FSA Group Limited
FSA Details
Reaffirmed FY18 EPS: FSA Group Limited (ASX: FSA) is the largest provider of debt solutions to individuals in Australia. It operates two main business verticals i.e., Services, and Consumer lending. However, the group had reported for a mixed result for the half year ending December 31, 2017 with net profit from ordinary activities after tax slipping by 5% while normalised profit after tax was up 13%. The Group recorded operating income of $36.8 Mn in 1H FY18 against $33.5 Mn in the prior corresponding period. Of which, service’s operating income surged by 7% to 27.5 Mn in 1HFY18 from $25.8 Mn in 1HFY17 while Consumer lending’s operating income increased by more than 22% to $9.2 Mn in 1HFY18 as compared to $7.5 Mn in 1HFY17. During the same period, new client number for debt agreement increased by 12% and was steady for personal insolvency agreement compared to the prior corresponding period. Debt agreement clients under administrative increased to 20,955, up 6%. FSA group manages $382 Mn of unsecured debt under debt agreements; and during the first half, the group paid $40 Mn in dividends to creditors. However, the Group maintained strong cash inflow on the back of long term annuity income from new and existing clients. Net cash flow from operating activity for the half year was $5 Mn, increased by 31% on YoY basis.
Debt Agreement Trend (Source: Company Reports)
In longer run, the Group focuses on increasing new client number for service business vertical and loan pool for both division i.e., home loan and personal loans. Further, the management aims to have a closing loan pool balance for June 2018 to be around $400 Mn. Of which, Home loan account for $350 Mn and personal loan amount to $50 Mn in full year. Moreover, FSA group expects its profit after tax (excluding swaps) to increase in the range of 5% to 15% in 2018 financial year with EPS in the range of 12.0 cps to 13.20 cps. The full year dividend is expected to be 7 cps. Recently, the Group announced that Westpac Banking Corporation has increased its non-recourse senior home loan facility by $50 Mn from $325 Mn to $375 Mn.
Meanwhile, FSA share price has been up by 3.93 per cent in the past six months and down by 9.1 per cent in the past three months. Based on the market sentiment and volatile trading scenario, we give a “Sell” recommendation on FSA at the current market price of $1.44
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FSA Daily Chart (Source: Thomson Reuters)
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