The Speculator: Growth stock offers a 12.8 percent yield

Punters who followed the Speculator into our first stock pick of the year should be well pleased, with Flexigroup <FXL.AX> up 68 percent from our 28 cents purchase price on in early January.

Flexigroup, a major provider of finance for buyers of consumer durables, has traded up to 47 cents, at which price it offers a fully-franked interim dividend of 3 cents for the December half-year. That’s equivalent to a fully-franked dividend of 12.77 percent on an annual basis and is in line with projections the company made at its annual meeting on November 27 last year.

Still time to cash in: The dividend is payable on April 15 to shareholders registered by March 16, so prompt buyers may still get set. Check with your broker.

At its November annual meeting, Flexigroup chairwoman Margaret Jackson (also a director of ANZ Bank) predicted net profit for the current year would be in the range of $28-30 million, down from 2007-08’s net of $32.3 million, after absorbing the costs of the acquisition of another financier, Certegy, which specializes in “no interest” purchases through its Ezi-pay finance plans.

The recently-reported December-half results was within that guidance, with a bet of $14.6 million, after providing $1.8 million for the costs of integrating the Certegy business. The Certegy acquisition was completed in October for $15 million cash, a $15 million interest only vendor note and 3 million Flexigroup vendor shares.

In the second year, Certegy is predicted top add a net $8 million to group earnings. In the meantime, Flexigroup has adopted a policy of restricting dividends to 40-50 percent of earnings/share to fund the repayment of the $15 million vendor note. In line with that, a 3 cents final was paid in October, with a 3 cents interim predicted and now confirmed.

That would provide shareholders who managed to buy in at around 28 cents when the Speculator took his plunge a fully-franked dividend yield of better than 20 percent.

Announcing the first-half results, Flexigroup chief executive John DeLano said: “Over the past six months we have focused on integrating and adding value to the Certegy business, while improving operating income and cashflow across Flexigroup. To reduce exposure to interest rate movements, we have increased other income across all products and services.

This has resulted in a 9 percent increase in operating income to $63.4 million. By focusing on higher yielding products we have increased our bet operating cash flow by 33 percent to $12.3 million.”

In February, 2009, funding facilities available to Certegy were increased from $150 million to $200 million and Flexigroup expects the new business unit to exceed its net-profit-after-tax guidance for 2008-09.

The Certegy acquisition is expected to increase Flexigroup’s annual assets financed from $300 million to $500 million, boosting annual customer contracts originated from around 100,000 to250,000.

Speculator’s gold tip cops a speeding ticket

Junior gold prospector Robust Resources (ROL) joined the Speculator’s portfolio at 13c on February 18 and within a week ran to a high of 32 cents on turnover of more that nearly 700,000 shares. That promoted a “reason why” query from the ASX to which the company drew attention to its recently announced assays from drilling on the Indonesia island of Romang.

Those assays were discussed in the Speculator (February 18) together with the company’s suggestion its may be sitting on a mineralised volcanic caldera system comparable in size to that of the giant Lihir gold mine off the north coast of Papua New Guinea’s New Ireland province.

At 13 cents, Robust’s 36 million shares carried a market capitalization of just $4.68 million, backed with $1.4 million cash, sufficient to complete a 2500m drilling program by mid-2009. After the stock ran to 32 cents, fleet-footed traders sold it down to around 21c on turnover of more than 1.5 million.

There will be more profitable volatility in this stock with assays awaited for another six drill holes.

How the portfolio stands

Company	ASX code	Shares	Bought	Purchase price*	Value 3.03.2009
Viralytics	<VLA.AX>	50,000	31.12.2008	$0.040*	$0.036
Laserbond	<LBL.AX>	20,000	04.07.2008	$0.100*	$0.094
EMT Corp	<ETC.AX>	20,000	01.08.2008	$0.240*	$0.220
Citigold	<CTO.AX>	50,000	16.09.2008	$0.274*	$0.210
FlexiGroup	<FXL.AX>	20,000	02.01.2009	$0.280	$0.485
Robust resources	<ROL.AX>	50,000	13.02.2009	$0.130	$0.230

Total value of portfolio: $39,780
Cash at bank: $5,340
Total: $45,120
Portfolio change since 1.1.2009: 12.80 percent
All Ordinaries change since 1.1.2009: -13.33 percent

Portfolio notes

Disclosure: The author's family holds shares in Laserbond