Bargain Hunter
Active Member
Credit Corp closed today at $10.11 (hit an intraday low of $7.23). The shares are extremely undervalued. This year it will earn $1.50 per share and pay $0.72 per share in fully franked dividends. On the current share price that is a fully franked dividend yield of 7.1% and a p.e. ratio of less than 7. They original analyst forecasts for Credit Corp were around $1.82 per share for next financial year. At the moment that is looking optimistic but I think at the very least they will be able to maintain their earnings and dividend next year.
They are the market leader in the industry (in Australia) and have the strongest balance sheet and best management. So far the corona virus has been beneficial for their earnings as they are taking market share from weaker competitors (who have less robust balance sheets) and also the drop in the Australian dollar will boost the earnings from their U.S. division.
All of the above being said obviously if Corona Virus causes a severe recession and unemployment spikes higher there collections and profits will go down.
As you can see from my quote above (October 3rd 2015) the earnings and dividends of Credit Corp have increased substantially in the last 5 years and yet the share price has hardly changed. Now is a great time to buy if you have the cash.
They are the market leader in the industry (in Australia) and have the strongest balance sheet and best management. So far the corona virus has been beneficial for their earnings as they are taking market share from weaker competitors (who have less robust balance sheets) and also the drop in the Australian dollar will boost the earnings from their U.S. division.
All of the above being said obviously if Corona Virus causes a severe recession and unemployment spikes higher there collections and profits will go down.
I topped up my holdings at $9.40 just this week
Donald Mclay who is chairman of the company is also chairman of Torress Industries (a private investment fund). Torress Industries increased its stake in Credit Corp by 50,000 shares recently at a price somewhere between $9.50 and $10 per share.
Credit Corp (CCP) is currently paying $0.44 per share in fully franked dividends albeit with a dilutionary DRP (dividend reinvestment plan) in place. This represents a yield at the last traded price of $9.49 of over 4.6% fully franked. My forecast for FY2016 is that they will slightly beat the top end of their guidance and produce earnings per share of at least $0.90. This represents a forward p.e. of less than 11 times.
My long-term (5-10 years) outlook for the company is that they will compound earnings per share in the low double digits while paying good dividends.
As you can see from my quote above (October 3rd 2015) the earnings and dividends of Credit Corp have increased substantially in the last 5 years and yet the share price has hardly changed. Now is a great time to buy if you have the cash.