rivken report, page-2

Here is the Rivken Report piece I mentioned yesterday. Whether you rate the RR or not, I personally do. They have thousands of subscribers and what FSA needs is exposure and IMO this is all positive.

Issue 486
12 March 2007
FSA GROUP (FSA)

S
ome weeks ago, we mentioned FSA as an attractive stock that provides leverage to a sector that will continue to do well as small businesses and individuals get over geared and end up in financial difficulty. The stock was around 60c, then moved up towards 70c and is now 67c, but has since provided more earnings transparency via its half yearly result. It appears on track for a full year after tax profit of between $5m-$6m, which at the current cap of $67m does not look like a steal but as we know, a P/E is only relevant in relation to growth. A P/E on its own means nothing without a growth rate. A high P/E can represent good value if the growth rate is particularly high and a low P/E can represent poor value if growth is zero or even negative.

Anyway, this company has delivered good growth and has ambitions of growing much, much more. Its capability to grow earnings by increasing its margin on lending is particularly attractive and we suspect the number of consumers getting into financial difficulty is only going to continue to grow in the future. While FSA has this space largely to itself right now, competition will probably grow in the future but it certainly appears to have first mover advantage. Our comfort with this one was only increased by the half yearly result. Lack of liquidity has prohibited us from recommending it at this time. (Member of the investment team owns shares in FSA)