The Credit Corp Group Limited (ASX: CCP) share price has been slapped down by investors after it released FY19 results this morning, as well as an outlook statement for FY20. Are Credit Corp shares a buy?
About Credit Corp
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.
The 5 Key Points
- Net profit after tax (NPAT) of $70.3 million, up 9%
- 16% increase in the consumer loan book to $212 million
- 69% increase in US collections
- A dividend of 36 cents to be paid 30th August 2019 (see dividend explainer video below)
- FY20 NPAT estimate of between $75 million and $77 million
Analyst Targets
Despite the growth in NPAT, Credit Corp came in marginally below analysts’ NPAT (profit) estimates. Bloomberg estimates were $70.73 million versus the actual result of $70.3 million.
However, Credit Corp beat the dividend estimate, with a result of 36 cents versus estimates of 35.2 cents.
Management Commentary
Credit Corp CEO Thomas Beregi said that a lot of the growth is coming from the consumer lending and US debt buying businesses, which together represented more than 36% of FY19 earnings.
“The US is on track to fulfil its potential of becoming as large as the Australian/New Zealand debt buying operation in the medium term,” he said.
Mr Beregi also said the company experienced unexpectedly strong new customer growth.
“We have grown new customer lending by 18% in a favourable environment because we have the cheapest and most sustainable product in our segment of the market,” he said.
FY20 Guidance
Besides the estimated NPAT figure of $75 million to $77 million, Credit Corp also estimated FY20 earnings per share (EPS) of 138-140 cents, which would be down from the 2019 figure of 141.9 cents per share, and dividends per share (DPS) of 72 cents, the same as FY19.
Are Credit Corp Shares A Buy?
While the US growth seems positive, investors have reacted negatively to NPAT result coming in under the estimates, as well as the lacklustre FY20 estimates.
I’m not tempted to buy Credit Corp shares based on these results, but the increased investment and market share in the US could make Credit Corp a company to add to the watchlist.
For other high-quality companies, have a look at the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
