FlexiGroup: Flexing its muscles

About Latest Posts Mike KingMike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than …

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

FlexiGroup Limited (ASX: FXL) today released its first half 2012 results with Net Profits up 13% to $28.2m, volume growth of 20% and a 20% increase in dividends to 6 cents, fully franked.

The company reaffirmed its FY2012 guidance of 12-15% growth over FY2011 results.

The company
FlexiGroup is a diversified financial services company, operating through four business units: Certegy (interest-free finance to homeowners), Flexirent (retail point of sale leasing), Flexi Commercial (business equipment leasing) and Blink mobile broadband. In December 2011, FlexiGroup announced the purchase of Paymate, an online payment business similar to PayPal.

Small financial services companies
There appears to be a growing list of companies providing finance and financial services to smaller companies and retail customers, such as small loans, interest free loans and business equipment leasing, of which FlexiGroup is just one company.

ThinkSmart Limited (ASX: TSM) provides finance for renting equipment, Cash Converters Limited (ASX: CCV) has now expanded into providing small loans to retail customers and Thorn Group Limited (ASX: TGA) provides rental and sale of brown goods, white goods, electronic equipment and furniture (through its brands such as Radio Rentals and RentLo) as well as unsecured personal loans through its Cashfirst brand.

Niche market?
I'm not sure if the big four banks, namely Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank (ASX: NAB) and Westpac Banking Corporation (ASX: WBC) or subsidiaries of these banks have ever provided these services, but it certainly looks to me like the small financial services companies, mentioned above, have found themselves a niche market.

Could this be a structural change in financial services, where banks no longer provide loans to small companies and retailers, as these smaller companies expand their services? Or could the banks come back, swoop into this market and take over control?

The Foolish bottom line
Either way, it appears that FlexiGroup is profiting from the situation at the moment and its future looks fairly rosy. With the purchase of Paymate (an online payments business), FlexiGroup is positioning itself for further growth of online payments. Paymate already has established relationships with 3,500 retailers, and with 300,000 merchants trading online in Australia, FlexiGroup looks like it has a huge market to offer its services to.

The company estimates that the online payments market to be worth $38bn in 2013, and is dominated by two payment methods – credit cards and PayPal, which account for 91% of the market. Even if FlexiGroup grabs a small percentage of this market, it will mean a significant increase in revenues for the company.

Trading on a forecast PE of 9.3 and paying a fully franked dividend yield of 5.5% certainly makes it interesting and deserving of a closer look.

Attention: Are you are looking for investing ideas for 2012? Request our free reportThe Motley Fool's Top Stock For 2012Click here, whilst it's still free and available.

More reading

Motley Fool contributor Mike King does not own shares in any of the companies mentioned. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool's disclosure policy.

More on ⏸️ Best ASX Shares

Three travellers laughing and smiling outside an airport
⏸️ Best ASX Shares

If you'd invested $2,000 in Webjet (ASX:WEB) shares 10 years ago, here's what it would be worth now

The travel expert has proved a winner for long-haul investors...

Read more »

illustration of three houses with one under a magnifying glass signifying mcgrath share price on watch
⏸️ Best ASX Shares

The 5 best ASX real estate shares of the 2021 financial year unmasked

Office space, industrial storage, retail malls and residential. These companies cover them all.

Read more »

asx share price increase represented by golden dollar sign rocketing out from white domes of lithium
Energy Shares

5 best ASX energy shares of the 2021 financial year revealed

As the world emerged from initial COVID lockdowns, the demand for energy soared.

Read more »

best asx 200 shares of financial year 2021 represented by 2021 formed with gold piggy bank
⏸️ Best ASX Shares

Meet the best performing ASX 200 shares of FY21. Are yours on the list?

These companies have been crowned the best of the best in FY21...

Read more »

retail asx share price represented by shopping trolley full of cash
⏸️ Best ASX Shares

How I'd build a 'best stocks to buy now' list

Focusing on the quality and prices of companies from a diverse range of sectors could make it easier to build…

Read more »

asx share price on watch represented by investor looking through magnifying glass
⏸️ Best ASX Shares

How I'd aim to find top shares to buy in March 2021

Comparing companies with their peers and considering how they might change in future could allow an investor to find the…

Read more »

Brest ASX shares represented by piggy bank surrounded by autumn leaves
⏸️ Best ASX Shares

Top ASX shares to buy in March 2021

Our Foolish contributors have compiled a list of some of the ASX shares experts are saying to Buy in March.…

Read more »

rising asx share price represented by man with arms raised against blackboard featuring images of dollar notes
⏸️ Best ASX Shares

Why the Wesfarmers (ASX:WES) share price has soared 24% in a year

The Wesfarmers Ltd (ASX:WES) share price has been a solid performer over the past year. Here's why this ASX blue…

Read more »