Pinned valuation:
Credit Corp has been sold off following the 1H 2026 results announced on 3/02/26. Profits came in 10% below expectations. Revenue was up 4% on pcp, but NPAT, EPS and the dividend were flat on 1H2025.
There were a few encouraging signs, including:
- US collections +23% versus prior corresponding period (pcp)
- Record lending volume and +7% loan book growth over the half year
- Strong growth in the AU/NZ debt ledger investment pipeline to $120 million
Net Profit after Tax (NPAT) of $44.1 million was in line with the prior year. This reflected reduced earnings in H1 arising from strong loan book growth and disruptions to AU/NZ purchased debt ledger (PDL) purchasing only remedied late in the first half.
Guidance
Both these factors will produce higher H2 earnings, and the Company reaffirms its full year NPAT growth of 6 to 17%, in accordance with previous guidance.
Credit Corp has two main growth engines:
- Debt buying & collections (core driver of value)
- Consumer lending (Wallet Wizard etc.)
Performance depends on three variables
- Supply of bad debts (to buy cheaply)
- Pricing of those debts
- Ability of customers to repay (collections)
In the US consumer stress is rising, credit card delinquencies are increasing and Subprime auto loan stress is increasing. The labour market has also softened. If this trend continues Credit Corp’s outlook will improve further.
Strong Dividends
Credit Corp declared a 32 cps fully franked dividend (goes ex-div on 17/03/26). I am expecting total FY26 dividends of 68 cps fully franked, the same as FY25. That’s a gross yield of 8% including the franking credits. Over the coming 13 months I am expecting 3 dividends totalling $1.00 per share fully franked. That’s a grossed up yield of 12.3% including the franking credits. The dividend should be sustainable with a 50% earnings payout ratio.
Valuation
Credit Corp is currently trading at 7.7 times FY26 EPS guidance ($1.54 mid-range), and 7 times FY27 earnings consensus (EPS $1.66 per share). Over the last 5 years PE has ranged from 9 to 22 times.
If Credit Corp achieves FY26 EPS guidance of $1.54 per share (mid-range), and the outlook continues to improve, the shares could realistically rerate to a 10 times multiple, or $15 per share.
Using McNiven’s Valuation formula assuming current equity of $13.13 per share, ROE of 11.7% (based on FY26 EPS guidance of $1.54 per share), 50% of earnings reinvested, and a required ROI of 12%, I get a valuation of $15.33 per share.
Rounding off to a current valuation of $15 per share.
Broker Price Targets
Morgans analysts have retained a buy rating on Credit Corp with a reduced price target of $19.35. This follows the release of Credit Corp's first-half results, which revealed profits that were 10% short of expectations. While disappointing, Morgans feels the selloff that followed, which dragged its shares 17% lower, was overdone and has created a buying opportunity for investors. The broker highlights that at just 7x estimated FY 2027 earnings, Credit Corp's valuation is undemanding. This is especially the case given that management has reiterated its guidance for FY 2026. https://www.fool.com.au/2026/02/08/top-brokers-name-3-asx-shares-to-buy-next-week-8-february-2026/
The consensus price target from 6 analysts on Simply Wall Street is $18 per share.
Held IRL (2%) and SM. Accumulating on weakness.
@Rick, I'm interested in CCP as a cyclical buy as well as an inclusion in my income portfolio. I was just wondering if you had any thoughts on CCP's NBIO for HUM? While I can see the rationale I'm just not sure of the merit when based on valuation, business integration and competitive pressures.
Then again I assume the recent weakness in the CCP share price (which afforrds one what appears to be an attractive entry point) has a lot to do with the market not enthused with this potential acquisition.
@OxyBBear when I look at HUM as a stand alone business I wouldn’t be that interested in it. It seems to be about fair value but it’s not a high quality business in my view.
However, Credit Corp may have other ideas for HUM if it passes its due diligence tests.
Credit Corp may be trying to buy HUM mainly for FlexiCommercial (considered the jewel in the crown), with the possibility of selling or shrinking the other divisions later. I’ve asked ChatGPT to help with this.
Some analysts think FlexiCommercial could be worth $300m – $450m considering its strengths:
• secured SME lending
• established broker network
• stable margins
• predictable repayment profile
For Credit Corp this division would also fit reasonably well with its credit expertise.
The indicative proposal is $0.77 per share. So Credit Corp might pay roughly $380m for the whole company.
The biggest risk with the HUM acquisition would be if the economy weakens and consumer and SME loan books deteriorate quickly.
If the transaction progresses there’s also the issue of funding it. Possible funding options include:
- existing balance sheet cash
- new debt facilities
- equity raising
- partial asset sales.
All options are risky for shareholders. A large equity raising will dilute shareholders, and heavy borrowing will increase balance-sheet risk.
Credit Corp’s traditional model is counter-cyclical. In downturns they typically benefit because distressed debt portfolios become cheaper.
Owning Humm’s loan book would make earnings more cyclical, which is not the reason I bought Credit Corp in the first place.
So I’m not really a big fan of the acquisition. I am hoping it doesn’t pass Credit Corp’s due diligence test, or they change their mind with a weakening economy.