FlexiGroup’s FVE Unchanged Following Previously Guided to Poor 1H19 Results

Our fair value estimate for struggling no-moat FlexiGroup remains at AUD 1.50 per share following previously guided to disappointing first-half fiscal 2019 results. New CEO Rebecca James unveiled another strategy to simplify the business and surprised with an AUD 21.5 million placement to Tanarra Capital. A solid performance in its core Cetergy business as well as its New Zealand leasing and new Australian consumer leasing business was not enough to offset the weakness in its Australian and New Zealand cards and commercial leasing businesses. In addition to the guidance to impairment losses, another disappointing feature of the results is the company’s continuing inability to convert strong receivables growth into commensurate net income growth. At our fair value estimate, the company has a fiscal 2019 P/E of 7.6 times and a dividend yield of 4.7%, with these undemanding metrics reflecting continuing macroeconomic and regulatory headwinds.