HMY - Harmoney Corp Limited

[Rawz]

The Harmoney investor day https://www.nzx.com/announcements/383470 made for good reading I thought.

With an avg loan book of AU$481m producing break even cash EBITDA they forecast a AU$1B book will generate AU$45m cash EBITDA.

Currently has a market cap of AU$186M.

Its all down to Aussie. They need to pump the numbers over the next few qrts to put a rocket under this SP.

See not much downside from here but lots of upside

[Muse]

Yeah I rather like the look of this - now has a place in my portfolio. Attended the AGM today and thought the investor update the other day had some good background on their technical capabilities and operating leverage. Some of my observations, certainly not advice, on how I am starting to see things.

Took me a bit of time to get my head around things but I've now dipped in a handful of times. The original sin from the IPO was they did it two years too soon! Kiwi's couldn't get their head around it (and got confused with the old P2P model which was never going to make them much money), the Aussies had fintech IPO fatigue, what limited volume there was got split across two exchanges, and the financials are messy (statutory, proforma excluding the old P2P model, & normalised for IPO and one off expenses including the borrower origination rebate which got a lot of negative press) - Jarden & Ord. read the market sentiment badly. But operationally the business has gone well post float and the run rate in originations is deeply impressive, debt metrics are all going the right way, a shift to a warehouse funded model is nearly complete, and the company is rapidly reaching scale & cash npat profitability. I'm not a big early stage person but I do like fintech and particularly in Australia. I think its well clear there is a structural shift in personal lending going online and that accelerated post covid with the uptake in ecommerce and banks closing branches. The TAM is massive, online penetration is tiny and there is actually a strong and identifiable shift to online lending, particularly in Australia. I've looked at some of their technical staff and talked to a few people in the know who give Harmoney good technical creds.

[Rawz]

Great post FM.

The IPO probably was ill timed, but hey- that has given us all a great opportunity.. When looking for value HMY must surely be worth some portfolio allocation, even if its 2%. Because its cheap as chips compared to its pairs. And whoever wins this direct to consumer race will be getting a 10 bagger... as $2b market cap isnt going to be unreasonable for a company that has say 5% of the total addressable market (AU$169 billion)

I had a small stake at the end of FY21 and then added much more after FY22 Q1 results. It was very pleasing to see them keep the tap on during the lockdowns. And write a new record originations.

I think you an Jarden's are being too conservative and I reckon they can hit $1b loan book by Q3 FY24. To do that they need to grow the book 5% a qrt. They will be doing that right now in order to hit their guidance of $600m book by years end. The aus book is currently growing 15-18% per qrt and soon its numbers will swap the NZ book so its really not unreasonable to expect 5% or higher qrtly growth.

Top competitor is PLT.asx. I actually reckon they have a better name but Harmoney has the better model imo

[Muse]

Great post FM.

The IPO probably was ill timed, but hey- that has given us all a great opportunity.. When looking for value HMY must surely be worth some portfolio allocation, even if its 2%. Because its cheap as chips compared to its pairs. And whoever wins this direct to consumer race will be getting a 10 bagger... as $2b market cap isnt going to be unreasonable for a company that has say 5% of the total addressable market (AU$169 billion)

I had a small stake at the end of FY21 and then added much more after FY22 Q1 results. It was very pleasing to see them keep the tap on during the lockdowns. And write a new record originations.

I think you an Jarden's are being too conservative and I reckon they can hit $1b loan book by Q3 FY24. To do that they need to grow the book 5% a qrt. They will be doing that right now in order to hit their guidance of $600m book by years end. The aus book is currently growing 15-18% per qrt and soon its numbers will swap the NZ book so its really not unreasonable to expect 5% or higher qrtly growth.

Top competitor is PLT.asx. I actually reckon they have a better name but Harmoney has the better model imo

Given us an awesome opportunity! This is one of the few early stage companies with a good risk/reward profile, I reckon.

[Rawz]

If anyone is unsure on HMY’s business model I highly recommend you spend some time watching the investor update (link below) which clearly explains how HMY differs from the banks and other personal lenders by partnering with google and using machine learning/ AI to attract only the highest value customers.

https://www.nzx.com/announcements/383827

Google even features HMY globally as a leader in their field. “Harmoney has one of the most advanced digital marketing models in Australia and New Zealand, if not the world”.

Best way I can describe it is; HMY will outbid other lenders on google ad’s for the customers they want, this is based on their AI (Stellare) and the many different data points it has analysed over many hundreds of thousands of accounts. Google will send them the customers, loans will be written, Stellare will then measure the performance of the loans and go back to google with a refined request. It is a continuous feedback loop getting better and better.

Harmoney.JPG



Another cool stat they gave was when the expanded into the Aussie market they only hired two extra employees. The model is clearly scalable

[whatsup]

F M, did you see the Jarden report, very great depth and well researched ?

[Muse]

F M, did you see the Jarden report, very great depth and well researched ?

Not sure which particular one you are referring to but yeah I get them. They've done about 4 since july - mosty short pieces updating on quarterly run rates and a note post the investor presentation released a few weeks ago where management gave an indicative model. They did an initiation of coverage report which is always the largest most comprehenive one as soon as they come off the restricted list but since then more ad hocs - ranging from 1 to 3 pages as they tweak their forecasts etc. Most recently had a spot price valuation of NZ$3.07 and 12m TP of $3.42 kiwi.

Their first report got some notoriety as their as their assessed target price was less than the IPO price that the Jarden/Ord investment banking teams undertook. probably a few conversations about that

[whatsup]

Not sure which particular one you are referring to but yeah I get them. They've done about 4 since july - mosty short pieces updating on quarterly run rates and a note post the investor presentation released a few weeks ago where management gave an indicative model. They did an initiation of coverage report which is always the largest most comprehenive one as soon as they come off the restricted list but since then more ad hocs - ranging from 1 to 3 pages as they tweak their forecasts etc. Most recently had a spot price valuation of NZ$3.07 and 12m TP of $3.42 kiwi.

Their first report got some notoriety as their as their assessed target price was less than the IPO price that the Jarden/Ord investment banking teams undertook. probably a few conversations about that

Their one covering the 31st Aug result, youve got it, hind sight is a wonderful tool, did jarden bid for the IPO. hmmmmm ! ?

[Muse]

Their one covering the 31st Aug result, youve got it, hind sight is a wonderful tool, did jarden bid for the IPO. hmmmmm ! ?

ah yeah i read that one. it was only 4 pages on content but succinctly got across it all. I hope as originations kick in and if interest in the stock starts rising again they will pick up the pace a bit with more comprehensive reports

[Rawz]

But before they do it is a great opportunity for the avg retail investor to pick some up at a dirt cheap price!