Growing factoring businesses make no sense mate, sure they make good money, but its a high touch model, and as these guys have no proprietary technology, their growth, will see them add overhead too.
Worryingly too, they are also completely funded by bonds, so their cost of funds is like 8.5-9.0%, compared to their competition who are sitting in the 4% range, so they would have to be doing high risk deals to compensate, where they can charge more to pay their interest costs, and it looks like they do larger deals too, so one big hit could knock them senseless.
A senior funder, like one of the big 4, wouldn't want to fund these kind of deals that can make up 10% or more of their book, so not sure their model is scalable either.
Also, most growing factors will try reinvest its dividends, so it can grow organically, so I wouldn't get excited about dividends.... I'd probably get more nervous about potential dilution, as they will need to raise equity.
CGR Price at posting:
23.0¢ Sentiment: Sell Disclosure: Not Held
