MoneyMe: 1Q22 trading update - A strong start to the year

About the author:

Steve Sassine
Author name:
By Steve 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.

The details

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.

Investment view

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.

Add maintained.

Price catalysts

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.

Risks

Key risks to our Add recommendation include: credit risk, funding risk, competitive threats and any unforeseen regulatory changes/intervention.

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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