Credit Corp Group Ltd CCP

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A$14.90 +0.37 (2.55%)

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As of May 31, 2024 6:11am Delayed Price Closed

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Company Report

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Credit Corp: Headwinds Gradually Being Recognized

Shaun Ler May 9, 2024

No-moat Credit Corp is performing in line with expectations, contending with near-term headwinds from higher interest rates, increased United States delinquencies, and a decreased debt ledger supply in Australia. Such headwinds adversely affect revenue generation and profitability. Its recent market update affirms a continuation of the trends. We maintain our AUD 15.80 per share fair value estimate, with shares appearing fairly valued at current prices. The share price decline since February 2024 likely reflects the market's recognition of the aforementioned downside risks.

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Price vs Fair Value

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CCP is trading at a 452% premium.

Price

A$14.90

May 31, 2024

Fair Value

A$38.10

Jan 31, 2024

Uncertainty

High

1-Star Price: A$75.23
5-Star Price: A$7.63
Economic Moat: Pcy
Capital Allocation: Jtcgplj

Bulls Say, Bears Say

Bulls

A relatively prudent business model allows for better countercyclical investment and cash collections, which helps fund more purchases and issue more loans. This also supports continued funding and prevents excessive potential value destruction.

Bears

Competition for PDLs may be stronger moving forward, with larger peers having the ability to persistently outbid Credit Corp for better-quality bad debts, and competition from credit card alternatives for consumers.

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Trading Information

Previous Close Price: A$14.53
Day Range: A$14.40–14.90
52-Week Range: A$11.49–23.79
Bid/Ask: A$15.38 / A$14.16
Market Cap: A$1.01 Bil
Volume/Avg: 354,015 / 224,769

Key Statistics

Price/Earnings (Normalized): 21.07
Price/Sales: 2.37
Dividend Yield (Trailing): 4.16%
Dividend Yield (Forward): 2.01%
Total Yield: 4.26%

Company Profile

Credit Corp operates in the distressed consumer debt market. In its core business, it acquires purchased debt ledgers, or PDLs, in Australia and is expanding this business globally by buying PDLs in the United States. These PDLs consist of unsecured debt that are at least six months in arrears and have already been through a collection process. Since 2012, Credit Corp also diversified its business into providing consumer credit to customers who are unable to gain access to credit from primary sources such as banks because of a poor credit history. Its consumer credit business is gaining scale but is also subject to increased regulatory scrutiny.

Sector: Financial Services
Industry: Credit Services
Stock Style Box: Small Core
Total Number of Employees: 1,840
Website: https://www.creditcorp.com.au

Competitors

Valuation

Metric	CCP	CBA	WBC
Price/Earnings (Normalized)	21.07	21.24	13.67
Price/Book Value	1.33	2.75	1.24
Price/Sales	2.37	7.86	4.77
Price/Cash Flow	76.19	—	13.04

Price/Earnings

CCP

CBA

WBC

Financial Strength

Metric	CCP	CBA	WBC
Quick Ratio	0.61	—	—
Current Ratio	5.92	—	—
Interest Coverage	3.99	—	—

Quick Ratio

CCP

CBA

WBC

Profitability

Metric	CCP	CBA	WBC
Return on Assets (Normalized)	3.89%	0.80%	0.68%
Return on Equity (Normalized)	6.07%	13.77%	9.72%
Return on Invested Capital (Normalized)	5.48%	—	—

Return on Assets

CCP

CBA

WBC

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