MoneyMe: Acquisition completes
About the author:
- Author name:
- By Steven Sassine
- Job title:
- Associate Analyst
- Date posted:
- 17 March 2022, 8:30 AM
- Sectors Covered:
- Diversified Financials
- With the recent announcement of the successful acquisition completion of SocietyOne (Soc1) by MoneyMe (ASX:MME), we update our numbers to include the recent result and take the opportunity to review longer term growth assumptions for the combined business.
- With the majority of key metrics known at the last quarterly update, there was little surprise in MME’s 1H22 result. Revenue of A$48m was up ~100% on pcp with a closing gross loan book of A$590m (+252% on pcp). Continued strength in Autopay originations was a key highlight in our view (now 26% of the book).
- We lower our FY22F/FY23F EBITDA estimates factoring in the first half result as well as higher impairment expenses (accelerated loan growth leading to higher upfront provisioning).
- Longer term, we remove some conservatism from our top line growth assumptions post the acquisition settling. Our target price is lowered to (login to view) factoring in the above changes. Add maintained.
Post the successful completion of MME’s acquisition of Soc1, having previously already factored in the acquisition, we update our forecasts to include the recent MME result and take the opportunity to review our longer term top line and margin assumptions for the combined business.
With 88.7% of Soc1 shareholders electing MME scrip, consideration payable represents ~67m MME shares and a $15m cash component (paid via recent $25m upsize in the PEP facility). Soc1 shareholders now represent ~28% of MME.
As a reminder, the acquisition will see MME’s pro forma gross loan book grow 68% to ~A$1bn (assumption being off-balance sheet loans are brought on balance sheet). Other potential benefits include:
- A$17m of pre-tax cost synergies (from FY24) gained through rationalisation of duplicate functions, systems, premises etc;
- Incremental opportunities for lower funding costs via accelerated securitisation (lower funding costs offsetting potential base rate increases);
- Over A$15m of pre-tax revenue synergies from FY24; and
- The cross sell of MME’s extensive product suite into the Soc1 customer base should be supportive of continued origination growth.
Rundown of the result
MME’s 1H22 revenue of A$48m was up 101% on pcp and ended the half with a gross loan book of A$590m (+252% on pcp). Management’s cash NPAT (adjusts for upfront provisioning, gross losses and one-offs) was up ~43% on the sequential half to ~A$10m (stat loss of ~A$19m).
Other details to note include: 1) provisioning reduced from 7.9% at 2H21 to 7.5% in 1H22 as macro conditions improved and MME originated into a higher credit quality cohort (average Equifax score now 672 vs 650 at FY21); 2) average funding cost for the half was 5.3% (down from 8.7% in the pcp), with a closing funding cost rate of 4.5%; and 3) Autopay continues its rapid growth, now making up 26% (A$155m) of the loan book.
Forecast and valuation update
We significantly lower our FY22F/FY23F EBITDA estimates (>80%) factoring in the first half result as well as higher impairment expenses (accelerated loan growth leading to higher upfront provisioning).
We remove some longer-term conservatism from our top line growth assumptions post the acquisition settling and assume greater operating leverage emerging from FY24 onwards as synergies emerge.
Our DCF-derived target price is lowered to (login to view) factoring in the above changes.
MME continues to deliver strong organic book growth by utilising its existing innovative products targeting niche under-serviced markets.
This diverse product suite now combined with the complementary customer base of SocietyOne has the potential to further drive top line growth for the newly combined group. Add maintained.
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