CCV - Cash Converters

[Rainman]

Does anyone like this stock for its turnaround possibilities? I have taken a nibble now that the legal horizon has cleared somewhat.

I hate its business but it looks cheap.

 

[Admiral Rimmer]

Does anyone like this stock for its turnaround possibilities? I have taken a nibble now that the legal horizon has cleared somewhat.

I hate its business but it looks cheap.

Given its current price, no lol

Lot of uncertainty around how its transition to MACC will go. The legal issues should be behind them soon. It's more how much of Money 3's market are they going to be able to make profit in that worries me.

I can't see them breaking through a 1.00 anytime soon that's for sure.

 

[Rainman]

... I can't see them breaking through a 1.00 anytime soon that's for sure.

Let's check back in a year's time.

CCV has provided guidance of $20 million to $23 million of NPAT for 2017. Its market cap is presently $170 million.

MNY made $20.1 million in NPAT last year. It is guiding to $26 million in earnings for 2017. MNY has a present market cap of $261 million.

Why do I want to spend $91 million more for at most $6 million more in earnings?

 

[Admiral Rimmer]

Let's check back in a year's time.

CCV has provided guidance of $20 million to $23 million of NPAT for 2017. Its market cap is presently $170 million.

MNY made $20.1 million in NPAT last year. It is guiding to $26 million in earnings for 2017. MNY has a present market cap of $261 million.

Why do I want to spend $91 million more for at most $6 million more in earnings?

You could well be right. Only time will tell how they go meeting guidance.

Market seemed to recently factor in legislative changes which wont take effect until 18 at the earliest, so potential in that I guess.

 

[WRiley]

Keen here.

 

[The Triangle]

Keen here.

I'm in. I think this capital raising will significantly change the company. Bonds will be wiped off the map. That saves $5m a year in costs + the admin costs + renegotiating costs if they had decided to get new ones. It also leaves a massive cash balance intact which will surely be enough to cover the class action (which will hopefully be resolved in the next 6 months). Expect in 12 months time to see earnings 4+ cents per share range.

 

[The Triangle]

Has not been a very good performer. Frustrating when you see twenty trades today for 12 shares each... I've significantly increased my holding this week and look forward to the new CEO starting Monday. EBITDA looking ok pos adjustments and hopefully class action will be resolved before the end of the financial year (anyone know what to expect? $35 million is my guess?)

 

[Zaxon]

It surprises me that with the belief that "payday loans" are ripping people off, how poorly CCV is doing operating in this space.

 

[sptrawler]

The problem is they can't sell stuff cheaper than you can buy new.

 

[Smurf1976]

The problem is they can't sell stuff cheaper than you can buy new.

Yep. Everything is against that side of the business really.

Value of new goods has dropped hugely thus limiting the potential markup on second hand items and also reducing the base of customers who want to buy second hand goods.

Meanwhile the cost of doing business has steadily increased. Rent, wages, utilities etc.

Plus the ability to advertise your own goods for sale to wide market at no cost online reduces the number of people who would consider selling their items to a second hand dealer.

It's a perfect storm really, under attack on all fronts.

To the extent there's an ongoing business here it's in the loans side of it all not the more traditional second hand goods business.

 

[greggles]

A five year weekly chart best illustrates CCV's declining fortunes.

Generally I agree with Smurf that Cash Converters is operating a business model that seems to have less relevance today than it ever has. If you want something second hand, get on Gumtree or eBay.

Even the loans side isn't something I'd be betting on with Afterpay and other ways of paying things off in installments. Short term loans with extortionate interest rates is something I think we'll be seeing less of in the future as competition and innovation changes the short term credit landscape for good.

It will be interesting to see where CCV does eventually bottom out.... if indeed it actually does.

 

[Smurf1976]

I note with interest the current buy order for 7.5 million shares at 1.3 cents each (verus last traded price of 15 cents).

Market depth can be yeah, whatever, but that's a bit extreme.

Someone's actually expecting to have a chance of getting that order filled? Or something else going on?

Do not hold, just noticed the large outstanding order and looked further into it.

 

[The Triangle]

Again, this one is very frustrating. Up 7% this morning on nothing, I bet it will be down 5% at some stage today and finish at the same price it closed at yesterday. This has been a relatively poor investment thus far, average price still in the low 20s. - but I have confidence it will be much higher once the class action is resolved (which is hopefully very soon). Added a 1/3 to my holdings in the past two weeks. I believe the SP factors in a loss on the class action. I'll have a very quick trigger once the annual results come out.

 

[sptrawler]

It looks as though Cash Converters are going to have a loss of between $2-$4m, in contrast to last years $22m profit.

https://www.smh.com.au/business/com...dicts-swing-into-the-red-20190729-p52buh.html

 

[Smurf1976]

I still hold my doubts about the long term viability of the business, second hand goods especially. As anyone who's cleared out a house in the past few years will be well aware, most items in practice have no value. Go through most houses and there might be a few items of value but the other 90% it's either keep it, give it away or send it to recycling / landfill.

That said, looking at a weekly chart of CCV I do note the volume increase in recent months and wonder if something's up?

 

[barney]

As anyone who's cleared out a house in the past few years will be well aware, most items in practice have no value.

Indeed …. We need to bring the American Pickers over .. they seem to like old stuff

CCV needs to trade back above 15 and show support otherwise it still looks vulnerable to more downside.

The recent spike to 17 cents on low Volume was quickly rejected ….. The recent low at 12 cents looks like the short term low, but if that gets broken, it could get even uglier.

Hopefully for holders it will form a base from here

 

[sptrawler]

The way technology and our society as a whole is moving toward a disposable lifestyle, that changes every season, there will be no place for cash converters. Possibly the only section that will survive is the gold recycling.
As for stereo's, t.v's, dvd's, electronic equipment and bicycles, it would be a brave person paying for them, on the hope of flipping it for a profit.

 

[InsvestoBoy]

The way technology and our society as a whole is moving toward a disposable lifestyle, that changes every season, there will be no place for cash converters. Possibly the only section that will survive is the gold recycling.
As for stereo's, t.v's, dvd's, electronic equipment and bicycles, it would be a brave person paying for them, on the hope of flipping it for a profit.

From a quick squizz at Yahoo! Finance, their operating margin is ~10% so they do seem to manage to flip!

I think the missing piece of the puzzle here is that regardless of how little value the junk in most peoples houses has there are always some people that need short term liquidity. CCV just operates the same business model as the old inner city pawn shops but at scale. Offer liquidity to people for their stuff at an absurdly low price and put it on display for the going rate of second hand goods, to sell to the same sort of people who buy used laptops and whatever on eBay. Hell, CCV can even list items that aren't moving in store on eBay themselves.

You guys are thinking of people who can afford to buy new stuff, not people who can't afford whatever expense is coming and need liquidity on the spot, who can't wait for a bargain hunter to come and bid on their eBay listing or field questions from randos on Gumtree.

I personally don't think it's a super ethical business and consequently don't hold, but the question is will the segment of society that needs liquidity grow? Because there is always a willing buyer for a cheap used laptop or whatever.

 

[Smurf1976]

CCV closed up 30% today to 19.5c following an announcement regarding settlement of a class action against the company.

The settlement is for $42.5 million with $32.5 million to be paid shortly and the remaining $10 million by 30 September 2020.

 

[The Triangle]

No admission of guilt. Plenty of cash on hand to pay this one, however I've never been less impressed with a 30% gain in a day. Nearly at breakeven. Will ride this one out another half.

Questions need to be asked as to why CCV spent millions + years of time defending a lawsuit that they settled in the end - especially when they settled the other one last year around this time? Maybe one of the reasons why the CFO is gone? (software write down maybe another reason?). My suspicion is that they were on the hook for far greater than 43.5 million if they lost the CA and decided to cut their losses and get this mess behind them.