Credit Corp Group Limited
(ASX: CCP) shares have gone into a trading halt.
Credit Corp is Australia’s largest debt buyer, called purchased debt ledgers (PDL), and collector. The company purchases past-due consumer and small business debts from major banks, finance companies, telecommunication companies and utility providers in Australia, New Zealand and the USA. It has been operating for over 25 years and also runs the ‘Wallet Wizard’ short term lending brand.
Why Credit Corp shares are in a trading halt
The company has given an update for FY19 and also announced that it plans to raise $100 million with a fully underwritten institutional offer.
FY19 Market Update
Credit Corp said it’s on track to deliver strong earnings growth in FY19 with increased investment and its debt capacity positions the company for further growth.
The core Australia & New Zealand buying debt division is continuing to do well despite the lower investments over the past two years. Cash collections are tracking close to the record levels of FY18 and the payment arrangement book has been maintained.
The consumer lending segment (think of Wallet Wizard) has grown in new customer volumes and settlements of 20%. The loan book is now $208 million, improving the segment growth outlook for FY20.
The US market also remains favourable, with investment 40% higher compared to FY18.
FY19 investment guidance in relation to purchased debt ledger acquisitions and net lending has been increased, however net profit guidance for FY19 remains at $69 million to $70 million. The company recently impressed with its half year result.
The capital raising
Credit Corp is undertaking the capital raising to maximise its opportunity in Australia & New Zealand if conditions improve, fund its acceleration of growth in the US and improve the balance sheet’s gearing to reduce to around 20%. The balance sheet will allow the company to be opportunistic.
The $100 million raising from institutional investors will be done at a share price of $20.45, being a 7.8% discount to the last closing price.
Regular shareholders will be then able to buy up to $15,000 worth of shares per shareholder.
Should you take part?
This capital raising is being done at close to Credit Corp’s all-time high share price. This time might also be described as near as the top of the market. But, the opportunity in the US is large and it could be worthwhile pursuing it.
I’m not sure if it’s the right call to invest today, you may be happy with your current holding size of Credit Corp.
I think it could be a better idea to go for the growth shares revealed in the free
report below which might not be as cyclical as Credit Corp.
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