Please read the disclaimer at the bottom of this
report before proceeding.
Investors have always appreciated those few stocks
who tend to perform well in all conditions. They
are defensive - but also high growth
These two desirable features
attract experienced investors and they are prepared to pay for these
combined - and rare qualities.
The two companies referred to below, work in
the debt receivables sector. Debt levels have been
approaching historically high levels in Australia and New Zealand. Australia is
a large market to operate in.
This sector is expanding at a high rate: due
to outsourcing by other companies, new sources of revenue are being tapped,
eg. Billing systems.
The sector requires focussed and highly skilled
technical personnel. The Board and managements will be developing and
testing new concepts as well.
High profit margins and strong free cash flows
will be the outcome of policies and shareholders will enjoy the
The two companies which comply with these demands
are BCH and CLH. Both companies have been
Investors have asked what the future holds
for CLH and this
report should give them added confidence.
CLH: Item ( 3
) indicates a compound return of
at least 31% every 10 months
up to Nov
1993. The " Remarks " of that item are important in this
CLH: Projected share
Date: 20/4/01 20/2/02 20/12/02
Oct / Nov. 2003
These are indicative values only; obviously, share
prices do no rise in a regular fashion.
The investor would get an additional 1.5%
dividend yield ( item ( 5 )).
The company pays out 65% of their profits in
dividends, the remainder will be added to reserves: see item ( 6
Mr Peter Maiden is the
chartist and his excellent work has been acknowledged in item ( 8
BCH ( BAY.AX ) or
Baycorp, was listed in 1986 and restructured in 1994; the company has
had an excellent performance since.
Many investors think that the current price of $NZ
12.26 - or $A 9.81 - is justified; it has a high
international rating and net profits have a consistent growth of
some 20% a year: < www.baycorp.co.nz
CLH or Collectionhouse
> was incorporated in 1992. It is an Australian company with its HO in
Brisbane. It has offices throughout Australia and in Auckland.
Like BCH, CLH has a
variety of services eg. credit reporting, debt collection and related
services. It also administers a National Tenancy Database and purchases
Debt ledgers. The current work-in-progress
exceeds $A 2.4 Bill.!
Potential growth will come from earlier
outsourcing by Firms, eg. commercial collections and billing management.
CLH has already obtained
contracts in these fields.
This growth will increase with time and will
result in a huge expansion of present
CLH has the highly rated "
The Controller "; this is a specialist debt collector and management
CLH is a respected Australian
BCH and CLH: How do they
Note: All data is in $A / cents ($ NZ =$A
0.8), year to June 30.
1. Net surplus ( $ mill
99 2000 01F
BCH 5.6 7.2 8.9 10.8
12.6 15.4(+22%) 18.5(+20%)
CLH ( Listed in
Oct. 2000 ). 2.5 8.4(+236%) 14.3(+70%)
projected growth in earnings in one year - 01 to 02 - is the equivalent
of about 3 years growth by BCH ( See 1997-2000 period
2. Shares (
BCH ( Price: $A
CLH ( Price: $A 4.40
Remarks: CLH will have cash left from their $
33 mill. raising in March. Hence, the 2001 and 2002 numbers are either weighted
or have taken this into account.
If this cash was ignored, then CLH would have
94.5 mill. shares in 2002.
BCH tends to have little cash left: See item
(4): dividends. Shares are weighted.
3. E/S (cents):
Remarks: CLH: It is estimated that it will take less
than 1.5 years-starting from July 1, 2002 - to obtain the same
E/ S that BCH has in the year up to June 30, 2002.
Therefore, the present CLH price
of $ 4.40 could at least grow to $ 9.81 from now to Oct / Nov.
2003 ( about 30 months ).
This is a compound rate of return of
31% every 10 months to Oct. / Nov. 2003.( Today's BCH share
price is $NZ 12.26 = $A 9.81).
It is a conservative estimate because it
ignores any possible increase of the BCH
share price between now and June
Should that increase by say 10% then the compound
rate of the above mentioned 31% could rise to 35%!
It could reach that level without having to
couple the performance or prices of CLH to that of
2000 2001 2002
93%).15.2,act. 17.3(+13.8%). 20.4(+17.9%)
5. Dividend yield
2000 2001 2002
1.5 1.8 2.1
6. Add cash to
reserves ( Surplus minus Pay-out of div.
CLH 2.9 5.0
Remarks:Due to its more conservative dividend
pay-out ( See item (4)), CLH will
be growing some nice reserves over time.
7. P/E ratios 2000
BCH 60.6 52.7 44.8
CLH 43.1 28.0
Remarks: BCH is highly
regarded internationally.CLH: At the current price of $A 4.40, the
prospective P/E for the 2002 year, is low.
As results come in and the
stock has performed, the P/E of CLH
will try to meet that of BCH. Therefore, a buyer who wants
CLH stock, could encounter increasing share prices.
And that is already happening.
Many thanks to our chartist, mr.
Peter Maiden who has given some excellent interpretations of
CLH price behaviour!
Readers, please refer to his
classics: " Collection House success story " of March 4,
2001 and " CLH - Chart update " of March 31,
His interpretations have turned out to be
conservative: On March 4 - when the price was $3.50, he predicted a price of $
4.50 on June 30. It reached $4.55 on April 17!
Peter is now predicting a new support level at $
4.70- $ 4.80 in June!
His work has given potential
buyers of CLH stock increased
Readers can also refer to my
" CLH - Chart update " of April 1,
Disclaimer. I hold BCH and CLH stock. This report was
prepared on April 21, 2001. The contents of this report are my
opinions. Readers are not asked to buy, hold or sell shares or any other
financial instrument.To do so, will be entirely at their own