Credit Corp Group Limited (ASX: CCP) shares have spent most of the day in a trading halt but closed the day up more than 13% on news of an acquisition. Here’s what you need to know.
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.
Credit Corp shares were placed in a trading halt this morning pending a further announcement to the market. The video below explains how a trading halt works.
At around 3:00 pm, Credit Corp released an announcement saying it has acquired Baycorp Holdings Pty Limited, which Credit Corp says is a “large and well-established debt purchasing and debt collection operator” with operations across Australia and New Zealand.
Baycorp was acquired from Encore Capital Group (NASDAQ: ECPG) for a total consideration of $65 million which was funded entirely from Credit Corp’s bank debt facility.
Credit Corp CEO Thomas Beregi stated that Baycorp has a leading position and a strong reputation in the New Zealand market which will benefit Credit Corp.
“Entry into the New Zealand agency market by acquiring a leading operator will enable us to broaden our client relationships and put us in a better position to grow our debt buying market share,” he said.
Revised FY20 Guidance
Credit Corp released FY20 guidance along with its FY19 results late last month, estimating profit growth in FY20 to be between 7% and 10% and purchased debt ledger (PDL) investment between $220 million and $240 million.
Due to the acquisition, Credit Corp now expects net profit after tax (NPAT) growth of 15-18% and PDL in the range of $300 – $320 million.
Is Credit Corp A Buy?
This acquisition looks set to seriously boost FY20 growth and will hopefully continue to help growth in the years to come. I don’t follow Credit Corp closely enough to say whether it’s a buy or not, but this acquisition certainly puts it on the watchlist for me.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.