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Profit report: Is the Collection House share price cheap?

This morning Collection House Limited (ASX: CLH) reported its half-year results for the period ending December 31 2018. Below is a summary of the results with comparisons to the prior corresponding half year.

  • Revenue of $66m, up 4%
  • Net profit after tax of $8.5m, up 3%
  • “Underlying profit after tax” of $8.7m, up 2%
  • Earnings per share (EPS) of 6.2 cents
  • Dividends per share of 4.1 cents
  • Made a $8.5 million equity investment in start-up bank Volt Bank
  • Acquired NZ-based Receivables Management Limited for NZ$14.1m
  • Drawn debt of $153m
  • FY 19 EPS guidance of 19.2 to 19.5 cents per share, or 15 to 15.2cps excluding ‘PEP’ transactions

The Collection House share price is up 1.4% to $1.42 on the back of a busy quarter for Collection House and its ebullient North American CEO Anthony Rivas.

The core debt collection business delivered flattish results but generally ticked in the right direction, with the group even increasing its purchased debt ledger guidance around 12% to a record $87m to $92m for fiscal 2019.

As such meeting its earrings per share guidance looks reliant on the group delivering a stronger second half to the year.

It also completed an NZ-acquisition and slightly left-field $8 million equity investment in Volt Bank that it would be interesting to get more of an explanation over, as so far it’s been light on detail other than talk around bringing new products to market that could help the financially challenged.

The stock looks cheap on conventional valuation metrics if you expect it to meet full year earnings guidance and except the backing out of certain costs in achieving that guidance.

It also offers a handy dividend and possesses a new management team that talks a good game, while delivering will be the key for investors.

Another stock in the debt collection space that has delivered superb returns for shareholders is Credit Corp Group Ltd (ASX: CCP), as such this suggests Collection House is in a reasonable space.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.


You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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