 
|
| Credit Corp Group Limited |
Tuesday, 18 July 2000
|
| Strong Growth Ahead for this
Established Business |
BUY |
| |
By Geoff Transom / Otto
Buttula |
| ASX Code: |
CCP |
Price: |
$0.50 |
| Sector: |
Investment & Financial
Services |
Market Cap. ($m):
|
$13.82m |
| Shareholder Benefits:
|
No |
Dividends Paid: |
Mar / Sep
|
KEY DATES
| Offer Opens: |
Now Open |
| Offer Closes: |
1 SEPTEMBER 2000 |
| Expected Quotation Date: |
18 SEPTEMBER 2000
|
Note:
|
This timetable is indicative only and
investors are encouraged to submit their Application Forms as early
as possible. The Directors reserve the right to scale back
Applications if the Offer is oversubscribed and vary the dates and
the times of the Offer, including closing or extending the Offer
without notice. |
OFFER
DETAILS
| Offer Price Per Share:
|
$0.50 |
| FY01 Forecast P.E.R. |
9.8 times |
| FY01 Forecast Dividend
Yield |
5.0%; 100% Franked |
| Number of Shares
Offered: |
11,000,000 |
| Minimum Subscription: |
$5,500,000 |
| Number of Shares on
Offer |
|
| following the Offer: |
27,636,000 |
| Options Outstanding: |
1,415,000
|
VIEW POINT
CCP
represents one of the more attractive initial public offerings (IPOs) being made
available to investors over the past half-year. Unlike many of the recent IPOs
being promoted, CCP has an established record of business operations beginning
in 1992, has a sound record of earnings and has a clear and real path to strong
future profit growth. Other attractive attributes warranting an investment in
the Group include its undemanding FY’01 forecast fundamentals, which
include a P.E.R. of 9.8 times, a dividend yield of 5.0% fully franked and strong
industry dynamics, with receivables management and debt purchasing expected to
grow by some 15% a year over the next five years. Overseeing this growth, is an
experienced Board and management team, who are committed to establishing CCP as
one of the leading debt ledger purchasers within the Australian marketplace.
Underlining our confidence is the recent jostling for position in this industry
by large corporates. Evidence of this was Commonwealth Bank’s (ASX Code:
CBA) move to take a 1/3 shareholding in Alliance Group Holdings with Data
Advantage and Baycorp Holdings (ASX Codes: DAD and BAY). Further, there was the
recent $120 million-plus market capitalisation given the recent restructuring of
Frontier Petroleum (ASX Code: FRO) into RMG Ltd (ASX Code: RMG). Given that RMG
re-listed at a premium to its new issue price (now $0.28 versus $0.25) and that
it was priced at an EBIT multiple above 11.0 times (and P.E.R. of 19.0 times),
the future for CCP, priced at an EBIT multiple of only 6.4 times (and P.E.R. of
9.8 times) looks encouraging. As such, we rate CCP a BUY at its $0.50 issue
price, setting a 12-month target price of $0.70.
ACTIVITIES
Commencing business in 1992, Credit Corp
Limited (‘CCP’) incorporated in May 2000, in order to allow for the
restructure and ASX listing of the existing Credit Corp businesses. Essentially,
CCP’s business involves the purchase of under-performing debt ledgers
(skewed towards credit card debts and personal loans) from credit providers.
Impaired debt ledgers are often tendered; CCP, along with others, bids normally
between $0.01 - $0.20 to each $1.00 in face value of debt. As the new owner of a
purchased debt ledger, CCP attempts to enter into a workable repayment program
with each individual debtor within that debt ledger. Upon assignment of the
debts, CCP effectively ‘steps into the shoes’ of the original lender
with the rights to all debt principal and accrued interest on these accounts. By
buying at such deep discounts, a successful extraction of funds (both accrued
interest and principal) from the debtor, above the average bid price, less
operating costs, can result in above-average shareholder returns. CCP also holds
a mercantile agency licence allowing it to leverage its corporate structure by
performing traditional, commission-based receivables/collection work.
|
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