MoneyMe: Trading update shows continued growth

About the author:

Steve Sassine
Author name:
By Steve Sassine
Job title:
Associate Analyst
Date posted:
07 December 2021, 8:00 AM
Sectors Covered:
Diversified Financials

  • MoneyMe (ASX:MME) released a brief trading update for the first two months of 2Q22. It was a broadly positive update which highlighted continued originations growth (A$170m in the first two months vs A$172m total in 1Q22).
  • The gross loan book of A$542m (+~20% on 1Q22) is made up of a larger proportion of receivables from the fast growing Autopay product (~20% of the book vs ~10% last quarter).
  • We lower our FY22F-FY24F EPS forecasts by ~3%-16% with slight increases to our revenue forecasts offset by revisions to our short-term expense and margin assumptions. Our target price reduces slightly to (login to view) on the above changes. Add maintained.

Trading update

MME released a brief trading update covering the first two months of 2Q22 (Oct/Nov).

In our view, it was a broadly positive update that showed continued growth in key business metrics, which included: originations growth momentum (A$170m); a gross loan book of A$542m; and 1H22 revenue guidance of greater than A$46m.

Further details

Oct/Nov had A$170m in originations (+286% on pcp) and is already broadly in line with the total 1Q22 performance of ~A$172m.

The gross loan book grew ~20% on 1Q22 (A$452m) and 63% from FY21-end to be at A$542m. Management stated that 1H22 revenue is expected to be greater than A$46m (MorgansF 1H22F ~A$48m).

Additional commentary was also provided on Autopay. The Autopay product continues to gain traction with A$68m of loans originated over Oct/Nov and a loan book at end of Nov-21 of A$111m.

Dealerships/brokers are continuing to onboard and management pointed to a “faster than expected take-up from car purchasers”. The Autopay product now makes up ~20% of the gross loan book (vs ~10% in 1Q22), highlighting the rapid growth of the product.

Further details

We lower our FY22F-FY24F EPS forecasts by ~3%-16% with slight increases to our revenue forecasts offset by revisions to our short-term expenses and margin assumptions.

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

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 2Q22 trading update in Jan-22 and its 1H22 result released 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.


Solid top-line outcome: BAP’s 1Q22 revenue was flat on the pcp, an extremely resilient result given the extent of lockdowns in the period (~70% of stores impacted) and the strength of the pcp (cycling 27% growth). Composition comprised: Trade +2%; NZ -10%; Retail -12%; and Specialist Wholesale +7%. Overall, BAP stated that non-lockdown areas are outperforming expectations. ▪ 1Q22 trade & retail: Trade/Burson revenue was up +2% on the pcp (LFL sales - 1%; cycling 8% pcp); NZ/BNT revenue was down -10% (LFL sales -15%; cycling +4%); and Retail/Autobarn revenue was down -12% (LFL sales -16%; cycling +36%). Within the Retail segment, online sales were +80% on the pcp. Stores percentages impacted by lockdown were: Trade 70%; NZ 100%; and Retail 50%. ▪ Specialist segment results: Specialist wholesale revenue is up 7% on pcp, with Auto electrical/Truckline divisions ‘performing strongly’; and WANO underperforming. ▪ GM pressure expected to be temporary: BAP stated GM was stable across Wholesale and NZ (45% of FY21 revenue); and down ~50bps Trade and Retail (~55% of FY21 revenue), driven by promotional and online pricing in lockdown areas (we assume no margin pressure witnessed in non-lockdown areas). BAP expect margins to revert once lockdowns ease. ▪ The cost base has increased vs pcp, a function of duplicated DC costs (commencement of new VIC DC), and higher group and team member support (covid related) costs. BAP noted FY22 store rollouts and refurbs are on track.

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