Top member reports
Consensus community valuation
$0.055
Average Intrinsic Value
120%
Undervalued by
Active Member Straws
#Bear Case
Added 4 days ago

After going through this more carefully, I'm a bit bearish on this company and I sold out even though they operate in the solvency sector which on appearances is a good counter-cyclical area to invest in. Not to mention there is a last minute buyer of shares which is propping the price. Some of many bear points are covered below.

I don't think the Chapter Two acquisition will be enough to gain traction in an already crowded Oz market dominated by larger players such as CCP and FSA. There is also the issue of integrating their tech platform used in HK to the acquisitions they've made.

There is dilution caused by extra shares being awarded to the directors as part of the remuneration (see all the Appendix 2A announcments).

The CEO does not own 50% of the float as mentioned before, transferring some shares to other big investors more than 6 months ago.

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#Coronavirus
Last edited 6 months ago

Sadly, HK and Singapore will both be badly effected by the pandemic. HK GDP recently revised to -6.8% for 2020. 
All +ve for this company. 
 

like Greyhound in real world am adding to holding  sub 2c. 
 

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#Business Model/Strategy
Last edited 6 months ago

Hong Kong based company specializing in bankruptcy and debt consolidation. Different to debt recovery companies. Started by the founder 15 years ago and is profitable with a low cost base. Looking to expand into Singapore and Australia to increase market share and counter lowering bankruptcy rates in Hong Kong

 

  • Stable duopoly in Hong Kong only one competitor
  • CI1 developed a software system that allows them to pay the banks all the different debtors installments in one payment, and creditors and debtors to access payment information etc.
  • Great profit margin (up to 40%) with a low capital outlay. The low barriers to entry make it easier for compeition to enter the market
  • Founding Managing Director is a large holder ( >40%)
  • Zero debt cash positive
  • A slowing Chinese economy could have spill over effects into Hong Kong
  • There has been declining rates of bankruptcy in Hong Kong one of the reasons for the expansion.
  • Entered into collaboration with Cor Cordis in Australia and Arrow Consultants in Singapore to expand internationally.
  • Broker valuation in December of 4.8c conservatively and 7.1c optimistically, this is using 50% DCF and 50% EV/EBITDA
  • A release today (14/8/19) reiterating the protests in Hong Kong should have no long term adverse effects on the business.

 

Disclosure: I baught into this company at 0.013, I will add to my scorecard if it drops back down again.

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