Collection House Limited

CLH Details

Impact on Cash Flows from Refinancing Transaction: Collection House Limited (ASX: CLH) is engaged in accounts receivables. The company primarily engages in the provision of debt collection services and receivables management throughout Australasia, and the purchase of debt. The company has recently completed its refinancing transaction in the quarter ending December 2020. The buyer from the refinancing transaction is entitled to the cash flows generated from debt ledger assets. The company has sold its PDL assets for a consideration of $157.7mn to reduce its debt which may impact the earnings of the company in short-term. The company has managed to reduce its senior debt amounting to $61.6mn at the end of six months ended 31 December 2021 and opted for refinancing option for a further three years.

1HFY21 Financial Highlights: The company has registered a decline in its revenues to $46.22mn in 1HFY21 as compared with $86.48mn in 1HFY20. The company has posted a net loss of $9.55mn in 1HFY21. CLH has registered an increase in its cash and cash equivalent to $33.95mn as on 31 December 2020 as compared with $9.65mn as on 30 June 2020.

Cash Position (Source: Company Reports)

Key Risks: The company is engaged in accounts receivable and collection services, any liquidation filed by a third party may result in business loss for the company. The company is exposed to pandemic situation risks, any such situation will result in decline in number of customers for the company and may lead to financial losses for the company.

Outlook: As per the company reports, the company will be utilising net proceeds from refinancing transaction to reduce its debt facilities. The company will utilise its cash reserves for the growth of the company, going forward. According to the Chairman, Leigh Berkley, next few accounting periods may remain subdued for the company but will remain focus on customer growth in the coming periods.

Stock Details: In the last one month, CLH has decreased by ~2.22% and by ~24.13% in the last three months. The current market capitalisation of CLH stands at ~$31.93mn as of 14 April 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.200-~$0.485. On the technical analysis front, the stock has a support level of ~$0.197 and a resistance of ~$0.259. Considering a steep decline in the stock prices from past many trading sessions, associated risks with the company, lack of catalysts for the company’s growth and current trading levels, we suggest investors with low-medium risk appetite to evaluate the current scenario as per their own risk appetite. The stock closed at $0.220, down by 2.223% as on 14 April 2021.

CLH Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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