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Money3 share price bounces on positive results

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The Money3 Corporation Limited (ASX: MNY) share price is trading higher today following the release of the lender’s half-year results. Impressive results have driven Money3 shares up 5.17% to $2.85.

Revenue and profit up 

Money3 reported first-half normalised net profit after tax (NPAT) of $15.7 million, up 61.9%. The loan book has grown 48.8% since December 2018 to reach $426.7 million.

H1 FY20 revenue increased 55% over the prior corresponding period (pcp) to $62.7 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) came in 56.4% higher at $30.5 million.

Additionally, earnings per share (EPS) increased 31.3% over the pcp to 8.6 cents, and an interim dividend of 5 cents per share (fully franked) was declared. 

Money3’s business 

Money3 operates in the consumer lending space providing personal loans up to $12,000 and car loans up to $50,000. Money3 acquired Go Car Finance in New Zealand in 2H19, expanding the company’s geographic footprint.

The company reports that it has originated loans for over 500,000 customers with more than $1 billion lent since inception. In Australia, 1 in 500 vehicles have a current Money3 loan while in New Zealand, 1 in 800 vehicles have a current Go Car Finance loan. 

Between FY15 and FY19, revenue grew at a compound annual growth rate (CAGR) of 25%, while EBITDA grew at 30%. Over the same period, the gross loan book grew at a CAGR of 28% with EPS growing at 21%. 

Originations and bad debts 

In H1 FY20, bad debts increased to $9.7 million from $7 million in the pcp, while the impairment allowance increased to $2.8 million from $0.8 million.

Loan originations in the first half of FY20 were $138 million, with Money3 forecasting $137 million in originations in the second half. This would bring total originations for FY20 to $275 million, well up on the $193 million in loans originated in FY19.

Money3 market 

Money3 estimates the annual market for consumer vehicle financing in Australia is worth some $20 billion, with $6.3 billion attributed to used vehicle financing.

The company estimates it finances 3% of the used car market annually, with 4-5 million Australians either not serviced or excluded by traditional lenders. Go Car Finance estimates around 1 million New Zealanders are either not serviced or excluded by traditional lenders. 

Outlook

Money3 is forecasting NPAT for FY20 from continuing operations of more than $30 million and statutory NPAT in excess of $32 million.

The company has $50 million in funding headroom and forecasts the gross loan book will grow to more than $475 million this financial year.

In addition, a 10 cent dividend is predicted for this financial year.

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Returns as of 6th October 2020

Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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