Credit Corp Reaffirms Fiscal 2017 Profit Guidance; FVE Unchanged

Our AUD 18.00 per share fair value estimate for no-moat-rated Credit Corp is unchanged following the mildly positive trading update. We have made minor changes to our forecasts and continue to forecast fiscal 2017 NPAT of AUD 55 million up 20% on the prior year, which is at the top end of the reaffirmed AUD 53 million to AUD 55 million guidance range. The strong growth is being driven by increased purchases and collections in purchased debt and strong growth in the newer consumer lending business. While returns for the purchased debt business are attractive, they are highly dependent on strong pricing discipline and collection efficacy and efficiency. Credit Corp shares have risen about 10% since we initiated coverage in early March 2017 and are now trading just above our fair value estimate.