Policy Stimulus May Provide a Short-Term Boost to FlexiGroup, but FVE Unchanged

No-moat FlexiGroup’s fair value estimate is unchanged at AUD 1.50 per share despite a potential short-lived boost to financing volumes from recent fiscal and monetary stimulus. We think an ongoing poor macroeconomic backdrop and intensifying competition from digital financing providers will continue to be headwinds. Recent stimulus measures may assist Australian retail sales over the next few months but off a very low base, and we expect any improvements to be temporary. The most recent Australian Bureau of Statistics figures indicate Australian retail sales grew by a lacklustre 0.1% in May 2019, following a fall of 0.1% in April 2019. Retail sales have been trending lower, and on an annualised basis grew by a paltry 2.7% in May 2019, compared with 3.0% in March 2019 and 3.2% in December 2018. Along with falling consumer sentiment, we foresee a generally weak economic backdrop for FlexiGroup to grow its finance receivables.