Cash Converters International Ltd. – Value Analysis (ASX:CCV) : December 29, 2017

Capitalcube gives Cash Converters International Ltd. a score of 41.

Our analysis is based on comparing Cash Converters International Ltd. with the following peers – BOOKOFF Corp. Ltd., Treasure Factory Co., Ltd., Hard Off Corporation Co., Ltd. and Tay Two Co., Ltd. (3313-JP, 3093-JP, 2674-JP and 7610-JP).

Investment Outlook

Cash Converters International Ltd. has a fundamental score of 41 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • It trades at a lower Price/Book multiple (0.70) than its peer median (1.38).
  • We classify CCV-AU as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • CCV-AU‘s relatively high profit margins are burdened by relative asset inefficiency.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • CCV-AU‘s return on assets currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • The company’s median gross margin and relatively high pre-tax margins suggest non-differentiated product portfolio but with tight cost control relative to peers.
  • CCV-AU‘s revenues have grown more slowly than the peer median over the last few years, which combined with the stock price’s relatively low P/E ratio suggests substandard growth expectations relative to peers.
  • The company’s capital investment program suggests it is under-investing in a business that is producing peer median returns.
  • CCV-AU might have enough interest coverage to take-on additional debt prudently.

Access our research and ratings on Cash Converters International Ltd.

Leverage & Liquidity

CCV-AU might have enough interest coverage to take-on additional debt.

  • While CCV-AU‘s debt to enterprise ratio of 58.93% is on the high side compared to an overall benchmark of 25% (Note: The peer median is currently 58.93%), it also enjoys a relatively high interest coverage level of 4.09x which may give the company enough financial strength to support additional debt. Thus, the company is classified as having Some Capacity to raise more debt.
  • Of the 4 chosen peers for the company, only 3 of the stocks have an outstanding debt balance. Companies with no debt include 2674-JP.

CCV-AU has moved to a Some Capacity from an Quick & Able profile at the prior year-end.

  • CCV-AU‘s interest coverage is its lowest over the last four years and compares to a high of 7.84x in 2013.
  • While its interest coverage decreased to 4.09x from 5.36x (in 2016), its peer median increased during this period to 6.22x from 5.36x.
  • Interest coverage fell 2.13 points relative to peers.
  • CCV-AU‘s debt-EV is its highest over the last four years and compares to a low of 14.08% in 2013.

Access the detailed analysis for Cash Converters International Ltd.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
BOOKOFF Corp. Ltd. 96.77 1.85 6.22 7.86
Treasure Factory Co., Ltd. 21.35 1.98 149.92 34.68
Hard Off Corporation Co., Ltd. 3.77 4.52 177.71 250.53
Tay Two Co., Ltd. 67.36 1.75 -11.54 -9.73
Cash Converters International Limited 58.93 2.71 4.09 24.67
Peer Median 58.93 1.98 6.22 24.67
Best In Class 3.77 4.52 177.71 250.53

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Company Profile

Cash Converters International Ltd. engages in the ownership, operation, and franchising of retail stores. It operates through the following segments: Franchise Operations, Store Operations, Financial Services-Personal Loans, Financial Services-Administration, and Vehicle Financing. The Franchise Operations segment sells franchises for the retail sale of second hand goods and sale of master licenses for the development of franchises in countries around the world. The Store Operations segment involves in the retail sale of second hand goods at corporate owned stores in Australia and United Kingdom. The Financial Services-Personal Loans segment includes cash converters personal finance personal loans business. The Financial Services-Administration segment provides Internet platform and administration services for the cash converters network to offer small cash advance loans to customers. The Vehicle Financing segment offers maintained vehicles through a lease product t customer for a term of up to four years. The company was founded by Brian Cumins in November 1984 and is headquartered in Perth, Australia.

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