Stocks’ Summary

Collection House Limited (ASX: CLH)

Upgradation in Guidance for Investment in Purchase Debt Ledgers – CLH soared up by 4.5% on May 29, 2018, as theCompany for the second time upgraded its FY18 Purchase Debt Ledger (PDL) guidance. Initially, the Company expected between $63 - $65 million, then improved this to $70 - $75 million and lately updated it to be $80 - $84 million. This improvement in full year guidance for Investment in Purchase Debt Ledgers was due to the fact that the Company was taking strategic steps to leverage the opportunities that have arisen from the requirement for Australian Banks to fully comply with the provisions of AASB 9 from 1 January 2018. Lately, Cash Converters International Limited (ASX: CCV) entered into an agreement with the Australian Securities and Investment Commission (ASIC) for historical issues relating to collections contact frequency and default listings. Since 2016, CCV has taken further steps to ensure compliance by transitioning its collections activity to a specialist third party that is Collection House Limited (ASX: CLH) and this transition program included its Personal Loan, Cash Advance and Green Light Auto car finance products which will be completed by 30 June 2018. Moreover, the monthly arrangement revenue base from the arrangements used in the Balbec deal completed earlier this month has now been replaced with strategic purchases in May 2018. 


PDL Pipeline (Source: Company Reports)

The Company continues to buy at pricing levels that are within the historical range and as well as expects to generate higher returns due to improvements in collection efficiencies, technology adoption and improved data analysis. Recently, CLH’s wholly owned subsidiary, ThinkMe Finance Pty Ltd was granted a full Australian Credit Licence that enabled it to provide consumer loans. It will now be able to offer innovative loan products to consumers, and in the future other services that are currently in development. The Company achieved the improved margins in 2HFY17 and expects to reach the historical levels as the Group makes further improvements. The Company also witnessed that the segment incur cost was ahead of Revenue in 1HFY18 which should be partially offset in 2HFY18 and fully offset in FY19. The stock has been rising up in the last one year by 24.6 per cent and climbed up by 10.56 per cent in last one month. We give a “Speculative Buy” recommendation at the current market price of $1.64.
 

APN Outdoor Group Limited (ASX: APO)

Release of FY18 EBITDA Guidance - APN Outdoor, a leader in outdoor advertising across Australia and New Zealand announced its FY18 EBITDA Guidance and expects that its Underlying EBITDA for the 12 months ending 31 December 2018 is expected to be in the range of $92 million to $96 million. The revenue momentum will continue to build in the coming time. The Company is now tracking the headline for its 1HFY18 revenue growth of mid-single digit against the prior corresponding period and the high-single digits excludes the impact of the Yarra Trams contract loss in 2H17. The Group expects that its FY18 capex expenditure will be in the range of $25 million to $30 million which is in line with the guidance that was provided by APO in its FY17 results presentation. It was noted that the out-of-home markets in both Australia and New Zealand have remained robust in recent months and is using its reinvigorated approach to sales that continues to gain momentum.


2017 Financial Highlights (Source: Company Reports)

It is focusing on the value-addition of its portfolio by investing in data and technology which will help in driving the Company’s growth. The Company recently submitted a non-binding proposal to acquire 100 per cent of Adshel in Australia and New Zealand at a headline enterprise value of $500 million but is subject to few regulatory conditions and due diligence. The Company expects that it will receive cost synergies benefits due to efficiencies in combining the two businesses. There is a possibility that the group will raise equity to fulfil the acquisition cost. In last one year, the stock was up by 16.84 per cent and by 27.44 per cent in last three months. The stock climbed up by 7.24 per cent in last five days and just after the release of its FY18 EBITDA Guidance, the stock price climbed up by 4.9 per cent. The stock looks “Expensive” at the current market price of $5.75 as it is inching towards its 52-week high price.

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