Investor Wag Informal Investment Insights

Update on three "poverty" companies

Credit Corp Group (ASX:CCP)
The AGM came and went. I was expecting a profit upgrade, but it didn't eventuate. However the guidance for PDL purchases in FY13 was upgraded to $70m - $90m (previously $50m - $70m). While conditions are tough with PDL prices at elevated levels, the collections run rate for the the first 4 months of the financial year is at record levels. And the US debt collection business and consumer lending business are due to contribute earnings in FY14. Though still one of my largest holdings, I've since sold a portion hoping to get back in at a lower price - an opportunity that perhaps already came and went...

After the market close on Friday, a time traditionally for bad news, the company again updated FY13 PDL purchasing by $35m to the range of $105m - $130m as well as a once-off $2m NPAT increase. Again upside surprise and along with the impeding profitability of the US and consumer operations, FY14-15 are now looking increasingly strong. You can do much worse than buying stock in a company with good ROE, minimal debt, highly cashflow positive and with a history of upside surprise.

CCP is current trading at $8.10.

Cash Converters Limited (ASX:CCV)

The 20/4 payday loan bill has passed and will take affect in July 2013. The company states that this will have minimal profit impact and "more than offset by volume growth". With this large distraction behind them, management can continue focusing on growing the company.

The company is establishing new corporate stores and expanding the personal loans business with haste. The growth in the UK and margin improvements have happening so quickly that it may have taken some by surprise. Outlook looks strong. With the recent capital raising at 85c, the kitty is flush with funds for continued expansion.

CCV is current trading at $1.125.

Thorn Group (ASX:TGA)
Half yearly report was out late November for the 6 months ending 30th September. All divisions growing well but a once off GST expense pushed NPAT down slightly past a flat result.

The rental business has reached maturity and will be stagnant into the foreseeable future. Furniture is growing strongly but is largely offset by the falls in computing and TVs. NCML (debt collections), was a bad acquisition no matter how you look at it, and one feels management would just be happy managing profitability going forward. Cashfirst (personal loans) and especially Thorn Equipment Finance (TEF) are drivers for the future and growing rapidly. As stated a few times in the half yearly presentation, its transformation into a financial services company will see management taking on more balance sheet leverage.

Thorn Group is now reasonably priced. As I see Credit Corp and Cash Converters to be better plays, I've since sold my holding in TGA.

TGA is currently trading at $1.99 - went ex-div on Thursday just past.

Disclosure: At the time of publishing, I own shares in CCP and CCV.