HUM - Humm Group

[kid hustlr]

This one popped up on my radar over the weekend as I see its gone on a bit of a run the last few days.

Ves/Mclovin (and you other balance sheet gurus) I always like reading your posts but as a general rule most of it goes over my head so bare with me.

Reading the posts above - you noted that the high level of debt was a bit of a concern? These guys are pretty much a bank in a lot of ways aren't they and as such you'd expect them to have a pretty high debt level? Also, thinking back to my accg101 days but if a lot of their 'services' are leases then that gets thrown on the assets/liabilities portion of the balance sheet inflating the debt/liabilities number?

Interesting to hear you talk about FXL's source of financing, I saw an article about secularization posted recently on the ASX site and I guess it kind of confirms what you said above, cheap funding is important to them as they have 'bank' type model of accessing cheaper financing and then lending it out at higher rates.

So overall what's the major risk? Increased debt funding costs hurting profit margins? Customer defaults? Competitors?

Just trying to put together what these guys are about and what the downside(s) could be but looks ok as a business to me?

 

[Ves]

This one popped up on my radar over the weekend as I see its gone on a bit of a run the last few days.

Ves/Mclovin (and you other balance sheet gurus) I always like reading your posts but as a general rule most of it goes over my head so bare with me.

Reading the posts above - you noted that the high level of debt was a bit of a concern? These guys are pretty much a bank in a lot of ways aren't they and as such you'd expect them to have a pretty high debt level? Also, thinking back to my accg101 days but if a lot of their 'services' are leases then that gets thrown on the assets/liabilities portion of the balance sheet inflating the debt/liabilities number?

Interesting to hear you talk about FXL's source of financing, I saw an article about secularization posted recently on the ASX site and I guess it kind of confirms what you said above, cheap funding is important to them as they have 'bank' type model of accessing cheaper financing and then lending it out at higher rates.

So overall what's the major risk? Increased debt funding costs hurting profit margins? Customer defaults? Competitors?

Just trying to put together what these guys are about and what the downside(s) could be but looks ok as a business to me?

Hi kid,

Probably should take my earlier posts in this thread with a grain of salt - I am looking through this company with different eyes now than previously. Maybe I've learned something or maybe I've still got it wrong. I will be honest in that I don't and have never had a position in this stock, and I am still very unsure whether I want one.

Yes, this company is like a bank or financial intermediary.

My current thoughts on how I will look at this company (and believe me they will need a lot more investigation) are:

Profitability over the long-term be driven by the following factors:

Scale of business & transactional volume (I note that in the last couple of years they are expanding their product offering into niche markets to substantially grow volumes).

How much potential is there to grow their existing product lines? Can they open these up to new customers? Can they also create new product lines in other niche areas?

Net interest spread - is essentially the difference between their lending rate to customers & how much the Funds cost them to acquire

Therefore you need to look at how much does it cost them to Fund the receivables (ie. money loaned to customers). Where do they get this money? If they can grow transactional volume and maintain profitability, the company has the potential to be perceived as less-risky by financers & new funding avenues will open up, and potentially lower costs of funds. I understand that we have seen this in the last couple of years.

In saying this, you appear to be correct, they are now able to access securitisation or in other words wholesale funding, which means they do not necessarily need to rely on the banks for funding - this is a big plus, and gives them more control of their future IMO.

Credit control - Another cost of Funds which decreases net interest margin is bad debts. If there customers cannot pay then this affects their net interest margin / profitability. Credit control is essential. The most profitable companies in these sort of financial intermediary industries have the best credit controls. Risk management / probability, very similar to what you no doubt do with trading perhaps?

At the end of the day they need to generate cash flow from their receivables to a) create shareholder value and b) service the existing debt.

Competition - as you rightly pointed out is important. Any company that is able to earn in excess of its cost of Funds, in this industry or another, will be attacked by competitors who also want a share of the pie. The only way to protect profits and margins from this competition is being able to do something that competitors cannot. In this case it may be scale and access to cheaper funds combined with better credit control than others. Do they have access to exclusive customer bases that competitors cannot gain? (ie. Flexirent is associated with Harvey Norman - doubly, what happens if this is opened up to competition or the agreement is torn up?)

If any of these things are compromised there probably won't be much left for equity holders once the debt financing is paid out (ie. a massive write-down in receivables).

 

[kid hustlr]

Outstanding post ves

 

[msarpi]

Flexi Group

What is happening with Flexigroup? FXL.AX

 

[skc]

Re: Flexi Group

What is happening with Flexigroup? FXL.AX

The market doesn't seem to like the AGM commentry yesterday.

UBS downgraded them to sell overnight.

 

[notting]

Every analyst on earth it seems had been recommending this one over the last few month especially since it tanked after the CEO left abruptly.
Whoops. 16% smashing today on more abrupt music stopping musical chairs.
Worth creeping into I reckon.

 

[notting]

Re: Flexi Group

UBS downgraded them to sell overnight.

Geniuses.

Note to self - Never listen to anything UBS says, ever.

Flexi is smashing em out of the park and hasn't blinked in the last week!!!

 

[greggles]

FlexiGroup has bounced back nicely today after a significant share price decline on 6 August when the company announced that Chief Executive Officer Symon Brewis-Weston has resigned effective from September 3rd 2018.

The catalyst for today's bounce was the release of the company's FY18 financial results, which beat expectations.

The FXL share price finished the day up 48.5c to $2.30, a gain of 26.72% and sending it back to where it was at the beginning of August.

 

[The Triangle]

I’m in. I must have bought most of the shares this morning.

Reaffirmed guidance, should be a sustainable dividend - which is already on a low payout ratio having been cut a year or two ago. Obviously negativity towards this sector and a history of falling short with their forecasts. This could go lower but LT (12 months) hard to see this not at some stage being up significantly on 1.40.

 

[bigdog]

https://www.livewiremarkets.com/wires/flexigroup-transforms-their-buy-now-pay-later-service

 

[greggles]

Gap up for FlexiGroup today after yesterday's release of their H1 FY19 financial results.

The financial results themselves were OK but not anything to write home about. Increasing impairment costs have weighed them down. Looks to be a bit of optimism around the company moving forward, as outlined in the article above posted by bigdog. Must be a bit of the Afterpay effect rubbing off on them.

FXL up 21.37% to $1.59 today.

 

[The Triangle]

Half yearly results were known a few weeks back with the earnings (write down ) downgrade announcement. It’s about the Strategic investor onboard with seat at the table. Doom and gloom of royal commission is lifting. ASX performing after last quarters sinking. FXL just moving back toward where it should be. PE and EV metrics were low relative to SP when this was 1.10 last month. Was a good little pickup (Still a dog of a stock! Never performs!
)

 

[bigdog]

https://www.theage.com.au/business/...ted-over-alleged-tv-scam-20190409-p51c6n.html

‘Systemic contraventions’: FlexiGroup investigated over alleged TV scam

By Cara Waters
April 10, 2019 — 10.42am


The corporate watchdog is investigating ASX listed finance provider FlexiGroup over its role in an alleged TV financing scam targeting small businesses.

The Australian Financial Complaints Authority (AFCA) referred FlexiGroup to the Australian Securities and Investments Commission (ASIC) under its obligation to report “systemic and serious contraventions of financial services laws” following an investigation by The Age and Sydney Morning Herald.

Thousands of small businesses around Australia have been caught up in the alleged scam which involved paying $430 to Viewble Media and its associated business, the Shoppers Network, for a television set which was to display advertising of other small businesses for which payment would be provided.

However, many small businesses have received no payment for the advertising.

The contracts cost up to $15,500 over three years, however small businesses had unwittingly signed a rental agreement with financing companies including FlexiGroup, which traded through its subsidiary Flexirent, and received payments of $1.5 million under the scheme.

The alleged scam was exposed in November 2018 just under a week after FlexiGroup confirmed market guidance to the Australian Securities Exchange of a net profit after tax guidance of $90 million to $100 million for the 2019 financial year.

At the time, a spokesperson for FlexiGroup told The Age and Sydney Morning Herald it was aware of the issues some Viewble customers were experiencing and was corresponding with the small business ombudsman "on a case by case basis" to reach a satisfactory resolution.

Earlier this year Viewble Media and The Shoppers Network both collapsed into liquidation leaving the televisions without advertising and the small businesses stuck in contracts with the finance providers.

Following the collapse on February 5, FlexiGroup announced an after tax impairment in its commercial leasing business of $12 million reducing this guidance to $76 million-$80 million following the liquidation of one of its “equipment finance vendor program partners”, Viewble.

FlexiGroup’s share price plunged from a close of $1.26 on February 4, 2019 to an intra day low of $0.975 on February 5, 2019.

The Australian Securities Exchange wrote to FlexiGroup on February 20, 2019 questioning when FlexiGroup was aware of the issues with Viewble.

The letter questioned FlexiGroup’s compliance with ASX listing rules which require listed companies to immediately tell ASX any information concerning it that a reasonable person would expect to have a material impact on the price or value of the company’s securities.

The letter cited The Age and Sydney Morning Herald’s investigation and noted a failure to respond by February 25, 2019 meant the ASX “will likely” suspend FlexiGroup’s trading.

A spokesperson for FlexiGroup wrote to the ASX on February 25, 2019 defending FlexiGroup’s disclosure and confirming its compliance with the ASX’s listing rules.

The spokesperson said FlexiGroup first became aware of complaints about Viewble through an anonymous “whistleblower” email on September 17, 2018 when it was warned its customers “may” have been receiving financial rebates from The Shoppers Network.

The spokesperson said FlexiGroup was due to receive $700,000 a month in payments from customers under the scheme, however 83 per cent of FlexiGroup’s loan portfolio involving Viewble is in arrears.

FlexiGroup explored replacing the advertising content agreed under the deal with Viewble but found this would cost up to $1 million and would “not provide an appropriate return” to FlexiGroup.

The spokesperson said 10 per cent of FlexiGroup’s loan portfolio involving Viewble was subject to complaints with AFCA and it is not permitted to enforce against these small businesses until the complaint process is finalised.

FlexiGroup has volunteered a temporary moratorium on the remaining 90 per cent of its portfolio involving Viewble while the complaint is finalised and has “reserved its rights” while it “explores settlement options” with AFCA

However, FlexiGroup's spokesperson told the ASX FlexiGroup remains of the view that Flexirent’s underlying rental agreements with small business customers “are valid and enforceable”.

A spokesperson for ASIC said the regulator had separately received a number of complaints and was "examining the conduct of some financiers".

It also received complaints via AFCA.

FlexiGroup declined to comment.

 

[Smurf1976]

A broad concern I'd have about investing in this, from a fundamental perspective, is that there seems to be an arms race underway regarding consumer credit offerings for smaller purchases.

 

[Ann]

Up 24.44% today to $1.68

Flexigroup locks in major retail partners for new Buy Now Pay Later platform to rival Afterpay and Zip Co


Australian finance provider Flexigroup (ASX: FXL) is giving rivals Afterpay Touch Group (ASX: APT) and Zip Co (ASX: Z1P) a run for their money, unveiling a string of deals for its new Humm Buy Now Pay Later (BNPL) platform.


In an announcement today, the company revealed new partnerships with high-profile retailers including Myer, Ikea, JB Hi-fi New Zealand, Strandbags and Solomon’s Carpets, as well as health groups National Dental Plan, National Hearing Plan and City Fertility.


According to Flexigroup, these new deals boost total Humm retailers to more 13,000, including both physical locations and e-commerce platforms. More...

 

[Zaxon]

A broad concern I'd have about investing in this, from a fundamental perspective, is that there seems to be an arms race underway regarding consumer credit offerings for smaller purchases.

There does. I think mainly because millennials are shunning credit cards, and they're looking for reasonably priced alternatives. Afterpay is the clear leader in this space though. There's enough room for more than one player, but I doubt people are going to keep opening new BNPL accounts if they're happy with the one or two they already have.

 

[rnr]

Flexigroup's recovery from the August low of $1.43 looks very impressive given the amount of attention/competition from other more recent additions to this market.

 

[barney]

I wonder if that double top around $2 will be too big a hurdle again?

 

[greggles]

I wonder if that double top around $2 will be too big a hurdle again?

It was, until today. FXL has smashed through the $2 mark today on high volume after announcing that high profile retailers such as Mitre 10, Home Timber & Hardware, Hanes Australasia, Zanui, KOOKAÏ, Surf Stitch and Smile Solutions - among others - have joined its Buy Now Pay Later platform, humm.

Financial YTD total transactions up 25% year-on-year and financial YTD volume in humm's key verticals up 85% year-on-year. Its new Buy Now Pay Later products, bundll and wiired money are to launch in FY20.

Really good news for FXL and a little surprising given the state of retail in Australia at the moment. I guess in tougher economic times, buy now and pay later options are quite appealing to people. Retailers need to maintain turnover and these kind of arrangements are a good way of achieving that.

FXL currently up 21.9% to $2.39.

 

[barney]

FXL currently up 21.9% to $2.39.

Up again today on tidy Volume … It sitting at a 2 year high around these levels (Currently $2.53)