MoneyMe: 1Q22 trading update - A strong start to the year
About the author:
- Author name:
- By Steven Sassine
- Job title:
- Associate Analyst
- Date posted:
- 19 October 2021, 8:30 AM
- Sectors Covered:
- Diversified Financials
- MoneyMe (ASX:MME) released its 1Q22 trading update, with record originations/revenue and the continued growth of the Autopay product the key highlights in our view.
- Quarterly originations were up ~8% on 4Q21 at A$173m, with revenue of A$23m up ~21% sequentially. Helping to fund this accelerating growth, MME announced an increase to its existing major bank warehouse facility to A$426m.
- We lower our FY22F/FY23F EPS by ~3% and increase FY24F EPS by ~8% on revised revenue and margin assumptions post today’s update. Our DCF-derived price target increases to (login to view) on the aforementioned changes.
1Q22 trading update – key A$1bn originations milestone reached
MoneyMe (ASX:MME) released its 1Q22 trading update which highlighted the continued accelerating growth across its diversified product base. It was a strong quarter overall, in our view, with record originations and revenue whilst asset quality remained stable.
MME also reached A$1bn in originations since its 2013 inception.
1Q22 saw originations of A$173m (+283% on pcp and +~8% on the previous 4Q21 record). Whilst the Personal Loan and Freestyle products still made up the majority of quarterly originations, management commentary highlighted the significant growth in the Autopay product as a performance highlight (A$37m in originations vs A$6m in 4Q21).
The gross loan book grew 227% on pcp (+36% sequentially) to A$452m. The growing diversified product suite offered by MME is beginning to show in its book, with MME+ and Autopay now making up ~13% of gross receivables at quarter-end.
Revenue for the quarter was A$23m (+92% on pcp and +26% sequentially), which looks on pace to reach our 1H22 estimate of ~A$47m. With the addition of Autopay and increased funding capacity, the average receivables term and size increased to 41 months (4Q21 = 37 months) and A$12.9k respectively (4Q21 = A$10.2k).
On asset quality, the performance appeared broadly stable with net charge-offs remaining unchanged quarter-on-quarter at 5.4%, with COVID deferrals minimal at 0.2% of the gross book.
On funding, post the recent A$50m 4-year secured loan from PEP, MME has upsized its warehouse facility to A$426m (previously A$338m), with both the mezzanine and senior notes increased. The increase is well timed, in our view, given the strong underlying business momentum.
Forecast and valuation update
We lower our FY22F/FY23F EPS forecasts by ~3% and increase FY24F by ~8% on revised revenue growth and margin assumptions post today’s update.
Our DCF-derived price target increases to (login to view) on the above-mentioned changes across our forecast period.
In our view, MME continues to deliver strong book growth and we believe its new, innovative product suite, targeting niche under-serviced markets has the potential to further drive top-line growth.
Potential upcoming events/news that may prove to be catalysts include: MME’s AGM on 23 November 2021; its 2Q22 trading update in Jan-22 and it’s 1H22 result in Feb-22.
Key risks to our Add recommendation include: credit risk, funding risk, competitive threats and any unforeseen regulatory changes/intervention.
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