Forum Archive Index - March 2001

["G Stolwyk" <stolwyk@wave.co.nz>]

 

Reference: " Collection House success story / Peter Maiden, of yesterday, 10:35 a.m.

 

Website of CLH: < www.collectionhouse.com.au > 

 

 

 

PETER,

 

Thanks for your competent interpretation of the chart!

 

INTRODUCTION:

As you may have observed, CLH has been around for some time but has been particularly active during the last few years.

Its acquisitions have taken over some of the best companies on the block.

 

CLH is feared by its competitors, one reason being that it is nimble, but the overriding factor is that it is much more than a debt collecting company:

 

1. Their propriety software system " The Controller " is a winner. They also have the latest installed predictive and power dialling devices. 

 

2. They are particularly active in obtaining debtor ledgers.

3.They are always trying to " grow " the company: Lately, they secured the total ( 100% ) outsource of a major financial institution's motor finance and commercial leasing book.

 

4.They maintain a National Tenancy Data Base and have ongoing contracts with government departments: CLH has been a respected company since its inception.

 

5. Their exclusive association with Australia's only fully integrated national law firm specialising in debt recovery and litigation, is a unique and cost-effective approach to receivables management.   

   

6. They are moving into the billing business and have started to handle the management of 14 to 60 day accounts for an existing client. Prospects for growth look good.

 

7. One, often overlooked but important factor: CLH is an All Australian company!  And it is well "connected!".

 

8. CLH has picked the best fitting and high calibre companies in their national expansion model.

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FINANCIAL DATA:

 As you mentioned, operating profit before tax is appr. 20 %. Considerable costs must have been incurred operating the newly acquired companies, hence this figure should improve: Much progress has been made in training staff in the use of advanced equipment and the use of computer software!

 

I had expected this figure to be less than the above mentioned 20% at this stage of development! Hence, I concur with their $8.334 mill. projected profit up to June 30, 2001.

 

Your mentioned intangibles of only $16 mill. will not be onerous. Yet, CLH has only 85 mill. shares!  

 

They are expecting several new contracts in the new year and at the same time relative costs should come down.

 

Their interim report notes that the current work-in- progress has increased to a staggering $A 2.3 Bill.!     

 

Comment: CLH is going places, has an excellent Board and a capable management with vision. It has excellent growth prospects and the Investor will not be able to buy CLH shares cheaply.

 

In hindsight, these shares may prove to be still cheap, as was the case with BAYCORP over the last few years!!

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PREDICTIONS: 

Year ending June 30     2001        2002

Profit (mill), $A:             8.45        13.0 ( + 53.8% )

E/S (cents)                 10.0          15.3

Dividend (cents)            6.5          10.0

 

Current price; $3.90.

Total shares: 85 mill.

P / E :                          39           25

 

Remarks: I consider the forecasted 2002 profit projection very obtainable and reserve the right to upgrade this data when warranted.  

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CONCLUSIONS:    

Peter, you mentioned your next support level to be at $A 4.50.

I concur with your opinion, however, there are at least 3 possible positive outcomes arising from the next few weeks trading:

 

Holders of BCH may convert some of their stock into CLH to further spread the risk and they may obtain nearly 3 CLH shares for each BCH share.

 

Australian investors may prefer CLH as it offers superior fully imputed and rapidly rising dividends.

 

NZ investors, please take note of the projected dividends in 2002 and that CLH could be paying about 65% of profit in dividends. This will enable them to increase reserves. ( BCH pays out about 94% of their profits ).

 

There is an increasing interest in CLH from analysts; reports and opinions favour this stock.

 

Investors may conclude that " waiting for a lower price " may not be the correct strategy.

 

 

Disclaimer.

The reader is not asked to hold, buy or sell CLH, BCH or any other investment. To do so will be entirely at their own risk!

This report is based on my opinions. These may change without notice being given. I hold CLH and BCH shares.

 

Gerry