Stocks’ Details

FlexiGroup Limited

FXL’s Share Surged ~23% Over Strong Growth Of BNPL ‘humm’: FlexiGroup Limited (ASX: FXL) is a diversified financial services group, providing no interest ever payment products, leasing, vendor finance programs, interest free finance, credit cards and other finance solutions to consumers and businesses, in Australia, New Zealand and Ireland. Recently, FXL highlighted that its Buy Now Pay Later platform ‘humm’continues to see strong growth in key homewares, retail and health verticals with Mitre 10, Home Timber & Hardware, Hanes Australasia, Zanui, KOOKAÏ, SurfStitch and Smile Solutions among the numerous retailers to join the platform. Around 3K seller locations added since July, taking the total partner numbers to 18K.

FY19 Financial Highlights for the period ended June 2019: FlexiGroup Limited announced its financial results for FY19 wherein the company posted a net income of $372 million, up 2% y-o-y and statutory profit of $61.7 million as compared to a statutory loss of $9.1 million on yoy. During the year, the business reported active customers of 1.76 million, up 8% from FY18 while retail partners grew by 8% y-o-y to 65,000. FXL reported its transaction volume at $2.56 billion, up 12% on the prior year. During April 2019, the company launched its new product humm, which reported a robust growth of 19% since its inception with an average of 1,200 app downloads on a daily basis. During the year, Credit Card volumes across Australian grew by 10% y-o-y, while income from portfolio grew by 39% on pcp, aided by strong growth in receivables and a stellar y-o-y increase of 21% in interest bearing balances.

The company announced a fully franked dividend of AUD 0.038500 for each ordinary share held with payment date of October 11, 2019. At CMP of $2.42,annualized dividend yield of the stock stands at 3.93%.


FY19 Key Metrics (Source: Company Reports)

What to expect:As per FY20 guidance, the Management expects at least 15% volume growth driven by new product launches, extension towards audiences and new collaborations. The company expects a healthy balance between margin and growth while ROE is expected to come in at double digits.

Stock Recommendation:FXL’s share generated a positive YTD return of 45.19%. Its gross margin and net margin for FY19 stood at 75.5% and 12.6% better than the FY18 margins of 75.2% and -1.9%, respectively, implying decent fundamentals for the company. Moreover, its EV/Sales and Price to Cash Flow multiple (on TTM basis) stand at 1.6x and 5.0x, lower than the industry median of 5.6x and 13.5x, respectively. Its annual dividend yield stands at 3.93%. Currently the stock is trading close to its 52-week high levels of $2.47. Hence, considering the aforesaid facts coupled with decent set of numbers for FY19 and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $2.420, up 23.469% on September 26, 2019, taking cues from the strong momentum in humm.
 

HotCopper Holdings Limited

FY19 Cash & Cash Equivalent Decreased by 50% On Previous Year: HotCopper Holdings Limited (ASX: HOT) operates HotCopper, which is Australia’s number one stock market internet discussion forum. Additionally, HotCopper is an investor relations tool for ASX-listed companies seeking access to HotCopper’s substantial user base of retail and sophisticated investors and self-managed superannuation funds. On September 26, 2019, the company proposed capital raising by way of a non-renounceable pro-rata entitlement offer of 53,492,501 new fully paid ordinary shares at an offer price of $0.13 per new share. The proceeds received from the issue will be used to fund the acquisition of Stockhouse Publishing Ltd.

FY19 Financial Highlights (ended on June 30, 2019):Cash receipts from customers for the period was reported at $5,859,221, posting a growth of 9% over previous year. The Company sold customer contracts to the value of $4,967,713, a decline of 9% from the previous year. Out of $4,967,713 (contracts) sold, $1,431,969 has been deferred to the Balance Sheet as an unearned revenue pending delivery of the service. Reported revenue decreased by 14% to $4,252,107, as compared to $4,917,647 in FY18. Cash and Cash Equivalents for the period was reported at $1,492,369, down 50% over previous year.


FY19 Income Statement (Source: Company Reports)

What to expect:As per the release, HOT intends to improve understanding and presentation of company’s value proposition to customers. It has increased its focus towards longer term, consultative style investor relations services and achieving significant growth in those sales. The company aims to grow profitably and expand the business to provide sustainable value for its shareholders.

Stock Recommendation:HOT’s share generated a negative YTD return of 5.56%. Its EBITDA margin and net margin for FY19 stood at 11.2% and 6.2%, lower than FY18 EBITDA and net margins of 35.2% and 24%, respectively. Its ROE for FY19 stood at 7.3%, lower than 33.4% in FY18. On the valuation front, EV/Sales stands at 3.9x on TTM basis, lower than the industry median of 5x. Hence, considering the performance of the company in FY19, progress with regards to capital raising to fund the acquisition of Stockhouse Publishing Ltd, and current trading levels, etc., we have a wait and watch stance on the stock at the current market price of $0.170 on September 26, 2019.
 

Marley Spoon AG

H1FY19 Revenue Increased by 55% Over Previous Year:Marley Spoon AG (ASX: MMM) is a subscription-based weekly meal kit service, catering to the customers in three primary regions: Australia, United States and Europe (servicing Austria, Belgium, Germany and the Netherlands). Recently, Woolworths Group and Union Square Ventures extended their current investment (structured debt) in Marley Spoon by ~$4 Mn each, for a total amount of ~A$8 Mn.

H1FY19 Key Highlights (ended on June 30, 2019):Revenue for the period increased by 55% on the previous corresponding period, equating to an annualised revenue run-rate of over $200 Mn based on Q2 revenue. Operating EBITDA margin improved from -36% in H1FY18 to -28% in H1FY19, and to -16% in Q2FY19, demonstrating progress towards profitability. During the period, new manufacturing technology was rolled out in Europe and Australia to provide the foundation for future scalability, increased menu choices and customer personalisation.


H1FY19 Income Statement (Source: Company Reports)

What to expect:As per the release, the company expects to achieve a global contribution margin in the mid to high 20’s for CY2019 and to reach profitability on an operating EBITDA basis by 2020.

Stock Recommendation:MMM’s share generated a positive YTD return of 12.50%. Its gross margin, EBITDA margin and net margin for H1FY19 stood at 24%, -28.3% and -35.4%, better than the H1FY18 gross, EBITDA and net margins of 21.7%, -38.5% and -49.1%, respectively. On the valuation front, its EV/Sales on TTM basis, stands at 0.5x, lower than the industry median of 0.6x. Hence, considering the aforesaid facts and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $0.480, up 6.667% on September 26, 2019 on securing the deal from WOW and Union Square Venturesfor the value A$8 million.

 
 Comparative Price Chart (Source: Thomson Reuters)

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