PNC

PNC has had a great success on the ASX since listing. With its 2018 profit forecast, profit increase will be more than 1400% since 2014.

The one thing I cannot understand is why does PNC adopt a fair value measurement on its portfolio debt ledger through income statement? This could be why its profits is increasing at a phenomenal rate. Probably allowed under accounting standards but if CLH and CCP does the same valuation wouldn’t their shares be worth 5-20 times more? I have looked into many similar companies now all over the world and PNC is the only one that measures its debt ledger on fair value. All other companies including CLH and CCP use cost basis. Gearing is at near 55% on fair value, if we have gearing on cost then a comparison to CLH and CCP can be evaluated. The research done by Cannacord on PNC some time ago points to cash collection is key to analyzing this company. Looking at FY17 on FY18, I see pretty much cash collection is flat. My main concern is if the company is not collecting cash how does it pay dividends? If the fair value is based on future returns but is increasing profits now then isn’t it paying dividends out of future profits? It also pays taxes on unrealised profit. I am hoping that the few capital raising done including IPO is not money raised from new investors to pay old investors, because we all know what that means. Your views