Question: What is your opinion or view on Sigma Healthcare (SIG), formerly Sigma Pharmaceuticals (SIP). Their recent announcements about future court action over contracts for supply has seen their share price plummet. I recently noticed also, that they advised the ASX this month of a ‘Daily Share buy back’, but seemed to be dated September 2012.
What is the link between this buy back, and how would it affect the share holdings I have in my SMSF?
Answer: Sigma Healthcare (SIG) has an ongoing buyback that allows the company to buy back up to 10% of its shares. It has been refreshed several times.
To complete the buyback, they will need to buy another 101.2m shares (there are about 1,075m shares on issue).
Potentially, an on-market buyback will provide support for the share price, and improve earnings per share.
As for the company, can’t say I am a huge fan, and don’t like the idea that it is in dispute with its major customer.
The brokers are also a touch bearish – with 1 buy and 3 sells (according to FN Arena). Consensus target price is $0.79, very close to the current price of $0.815
Question: I would love to know your view as to FlexiGroup (FXL) steadfast decline over the last two years. I don’t see any dire announcements or circumstances and FWIW I think at least Morningstar has had a BUY recommendation on it all the way down.
Answer: It is one of those very interesting stocks. A chronic underperformer, very cheap, and with a relatively new (and accomplished) CEO in Symon Brewis-Weston.
Morningstar is not the only analyst to be wrong. According to FN Arena, the current consensus broker target price is $2.48 compared to la last traded price around $1.71. There are 3 buys, 3 neutrals and 0 sells.
At the beginning of May, FlexiGroup marginally downgrade their profit guidance (from range of $90m to $97m to a range of $90m to $93m). They cited issues with their Certegy business in Ireland.
FlexiGroup is trading on a multiple of 6.9 times forecast FY17 earnings and 6.4 times FY18 earnings. Notwithstanding that the company has underperformed in the past, I would probably tough it out and hold on. I wouldn’t, however, double down.
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