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Afternoon Peter, I am a new subscriber and a big fan of you and sky business. I run my own SMSF, a couple of weeks ago you and Scott Carson spoke about Flexigroup, their new CEO, and what you thought was a great business they have and a bright future ahead . Since then their stock price has gone south, I own their stock, and hopefully they return about 8-10% including franking, do you still believe they are a good stock and hopefully the share price will return in time, many thanks.
A: Thanks for the question. Peter is off sick at the moment, so he asked if I could reply.
Flexigroup had an Investor Briefing Day on 31 May, in which it announced the divestment of 3 non core businesses, and issued a slight profit downgrade. As a result, a couple of brokers downgraded the stock, citing concerns about organic growth and new management needing to prove that they can deliver the goods..
Notwithstanding the downgrades, the brokers as a group like the stock. The current consensus target price is $2.40, sentiment is +0.5 (on a scale of -1.0 being most negative, to +1.0 being most positive), it is trading on a multiple of around 6 times forward earnings, and a forecast yield of over 8%.
In relative terms, it is a small cap stock – so you have to invest on this basis – but I don’t think I would be bailing out at this price.
