FlexiGroup Limited

Stock Price Zoomed Over 24% on ASX Post Update on humm Retailer: FlexiGroup Limited (ASX: FXL) offers a diversified range of finance solutions to consumers and business with a network of retail and business partners, serving 1.3 million customers across Australia, New Zealand and Ireland. The company, on 10^th April 2019, updated that Elizabeth Minogue has been appointed as Chief Revenue Officer (Australia) of FXL with the responsibility for looking after the next phase of revenue growth in Australia.

The company, on 08 May 2019, released an update stating that following merchantshave joined the humm community: (a) Fashion Retailer: Myer, one of the leading department store groups in Australia, will enable its customers to make humm purchases in all Myer stores and concessions. Strandbags- the destination store for bags with stores in Australia and NZ. (b) Home improvement retailers: IKEA Group and Solomon’s Carpets (c) Health providers: National Hearing Care, National Dental Plan and City Fertility (d) New Zealand: JB Hifi New Zealand. With more than one million customers shopping at over 13,000 seller locations and e-commerce platforms, humm accounts for 17% market share of the BNPL transaction volume in Australia (and 40% of receivables).

Financial Performance: Net Income for the Group witnessed a pcp growth of 2% to $185.9 million in 1H FY19. Cash NPAT of $31.9 million in 1H FY19 represented a pcp 22% de-growth on the back of $10M impact of an increased provision in AU Commercial. Closing receivables increased to $2,547 million with a 13% rise (pcp).


Group Financials – 1H FY19 Results Update (Source: Company Reports)

Capital Management: The company adopts a conservative yet dynamic funding strategy to retain committed funding facilities combined with an active debt capital markets presence. The company is well funded for the growth as it has significant funding facility headroom. The majority of the wholesale debt facilities have no bullet repayment on maturity. Corporate debt facilities are secured by the assets of the Group with maturity dates in the ambit of March 2020 to March 2021.


What to Expect: The management expects the FY19 Cash NPAT to be in the range of $76 million-80 million.

Stock Recommendation: At the current market price of $1.680, the stock is trading at price to earnings multiple of 7.220x with a market capitalization of ~$532.43 million and annual dividend yield at 5.7%. With the history of financing Australian and New Zealand lifestyles more than 20 years, humm platform enables its customers to handle the ‘little things’ worth up to $2,000, repaid over 2.5-5 months and the ‘big things’ worth over $2,000, repaid over 6-60 months. However, its 3-month return was 16.38% and one-month return was -6.90% which reflects the stock volatility.

Considering the strong customer and volume growth, excellent financials and well-established brand, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.680 per share (up 24.444% on 08 May 2019).
 

Splitit Payments Ltd

Addressable Opportunity at USD $4.5 Trillion: Splitit Payments Ltd (ASX: SPT) is a leading global monthly instalment payment solution enabling merchants to offer their customers an easy way to pay for their purchases. The company recently released an update related to its performance in 1Q CY19. SPT transacted with 42,000 new shoppers in 1Q CY19, with the total number of Unique Shoppers at 160,000, up 36% (qoq). SPT recorded a growth of 168% (yoy) in Underlying Merchant Transactions in Q1 CY19 to AUD$32.8 million.

Cashflow Update: The company recorded net operating cash outflow of USD$2.54 million in the quarter ended March 31, 2019. Its cash received from customers stood at USD$322K and cash in hand was USD$6.52 million.

Financial Performance in FY18:  Revenue for the company came in at USD$789,920, an increase of 203% (yoy), reflecting SPT’s growth across all key performance metrics.SPT recorded a loss before income tax of USD$4,641,096 in FY18 as compared to $ 3,421,636 in FY17. Growth in revenue at 203% whereas % change in costs of revenue and operating expense at 99% shows a large difference, mainly on the back of low headcount.


Consolidated statement of Income (In USD) (Source: Company Reports)

What to Expect From SPT: With the increasing awareness and demand for instalment payment solutions, SPT remains the only global interest and fee free solution for purchasers, hence, is positioned to take advantage of this huge opportunity. IPO funds deployed to sales and marketing of its products have been visible from results. SPT possesses extensive global sales pipeline and it continues to thicken. The addressable opportunity within the key markets for the company stands at USD$4.5 trillion.

Stock Recommendation: At the current market price of $1.005 per share, the market capitalization of the stock stands at ~$280.44 million. 52-week high and low range for the stock is at $2.00-$0.305. Looking at the historical price movement, the stock has gained 5.05% in the last 3-months. Considering the above-mentioned factors and current trading level, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.005 per share (down 3.365% on 08 May 2019).  

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