PNC Offers Investors Sustainable Earnings Growth

Romano Sala Tenna

Katana Asset Management

Sustainable earnings growth is the rarest of commodities, with one recent note highlighting that the vast majority of stock price increases over the past 4 years have been due to PE expansion. One of our key holdings - Pioneer Credit (ASX:PNC) – boasts earnings growth of >40% for the 2015 FY and in excess of 30% for the current FY. If this modelling proves accurate, then PNC is on a PE ratio of 8.5x FY16 and a forecast yield of 5.9% fully franked. Importantly, we also see double digit EPS growth in the following years due to a combination of organic growth, scale benefits and the launch of PNC’s own financial products. Whilst PNC was only listed in May 2014, it is following the well-worn path of its larger listed rival Credit Corp (CCP). CCP listed in September 2000 at 50c per share, but today it is trading at ~$12.50 and has paid $2.34 in dividends ($3.34 including franking credits). If PNC is able replicate even part of this success, then it will be a rewarding investment for patient shareholders.


Romano  Sala Tenna
Portfolio Manager
Katana Asset Management

Katana Asset Management was founded in September 2003 as a boutique investment management firm. Katana employs an all opportunity investment mandate being style, sector and market cap agnostic.

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