87 million. Its fiscal 2007 EBITDA was $89.51 million.

Investors punished the company yesterday, pushing its stock down more than 77 per cent, or $3.08, to 91.

Its share price has slumped more than 90 per cent since a high in July last year of $12.55.

The latest downgrade comes just three days before Credit Corp's board will face shareholders at its first-half results presentation.

The board's own effectiveness will be one of the areas examined in the review. Mr Deane, who has been the company's chairman since it listed in 2000, will remain a non-executive director.

Another director, Richard Thomas, took over as acting chairman yesterday.

Credit Corp attributed the latest profit revision to lower productivity after large scale recruitment and underperformance of recent debt purchases.

 

[ROE]

All quiet on the western front I done with my CCP purchase time to go walk about for three years in Amazon jungle .. I see you guys in three years time
Adio