Join the club. FM is president and Jimdog is VP. Im the cleaner lol
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You know its going to go up. But when. And what's the low point. I thought 1.50 was a steal and I wouldn't see anything close to it again. But today someone sold their holding on low volume of buyers. Institutions will need to see value before this goes up. 😊
OK, I made a mistake here suggesting that HMY was 'very expensive' trading at 1xRevenue when, as Rawz has pointed out, it is already trading at 2x revenue. Meanwhile the likes of Heartland, trading at $2.45 today, are trading on an historic revenue ratio of:
($2.45 x 589.843m) / $327.935m = 4.4 times
I put my error down to putting all the financial shares that I hold in the "That will do for now" box, while I went off and researched some of my other investments, and I temporarily forgot about some quirks of analysing finance companies and banks.
I see from iceman's post on the HGH thread (post 14,831), that the Heartland 'Net Interest Margin' was 4.35% over FY2021. Now I know that 'Net Interest Margin' (NIM) is not the right thing to truly judge the profitability of a finance company. To do that you have to subtract the non-interest related running expenses as well. But in the case where a finance company is relatively new and growing (like Harmoney), the establishment costs are likely not representative of the longer term non interest running costs of the company. Thus the quoted profit of a rapidly growing company is likely under-reported, relative to where the profit on similar revenue going forwards is likely to end up. In this instance comparing NIMs between established and growing finance companies has some merit.
Returning to Harmoney, I use Ferg's quoted future estimated NIM of 7.0% (post 313)
The Harmoney group loan book was $501m at EOFY2021 while Heartland gross receivables at the same end of year date was an order of magnitude higher at $5 billion.
I find it a strange quirk of finance companies that they don't include the full value of what they sell (in this case the capital value of the loan book) anywhere on the balance sheet. It is clear that with a higher NIM, a given amount of capital lent through Harmoney will attract more in net interest payments than that same amount of capital lent through Heartland. Albeit you might argue that the Harmoney loan is at higher risk of not getting your loan capital ultimately repaid.
Using the gross value of the loan book as 'revenue' produces rather different market value to 'revenue' ratios:
Heartland: ($2.45 x 589.843m) / $5,000m = 0.2890 times
Harmony: ($1.73 x 100.913m) / $501m = 0.3485 times
These were the kind of calculations I was thinking about when I mused that paying "1x Revenue" for a company was too high. In Heartland terms that would mean paying a price of $2.45/0.2890= $8.48 was too high (it would be a very dutiful disciple of Heartland that would disagree with that). In terms of Harmoney, using the same logic, a price of $1.73/0.3485 = $4.96 would be too high. Given the share was floated at $A3.50 or $NZ (3.50/0.93)= $NZ3.76, some here might consider $NZ4.96 a reasonable price target today.
But on my measure of 'revenue', $4.96 would be looking extremely 'toppy'. I guess the real accountants out there will scowl and dismiss my analysis as corrupt. But I am sticking with it.
SNOOPY
Thanks to Rawz, as acting CEO of the Harmoney fan boy & girl club (its a rather small club) I can declare we are prepared to accept a $1 dollar discount off the 4.96 tp (lets call it $4.00) and would be delighted with that as an acceptable target price over the next year or two. hell mate we are sitting here at a buck 70 anything north would be dandy! that said -
beware the WRATH of the SHAZ. When I was looking into HMY I searched for harmoney on the Sharesies share club page. There is some deep resentment from the p2p lenders who used harmoney before HMY rightly moved to a warehouse model and booted individuals. I haven't bothered to see if it was handled well or poorly - it doesn't matter - as the people were very grouchy and shared their grievences loudly and widely amongst the shaz. Couple that with an IPO that was years too early and dollars too high and thats a toxic combination for any retail aftermarket. No matter the run rate, no matter the scalability and the early days of growing npat, will the smaller end of the retail market take notice of harmoney. But if it can keep growing its book, and do so profitably, scaling and rapidly growing its npat, bigger individual retail investors will creep back in. but eventually it will take an insto or two hovering up cheap shares to confirm an uptrend and the broader retail market will return.
The company just needs to deliver EARNINGS. So I hope management are sensible - don't chase unprofitable growth - and show and deliver what the platform can do. Long gone are the days where people just want topline growth and with Harmoney's baggage they absolutely need to deliver those earnings over the next few years.
If they can we have a multibagger on our hands. If they can't - the club will need a new CEO, if there is anyone left