Author Topic: ADS - Alliance Data Systems  (Read 94446 times)

frank87

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Re: ADS - Alliance Data Systems
« Reply #400 on: August 27, 2019, 01:45:54 PM »
Curious if ADS has updated their CECL guidance. Even SYF is now out saying 50-60% increase in reserves.  Is ADS sticking to its no material impact line?

I don't think CECL should have a significant effect given that credit card loans are completely written off once they're 180 days past due.

Edit: ADS is expecting some build in reserves, mainly due to hard goods and jewelry receivables since they have longer lives
« Last Edit: August 27, 2019, 01:52:30 PM by frank87 »


chompsterama

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Re: ADS - Alliance Data Systems
« Reply #401 on: August 27, 2019, 01:51:37 PM »
Curious if ADS has updated their CECL guidance. Even SYF is now out saying 50-60% increase in reserves.  Is ADS sticking to its no material impact line?
July Call only mentioned some build up from their prior no effect.  No dollar or % value:  "As we adopt the CECL into 2020, we've been very successful in hardgoods and jewelry. Those assets generally have longer lives, so we would expect to have some build as we go into 2020 as we adopt CECL. We're going to have to look at the end-of-period balance sheet to see how much we have of the longer-lived assets versus short-lived assets. But we do expect some build."

kab60

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Re: ADS - Alliance Data Systems
« Reply #402 on: August 27, 2019, 02:04:27 PM »
I think Valueact converted their shares to Preferred.

Yes, you are correct. That makes me feel much better. What else could account for current price action? L Brands sure isn't helping. I wish I knew this company better because it does seem like a no-brainer here.
Lots of good point. Just a few comments;

Some retailers will obviously go under. Others will restructure, and if they wan't to have a fighting chance they'll probably need a solution ala ADS'.

L Brands is interesting, because while Victorias Secret is struggling, they have a gem in bath and body works.

Thus L Brands can probably do okay in a slimmed down version (they've been slow to close down locations), and their debt load is high, so possibly they could restructure, and thus still be a client, albeit smaller.

While Amazon and the death of many malls are hurting many of their traditionel clients, I could see their service becoming increasingly necessary for those that wan't to have a fighting chance. Whether 30 pct. ROE is here to stay is to be seen, but I haven't seen anything to suggest otherwise (apart from price action).

That anecdote from Floor & Decor can be read very differently whether one is a bull or bear, but it obviously adds value to the retailer.

Management has obviously been too optimistic before, but they've been guiding double digit receivables grow recently (grew 16 pct. in July), while it probably trades as if it's no growth/melting icecube type of thingy.

Boy I have taken a beating, but while I was definatley early I haven't seen anything that suggests the company is broken.

Agree that Valueact and Greenberg selling is a negative (while Valueact swapped some of its stake to preferred they did sell a large chunk large fall which spooked the market). Those guys are obviously way smarter than I, and I might be a patsy for relying too much on management (even though I think they were actually quiet right on some of the longer term drivers - like losses falling after insourcing collections etc. etc.).


abitofvalue

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Re: ADS - Alliance Data Systems
« Reply #404 on: August 27, 2019, 04:55:59 PM »
https://www.bloomberg.com/news/articles/2019-08-27/jpmorgan-weighs-sale-of-1-billion-aarp-credit-card-portfolio?srnd=premium

isnt this a cobrand card? How many cobrand deals does ADS have...   to be clear - not talking of private label, just co-brand.  iirc, a vast vast majority of the deals are private label but maybe i am missing something. 

my worry is SYF and ADS are increasingly relying on / doing co-brand deals where the economics likely aren't as juicy as pure private label.  Atleast SYF has dual-card so its quasi private-label. 

anyway - i agree its cheap just not sure how cheap..
« Last Edit: August 27, 2019, 05:02:07 PM by abitofvalue »

abitofvalue

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Re: ADS - Alliance Data Systems
« Reply #405 on: August 27, 2019, 04:57:39 PM »
Curious if ADS has updated their CECL guidance. Even SYF is now out saying 50-60% increase in reserves.  Is ADS sticking to its no material impact line?

I don't think CECL should have a significant effect given that credit card loans are completely written off once they're 180 days past due.

Edit: ADS is expecting some build in reserves, mainly due to hard goods and jewelry receivables since they have longer lives

frank87 - this may be a dumb question but how can SYF be guiding to 50-60% increase in card reserves and ADS to minor..   something seems off right? I get JPM @100% increase in card reserves may be too high given GPCC vs PLCC but ADS and SYF shouldnt be that far off.. 


frank87

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Re: ADS - Alliance Data Systems
« Reply #406 on: August 28, 2019, 06:48:24 AM »
Curious if ADS has updated their CECL guidance. Even SYF is now out saying 50-60% increase in reserves.  Is ADS sticking to its no material impact line?

I don't think CECL should have a significant effect given that credit card loans are completely written off once they're 180 days past due.

Edit: ADS is expecting some build in reserves, mainly due to hard goods and jewelry receivables since they have longer lives

frank87 - this may be a dumb question but how can SYF be guiding to 50-60% increase in card reserves and ADS to minor..   something seems off right? I get JPM @100% increase in card reserves may be too high given GPCC vs PLCC but ADS and SYF shouldnt be that far off..

This is just my take on it: Even credit card loans can differ quite a bit, particularly in terms of their estimated lives, $ amount per balance, etc. Higher dollar items and higher balances have relatively longer lives and would be more sensitive to the CECL change. ADS credit card balances are the lowest among the bunch but even then they acknowledge that there's going to be reserve build. Also, CECL requires the company to take a view on the macroeconomic environment, which can vary across different banks.

Obviously, loan categories such as mortgages would be affected a lot more.

ander

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Re: ADS - Alliance Data Systems
« Reply #407 on: August 28, 2019, 08:54:00 AM »
Post the recent tender, what's the latest estimate as to how much more ADS has in terms of capacity for repurchasing shares - with and without CECL adjustment and sale of Loyalty?

frank87

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Re: ADS - Alliance Data Systems
« Reply #408 on: August 28, 2019, 09:37:09 AM »
Post the recent tender, what's the latest estimate as to how much more ADS has in terms of capacity for repurchasing shares - with and without CECL adjustment and sale of Loyalty?

I think they planned to use $1.1 billion of the Epsilon sale to buy back shares. $750 million was spent in the tender, so that means there's still $350 million left.

KCLarkin

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Re: ADS - Alliance Data Systems
« Reply #409 on: August 28, 2019, 04:47:54 PM »
Sees Forever 21 is mulling bankruptcy. Checks to see if they are a client.
Of course they are.