MoneyMe Ltd (ASX: MME) is a digital consumer credit business leveraging its technology platform and big data analytics to deliver an innovative loan offering to tech-savvy customers. The company generates revenue primarily through its personal loan product and freestyle virtual credit product.
The company had an IPO offer price of $1.25 per share and a market capitalisation of $211.8 million at the offer price. Its share price closed on Friday at $1.52, which would represent a ~20% return for those that participated in the raising.
MoneyMe products
The company's personal loan service provides customers with a loan between $2,100 to $25,000, with a loan term of 3 months up to 3 years. An establishment fee is charged on the origination of each loan and it employs risk-based pricing with an annual simple interest rate range of 8.99–29.99%.
Its freestyle virtual credit account allows access to $1,000 to $10,000 as a revolving line of credit. Users can tap n pay in-store, shop online and send money to banks with up to 35 days interest-free on purchases.
Financial metrics
The company grew its revenue in FY19 by 32.3% to $31.9 million and reported a net loss of $1.6 million. MoneyMe forecasts that revenues will grow by approximately 43.5% in FY20 to $45.8 million and a maiden profit of $1.1 million. Over the last 3 years, the lender has experienced a 49% compound annual growth rate (CAGR) in its gross loan book size from FY17 to FY19 and 42% CAGR revenue.
Growth in 2020 and beyond
MoneyMe believes that there is a significant change in customer preferences, including the emergence of a digital native generation as borrowers, alongside increased scrutiny and regulation arising from the Banking Royal Commission. MoneyMe is one of a number of new technologies disrupting the consumer credit sector and driving the recent decline in traditional lenders such as Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC).
The company's Horizon Technology platform allows it to roll out additional products such as its recently launched "ListReady" – a real estate product that provides a payment solution to vendor listing and property marketing costs.
The MoneyMe prospectus also stated that the consumer credit market is in excess of US$4 trillion in the US and presents an attractive market opportunity for MoneyMe. It expects to establish a beta version of MoneyMe in the US market, which will be completed in FY21.
Foolish takeaway
MoneyMe represents one of many fintech players that are chipping away at the traditional lending market dominated by the big four banks. The company should continue to experience success from its digital credit products and innovation to payment solutions in various sectors.
Its valuation is neither expensive nor cheap, in my opinion, but its focus is on delivering a maiden profit and potentially expanding into the US market.
