FXL - a growth company once more, page-2

Results were actually pretty solid and EPS growth will likely pick back up into double digits again from next year. EPS already up now as NZ Cards begins to show through.

What was a surprise was the dividend cut - not because they made less money (they made more money than ever before), but because growth was stronger than expected and more funds need to be reinvested - I was always surprised how they could pay such a high dividend, seeing they are a growth company. Some investors brought in simply for the dividend and we saw some selling on results day - but now those looking for a growth company are buying in as results were actually achieved, and guidance maintained (and easily achievable.

FXL always make more in the 2nd half and I am picking them to make 97 or 98m - bang on or above their top end guidance, which they will likely upgrade (from 90 to 97) in July ish. With a 98m forecast, flexi is currently trading on a PE of just 11 ($863m market cap), and although this would only be 1m more than FY16, underlying profit (when stripping out investment in growth, write downs on discontinued operations etc) is likely to be 107m... representing 'real' growth of 11.3%... it is this double digit growth that will be relfected from FY18.

Over the coming year, a re-rating should begin, as dividend investors sell down, and those wanting dividend + growth will buy... and Flexi should begin to trade on a PE of 18 ish, not 11