Fascinating idea. One note - if you're assuming that FCF will be immediately paid out as a dividend, doesn't it make sense to multiply the FCF yield by 1 - (whatever tax rate you will pay)?
Thank you! It would make sense indeed, however, each individual handles taxes differently and/or pays a different %. So I shied away from doing that and let people do it for themselves haha
Fair, though it gets tricky if you present a case and do that. One could also argue that you need to incorporate a capital gains tax calculation as well. In my case, I'm paying a flat 12% on divvys and 0% on capital gains if I hold it for 2+ years.
Thank you for the note. Any idea why this kind of business will go public during 2020?
What is the purpose of the proceeds?
Separately, the expansion to China is not going to work, because the credit data business is owned by internet giant like Ant Financial under Alibaba. Credit card is non-existent in China.
Tbh I don't have enough info on their China plans to have an opinion. You might be right or they just might be taking a different angle to it.
According to the prospectus, the purpose of proceeds was mostly for inorganic growth and software/infrastructure development. Though I'm sure they could have do that without it. So I think a more likely explanation is that insiders wanted to cash out some, or that they wanted gain more credibility in the financial sector by going public.
Thank you David. Experian is deemed as a good business, at least by compounder bros, but share price is just doing alright the past few years , probably due to high multiple ?
Any catalyst you think credit bureau share price should go up ? Think it already trades at a premium vs the index. The growth seems to be dependent on m&a which is a big question mark.
I just think if I were the owner, if someone want to cash out, can easily use the cash on balance sheet to buy them out. If want to do m and a, can levered up the bs.
Why give people I don’t know a chance to share my wealth ?
Hi David. Fantastic find and great write-up! Always enjoy reading your stuff.
Do you mind helping me understand the difference between the Global Credit Risk Management (GCRM) business (where Experian has 57% share) and the Commercial Credit Bureau segment (both in non-FI)? I'm unclear how Experian is able to compete in GCRM if CBA has all of the commercial credit data as the holder of the sole Singapore license.
Secondly, how do you think this plays out over the longer-term with the founders? If they were to retire (or pass away) then are they allowed to sell their equity and would that not be a catalyst for the share price to rerate since the free float would be larger allowing bigger stakes by the funds?
Fascinating idea. One note - if you're assuming that FCF will be immediately paid out as a dividend, doesn't it make sense to multiply the FCF yield by 1 - (whatever tax rate you will pay)?
Thank you! It would make sense indeed, however, each individual handles taxes differently and/or pays a different %. So I shied away from doing that and let people do it for themselves haha
Yep, fair enough - perhaps I would add a little note just mentioning that :)
It is interesting how in DCFs in general, no one seems to account for taxes on dividends though. At least not in the ones I see.
Fair, though it gets tricky if you present a case and do that. One could also argue that you need to incorporate a capital gains tax calculation as well. In my case, I'm paying a flat 12% on divvys and 0% on capital gains if I hold it for 2+ years.
Thank you for the note. Any idea why this kind of business will go public during 2020?
What is the purpose of the proceeds?
Separately, the expansion to China is not going to work, because the credit data business is owned by internet giant like Ant Financial under Alibaba. Credit card is non-existent in China.
Thank you
Tbh I don't have enough info on their China plans to have an opinion. You might be right or they just might be taking a different angle to it.
According to the prospectus, the purpose of proceeds was mostly for inorganic growth and software/infrastructure development. Though I'm sure they could have do that without it. So I think a more likely explanation is that insiders wanted to cash out some, or that they wanted gain more credibility in the financial sector by going public.
Thank you David. Experian is deemed as a good business, at least by compounder bros, but share price is just doing alright the past few years , probably due to high multiple ?
Any catalyst you think credit bureau share price should go up ? Think it already trades at a premium vs the index. The growth seems to be dependent on m&a which is a big question mark.
No problem.
Rate cuts and no, I don't think growth is dependent on M&A, as it can be seen in historical financials
But thank you for the great analysis
But we are also paying a high multiple.
I just think if I were the owner, if someone want to cash out, can easily use the cash on balance sheet to buy them out. If want to do m and a, can levered up the bs.
Why give people I don’t know a chance to share my wealth ?
Hi David. Fantastic find and great write-up! Always enjoy reading your stuff.
Do you mind helping me understand the difference between the Global Credit Risk Management (GCRM) business (where Experian has 57% share) and the Commercial Credit Bureau segment (both in non-FI)? I'm unclear how Experian is able to compete in GCRM if CBA has all of the commercial credit data as the holder of the sole Singapore license.
Secondly, how do you think this plays out over the longer-term with the founders? If they were to retire (or pass away) then are they allowed to sell their equity and would that not be a catalyst for the share price to rerate since the free float would be larger allowing bigger stakes by the funds?
So this bump in volume on September 30 is you 😁
Rounding here for simplicity's sake:
- EPS 0.05
- Price 1.00
- P/E 20
- 100% payout ratio
Assuming it grows at 7%, because it is easier to calculate, it will double in 10 years, and:
- EPS 0.10 -> Price 2 -> Total return 2.75 or ~10.5% per year (at 7% growth and no multiple expansion)
Is this about right?
Hope not haha but think so. I provided my calculations on this in the article
What platform did you use to buy?
IBKR
Can you speak more about the friend you have that interviewed management and didn't get impressed?
I don't have more useful info to share on that front, sorry
Compounder Bro
😤