Financial Stocks and Importance of Value versus Growth- FXL, HGH, PSI, HUB, EQT

  • Nov 26, 2019 AEDT
  • Team Kalkine
Financial Stocks and Importance of Value versus Growth- FXL, HGH, PSI, HUB, EQT

Financial sector constitutes of both banking and nonbanking businesses. Within the nonbanking space, there are several businesses that are directly linked with the current economic scenario of the country. We will be discussing five financial stocks having diversified businesses like - insurance, funds management and banking.

Let’s have a look at the current trading levels and the recent updates of these financial stocks.

FlexiGroup Limited (ASX: FXL)

FlexiGroup Limited offers a wide range of finance solutions to its customers and business via a network of retail and business partners, which comprises of products like - buy now pay later, credit cards and consumer and business leasing.

On 25 November 2019, the company announced the pricing of $265 million asset-backed securities, supported by a pool of unsecured, consumer receivables originated in Australia under its rebranded Buy Now Pay Later offering.

FY20 bi-monthly update for period ended 30 June 2019: FXL reported business updates for the first two months for financial year 2020 wherein, the company reported the followings:

  1. One of the company’s product humm, witnessed strong demand from key homewares, retail and health verticals where esteemed retailers like Mitre 10, Home Timber & Hardware, Hanes Australasia, Zanui, KOOKAÏ, SurfStitch and Smile Solutions have joined the platform.
  2. As far as the retailer’s segment is concerned, they are attracted to wide offering, broader demographic and spending power, while the company reported an addition of 3,000 seller locations since July, taking the total to 18,000 partners.
  • The business reported 25% year-on-year growth in financial YTD total transactions, followed by financial YTD higher volume in humm’s key verticals up 85% year-on-year basis.
  1. The company has a product pipeline, which is expected to be launched in FY20 period, including of new Buy Now Pay Later products, bundll and wiired money.

Stock Update: The stock of FXL last traded at $2.130, up 2.404%, as on 26 November 2019. The stock has given a dividend yield of 3.7% on an annualised basis.

Heartland Group Holdings Limited (ASX : HGH)

Formed in 1875 Heartland Group Holdings Limited operates in both New Zealand and Australian regions. It offers banking services comprising of savings and deposits, internet banking, customer financing etc.

Recently, the company announced that, one of its subsidiaries named Heartland Australia Group Pty Limited has concluded a senior unsecured bond placement of $100 million with a key Australian institutional fixed income investor arranged with the assistance of Westpac Institutional Bank with BBB- stable Fitch Ratings.

FY19 Financial Highlights for period ended 30 June 2019: HGH declared its FY19 financial results wherein the company reported net profit after tax (NPAT) at $73.6 million, increase of 9% on y-o-y basis and accounted an impacted of one-off costs of $4.2 million associated with the corporate restructure and ASX listing. The net interest margin (NIM) during the year stood at 4.33% and came 0.09% lower on y-o-y basis due to relatively strong growth in lower margin reverse mortgages and $1.1 million of break costs incurred due to the early repayment of the Tier 2 Australian dollar subordinated bond.

The business reported NIM at 4.35% excluding the break costs. Return on Equity (ROE) during the year stood at 11.1%, remained unchanged on y-o-y basis. The business witnessed an improvement in ROE during the second half and stood at 12.2% from 10.3% noted in the first half. During the year, the company reported $9.0 million higher Net Tangible Assets of $593.5 million. The company reported NTA per share at $1.04, unchanged from FY18.

Stock Update: The stock of HGH last quoted at $1.46 on 30 August 2019. The market capitalisation of the stock was noted at $843.1 million.

PSC Insurance Group Limited (ASX: PSI)

PSC Insurance Group Limited is a financial company, specialising in a diverse range of insurance services businesses across Australia, the UK and New Zealand.

Recently, the company has informed that one of its directors named Antony David Robinson has acquired 15,000 fully paid ordinary shares at total value consideration of $44,194.

FY19 Key operating highlights for period ended 30 June 2019: PSI declared its FY19 full-year financial results, wherein the company reported underlying revenue at $117.4 million, up 19% on y-o-y basis. The company reported NPAT of $25.4 million, down 9% on y-o-y basis. Underlying EBITDA (operational) came in at $41.7 million, up 6.8% on y-o-y basis. The financial results improved on account of organic and acquisition-based growth. The company reported underlying revenue 3-year CAGR of 21% followed by underlying NPATA 3-year CAGR at 25%, respectively.

Financial Snapshot of PSC Insurance Group Limited (Source: Company’s Report)

Outlook: As per the management’s expectations, the business is likely to grow at a decent pace in the coming years. Griffiths Goodall is expected to contribute incremental EBITDA of more than $5.5 million in FY20. Paragon is expected to contribute incremental EBITDA of more than $7.5 million on an annualised basis. The company expects an incremental EBITDA of ~ $10.5 million in FY20 from these acquisitions.

Stock Update: The stock of PSI last quoted at $2.98, up 1.017% compared to its previous close, as on 26 November 2019. At current market price, the stock has a market capitalisation of ~$800.47 million.

HUB24 Limited (ASX : HUB)

HUB24 Limited (ASX : HUB) is focused on the delivery of the HUB24 platform, along with connecting advisers and their consumers via innovative solutions that pave way for the opportunities.

Q1FY20 Operating Highlights for the period ended 30 September 2019: HUB reported its first quarter financial results wherein, the company reported net Inflows of $1,238 million (up 94% on pcp), while gross inflows during the quarter stood at $1,673 million. During Q1FY20, HUB reported a growth of 57% in funds under administration (FUM) at $14.4 billion. During the quarter, the business benefitted from the current trend, where the advisers are moving away from institutions. Currently, Paragem has completed onboarding of 11 new practices.

According to the latest Strategic Insights data to 30 June 2019, HUB stood second in quarterly net inflows and also, retained its second place for annual net inflows throughout the platform in Australia market. HUB24 increased platform market share from 1.3% to 1.5% during the June quarter.

HUB Statistics (Source: Company’s Report)

Stock Update: The stock of HUB last quoted at $11.16, down 5.664% from its last close, as on 26 November 2019. The stock has given returns of 6.96% and -11.78% during the last three-months and six-months, respectively.

EQT Holdings Limited (ASX : EQT)

EQT Holdings Limited operates in provisioning of services as trustee, executors, administrators, attorneys, agents, approved trustee under SIS, financial planning and other fiduciary and agency services.

Recently, the company informed that one of its directors, Michael Joseph O’Brien has acquired 16,562 Share Entitlements as per Long Term Incentive Award Share entitlements under the Executive Performance Share Plan.

FY19 Financial Highlights: EQT announced its FY19 financial results for the period closed 30 June this year wherein, the company reported total revenue at $92.5 million, up 4.6% and net profit of $22.2 million, up 12.7% on y-o-y basis. The company reported 2.4% higher disciplined expense management on a yearly basis. Funds under management rose significantly aided by growth in both trustee and wealth services.

The year was marked by robust FUMAS growth aided by 10 new perpetual and charitable trusts donors followed by 10 new inclusion of compensation trusts. During the year, the company reported an addition of 20 new advice clients. The company acquired Zurich Australian Superannuation Pty Ltd during FY19 period.

Stock Update: The stock of EQT last quoted at $32.32, slipping by 1.343% compared to its last close, as on 26 November 2019. The stock is available at a price to earnings multiples of 30.160x while the dividend yield of the stock stood at 2.75% on an annual basis.


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