McMillan Shakespeare Limited

MMS Details

Clarification on Australian Financial Review Article: McMillan Shakespeare Limited (ASX: MMS) has given clarification regarding a potential class action being prepared by a Sydney law firm. The company understands that the nature of the potential claim may be based on allegations in relation to a warranty product business operated by Davantage Pty Ltd (trading as National Warranty Company). The company further asserted that the potential claims against Davantage under the class action may amount to $80 million, and claim is alleged to relate to the period from 2011 to 2015. Davantage was registered as a company in 2013 and acquired the warranty product business trading as "National Warranty Company" in June 2013, and Davantage is a subsidiary of Presidian Holdings Pty Ltd. Presidian Holdings Pty Ltd was acquired by the MMS Group in February 2015. The stock has fallen 6.2% on 19 June 2017, owing to potential class action news, however it was up 35.5% in the past six months. We give a “Hold” recommendation at the current price of $ 13.11


MMS Daily chart; (Source: Thomson Reuters)

FlexiGroup Limited

FXL Details

During H1FY17, FlexiGroup Limited’s (ASX: FXL) revenue grew by 33% year on year (yoy) to $235.5m with 15% yoy increase in net income to a $47.7m, led by NZ Cards segment and Australia cards segment. However, net income was partially offset by increase in employment expenses of 35% to $43.7m. The group has lowered its guidance for FY17 cash net profit to $90-93m (down 2%) from $90-97m earlier forecast, largely due to the underperformance of Certegy and impacted by ~$3m investment in Flight Centre partnership. However, Australian cards, which constitute 52% of group receivables and 39% of group cash net profit, continued to deliver robust growth while Certegy (No Interest Ever business), is behind expectations. Going forward, company expects interest free / interest bearing mix to normalize towards historical average driving revenue growth from significantly increased receivables. The company expects underlying trading in Q4FY17 to be robust and key initiatives include the launch of Oxipay and the project in Ireland going live.  The stock has declined 27.1% over the last six months as on 19 June 2017 and currently trading close to its 52 week low levels, owing to subdued performance in Certegy and lower guidance for FY17. However, we believe that the ongoing initiatives to reduce costs and anticipated benefits will aid going forward, and give a “Buy” recommendation on the stock at the current price of $ 1.59


FXL Daily chart; (Source: Thomson Reuters)

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