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Emerging Companies: ThinkSmart Limited (ASX: TSM)

Published 14-FEB-2014 00:00 A.M.


2 minute read

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Overview: ThinkSmart Limited ("TSM", the Group") is an Australian micro-finance Company focused on the UK. It provides a point of sale financing solutions through alliances with major international retailing groups. The Company’s patented ‘QuickSmart’ technology facilitates credit approval in just a few minutes, whether customers are online or in-store. December 2013, TSM announced the sale of its Australian & New Zealand businesses to FlexiGroup ("FXL") for $43m.


Catalysts: Keith Jones’s appointment as CEO and the disposal of TSM’s marginal ANZ operations provide a platform for growth. Following a three-year rationalisation phase, the Company has resolved to exclusively focus on its profitable UK operations, where Mr. Jones’s alliance partner background is expected to drive opportunity. The remaining business has a CY2014 NPAT profile of $3m, and post special dividend, net assets of ~$57m (35c/share). A 7.4c return of capital is expected in May, and the Company intends to undertake a share buyback for up to 10 percent of the issued capital.

Hurdles: UK segment earnings have been volatile. The Company is reliant on securitisation markets to expand its loan portfolio. A deterioration in borrower quality could adversely impact financial performance.

Investment View: TSM is a turnaround candidate positioned to benefit from improvements in UK consumer spending. We are attracted to recent management changes and view current valuations as undemanding. With pending capital management initiatives expected to drive interest, and UK retail sales growth reaching a nine-year high, we commence coverage with a ‘buy’ recommendation.


General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

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