READ THIS!!31 May 2011 10:45
just out
http://www.cleardebtgroup.co.uk/download/Equity_Development_Research_27_May_2011.pdf
Other factors that we think investors should note are that:
 ClearDebt is increasing volume and, as per the preceding table, gaining
market share (it had more IVAs passed in the first seven months of 2010/11
than in any previous full year)
 We do not yet know how many ClearDebt IVAs were approved in the first
quarter of 2011, but the January number (all January numbers are seasonally
depressed as fewer are submitted over Christmas) was 77, a 285% increase
on January 2010…
 ClearDebt already had a lower rating on a PFER basis than Fairpoint prior to
the announcement and its share price had already fallen by one-third from its
2011 peak in the last three months
 Also, the decline in the number of IVAs approved and the lower average fee
has a less geared impact on ClearDebt because it has low costs (both fixed
and variable): the latest published data shows ClearDebt‟s EBITDA on IVAs as
an attractive 39.6%. This is despite taking a larger proportion of the smaller
IVAs that reduce fees and margins, although their conservative accounting
policies reduce the difference reported at the pre-tax level.
Earlier this month ClearDebt was rated at 6.7x its broker‟s forecast of 2011 eps
but now it is only 4x. Despite its impending year end, it has seen no need to issue
a warning in respect of those market expectations.
Our opinion is that a slowdown in the market will merely slow ClearDebt‟s growth
rather than cause an actual fall in its profits; also ClearDebt‟s reported profits will
rise as the amortisation charge on the assets acquired from the administrator of
“Relax” runs out. Even if earnings per share were to be 10% below the house
broker‟s forecast, the current share price would be trading on less than five times
eps for 2010-11.
Conclusion
Fairpoint has warned of a temporary one-off drop in earnings per share
of, say, 3p (probably less) and its share price has declined by 31p, which
I can safely say is excessive; ClearDebt has issued no warning, but its
share price fell by one-eighth, which I think is irrational.
We think that ClearDebt’s current share price should be at least 3.6p, and
preferably 4.5p, which is double the current pric
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