Wednesday 03 February 2016 by William Arnold Company updates

CML Group is performing well and offering attractive value for a senior secured bond

As part of the requirements of its bond issue, CML provides monthly investor reporting. Details include eligible receivables and a statement of compliance with its covenants

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As such, the company has confirmed compliance and provided statistics on its trade finance loan book as at December 2015. Please see the ASX release here

The following charts detail the size of the trade finance loan book as well as the loan to value ratio.

Book size                                                                                 Loan to value ratio
CML
 Source:  FIIG Securities, Company report

Key points to note:

  • The loan book is growing in line with expectations peaking in the build up to Christmas and ending in December at just below $39m
  • The loan book is supplied with $25.2m of funding giving a loan to value ratio of 67.5% in December which remains within its historic rang
  • As the loan book grows un-deployed interest costs are reducing

The following charts detail arrears performance of 60-90 days and 90 days plus.

Arrears performance
CML 2
Source:  FIIG Securities, Company report


Key points to note:

  • Arrears performance spiked in October however fell away as the account was collected
  • The 90 days plus arrears have remained below 5% for the majority of the year

The integration of the Cashflow Finance Australia (CFA) acquisition appears to be on track:

  • All clients have been transitioned to an industry leading software platform
  • Operations have been merged into a central location
  • Headcount has been reduced across the combined business by 25%
  • As such, costs will reduce and efficiency should improve

While a relatively small business, CML Noteholders are in a senior position secured primarily against the loan receivables portfolio. The portfolio is covered by an insurance policy with a AA- rated insurer covering losses greater than $5,000.  As such recovery in the event of a default would be expected to be high.

The Notes currently offer attractive value given the company has grown notably and performed within expectations since issue.  The Notes are indicatively offered with a yield to maturity of 7.30% or ~500bps over BBSW stepping up to 700bps over after May 2020 until the final maturity in May 2021 if not called earlier.