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FSA, FSA GROUP LIMITED
nipper
post Posted: Dec 17 2016, 09:25 AM
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since the last post on FSA Group more than 5 years ago, SP pushed up from mid-20c range, to a high late 2013 around $1.40 and since then trading between a buck and that high point - now $1.29

Assuming its the same company - FSA Group Limited (FSA) is a provider of debt solutions and direct lending services to individuals and businesses in Australia. FSA has three business divisions which are Services, Home Loans, and Small Business - its doing quite nicely. I notice Business Lending was sold in May 2016 and now focusing on a "range of debt solutions and direct lending services", which they "tailor to suit individual circumstances" (including insolvency and bankruptcy).

In the field of Consumer Lending, and with advances in web and mobile based product, they are pushing into Easy Bill Pay, still trialling but looking to expand. The lending services are based on 'non-conforming loans' - mezzanine, non-recourse, small corporate - which is a space the bigger insto's find it difficult to operate in. More groundwork needed, margins are fatter but risks higher.

So, a difficult space, prone to blow up in one's face if not tightly monitored. In current economic times, there are both head and tailwinds to the businesses within FSA, a business that is all about debt, whichis about to get more expensive after years of being very cheap:
- rising interest rates are not good for the sharemarket, anyone with debt, or the property market,
- businesses that are funding their growth with cheap credit will no longer have access to historically low debt.
- household debt also growing faster than household income (from just over 50 per cent in 1990 household debt to income swelled to 125 per cent in 2002, to 177 per cent in 2014 and now, according to the OECD, it's at 206 per cent).

Nigel Littlewood, of Harness Asset Management, thinks FSA will do well now that rates are rising
QUOTE
The stock has a market cap of about $160 million but it's the largest holding in Littlewood's boutique fund, that specialises in looking for value in the small and micro cap space.

He likes the stock for a number of reasons, the most obvious being it's still cheap and will benefit from higher rates. But he also thinks that it will be a good investment no matter what rates do.

It trades on a price earnings ratio of 10 times this year's earnings and a dividend yield of about 6.2 per cent that is fully franked.

If anyone starts to get into financial distress as these interest rates rise then Littlewood says the services division will grow and "grow faster if interest rates start to surprise on the upside".

FSA also provides finance to borrowers with a poor track record to buy a car or home. "This lending business is growing" says Littlewood. "There is also an additional growth product called Easy Bill Pay but it's too early to predict how it will go" he says.

In addition the management is good and, perhaps just as important, has got a fair bit of skin in the game with a significant stake in the company. The balance sheet is strong, they are a market leader in debt services and have a respectable organic growth rate, says Littlewood.

Credit Corp Group, Collection House and Pioneer Credit are other stocks in the same space.





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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Dec 17 2016, 09:25 AM
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double



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
hayboys
post Posted: Sep 6 2011, 07:45 AM
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In Reply To: michael_milken's post @ Apr 21 2009, 01:01 AM

trading on a PE of less than 5 and with growth its now a buy IMHO. Also the LTV of its loans are under 70% providing valuations are correct the loans seem safe I feel. Also has plenty of money in treasury and now paying a maiden div.
My only misgiving is admin costs seem vey high

 
michael_milken
post Posted: Apr 21 2009, 01:01 AM
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In Reply To: whocareswc's post @ Oct 14 2008, 12:21 PM

It has been some months since i posted on this site but glad i held onto the stock. I was very pleased with 1/2 yr result and I expect FY to be an absolute cracker. Even share price was moving today up to 24.5c.

 
whocareswc
post Posted: Oct 14 2008, 12:21 PM
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for all those that missed

"FSA Group Limited announced that Westpac Banking Corporation has approved, subject to normal conditions precedent, a new funding facility of $10 million for it subsidiary 180 Group.

The Company intends to use the funding facility to allow 180 Group to accelerate the growth of its factoring finance lending activities."

 
mondo45
post Posted: Nov 30 2007, 01:49 AM
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I decided to check my earlier statement regarding the apparent tardiness of directors in disclosing the slow-down in growth.

The company's annual report was released to the ASX on 25th October, close to a month after the most recent decline had commenced.

Relevant extracts from the Annual Report regarding outlook are:

1. (From Chairman's Report, P2) "I am confident of continued substantial growth for the Company for the financial year ahead and would like to conclude with my sincere appreciation to my fellow directors, all our executives and staff for their contribution to the successes of the current year."

2. (From Future Developments, P8). "The Company’s recent growth has been achieved due to a deliberate and strategic roll out of additional products and services. Each core area of the Company has increased its product range and this process will continue as the Company strives to provide a comprehensive range of products and services to meet client needs.

The Company will continue to investigate and explore growth opportunities. These may include the acquisition of additional business and the development of additional products. To ensure that growth opportunities are responsive to client needs the Company has commissioned an extensive survey of current and former clients. A critical component of the survey is to identify the expectations of clients, assess client satisfaction and to establish the need, if any, for additional Company solutions. The information extracted from the survey will be used in future marketing and product development.

There is a strong and growing demand for bridging finance and factoring finance. This demand has outstripped the Company’s capacity to fund internally. As a result the
Company is planning wholesale lines of credit to further support the growth of these activities. The Company is in discussions with prospective wholesale funders in relation to
a significant funding facility for its bringing finance and factoring finance lending activities.

The Company will continue to grow its direct lending services. One additional product will be Inventory Finance which will be launched in the 2008 financial year. The Company will
continue to explore other direct lending services. The Company will continue to invest in research and development of future opportunities.

3. (From REVENUE Page 9). "The growth in revenue for Lending for the 2007 financial year was due to growth in the loan books of both bridging finance and factoring finance. There is a strong and growing demand for bridging finance and factoring finance and it is important that the Company secures wholesale lines of credit to further support the growth of these activities. The Company should see a strong contribution to revenue from its non-conforming mortgage lending business during the 2008 and 2009 financial years. The Company will be launching an Inventory Finance product in the 2008 financial year.

4. (From PROFIT AFTER TAX ATTRIBUTABLE TO MEMBERS Page 10) Profit after tax is broken down by three primary areas as follows:

• Personal Debt and Corporate Debt

• Lending

• Other

Profitability for Personal Debt and Corporate Debt increased as a result of revenue growth and continually improving collections procedures.

During the 2007 financial year the Company expensed on a pre-tax basis a total of $1.7 million of set-up costs and initial operating losses for its non-conforming residential mortgage lending business. The Company therefore achieved for Lending a “normalised” profit after tax attributable to members of $1.1 million.

The effect of the introduction of direct lending services will allow the Company to capture a greater margin and create recurring revenue and profit streams. The full effect of this
initiative will be seen in the 2008 and 2009 financial years.


There was hardly any cautionary tone in the Annual Report, which as I say was released to the ASX on 25th October.

Then, at the Annual Meeting we are shown a slide that says:

"First Half of FY 2008

�� PBT for H1 FY 2007 was $3.7m

�� PBT for H1 FY 2008 estimated between $2.5m to $3.0m. Impacted by:

�� Change to Debt Agreement Legislation 1 July 2007 – Lowest numbers in 3 years for July (still over 50% market share). Took 6 weeks to adapt to new legislative process. Entire industry affected. Return to normal volumes in late August.

�� Potential borrower confidence affected by press coverage of US sub prime and RAMS, two RBA interest rate increases - Lower than expected enquiry levels for mortgage finance during the months of August and September. Entire industry affected. Return to normal volumes in October.

�� Shift from mortgage broker to mortgage lender. Investment in direct lending services.

�� The above events had an adverse affect of approximately $1.5m on H1 PBT. The events are not expected to re-occur in H2 2008.

�� FY 2008 earnings expected to be around FY 2007 levels"

It is evident from the wording of this slide that at the time the Annual Report was released, the Directors knew that the July performance had been poor for the reasons disclosed, yet, as the extracts from the Annual Report released on 25th October, there was no hint of any slowdown.



 

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mondo45
post Posted: Nov 29 2007, 10:18 AM
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I think that shareholders are justified in asking why the board and management were so tardy in coming clean with the bad news.

It is clear from the shareprice performance since early October that "somebody" knew that bad news was coming. I carefully perused all of their announcements seeking a reason as to why the share price was weak. I couldn't find any statement that signalled concern, and trusting that responsible directors these days would disclose adverse developments as soon as they knew of them (as they are obliged to do under ASX listing rules and Corps Law), I bought on weakness at 65c and 60c.

I wasn't happy to see the AGM presentation, and feel that the directors have some explaining to do.

 
kiril
post Posted: Nov 29 2007, 08:33 AM
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I have sold.

Chasing other opportunites. Will keep my eye on FSA over next 12 months and see where she lands.

Good luck to all holders.

Kiril.

 
Bluechip
post Posted: Nov 29 2007, 08:20 AM
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In reply to: michael_milken on Wednesday 28/11/07 08:56pm

I too am dissappointed with FSA although I am inclined to give them a break. At present they have only managed to get 14% ($28million) of their $200m line of credit out the door. It may take another 12 months to get the rest of the lending done. I have seen the impact of the subprime credit crunch as know the impact transitionary legislation can have on business. I hold and buy more to reduce average price. I may be chasing my tail on this one, time will tell.

 
michael_milken
post Posted: Nov 28 2007, 08:56 PM
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In reply to: toilet on Wednesday 14/11/07 06:35pm

I think this is why.

At the FSA AGM yesterday, the company has to my mind shocked shareholders by stating that 08 earnings will be roughly in line with 07.

I for one certainly never saw this coming and for a company that has basically been doubling earnings year on year for the last 3 or 4 years it is a major disappointment.

The amazing growth story that was FSA has slammed into an earnings wall. I personally don’t have the patience in this market to stay in companies that don’t have earnings growth, especially in the small cap space.

 
 


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