re: Ann: Credit Corp Group FY13 Results Prese...
The growth options are lower roe than the core business, which is the key. Better off getting eps growth via buy backs until you find higher roe growth options. If roes converge to 'bank' style roes of 15-18% from the current 24% then valuation multiples will contract.
Remember the expansion is driven by having surplus capital and not being able to deploy this to pdls, rather some great investment opportunity. Is now the right time to be lending to impaired credit with the economy coming off the boil and potentially higher unemployment in the years' ahead?!? Or should they simply sit out a year or two...
I also think the analysis of the higher loan growth leading to higher eps growth is flawed. The provisions they are taking upfront on the loans is large, if growth accelerates the lending business will go from loss making in 2013 to bigger losses in 2014 - the profit will only emegrge once lending growth rate stabilises.... Think about it... It's quite capital intensive.
CCP Price at posting:
$9.60 Sentiment: Buy Disclosure: Held
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