CCP: Credit Corp Group

Credit Corp is a debt collections company. Buys distressed debt from banks, financial institutions and lately telcos at a heavily discounted price, and attempts to collect the money back.

Not the easiest company to judge because one of the major costs is debt ledger write-offs which management hold a lot of sway in. So it's important to keep a keen eye on amortisation, cash-flow, and collections revenue numbers.

CCP was one of my first investments back in 2004. Was lucky to ride it up and avoid the crunch. Six months ago I accumulated a position and have held it since.

Based on the HY11 report, all metrics look healthy at the moment. Though there are some growth risks as they've decided to expand on a few fronts:
1. Overseas office in the Philippines has been established. The usual cheap labour play.
2. First major purchase of NZ debt
3. First purchase of insolvency debt
4. First purchase of telecommunications debt

The new types of debt purchases are definitely something to keep an eye on.

Having mentioned all the risks associated with its growth, the following is an indication of how well its traveling when compared to its peak in late 2007.

1. It's in line to make more profit in FY11 than ever before. Traveling towards record EPS and DPS as well.
2. Has not raised any cash during this period
3. Has paid back ~$90m in debt ($128m to $37m in non-current debt)
4. Carrying roughly $60m less in debt ledgers on the balance sheet
5. Scrapped dividend reinvestment plan. Read: We have lots of cash, don't need anymore thanks.
6. Stock price of $4.70 today vs peak at $12

Last month they upgraded their earnings forecast for FY11 from 41-46c to 44-46c per share. Their actual result over 10 months extrapolated to 12 is 48cps, so they're probably still underquoting a little there.

Current price: $4.70