Is Pioneer Credit Ltd a better bet than Collection House Limited and Credit Corp Group Limited?

Credit: Chris Potter

Shares in recently listed Pioneer Credit Ltd (ASX: PNC) have slipped close to 3% on Monday, bucking the trend of a rising S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

Pioneer Credit undertook an initial public offer (IPO) in May 2015 and operates in the debt solutions sector, but with a market capitalisation of just $80 million it is less well known than its larger peers Collection House Limited (ASX: CLH) and Credit Corp Group Limited (ASX: CCP).

With the market reacting with mixed emotions towards Collection House and Credit Corp recently – read about each company here and here respectively, it’s time to put Pioneer under the microscope.

Here are the key points from Pioneer’s half year results for the six months ending December 31…

  • Portfolio face value of customer accounts expanded to over $1 billion after the investment of $21.8 million in purchased debt portfolios (PDP) during the half
  • Customer payment arrangements (the performing loan book) grew to $150 million
  • Customer payments grew 22% to $27.1 million
  • Net revenue increased 36% to $21.1 million
  • Earnings before interest and tax (EBIT) margin expanded to 26%
  • Operating profit after tax leapt 105% to $3.3 million
  • Underlying earnings per share grew 103% to 7.23 cents per share (cps)
  • A fully franked dividend of 3.6 cps was declared. Pioneer’s shares will trade ex-dividend on March 30 with payment expected on April 29.

Relative value

Pioneer’s full year guidance was reaffirmed for a net profit after tax of at least $8.8 million with management commenting that margins within the business are expected to expand during the second half (an EBIT margin of at least 31% is expected), but a conservative outlook on purchasing opportunities at around $42 million for the full year was also noted.

Based on the company’s guidance, Pioneer is currently trading on a price-to-earnings (PE) ratio of around 9x. In comparison, the forecast PE multiples of Collection House and Credit Corp are approximately 8x and 10x respectively (source: Thomson Consensus Estimates).

Looking out to 2017 and the outlook for earnings growth appears to favour Pioneer over its listed peers which arguably makes the stock relatively more attractive.

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Motley Fool contributor Tim McArthur owns shares in Credit Corp Group Ltd and Pioneer Credit Ltd. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia owns shares of Collection House Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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