News: FlexiGroup buys IT provider Telecom Rentals, page-3

Comsec overweight with 12 mth target $3.93

Overweight maintained, $3.93ps price target We have incorporated the proposed acquisition into our forecasts. While it is expected to settle in April 2015, we have included only the $1m integration costs and no earnings contribution in our FY15 forecasts. Our FY16 forecasts have risen ~3%, reflecting management’s expectation of an NZ$3m cash NPAT contribution from TRL in that year. Our price target has increased 8% to $3.93 due to our EPS changes and an increase in the target multiple used in our PE relative valuation (16x, in line with the Small Industrials index multiple). Despite FXL trading at 2.64x price/book, we think the 23% ROE justifies our valuation and suggests further potential upside to the current share price. However, we believe the company will need to demonstrate it can deliver higher levels of sustained organic growth or make a large accretive acquisition to achieve a significant rerating beyond our price target.