Investors in the payment solutions space might find themselves stuck between a rock and a hard place at the moment – attracted to the story and growth potential behind the ASX buy-now, pay-later (BNPL) players, but fearful of the sudden change in sentiment and increased focus on valuation occurring in the market.
The Afterpay Touch Group Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) share prices have been bruised and battered in the past two weeks, sinking by more than 20%, while smaller players such as Sezzle Inc (ASX: SZL) and Splitit Ltd (ASX: SPT) might be too speculative for some investors.
So, for an investor keen on the BNPL sector, what is the alternative?
Enter, FlexiGroup Limited (ASX: FXL)
FlexiGroup is a diversified financial services group that provides leasing, vendor finance programs, credit cards, lay-by and other finance solutions to consumers and businesses.
FlexiGroup was once a business that consisted of many small businesses and brands, confusing the market with a serious lack of integration and efficiency. It has now undergone a significant transformation, consolidating these ‘invisible’ brands such as Flexi Rent, Easy Lease, Ezi-Pay, Oxipay and many more into 3 clear propositions that are unique, recognisable brands:
- humm: humm is FlexiGroup’s own BNPL platform. This consolidates its Oxipay and Certegy Ezi-Pay businesses. humm continues to see good customer and merchant growth with a total of 18,000 partners and 63,000 new customers added since April (as of August 2019).
- cartt: cartt is a credit card solution designed for the dedicated shopper. Customers can choose to add cartt and enjoy up to 90 days interest free, with options to switch to a 9, 12 or 15 month interest-free instalment plan.
- wiired: wiired addresses the 2.3 million small businesses in Australia and 580,000 in New Zealand that have identified cash flow as their biggest concern. Wiired has two unique product offerings – “wiired lease” and “wiired money”. wiired lease is the first digital, integrated leasing platform in Australia that focuses on >$100,000 SME lending. Lease quotes are delivered in real time, and can be tracked and revisited any time, including adding margins and bundling assets from a range of suppliers. wiired money provides up to $30,000 with instant approval.
FlexiGroup trades at a price-to-earnings ratio of just 12.5. It has an existing ecosystem and clients that will allow its new, consolidated products to transition into success.
I believe FlexiGroup exposes investors to the growth potential of a BNPL product, as well as consistent credit, card, consumer leasing and commercial leasing businesses.
It also pays a modest dividend yield of 3.88%.
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*Extreme Opportunities returns as of June 5th 2020
Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia has recommended FlexiGroup Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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