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Packersoldkidney
10-03-2006, 01:07 PM
Very good report just released....this is one for fundamental investors to run the ruler over. Ripped a quote out of the report just to get this thread rolling:

"FSA’s core activity is to assist individuals who are experiencing financial difficulties. It is the largest personal insolvency business in Australia. FSA initially started as a single product provider. Over the past 18 months it has diversified the products and services it offers debtors to assist them resolve their financial difficulties."

Looks like a company that will start to profit as the air comes out of the boomtimes we've been having.

For those with a long term outlook; looks undervalued to me.

Packersoldkidney
31-05-2006, 07:39 PM
I'm surprised this isn't getting more interest on ST: great little stock to have in declining economic conditions. Solid fundamentals. Is up around 60% since I mentioned it here, albeit on low volume.

Will get more interest as conditions soften.

tommy
31-05-2006, 09:49 PM
Nice pick POK,

I was looking for a company in the insolvency industry but didn't know about FSA at all, it looks like one worth keeping an eye on! Very interesting, I must do some research on this myself.

Illiquidity might be an issue but it doesn't matter if the company is performing[:I]

I am also looking for debt-collection houses but having trouble finding performers... do you know any?

Packersoldkidney
31-05-2006, 10:50 PM
To be honest Tommy, none of the top of my head....I'll keep them in mind when I'm having a look around though, and post them here if I find any.

mark100
31-05-2006, 11:33 PM
Hi POK,

Nice pick. I got some of these a couple of months ago at 17.5c. At the time I estimated it was trading on a 2006 PE of 6. So I suppose that has increased to around 10 now.

Here is a bit of a summary I posted on another forum at the time (2 April). Might help give others some background info:

"FSA group seem to be trading on attractive fundamentals.

FSA's main focus is helping out people in financial difficulty. There 2 main areas of business are:
1. Acting as an administrator for people entering into debt aggreements, insolvency arrangements etc
2. Acting as a finance broker for people in financial dificulty who need to consolidate debt etc

The first area of business was effectively created by a few years ago with an amendment to the bankruptcy act. Rather than being declared bankrupt immediately, people now have the option of entering into a debt agreement with the bank etc whereby they enter into an agreement to pay back what they can in installments. This can be a beter option for the party that is owed the money rather than having the person declared bankrupt and potentially not receiving anything. FSA arranges these agreements

The second area of business is basically a mortgage broking business but they only originate loans for people in financial trouble. You may have seen them advertising as Fox Symes and Associates on TV. Basically, some people get into financial difficulty from credit card debt, person loans etc making their monthly repayments impossible to cover. Sometimes these people have some equity in their home and these debts can be consolidated into one loan over 30 yrs, greatly reducing the monthly repayments. Obviously its not a good idea to be putting personal debt onto a 30yr term but sometimes this is the only way people can get out of trouble. When FSA does a consolidation loan, they are simply acting a mortgage broker like say Mortgage Choice and get paid the same way, via an upfront and trailing commission

Their historical NPAT is

FY 2004 $1.2m
FY 2005 $1.3m
H1 2006 $1.265m

The first half of this year was a large jump. The directors say they expect the second half to be as good. So if we double the first half result they could earn $2.5m for FY06. There are 89m shares on issue which gives potential EPS of 2.8c.

Operating cash flow for the half was strong at $2.9m. The market cap is currently $15m and they have $5.6m cash in the bank. Current Assets of $11m vs Current Liabilities of $5.6m. They have no debt.


Now, to complicate matters FSA is seeking shareholder approval to buy a business called the 180 Group. A brief discription of the 180 Group I have copied says:
"The 180 Group commenced business in July 2003 and specialises in corporate advisory services.180 Group works closely with a client company’s accountant and lawyers to assist the directors ofsmall to medium sized companies which are experiencing financial difficulty. 180 Group providesolutions to resolve these financial difficulties. The solutions are aimed at preventing the companyfrom entering external administration, or at least planning how to best deal with an external administration should it be unavoidable."

They are paying for the 180 Group by issuing shares and convertible notes. The issue of convertible notes is dependent on financial performace over the next 3 years. The details of this is in the recently released explanatory memorandum.

In summary, assuming the 180 Group earns better than $0.5m this FY, 16m shares will be issued (I have assumed conversion of the convertible notes into shares). This represents a pe of 5.5.

If it earns better than $0.75m in FY07, an extra 8m shares will be issue. Better than $1.15m in FY08, an extra 8 shares will be issued and better than $1.45m in FY09 will see another 8m shares issued.

I'm not real keen on this progressive issue of shares however the profit targets do imply a high level of growth from the new business. The value they are paying for the acquisition down the track can't really be determined as we do not kn

Packersoldkidney
31-05-2006, 11:42 PM
Fantastic analysis, Mark, superb: it was the fundamentals and the industry FSA are in that attracted me to them. Some of your figures would have changed now obviously.

There isn't a lot of scrip available to buy, and it appears others are of the same mind as we are; that this is undervalued on a fundamental basis. I grabbed some around the mid/late teens like yourself, and am hoping there will be a pull back to get some more somewhere down the track. If not, I'll just have to make do with what I have.

mark100
31-05-2006, 11:48 PM
Thanks POK. Yes I would have liked a few more as well but it run faster than I expected. I will look to top up if it pulls back to the mid 20's.

cheers

OneUp
31-05-2006, 11:48 PM
Yeah, talk about tight scrip. I've been trying to accumulate all week without much to show for it, and the one decent sized sell at 30c was pulled late today. Guess I will just need to be patient.

Great fundamental analysis Mark. 180 Group may turn out to be a rather expensive acquisition the way they've structured it. The deal looked OK when they originally announced it, but FSA's shares have since gone up from under 5c to nearly 30c.

OneUp
01-06-2006, 02:04 AM
One more thing. There was a lawsuit from the ACCC ongoing. Didn't see any updates on this.

2005 annual report:

"As reported last year, the Company continues to defend allegations from the Australian Competition and Consumer Commission (ACCC). At the time of writing, the allegations have been reduced, however the company expects to incur significant expenditure on legal fees in the year ahead. We take this opportunity to state that, as with any legal proceedings, there is inherent uncertainty about the prospects of a positive outcome."

steve fleming
01-06-2006, 10:19 AM
Yep - a nice little outfit, with a pretty good monopoly in that part of the market, and diversified/ing….

Given the nature of their customers though – ie they have little/limited money, it might be worthwhile keeping a close eye on the write downs and provisions….which are likely to be rather high….therefore impacts on CF....

Provisions for bad debts

In 2004 5,175/10,435 = 50%
In 2005 6,719/11,570 = 58%!!

- exceedingly high - ie they estimate to collect only $1 in every $2 of debtors
-and trending upwards…so little concerning


bad/doubtful debt expense/ revenues –

in 2004 3,931/13.921 = 28%
in 2005 2,755/14,178 = 19%

- reducing / improving, maybe due to diversified earnings, but still high…....essentially every five jobs they do, they only invoice 4...and collect in cash (collect debtors) less

so essential to monitor cash flow…..

Packersoldkidney
01-06-2006, 08:04 PM
Good pick up Steve....something certainly to be aware of going forward.

steve fleming
01-08-2006, 06:19 PM
Just saw that Hugh Parsons has taken a seat on the board of FSA.

That is fantastic news for FSA shareholders…..I know Hugh personally, and he is an outstanding, hugely respected individual.

The fact that Hugh has accepted this seat, IMO, says far more about the long term future of FSA than any positive financial announcement could possibly say….

The credibility of FSA, IMO, has gone up immeasurably on this announcement….absolutely impressive- Hugh's connections and experience will do wonders for FSA, i am absolutely sure…...

mark100
02-08-2006, 12:10 AM
Thanks for that update steve fleming.

Further good news for FSA is the conclusion of the dispute they had with the ACCC. This was announced on 14 June. And they only had to pay a refund to 5 clients amounting to $3,670.

Mark

mark100
15-09-2006, 12:04 PM
FSA posted a pretty good full year result yesterday.

NPAT up 85% to $2.6m compared with $1.4m last year.

They also provided a 'normalised' NPAT figure of $3.7m to reflect a number of one-offs this year.

The adjustments were:
ACCC defence costs. This issue is has now been resolved
Acquisition costs of the 180 Group
Relocation expenses
Setup costs of new departments
Including the full year profit of the 180 Group (which was acquired in April 2006)

Using a figure of 98m shares on issue as at 30 June, the reported EPS were 2.65c and the normalised EPS were 3.77c. More shares will be issued provided the 180 Group meets certain profit targets although these targets require a high level of growth.

Other points to note:
Operating cash flow: $2.2m
Cash on hand: $8m
Net working capital: $7.6m
ROE: 39% (using the normalised profit)
Provision for doubtful debts / Revenue: 15.6% (down from 19% in FY05 and 28% in FY04)
Debt: $900k

FSA appears to be very cheap considering its growth potential. Its trading on a PE of 7.5x normalised earnings (10.5x reported earnings).

Mark

anne2
15-09-2006, 01:20 PM
Hi Mark

don't forget to mention that FSA is just about the only asx-listed company to benefit from a massive increase in personal and small business bankruptcies - should our economy enter into an awful recesson.

Cheers Anne

mark100
24-10-2006, 01:10 PM
I liked what I read in the FSA Annual Report. They are 'confident of continued substantial growth'.

At 32c I estimate they are trading on a forward PE of less than 8. And given their cash position, I'm optimistic that we could see a maiden dividend this year

mark100
31-10-2006, 10:08 AM
Its looks like everyone liked what they read in the annual report. Up 34% in the past week.

Its forward PE has probably just got into double figures

mark100
21-11-2006, 06:22 PM
Upbeat AGM presentation from FSA today.

They said the September quarter delivered record profitability and they are 'extremely pleased' with the December quarter so far. They also re-iterated the 'significant future growth' line. I wonder what sort of a percentage increase is significant?

steve fleming
06-01-2007, 04:40 PM
quote:Originally posted by anne2

Hi Mark

don't forget to mention that FSA is just about the only asx-listed company to benefit from a massive increase in personal and small business bankruptcies - should our economy enter into an awful recesson.

Cheers Anne


FSA positioned very nicely:

Money troubles on the increase
By David Uren
January 06, 2007 12:00am


THE number of people declared bankrupt or entering into agreements with creditors jumped 16.4 per cent last year, with higher interest rates and excessive debt to blame.

The Inspector-General in Bankruptcy, Peter Lowe, yesterday said the number of people getting into trouble with their creditors had been rising since 2002-03.
"There has been a resurgence of bankruptcy activity. It is not astronomical but it is happening," he said.

During 2006, 23,840 people went bankrupt while a further 5800 entered formal agreements with their creditors.

http://www.news.com.au/business/story/0,23636,21016858-462,00.html

tommy
07-05-2007, 04:54 PM
Absolutely brilliant announcement out, time to wet my pants again[:p]
Brilliant move by the management, securing more growth potential in the years to come. FSA has become a one-stop shop in this field!

________________


FSA Group secures $210 million Westpac mortgage facility
(ASX code: FSA)

The Directors of FSA Group Limited (“FSA Group” or the “Company”) are pleased to announce that the Company has secured non-recourse funding for its residential mortgage backed securitisation program with Westpac Banking Corporation committing funding of $210 million - a move which will make FSA Group a lender in its own right.

FSA Group, the leading provider of debt solutions to individuals and businesses, is the largest broker of non-conforming residential mortgages in Australia. It expects to broker over $200 million worth of non-conforming residential mortgages for the 2007 financial year.
"The new funding facility marks a significant step in our progress of catering to the needs of our clients," said Executive Director Mr Tim Maher.

"Our clients are our priority. With our own funding it will mean we’ll be able to offer more comprehensive solutions directly to them because we can tailor our products to meet individual needs. This will deliver real benefits to our clients”, Mr Maher said.

Expanding the Company’s business to include its own lending services will also create significantly stronger shareholder value.
It is anticipated that the funding facility will improve business activity levels as the Company will be able to develop lending products to meet the diverse needs of its clients.

FSA Group will still maintain its relationships with non-conforming mortgage lenders through whom it previously originated business and will continue to refer new business to them where appropriate.

mark100
07-05-2007, 05:01 PM
This gives them capacity for massive growth I believe. Still holding from 17.5c. Topped up a little today

cheers

tommy
07-05-2007, 05:05 PM
quote:Originally posted by mark100

This gives them capacity for massive growth I believe. Still holding from 17.5c. Topped up a little today

cheers


Hi Mark,

Yup, the impact of this deal has not yet been fully appreciated by the market. This is a MAJOR breakthrough, in that it would massively improve their margin.

Well done mate for holding on to this little gem, I believe there is even more growth potential at FSA now.

mark100
07-05-2007, 05:11 PM
Hi Tommy,

I still haven't grasped the impact completely but at first thoughts FSA may benefit from the following:

1. Re-finance loans that were once written through say another lender saw the lender earn the establishment fees etc with FSA only getting the small upfront commission and trail. Now FSA will get the establishment fees and interest margin.

2. Importantly the facility is non-recourse to FSA

3. Not just improve their margin but also allow them to write business that possiblly they couldn't previously.

cheers

Edit - I should add that these guys appear to maintain a very low profile. No blowing their trumpet, just quietly going about their business which is a good thing in my view

tommy
07-05-2007, 05:26 PM
quote:Originally posted by mark100

Hi Tommy,

I still haven't grasped the impact completely but at first thoughts FSA may benefit from the following:

1. Re-finance loans that were once written through say another lender saw the lender earn the establishment fees etc with FSA only getting the small upfront commission and trail. Now FSA will get the establishment fees and interest margin.

2. Importantly the facility is non-recourse to FSA

3. Not just improve their margin but also allow them to write business that possiblly they couldn't previously.

cheers

Edit - I should add that these guys appear to maintain a very low profile. No blowing their trumpet, just quietly going about their business which is a good thing in my view


Excellent summary, mark.

FSA says "It expects to broker over $200 million worth of non-conforming residential mortgages for the 2007 financial year."

I hope they do an investor presentation but I somehow doubt it... FSA is frustratingly low profile as you say[}:)] but really don't care as long as they keep on improving and growing their business.

______________

P.S.

Hi Absolut-advance,

Sorry mate, missed your previous post! For an explanation on how FSA does business, check out

http://www.foxsymes.com.au/

and

http://www.180corporate.com.au/

Hope it helps[:I]

tommy
30-05-2007, 04:52 PM
Dilution?!

http://sa.iguana2.com/cache/9116c6f5bebefe424015b8c99ad5b774/ASX-FSA-188402.pdf

tommy
22-06-2007, 04:11 PM
Yesterday's announcement was excellent yet the market totally ignored it... what da[:0]

Am I the only one who thinks FSA is cheap?


ASX Announcement
21 June 2007
$210m facility forecast to add up to $5m to Pre-Tax Profit
(ASX code: FSA)

FSA Group Limited (“FSA Group”) would like to expand on its announcement of 7 May 2007 and provide the market with further details relating to the $210 million Westpac Banking Corporation non-recourse funding facility, the creation of its subsidiary Fox Symes Home Loans Pty Limited (“FSHL”) and its anticipated impact on group profits.
The $210 million Westpac Banking Corporation funding facility will allow FSA Group to add direct lending services to its already diversified range of debt solutions.

Previously FSA Group acted as a mortgage broker, brokering new business to external non-conforming mortgage lenders. FSA Group (through its subsidiary “Fox Symes”) is the largest individual broker of non-conforming residential mortgages in Australia, brokering new business to external non-conforming mortgage lenders in excess of $200 million per annum. The $210 million Westpac Banking Corporation funding facility will allow FSA Group to act as principal lender, not broker.

FSA Group is forecasting the following:
- up to 75% of existing business will now be facilitated through FSHL, resulting in a greater lending margin being captured within FSA Group rather than being passed on to external non-conforming mortgage lenders.
- the balance of existing business, which cannot be facilitated through FSHL, will continue to be brokered through external non-conforming mortgage lenders.
- overall business levels will increase as FSHL will develop lending products that will be flexible and tailored to meet the diverse needs of its clients.

The impact of this change is significant to the profitability of FSA Group. Based on existing business volumes, FSHL should progressively add up to $5 million annually to FSA Group’s pre-tax profit as the loan portfolio grows over the next two years.
These financial results are however dependent upon a number of factors including the take-up rate of the new offering by our clients, the performance of the loan portfolio and the appetite of the capital markets for such assets.

FSA Group will own 90% of FSHL with the balance of the equity equally shared between Westpac Direct Equity Investments (through an option agreement) and FSHL senior management (through a converting share agreement). Westpac Direct Equity Investments have the right to appoint a representative to the FSHL board.

The loan portfolio will be funded through the “Fox Symes Home Loans Warehouse Trust” with Westpac Banking Corporation and FSHL committing funding of $210 million and $2 million respectively. The funding of the “Fox Symes Home Loans Warehouse Trust” is on a non-recourse basis to FSHL and FSA Group. The maximum capital at risk for FSHL (which has been provided by FSA Group) in the “Fox Symes Home Loans Warehouse Trust” is $2 million, if FSHL does not breach representations and covenants provided by it to Westpac Banking Corporation. The loan portfolio created in the “Fox Symes Home Loans Warehouse Trust” will then be securitised in the capital mrkets FSA Group has expensed a total of $1.4 million of set-up costs for FSHL to date. No further set up costs will be incurred.

Background to FSA Group
FSA Group Limited is the leading provider of debt solutions to individuals and business in Australia. Its subsidiary “Fox Symes” offers a broad range of debt solutions to individuals, including budgeting assistance, informal creditor arrangements, consolidation loans, mortgage refinancing, debt agreements, personal insolvency agreements and bankruptcy assistance.

Fox Symes currently administers around 50% of all debt agreements entered into and is the largest individual broker of non-conforming residential mortgages in Australia, brokering new business in excess of $200 million per annum.

For and on behalf of the Board
Duncan Cornish
Company Secretary

steve fleming
01-07-2007, 12:14 PM
quote:Originally posted by tommy



BTW, Steve, are you still interested in FSA? I still hold and thought the latest Westpac facility announcement was absolutely brilliant but market totally ignored it... is there anything in the industry that I don't know about? Your views will be highly appreciated mate, as always!



Hi Tommy,

i think the market hasn't fully digested the impact of this announcement.

forecast $5m before tax, apply a reasonably bullish EBIT multiple to reflect growth, say 10, therefore supports an additional $50mil to FSA's marketcap.

Plus the fact that they have teamed up with a big 4 bank, gives immense credidibility to the deal (plus it is NON-RECOURSE minimising any financial risk)!

Should be re-rated after FSA releases its annual financials, when the market can get a better handle on the group's balance sheet and growth....hopefully they will also release some FY08 guidance which may set the share price alight.

Cheers

mamos
01-07-2007, 03:22 PM
Hi guys.

I think the shift towards lending rather than a fee for service will serve the business really well. Note the $5m is also based upon current levels of business. However, with the facility they will be able to design products that are more suited to their clients and increase business in this respect.

I think the FY07 result may not be that flash as $1.4m will have been expensed in setting up the facility and i'm not sure how much of a contribution will be included as it only started in May. But 2008 is looking good.

thereslifeafter87
01-07-2007, 04:15 PM
Non-recourse isn't necessarily non-recourse. Witness what has happened in the US recently with many lenders in the sub-prime mortgage area (essentially the market FSA is entering).

At least in the US, the trustees of the securitised loan books can force the finance company to repurchase the loans if certain criteria are met (eg: defaults above a prescribed level). This saw a lot of sub prime lenders go bankrupt there.

The reasons outlined above may be why the market hasn't reacted favourably to FSA's news.

tommy
23-08-2007, 03:00 PM
Massive increase!!!!!! FSA more than doubles profit! Still cheap at current level, one dollar here we come!

23 August 2007
Profit Guidance - FY 2007 Profit Before Tax $9.4m to $9.8m


Based on its management accounts (before audit sign-off) the Company
expects to report a profit before income tax (and before minority interests) for
the year ended 30 June 2007 (FY2007) of between $9.4m and $9.8m, a
significant increase from the FY2006 result.

FY 2005 FY 2006 FY 2007
Profit before income tax
(and before minority interests)
$1.7m $4.1m $9.4m to $9.8m

The Company expects to lodge its final Financial Statements for the FY2007
next week following completion of the audit by the Company’s auditors.
This record result represents a 129% to 139% increase in profit before income
tax (and before minority interests) compared with the FY2006 results. Further
commentary and analysis of the result will be set out in the Company’s 2007
Annual Report to be released shortly.

This record result is after the Company has expensed during the FY2007 a
total of $1.7m of set-up costs and initial operating costs for its new nonconforming
residential mortgage lending business.
The continuing organic growth of the Company’s historic business lines, plus
the future recurring revenue and profit streams from its direct lending
businesses: residential mortgages, bridging finance, factoring finance and
inventory finance (to be launched shortly), ideally positions the Company to
continue growing profits and shareholder value.

On behalf of the Board
Duncan Cornish
Company Secretary
FSA GROUP LIMITED

tommy
23-08-2007, 03:22 PM
FSA up 18%!!!!

Once this hits 100 million market cap, instos should pick it up in their radar... safe recession-proof play considering it makes money out debt consolidation.

Would love to see their profit margin at the moment, as westpack mortgage facility should lead to even higher margin in the coming year.

tommy
23-08-2007, 03:47 PM
Just did some calculations and came up with crazy conclusions.

First half profit before tax was 3.7 million
Full year profit guidance before tax is 9.4 million
This means second half profit was 5.7 million

BUT they spent 1.4 million to set up that mortgage facility with Westpac (one-off)

Assume they sustain their second half profit momentum =annual profit before tax is 11.4 million

AND they expect 5 million extra profit before tax to be generated from that new facility per year...

so that is at least 16 million profit before tax for next year...

what da, I am topping up more, the PE is too low!

Can someone refute this?? We might have a relatively safe multibagger here.

tommy
23-08-2007, 05:00 PM
Just did some calculations and came up with crazy conclusions.

First half profit before tax was 3.7 million
Full year profit guidance before tax is 9.4 million
This means second half profit was 5.7 million

BUT they spent 1.4 million to set up that mortgage facility with Westpac (one-off)

Assume they sustain their second half profit momentum =annual profit before tax is 11.4 million

AND they expect 5 million extra profit before tax to be generated from that new facility per year...

so that is at least 16 million profit before tax for next year...

what da, I am topping up more, the PE is too low!

Can someone refute this?? We might have a relatively safe multibagger here.


Oops, sorry guys made a huge calculation mistake:

First half profit before tax was 3.7 million
Full year profit guidance before tax is 9.4 million
This means second half profit was 5.7 million

BUT they spent 1.7 million to set up that mortgage facility with Westpac (one-off)


So second half profit without that one-off expense will be 7.4 million

Assume they sustain their second half profit momentum =annual profit before tax is 14.8 million

AND they expect 5 million extra profit before tax to be generated from that new facility per year...


so that is at least 19.8 million profit before tax for next year!!! WTF!!

And that is assuming ZERO organic growth in existing operations, only adding additional profit from the new facility... but zero growth is highly unlikely given the increase in insolvencies in the current consumer credit/debt situation.

You do the maths, current PE is an absolutely steal... unless I am the only crazy nut getting excited here. Topped up more today, couldn't resist it :-)

I hope the management provides an upbeat outlook for the coming year, I am wetting myself!

OneUp
23-08-2007, 05:04 PM
Tommy, you're pretty much on to it, but $5m PBT was supposed to come within 2 years, not next year.

Management have a habit of being conservative though.

Don't forget organic growth of the debt agreement sector either (30% p.a.).

tommy
23-08-2007, 05:09 PM
Tommy, you're pretty much on to it, but $5m PBT was supposed to come within 2 years, not next year.

Management have a habit of being conservative though.

Don't forget organic growth of the debt agreement sector either (30% p.a.).

errr, sorry mate, I got carried away! Was it two years? Bummer, I thought the chicken came home to roost too quickly :-P

Okay, so that makes it 16-17 million? Mate, that is still not bad, that's still good enough for me in this volatile market. I wonder this will be a good outfit for private equity takeover?

OneUp
23-08-2007, 05:10 PM
Mate, I really hope FSA do NOT get taken over by Private Equity - they'll be a multi-bagger for sure if we can keep it in our own hands!

tommy
23-08-2007, 05:18 PM
Mate, I really hope FSA do NOT get taken over by Private Equity - they'll be a multi-bagger for sure if we can keep it in our own hands!

Yeah, but the combination of lender + debt consolidator in the current market is a win-win situation!

I won't be surprised if some greedy private equity decides to get their grubby mits on this gem before it fully realizes its full value.

It has GROWTH written all over it and is hugely undervalued in the current market...

Isnt the current PE less than 10?

Also, I think a dividend payment is overdue now. If they decide to pay a dividend, that should get some instos interested.

OneUp
23-08-2007, 05:26 PM
Try a forward P/E of under 7.

tommy
23-08-2007, 05:35 PM
Try a forward P/E of under 7.

I still can't believe that the share price didn't approach $1 today after the announcement, or end above90c at least... perhaps the current climate does not like any stock in the financial sector, seems like it is being punished based on "guilty by association" rule?

Market cap should be at least 150 million given the rapid growth trajectory.
They have more than doubled PBT for three consecutive years ($1.7m -> $4.1m ->$9.4m to $9.8m).
And the management always seem to be conservative in their forecast, as you said.
Not many companies doubling their profit making capacity every year are valued so low.

In any case, I will continue to top up because the current price is clearly unjustifiable...
I don't expect FSA to be at the current price level for long, unless the entire market collapses!

mark100
24-08-2007, 02:39 AM
OneUp, they already are a multibagger

mamos
25-08-2007, 05:19 PM
Can someone explain how the $210m facility from Westpac will work. I have read all the announcements a number of time. I am just trying to fully understand this arrangement.

The $210m is non-recourse so if there is insufficient collateral to pay off the loan then Westpac cannot pursue FSA for the debt.

Business will now be facilitated through FSHL, resulting in a greater lending margin being captured within FSA Group rather than being passed on to external non-conforming mortgage lenders.

So FSA will now obtain a margin rather than a brokerage fee for referring non-conforming borrowers.

So why would Westpac do this? The deal just seems to good for FHSL. Given the concerns with non-conforming mortgages recently Westpac they must be commanding a significant interest rate on these loans to justify the risks.

Does anyone know what % FSHL will be obtaining from these non-conforming mortages? Although FSHL is acting as principal lender in reality it seems that they are acting as a broker for Westpac to obtain non-conforming loans at high interest rates, while retaining a % of the loans value.

The maximum capital at risk for FSHL (which has been provided by FSA Group) in the "Fox Symes Home Loans Warehouse Trust" is $2 million, if FSHL does not breach representations and covenants provided by it to Westpac.

Does anyone know what these are. Quite important to know I guess.

The loan portfolio created in the "Fox Symes Home Loans Warehouse Trust" will then be securitised in the capital markets.
Does this mean they will be packaged up in products similar to CDO's?

shane_m
25-08-2007, 06:46 PM
FSHL will save on legal fees on non-conforming mortgages through FSA?

kura
25-08-2007, 07:36 PM
When detailed annual accounts come out (this coming week) compare cash flow from operations with reported profit, as didn't look that great in the half year accounts.

tommy
26-08-2007, 04:21 AM
Interesting points you have raised there mamos.

I suggest you forward those important questions to FSA management to get clear answers because I do not think any of us are highly informed of such specifics. I personally would like to know that kind of info too! Please post it if you get a response, will be highly appreciated.

In any case, it must be remembered that FSA is not gonna be a mere mortgage lender but primarily a debt consolidator/collector, which puts them in a unique position; I presume they can consolidate debt and make customers switch to their loans using this new Westpac loan facility.

Considering that they have specialized in debt consolidation/collection over the years, I believe they have enough experience to determine the risk-reward ratio of dealing with debtors that are considered higher risk, compared to other financial institutions who do not specialize in this field. (To compare FSA with mortgage houses like RAMS would be highly misleading because their core business is different, I see the mortgage facility to be more complementary to their existing business -it just widens the range of products offered to customers, while increasing their margins.)

The fact that a big bank like Westpac has been happy to seal such a deal with FSA is enough reassurance for me at least at this point, especially considering FSA's market cap (PE ratio is a joke!). If there is any other company that has beaten FSA's earnings growth rate over the past three years in this sector with similar market cap, please let me know because I will surely be interested in buying the stock! (e.g. BNB looking pretty cheap at the moment, very tempting...mmm)

mamos
26-08-2007, 10:23 AM
Yeah I will Tommy.

BTW did you get my PM re BLU?

tommy
26-08-2007, 04:35 PM
Yeah I will Tommy.

BTW did you get my PM re BLU?

Hi Mark,

Yup, sorry I didn't notice it until you alerted me! Check your inbox now:-)

mamos
26-08-2007, 09:24 PM
When detailed annual accounts come out (this coming week) compare cash flow from operations with reported profit, as didn't look that great in the half year accounts.

That is a good point Kura. I am always suspicious when cash flow from operations deviates significantly from Net Profit After Tax.

Cash Flow is much more difficult to manipulate than items in the St of Fin Performance so I rely more heavily on the former.

OneUp
26-08-2007, 10:06 PM
You should expect operating cashflow to be less than NPAT in a company growing rapidly. The cash is used to finance growth in working capital (especially growth in accounts receivable, which is a natural function of growth in sales).

steve fleming
26-08-2007, 10:40 PM
Yep - a nice little outfit, with a pretty good monopoly in that part of the market, and diversified/ing….

Given the nature of their customers though – ie they have little/limited money, it might be worthwhile keeping a close eye on the write downs and provisions….which are likely to be rather high….therefore impacts on CF....

Provisions for bad debts

In 2004 5,175/10,435 = 50%
In 2005 6,719/11,570 = 58%!!

- exceedingly high - ie they estimate to collect only $1 in every $2 of debtors
-and trending upwards…so little concerning


bad/doubtful debt expense/ revenues –

in 2004 3,931/13.921 = 28%
in 2005 2,755/14,178 = 19%

- reducing / improving, maybe due to diversified earnings, but still high…....essentially every five jobs they do, they only invoice 4...and collect in cash (collect debtors) less

so essential to monitor cash flow…..

Re cash flow - i don't know how much things have improved, but cash was a bit of a concern when i looked at FSA last year.

Don't forget KIA - reported great profits, but could never convert their billings to cash.

OneUp
29-08-2007, 04:44 AM
Steve are you suggesting FSA is under provisioning doubtful debts?

steve fleming
29-08-2007, 09:01 PM
Steve are you suggesting FSA is under provisioning doubtful debts?

I think it would be exceedingly difficult to accurately estimate their provisions.

But when you are provisioning $8m of debtors on a ledger of $16m (2006) - ie 50%, it does flag a potential concern as to quality of earnings.

tommy
31-08-2007, 03:03 PM
Hi Steve and Oneup,

FSA preliminary report released:

http://sa.iguana2.com/cache/c21687d0c231e351db4e620a6530d9b6/ASX-FSA-191134.pdf

Operating cash flow negative, while cash flow from financing activities was a major source of cash. Should we be concerned about this? I would have thought that the operating cash flow situation wouldn't be such an issue considering its rapid expansion.

steve fleming
01-09-2007, 10:30 AM
Hi Steve and Oneup,

FSA preliminary report released:

http://sa.iguana2.com/cache/c21687d0c231e351db4e620a6530d9b6/ASX-FSA-191134.pdf

Operating cash flow negative, while cash flow from financing activities was a major source of cash. Should we be concerned about this? I would have thought that the operating cash flow situation wouldn't be such an issue considering its rapid expansion.

Hi Tommy, you are right.

As the copmany grows, cash is used to fund working cap, which in the case of FSA is receivables.

The issue is, if cash is used to fund working cap (receivables) which is then NEVER collected/converted to cash. That pretty much is what happened to KIA.

Provisioning for receivables is well down for 07 ($5m/$18m) so that is a good sign, and should continue to fall as revenue streams diversify.

However, its important to remember that at the end of the day, FSA's customers do have "cash flow" issues themselves, so debtor collection/cash conversion is always going to be a risk associated with FSA.

mamos
01-09-2007, 11:49 AM
Totally agree with you Steve.

There are many avenues for growth in this company. I am concerned about the quality of the earnings and how much of the receivables can be converted to cash.

Does anyone have an analysis of their historical proportion of bad debts to revenue?


"The cost of funds of the“Fox Symes Home Loans Warehouse Trust” is benchmarked to BBSW (Bank Bill Swap Rate) as funding is domestically sourced. FSA Group has no exposure to offshore markets."


Does this mean Westpac is only receiving the BBSW and FSA is taking the difference in margin between what they charge the client and BBSW? I would have thought that Westpac would want a higher margin to compensate for the higher risk loans.

thereslifeafter87
01-09-2007, 01:38 PM
Totally agree with you Steve.

There are many avenues for growth in this company. I am concerned about the quality of the earnings and how much of the receivables can be converted to cash.

Does anyone have an analysis of their historical proportion of bad debts to revenue?


"The cost of funds of the“Fox Symes Home Loans Warehouse Trust” is benchmarked to BBSW (Bank Bill Swap Rate) as funding is domestically sourced. FSA Group has no exposure to offshore markets."


Does this mean Westpac is only receiving the BBSW and FSA is taking the difference in margin between what they charge the client and BBSW? I would have thought that Westpac would want a higher margin to compensate for the higher risk loans.


I would say Westpac would make most of their money on the back end of the transaction - when the loans are packaged, securitised and sold off to investors. Hopefully the credit crunch won't affect Westpac's ability to do this.

tommy
03-10-2007, 05:53 PM
FSA GROUP LIMITED
3 October 2007

180 GROUP EXCEEDS CUMULATIVE PROFIT TARGET
Pursuant to the Share Purchase Agreement (as varied) (Agreement) signed on 27
October 2005 with Capital Management Corporation Pty Limited (Capital Management),
Tim Odillo Maher (a director of FSA Group Limited) and 180 Group Holdings Pty Limited
(180 Group Holdings), FSA Group Limited (FSA Group or the Company) acquired all of
the issued capital in 180 Group Holdings from Capital Management in consideration for
the issue of:

• Eight million (8,000,000) ordinary shares in the capital of FSA Group (Ordinary
Shares); and

• Thirty two (32) convertible redeemable preference shares in the capital of FSA
Group on the terms described in the Agreement (CRPS).
Having exceeded the Financial Year 2006 Consolidated Profit Before Tax Target, eight
CRPS were converted in October 2006 and as a consequence of such conversion, the
Company issue to Capital Management 8,000,000 Ordinary Shares, in accordance with
the terms of the Agreement.
It has now been determined that the Consolidated Profit Before Tax Target for the
Financial Year 2007 as contemplated in the Agreement has not been exceeded as
follows:

• Target $1,071,429 profit before tax

• Actual Result $1,054,176 profit before tax

However, in accordance with clause 2.4(a)(ii) of the Agreement, the Cumulative
Consolidated Profit Before Tax Target for the two financial years ending 30 June 2007 as
contemplated in the Agreement, has been exceeded as follows:

• Target $1,785,714 profit before tax

• Actual Result $2,210,936 profit before tax

These actual results were subject to an external audit process that has now been signed
by the Company’s auditors.

Having exceeded the Cumulative Consolidated Profit Before Tax Target for the two
financial years ending 30 June 2007 as contemplated in the Agreement, a further eight
CRPS will convert and as a consequence of such conversion, the Company has issued
8,000,000 Ordinary Shares to Capital Management.

For and on behalf of the Board
Duncan Cornish
Company Secretary

steve fleming
27-11-2007, 10:48 PM
Wow....has come back big time, on the back of a very disappointing FY08 guidance and YTD.

Confidence in FSA's new direction will be affected.

tommy
28-11-2007, 06:00 PM
Hi Steve, mamos and TLA87,

FSA punished heavily for latest profit guidance, hope you guys got out before the nosedive (shows how important stop-loss function is! Luckily I closed my positions before going on holiday so didn't have any FSA shares...)

http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=AU%3Afsa&draw.x=0&draw.y=0

Why they didn't clarify their poor performance earlier is beyond my comprehension, especially when they announced "180 GROUP EXCEEDS CUMULATIVE PROFIT TARGET" in early October.

steve fleming
28-11-2007, 09:45 PM
Hi Steve, mamos and TLA87,

FSA punished heavily for latest profit guidance, hope you guys got out before the nosedive (shows how important stop-loss function is! Luckily I closed my positions before going on holiday so didn't have any FSA shares...)

http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=AU%3Afsa&draw.x=0&draw.y=0

Why they didn't clarify their poor performance earlier is beyond my comprehension, especially when they announced "180 GROUP EXCEEDS CUMULATIVE PROFIT TARGET" in early October.

Nice move Tommy! Pretty poor form from FSA.

I've acutally (un)luckliy never held shares in FSA...I know a couple of guys who worked there and never risked the possibility of inside trading it!

tommy
29-11-2007, 03:27 AM
Nice move Tommy! Pretty poor form from FSA.

I've acutally (un)luckliy never held shares in FSA...I know a couple of guys who worked there and never risked the possibility of inside trading it!

Hi Steve,

FSA management will probably have to do a lot of explaining to win back investor confidence, it was pure luck I didn't get burnt this time.

BTW, belated congrats for your $100k options windfall! Well done mate, max respect :-)

Keep up da good work mate!

tommy
11-01-2008, 11:32 PM
I no longer hold FSA but now it's starting to look more reasonable prices at 39c.

Chart:
http://asx.netquote.com.au/charts.asp?code=fsa&x=0&y=0

Oversold?? That said, finance sector is tooooooooo scary at the moment, rather hold BNB especially considering liquidity risks!

http://www.news.com.au/heraldsun/story/0,21985,23035127-2862,00.html

Victorians sinking in consumer debt
Article from: Herald Sun

Jason Bryce

January 11, 2008 12:00am

CONSUMER debt is growing much faster in Victoria than in other states and is about to get worse.

The latest insolvency statistics show the number of Victorians filing for bankruptcy and registering debt agreements is soaring.

There were 1165 non-business-related bankruptcies registered in Victoria during the last three months of 2007, up 9 per cent on the December quarter of 2006.

Nationally, the number of non-business-related bankruptcies was up 6.6 per cent, and just 2.2 per cent in NSW.

The number of debt agreements registered in Victoria grew 14.46 per cent when compared with the same period a year ago. A debt agreement is a low-cost alternative to full bankruptcy for those with unsecured debts of less than $78,915.20.

Nationwide the number of agreements registered fell 3.9 per cent with big falls in SA (down 55 per cent), Queensland (down 22) and Tasmania (down 16).

In NSW and WA, about 9 per cent more agreements were registered than in the 2006 December quarter.

In total, 451 new debt agreements were started in Victoria in the lead-up to Christmas.
[/b]
Deborah Southon, a director of debt administrator Fox Symes, said interest rate rises were hurting families in Victoria and NSW.

"A lot more in Sydney and Melbourne are under pressure due to house prices," Ms Southon said.

"Victorians . . . have been coping, but the last couple of interest rate rises have really pushed people over the edge.

"We've never had this volume (of calls) and we are struggling to deal with it. It has been phenomenal."[/b]

steve fleming
25-06-2010, 10:32 PM
FSA up 10% today following a profit downgrade of approx 20% - 30%.

Its interesting sombre read on the economy will have helped: "Looking ahead, high levels of consumer debt together with a
higher interest rate environment are driving demand for our products and services. We expect this to
increase in 2011”.

New bankruptcy laws as passed in the upper house yesterday will also help FSA as debtors will now prefer to enter debt agreements rather than full bankruptcy.

http://news.smh.com.au/breaking-news-national/bankruptcy-laws-modernised-20100624-z29o.html

Currently on a PE of approximately 4.

mark100
02-09-2011, 12:54 PM
I've picked up a few FSA for the first time since 06/07 following their result.

EPS were up 12% to 6.5c, PE is around 4.5x and they announced a maiden FF dividend of 1c. NTA is 35c per share and ROE was around 20%.

Cash flow has also started to improve which has been an issue for me and the annoucement of a maiden dividend gives me confidence in the longer term prospects.

While FSA is cheap it always has been so perhaps the market still won't re-rate it in which case I won't hang around for too long.

mark100
18-04-2013, 11:20 AM
Another profit upgrade. Trading at less than 8x FY13 forecast

noodles
08-07-2013, 08:11 AM
Useful link on debt agreement stats. Not very good for FSA last quarter.
https://www.itsa.gov.au/resources/statistics/provisional-bankruptcy-and-personal-insolvency-statistics/personal-insolvency-activity-in-the-march-quarter-2013#_Key_points

noodles
10-07-2013, 11:50 AM
Those are figures for Dec-Mar 13 however, FSA reported a profit upgrade in April, so any decrease in numbers had no effect on their business. The lower insolvency rate will be due to the interest rate reductions, which will have given people a bit of breathing space. However, mortgage arrears for the self employed and loc-doc holders are still on the rise. Increasing unemployment will exacerbate the problems, particularly in high cost cities like Perth.

Companies like these are very cyclical, and with a looming recession due to the abrupt cessation of the mining boom we may be heading into a period where their business takes off even further.

KW, I'm not sure how the stats affect the profit. However, my guess would that if there is a long term trend, profitability would be affected.

Latest stats are out, and there was an increase for the last quarter.

https://www.itsa.gov.au/resources/statistics/provisional-bankruptcy-and-personal-insolvency-statistics/documents-july-2013-release/debt-agreements-change-comparison-june-quarter

mark100
10-07-2013, 12:28 PM
KW, I'm not sure how the stats affect the profit. However, my guess would that if there is a long term trend, profitability would be affected.

Latest stats are out, and there was an increase for the last quarter.

https://www.itsa.gov.au/resources/statistics/provisional-bankruptcy-and-personal-insolvency-statistics/documents-july-2013-release/debt-agreements-change-comparison-june-quarter

Hence the expansion into home lending and small business factoring in recent years. I note in the interim results the home lending division contributed over a third of profit (up from zero a few years back) and the loss narrowed considerably in the more recently formed small business factoring division

mark100
12-09-2013, 11:09 PM
I've picked up a few FSA for the first time since 06/07 following their result.

EPS were up 12% to 6.5c, PE is around 4.5x and they announced a maiden FF dividend of 1c. NTA is 35c per share and ROE was around 20%.

Cash flow has also started to improve which has been an issue for me and the annoucement of a maiden dividend gives me confidence in the longer term prospects.

While FSA is cheap it always has been so perhaps the market still won't re-rate it in which case I won't hang around for too long.

I thought the FY13 result was excellent. Cash flow is really starting to grow now and as a result the dividend payout up been increased to 60%. With lending conditions improving I expect the home loan part of the business should be a decent growth driver in the future. Must admit to offloading a few when it continued past $1 after going ex div but I'll top up again when I get the chance

mark100
25-10-2013, 02:07 PM
More growth forecast at the AGM

OneUp
25-10-2013, 03:12 PM
More growth forecast at the AGM

Yep, PAT forecast to be up 8 - 13% and DPS forecast to be up from 5.0cps in FY13 to 5.25 - 6.0cps in FY14 (in addition to continuation of the buyback). Puts FSA on a 5.9% fully franked yield at the top end of the guidance range. Also worth keeping in mind FSA upgraded guidance several times in FY13.

mark100
25-10-2013, 03:31 PM
Yep, PAT forecast to be up 8 - 13% and DPS forecast to be up from 5.0cps in FY13 to 5.25 - 6.0cps in FY14 (in addition to continuation of the buyback). Puts FSA on a 5.9% fully franked yield at the top end of the guidance range. Also worth keeping in mind FSA upgraded guidance several times in FY13.

AGM last year forecast 12-15% growth and they delivered 27%...

Lizard
15-11-2013, 12:49 PM
Thanks Mark/One Up.

I bought a few at $1.01 after taking a closer look on the back of your posts and am happy to say it has been one of my better small-cap performers so far this month - now $1.16. :t_up:

mark100
17-12-2013, 11:13 AM
The first upgrade is rarely the last

Lizard
23-02-2014, 01:13 PM
Market didn't like result despite being easily on track for forecast. Was it just that the market was hoping for another upgrade? Currently $1.20, but had run up to over $1.50 recently.

noodles
23-02-2014, 03:12 PM
Market didn't like result despite being easily on track for forecast. Was it just that the market was hoping for another upgrade? Currently $1.20, but had run up to over $1.50 recently.

Revenue is flat. The growth has come from cost cutting. I think that is the main reason the stock fell.

mark100
23-02-2014, 11:17 PM
Yeah hard to see where FY15 growth will come from. The Debt agreement business is low growth and they are not forecasting growth in the home loan division. The profit increase came solely from a reduction in administration expenditure.

I was conveniently out at $1.50 which I thought had come up too fast on the back of a few media articles. Traded it briefly on Friday but am out for the moment. Might be a few stale bulls in it. At $1.50 some poster on hotcopper said a new type of buyer was going to push it higher still...normally a good time to sell.

cloggs
05-12-2014, 11:16 AM
You were obviously right because they are now at $1.05 and going sideways. I'm don't hold but look them up occasionally. Their profit was up 27% and their dividend is up to 6 cts a share so worth keeping an eye on.

mark100
05-12-2014, 11:29 AM
Yes they are on my watchlist. They have forecast an increase in the dividend of around 10% but no mention of a profit forecast. Yield is better than 6% fully franked at the moment but I suspect growth will be low

Lizard
16-12-2014, 05:17 PM
Profit upgrade with growth of 12-17% for the half year in NPAT. Growth still there, so at $1.11 seems good value?

Life has turned crazy busy again, so it might be New Year before I get the time to sit down and do some analysis.

noodles
16-12-2014, 05:58 PM
Profit upgrade with growth of 12-17% for the half year in NPAT. Growth still there, so at $1.11 seems good value?

Life has turned crazy busy again, so it might be New Year before I get the time to sit down and do some analysis.

FSA is an old favourite of mine. I did a quick analysis of the forecast (not upgrade). The result would have them make less in 1H15 than 2H14. So the reaction by the market was surprising to me.
EDIT: It appears that there is some historical seasonality. 1H is usually weaker than 2H

What was more interesting to me was the number of bidders who participated in the auction after the news . Compared to 18 months ago, there were probably 500% more bidders. Additionally, sellers were pulling their offers during the auction. I thought I used to have an edge by monitoring the news events. I think that edge has well and truly gone.

mark100
16-12-2014, 07:38 PM
FSA is an old favourite of mine. I did a quick analysis of the forecast (not upgrade). The result would have them make less in 1H15 than 2H14. So the reaction by the market was surprising to me.
EDIT: It appears that there is some historical seasonality. 1H is usually weaker than 2H

What was more interesting to me was the number of bidders who participated in the auction after the news . Compared to 18 months ago, there were probably 500% more bidders. Additionally, sellers were pulling their bids during the auction. I thought I used to have an edge by monitoring the news events. I think that edge has well and truly gone.

FSA is also an old favourite of mine. I was pleasantly surprised by the announcement, after the AGM I thought they had missed their chance to announce growth in profit. Also last year all the growth came from a reduction in 'Other Expenses' which I recall was actually a reversal of receivables impairment. Today's announcement seems to indicate this years growth may be the result of revenue growth.

You're right, it still indicate H1 15 will be below H2 14 but that seems to be a bit of a trend with FSA so I wasn't too worried by that.

I bought a few today. But until you see the accounts with FSA you never really know where the growth come from so I'm not getting too excited. I pulled my bid during the auction and purchased later on.

Penfold
06-08-2015, 06:07 AM
Bit of movement in the share price of the last few days... boding well for a good result. Naturally I sold half my holding 2 weeks ago.

mark100
06-08-2015, 10:59 AM
No profit guidance was given in June which is a bit unusual for them but I held on and have been pleasantly surprised by the price action this week. Not sure if a broker or tipsheet has mentioned them

Penfold
06-08-2015, 05:41 PM
Did think the same thing about the profit guidance. Hence selling off half. You might be on the money with a positive mention somewhere... or maybe a like company producing a solid result.

Lizard
06-08-2015, 06:20 PM
I am still holding. Maybe some are lining it up to collect a dividend? They have been fairly early off the mark in results and dividends over the past year.