Pioneer Credit (PNC)Reaching FY19 Guidance is...

Pioneer Credit (PNC)Reaching FY19 Guidance is KeyRecommendationBuy (unchanged)Price$2.17Target (12 months)$2.86 (previously $4.35)AnalystLafitani Sotiriou 613 9235 1668AuthorisationTS Lim 612 8224 2810GICS SectorDiversified FinancialsExpected ReturnCapital growth 31.8%Dividend yield 6.4%Total expected return 38.2%Company Data & RatiosEnterprise value $130mMarket cap $134mIssued capital 63.2mFree float 82.3%Avg. daily val. (52wk) $359,50512 month price range $2.17 - $3.78Price PerformanceBELL POTTER SECURITIES LIMITED Page 1(1m) (3m) (12m)Price (A$) 3.08 2.85 3.00Absolute (%) -26.79 -20.88 -24.83Rel market (%) -31.54 -28.72 -27.82A bump in the roadPNC has delivered a disappointing 1H19 result, with NPAT falling below expectations,and with the auditor providing a qualification of the result being a review and not a fullaudit as the information provided and time was limited. However, the company hasreiterated its FY19 guidance which implies a meaningful recovery in 2H19. It appearsthe liquidations of recent purchased books aren’t reaching expectations, but thecompany is confident of a rebound.PNC has guided to full year NPAT of greater than $20m, which compares to the $5.5machieved in 1H19, and to our revised FY19 estimate of $17.8m. We view the 1H19update as a bump in the road for PNC and if it can show a recovery in 2H19, there ismeaningful upside on offer. Other guidance includes PDP investment of $80m forFY19, and liquidations greater than $120m.Result highlights 1H19 NPAT of $5.5m, below our $9.6m estimate; Interim dividend of 4.31cps, below our 6.9cps estimate; PDP liquidations below company expectations in 1H19, but the company hasguided to a bounce in 2H19; and PNC moving away from small loans.Earnings revisionsFollowing PNC’s 1H19 result we have downgraded our underlying EPS by -15.3%, -25.6% and -33.0% for FY19, FY20 and FY21. The earnings revision is driven by the1H19 results miss.Following our earnings revisions, our revised Price Target is $2.86 per share(previously $4.85 per share), with our Buy recommendation remaining unchanged.Absolute Price Earnings ForecastYear end June 30 2018 2019e 2020e 2021eSales revenue ($m) 101.7 119.4 146.5 171.8EBITDA (adjusted) (A$m) 53.6 59.5 75.5 93.6NPAT (operating) (A$m) 17.0 17.8 19.6 20.9NPAT (reported) (A$m) 17.6 17.8 19.6 20.9Diluted adjusted EPS (cps) 28.0 26.8 29.4 31.2EPS growth (%) 34% -1% 10% 6%Diluted adjusted PER (x) 8.0 8.1 7.4 7.0Price/CF (x) 2.8 10.2 2.4 1.9EV/EBITDA (x) 3.4 3.0 2.4 1.9Dividend (¢ps) 14.3 13.8 15.0 15.9Franking (%) 100.0% 100.0% 100.0% 100.0%Yield (%) 6.6% 6.4% 6.9% 7.3%ROE (%) 16.7% 15.0% 15.4% 15.1%