Propsa IPO

Bear with me here. This is just a fun thought exercise.

Prospa is IPO-ing. It's in the small-business lending segment with lots of talk about "fin-tech", "AI" and "automation". But there are parallels in terms of scale and segment with Credit Corp's Consumer Lending business.

Firstly the types of loans they offer, apart from the loan size...

PGL: $5k to $250k, 3 to 24 months term, 41% pa average interest across portfolio
CCP Consumer Lending: $500 to $5k, 6 (?) to 24 months term, 47% pa interest

So very much *post* credit card and personal loan customers. They're also not dissimilar in scale...

PGL: $208m gross loan book, $90m revenue, 135 employees
CCP Consumer Lending: $160m gross loan book, $80m revenue, ~110 employees

CCP's provision/impairment rate is higher at ~18.4% vs PGL's ~10.2%. But one's leading and the other the trailing on a fast growing loan-book. So the quality, in terms of impairments, of their customers is probably quite similar if standardised.

Prospa is growing their loan book at a quicker clip. But overall CCP's consumer lending is in a stronger competitive position:

* PGL is in a much more competitive space with TGA, SIV, AXL, Moula, etc. CCP has the lowest priced product and not in regulatory hotbeds of SACC/MACC vs their competitors.
* PGL has no real data advantage over their competitors. Players like XRO holding the keys for small business segment. CCP is the biggest debt collector in Australia and know their consumers well - they can essentially play a pseudo-credit-agency role for themselves.
* CCP can collect their own debts = reduced costs.
* Consumer lending is tightly regulated. Small business lending is not. Potential for regulatory risk.

PGL is borderline profitable and has an EV of $468m, or 40% of CCP's ~$1150m. Is CCP's consumer lending - which makes NPAT $16m or 25% of the group's NPAT - being valued in this manner?