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Mid-Cap

Three Dividend Stocks to Grab

October 15, 2015 | Team Kalkine
Three Dividend Stocks to Grab

FlexiGroup Limited


 
The consumer finance provider announced that it has met its guidance for FY 2015 by reporting net cash profit after tax of $ 90.1 million which is up 6% over the previous year. The increase was achieved at the back of 5% volume growth, 8% receivable growth and with a return of 23% on equity. A dividend of 17.75 cents per share fully franked was declared which is a growth of 8% on the previous year and represents a dividend yield of approximately 7% fully franked. The growth in NPAT was achieved as a result of overall performance, cost control and reduction in the cost of funds. The company continues to transform its pool of profits with all segments reporting greater contributions than the previous year. The strategic investment programme has created further synergies across the group particularly in the Digital business. At 36%, the conversion of portfolio income to operating cash flow was good and the FY 2016 cash guidance for NPAT was highlighted as $ 92 million-$ 94 million.



Net Impairment Losses and Delinquency (Source: Company Reports)
 
Acting CEO David Stevens said that the focus on digitisation and simplification is now starting to produce momentum across Interest-Free Cards, New Zealand and Certegy; and as the program progresses, further upside can be expected. Certegy VIP and Repeat volumes are growing by 20% annually, enhanced by online services and tailored marketing with merchant partners. New Zealand Leasing is performing robustly with volume growth driving a 25 % increase in NPAT and the acquisition of Telecom Rentals will provide a platform for further growth. Additional volume opportunities have been created in New Zealand after signature of a preferred provider agreement with Apple for Educational and commercial leasing.


Funding Sources (Source: Company Reports)
 
The prices of shares rose following reports in the Australian Financial Review that the company has won the fight to buy New Zealand-based Fisher & Paykel Finance for around $ 270 million. The deal is expected to be announced shortly along with details of capital raising for funding the transaction. The acquisition could help accelerate the re-rating in the company following the departure of a number of senior executives. We believe that there is upside in the shares and rate the company as a Buy at the current price of $2.55.


FXL Daily Chart (Source: Thomson Reuters)

Platinum Asset Management Limited


 
The yearly results for FY 2015 show management and administration fees of $ 338.6 million compared to $ 285.1 million of prior corresponding period (pcp), performance fees of $ 2.3 million compared to $ 27.4 million of pcp, interest income of $ 7.1 million compared to $ 9.5 million of pcp and other income of $ 12.4 million compared to $ 2.2 million of pcp. Total revenues were up 12.7% to $ 360.4 million and total costs were 0.2% up to $ 58.8 million. Pre-tax profit was up 15.5% to $ 301.6 million and net profit after tax was up 12.4% to $ 213.5 million. Diluted EPS was up 13.6% to 36.66 cents per share and the average Funds under Management were up by 17.3% to $ 26.1 billion. Dividend yield for PTM is about 5.43%. The recent update on
September 2015 Funds under Management being of the order of $26.7bn has been influenced by negative market movements but has been slightly better than expectations given about 2% outperformance in International Fund in September following about 4% underperformance in July/August.
 

Funds and Balance (Source: Company Reports)

The initiatives undertaken by the company include distribution strategy with a focus on advisers and direct-to-consumers. 35,000 PT funds reports are mailed out to investors and advisors every quarter expanding the Journal portion of the company website. In addition, road shows to investors and advisors continue such as the recent events held together with Morningstar as well as access to direct meetings to make presentations. Platinum Asia Investments Ltd LIC was launched on 21 September 2015 and three UCITS (Undertaking for Collective Investment in Transferable Securities) were also launched in the same month. Professional investor development continues but involves long lead times. The new appointments include a CFO, company secretary/legal adviser and expansion of the compliance team to 5 members.
 
The outlook will be to continue working with small teams and taking specialist approach generating a large base of ideas. There will be competitive debasement of currencies which are positive for real assets such as equities. The weakness of the AUD will probably continue and there could be more exposure to foreign equities.

 
PTM Daily Chart (Source: Thomson Reuters)

The results are impressive and the funds over years have easily outperformed the broader market indices. We have no doubt that this excellent performance can be sustained in the long-term and rate the shares as a Buy at the current price of $6.81.
 

Dick Smith Holdings Ltd


 
The company is one of the best-known consumer electronics brands in Australia and is grown from its humble beginnings to more than 400 store locations in Australia and New Zealand while expanding laterally into different store formats. The company reported a second year of strong performance as it continues to execute its growth strategy. Continued investment in trading, new store formats and new stores resulted in sales growth of 7.5% for FY 2015, with comparative sales increasing 1% and Net Profit after Tax before restructuring costs growing 3.1% to $ 43.4 million. Managing director and CEO Nick Abboud said that he's pleased that the company has delivered another solid profit performance in its second year as a listed company. Performance in the second half of 2015 showed an increase of 6.3% in NPAT reflecting the better operating leverage with EBITDA up 7.4% on sales growth of 6% despite the impact of an intentional reduction in sales promotion. Australia continues to deliver outstanding performance with 21.9% EBITDA growth for the year and 30.1% in the second half resulting in an EBIT margin of 5.5% for the year.


Gross Margin and CODB/Sales(%) (Source: Company Reports)
 
Gross margin for the year was 24.8% of sales compared to 25.1% in the previous year with the Australian Gross margin consistent at 24.9% while New Zealand reported 23.9% reflecting the more competitive market and a larger scale of promotions. Cost of Doing Business decreased by 32 basis points to 18.7% of sales and increases in depreciation and interest costs reflected higher investment levels for the long-term growth of shareholder value. The EBITDA growth was achieved despite the increased competitive activity and restructuring charges of $ 7.9 million. The directors declared a final dividend of 5 cents per share fully franked making total dividends of 12 cents per share for the year representing a payout of around 65% of the profit after tax before considering restructuring costs.


Stock Position (Source: Company Reports)
 
We can see several factors which could provide an upside for the stock price in the future. The dividend yield of around 8.25% is attractive and appears to be sustainable because there is no decline in profit which may be growing slower than in the past. In addition to an excellent online offering, there is the option to grow the Move brand network. DSH expects to come up with 15 to 20 new stores in FY16. We would recommend a Buy at the current price of $1.39.


DSH Daily Chart (Source: Thomson Reuters)

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The information given by Kalkine Pty Ltd ABN34 154 808 312 (Australian Financial Services License Number 425376) on this website is general information or advice only.

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