Credit Corp Group Limited

CCP Details

Robust earnings growth and a strong outlook: For FY17, Credit Corp Group Limited (ASX: CCP) reported a 20% yoy growth in Net Profit After Tax (NPAT) to $55.2 million at record 9-year compound annual earnings growth of 28%. Notably, NPAT doubling from the fast-growing lending division to $12.3 million, while US division turned into a profitable driver of earnings growth. The results were driven by a strong core debt purchasing business operations and impressive contributions from the company’s organic expansion into consumer lending and US debt purchasing. Credit Corp outlaid $250 million to acquire charged off debts, including $202 million in the core Australian and New Zealand business. These record outlays produced 11% growth in total collections and expected to witness another year of strong core business performance in 2018 with NPAT growth of 9% - 14%.

The lending division was the main driver of earnings growth in 2017 and is set to grow rapidly again in 2018. The company started it from scratch just over five years ago and have built sizeable operation servicing 150,000 customers. Lending is now a critical part of the company’s future as it accounts for 28% of investment and 22% of earnings. Further, The US division executed a turnaround in 2017, achieving profitability over the final months of the year. Moreover, operational improvement produced a 20% increase in labor productivity with improved market conditions, while Credit Corp increased its outlay on purchased debts by 37% to $48 million. The US division is estimated to contribute to a significant component of Credit Corp’s 2018 earnings growth with expanding collection capacity. Although the outlook is optimistic, the stock has already moved up 26.6% in the last one year and trading at elevated levels. We give an “Expensive” recommendation on the stock at the current price of $18.09


CCP Daily chart; (Source: Thomson Reuters)

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