MoneyMe: Finishing the half strong

About the author:

Steven Sassine
Author name:
By Steven Sassine
Job title:
Associate Analyst
Date posted:
02 February 2022, 9:30 AM
Sectors Covered:
Diversified Financials

  • MoneyMe (ASX:MME) released its 2Q22 trading update, which was broadly positive in our view, highlighting the strong underlying momentum of the business despite ongoing COVID disruptions to the wider economy.
  • Originations of A$269m (+290% on pcp, +56% on 1Q22) helped drive the gross loan book to A$590m (MorgansF A$570m), with Autopay flagged as contributing significantly to the growth (now ~26% of the book). 2Q22 Revenue of A$25m (+108% on pcp), takes 1H22 revenue to ~A$48m (above the floor of recent guidance of A$46m)
  • We alter our FY22F/FY23F/FY24F EBITDA forecasts by between -0.4% and +2.0%, with the changes predominantly driven by revised assumptions to our top line estimates post factoring in the quarterly update. Our price target rises marginally to (login to view). Add maintained.

2Q22 update shows growth trajectory continuing

MoneyMe (ASX:MME) has provided a 2Q22 trading update to the market, which continued to highlight the strong underlying momentum of the business and the benefits of its diversified product suite. Unaudited 2Q22 revenue was A$25m (+108% on pcp, +~9% on 1Q22) taking 1H22 revenue to ~A$48m.

Overall, it was another solid quarter from MME, in our view, with origination momentum continuing despite ongoing Omicron disruptions to the broader economy.

Points worth noting

The gross loan book finished the December quarter at A$590m (+252% on pcp and +31% on 1Q22) which was ~4% ahead of MorgansF.

Originations remained robust, with A$269m over the quarter (+290% on pcp, +56% on 1Q22), with Autopay said to be contributing significantly now to this growth (350 dealers and 845 brokers now have access to the Autopay platform). Autopay now makes up ~26% of the gross loan book (vs ~20% at the end of Nov-21).

Also flagged as contributing to the strong originations growth has been the core personal loan product (~37.5% of the book) which management commentary suggests is expected to continue its growth trajectory post the establishment of a broker distribution channel in Nov-21.

With Autopay now making up a greater proportion of the book, the average receivables term is now 47 months (vs 41 months at 1Q22), with the average loan size +28% on 1Q22 to ~A$16.6k.

Asset quality appears in check with net charge-offs at 4% for the quarter, while the average Equifax score of its customer cohort has risen to 672 (vs 658 in 1Q22). 

Post the MME EGM today, the SocietyOne acquisition remains on track for completion in mid-March 2022.

Forecast and valuation update

We alter our FY22F/FY23F/FY24F EBITDA forecasts by between -0.4% and +2.0%, predominantly driven by changes to our top line estimates factoring in the quarterly update. 

Our DCF-derived target price increases slightly to (login to view) on the above changes.

Investment view

In our view, MME continues to deliver strong organic book growth and 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 1H22 result on 22 February 2022 as well as the final conditions being met for the SocietyOne acquisition, which is expected to complete on 15 March 2022.

Risks

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

Find out more

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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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