Flexigroup Limited (ASX: FXL) recently united its Flexigroup and flagship consumer brand under the name 'Humm'. Humm is a buy now, pay later (BNPL) and interest free finance provider, currently operating in Australia, New Zealand and Ireland. Could its rebranding and recent capital capital raising make it an opportunity for those that missed out on the Afterpay Ltd (ASX: APT) share price run?
Did something happen to Flexigroup?
Flexigroup has changed its business model and proposition to provide 'interest free buying power for everything, everywhere and for everybody'. It's been one year since the company launched its Humm brand. Humm has evolved into a leader in the BNPL space involving transactions over $1,000 and is achieving strong and profitable customer growth. Humm is ranked as the third largest BNPL player in Australia with 17.5% market share, 2.1 million customers, 56,700 retail partners and $2.1 billion in transaction volume in FY20.
Flexigroup commented that since transforming its Ireland business from leasing to BNPL, its customer base doubled in FY20. It also delivered strong, double-digit growth across volumes and retail customers. With many of Flexigroup's retail partners in Ireland also operating in the United Kingdom, this provides a strong optionality for further expansion.
Capital raising
On 26 August, in conjunction with the company's FY20 results, Flexigroup announced a $140 million capital raising to ramp up its strategy under Humm. The net proceeds of the capital raising will be used to provide balance sheet strength to underpin funding of a sustainable growth outlook. The additional capital will further enable investment in enhancements to the customer experience and expansion of business partnerships and alliances. The capital raising had an entitlement offer price of $1.14 which is near the current Flexigroup share price.
Could this be an opportunity for those that missed the Afterpay share price run?
The Afterpay share price has shown a significant amount of strength in recent weeks, cruising past the $80 mark on Tuesday. Investors might be looking to Flexigroup as a cheaper BNPL alternative to make up for a missed opportunity in Afterpay.
While Flexigroup has truly committed to being a BNPL player, I believe its shares are cheap for a reason. The Flexigroup share price has underperformed all its peers in the BNPL space and may not necessarily deliver the explosive growth we've sees from the likes of Afterpay and Zip Co Ltd (ASX: Z1P). While it does appear to be relatively cheaper than its peers, personally I would prefer to invest in the market leading BNPL shares.
