Why the Credit Corp (ASX:CCP) share price is surging 19% higher today

The Credit Corp Group Limited (ASX: CCP) share price is surging higher today. This comes after the company announced an acquisition of a ledger book and an increase of its FY21 guidance.

| More on:
ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Credit Corp Group Limited (ASX: CCP) share price is surging higher today. This comes after the company announced an acquisition of a ledger book and an increase of its FY21 guidance.

At the time of writing, the Credit Corp share price is up 19% to $29.70.

What's driving the Credit Corp share price higher?

According to its release, Credit Corp advised that it will acquire the Australian purchased debt ledger (PDL) book of Collection House Limited (ASX: CLH).

Collection House is a credit management agency that specialises in commercial debt recovery and outsourced credit control.

The book value of the transaction is estimated to be around $160 million. Credit Corp, however, will provide Collection House with an additional short-term loan of $15 million. The loan is due to be repaid back within 9 months and is secured against Collection House's tax receivables.

The total amount of the deal is subject to minor adjustments including costs associated with the transaction. Credit Corp therefore estimates it will have a net expense of $150 million from the acquisition. This will be funded by the company tapping into its existing cash reserves, without the need to draw down on loan facilities.

The transaction is expected to be completed by the end of the current calendar year.

Under the terms of the agreement, Collection House is able to receive a portion of the collection funds that Credit Corp recovers. This is provided that Credit Corp achieves above the level required to have a return on its investment. Pleasingly, the book that will be acquired includes ongoing payment arrangements to the value of almost $200 million.

Words from the CEO

Commenting on the transaction, Credit Corp CEO Mr. Thomas Beregi said:

Acquisition of Collection House's Australian book will be the largest single PDL purchase in Credit Corp's history.

Even after this acquisition, Credit Corp will retain almost $400 million in available cash and funding lines to deploy as and when suitable investment opportunities arise across all of its segments.

Revised guidance

With the deal due to be wrapped in the coming days, Credit Corp revised its guidance for 2021. The company is forecasting its current financial year earnings to grow by $10 million in net profit after tax. This brings the adjusted net profit after tax between $70 million to $85 million, which is an increase on the previously projected net profit after tax of $60 million to $75 million.

Credit Corp said it will update shareholders on its operational performance at its half-year results release on 2 February 2021.

At the time of writing, the Credit Corp share price is up almost 20% in morning trade, giving it a current market cap of $1.67 billion.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX shares finished the trading week on a high this Friday.

Read more »

A businessman stacks building blocks.
Technology Shares

6% gain! What's up with Block shares today?

Block shares are up more than 34% since 2 May.

Read more »

Broker looking at the share price.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Share Gainers

Why ARB, Block, Mayne Pharma, and Paladin Energy shares are charging higher today

These shares are having a strong finish to the week. But why?

Read more »

A woman puts her hands up as she smashes and breaks through a glass ceiling.
Share Gainers

How these 5 ASX 200 stocks are smashing the benchmark this week

These fives ASX 200 stocks have made some very happy shareholders this week. Here’s how.

Read more »

Bored man sitting at his desk with his laptop.
Share Fallers

Why Catalyst Metals, Duratec, Nufarm, and Rio Tinto shares are dropping today

These shares are ending the week in the red. But why?

Read more »

A smiling woman at a hardware shop selects paint colours from a wall display.
Broker Notes

After its strategy day, what does Macquarie think Wesfarmers shares are worth?

Let's see what the broker is saying about this blue chip.

Read more »

Buy, hold, and sell ratings written on signs on a wooden pole.
Technology Shares

After surging 13% yesterday, are TechnologyOne shares a buy, hold or sell according to Macquarie?

Valuations matter when investing, and Macquarie feels no different.

Read more »