Moelis Australia has slapped a 'Buy' rating on WISR Ltd (ASX: WZR) stating that new initiatives point to a Q4 ramp up. Moelis has a 28 cent price target on Wisr, which is currently trading at 17 cents.
Expanding ecosystem
Following the release of Wisr's half-year results, Moelis opined that the Wisr Ecosystem is expanding nicely. Some 125,000 customers use the Wisr App or WisrCredit, up 104% from 61,500 at June 2019. According to Moelis, a large proportion of these customers likely have high purchase intent.
Revenue increasing
Wisr reported revenue of $2.2 million for 1H20, up more than 80% year-on-year but slightly down from Moelis' estimate of $2.4 million. According to Moelis, the difference was due to the upfront recognition of three years of share-based payments for the incentive plan ($4.6 million impact), new accounting treatment for expected credit losses ($0.9 million impact), and higher employee expenses ($0.5 million impact). Moelis is predicting FY20 revenue of $7.5 million and FY21 revenue of $26.8 million.
Expenses also up
Wisr's expenses increased to $15.17 million during 1H20, up from $4.67 million in 1H19. The increase was attributed to increases in staff and marketing costs to $4.3 million and $1.7 million respectively, incurred as Wisr continues its growth strategy of rolling out the Wisr Ecosystem. Wisr reported a loss of $12.9 million for 1H20, and Moelis predicts that Wisr will record losses before tax of $20.7 million in FY20 and $12.4 million in FY21.
Growth initiatives on track
Moelis reports that Wisr's growth initiatives appear to be tracking well. These include auto loans, partnerships, Wisr App, and Wisr Credit. Wisr successfully piloted secured vehicle finance during the first half, with these loans to be rolled out across Wisr distribution channels in Q4.
Wisr is already generating strong growth in unsecured loans through its broker, direct, and paid digital channels. The company reported $54.9 million in originations in the half, a 90% increase over 1H19 and a 35% increase over 2H19. Total loan originations were $163.8 million at 31 December 2019.
Loan originations increasing
Wisr hit the $150 million loan origination mark in November 2019, with the initial $50 million taking 45 months to write, the second $50 million taking more than 8 months, and the most recent $50 million written in less than 6 months. The total loan book was $114 million at the end of 2019. This includes $89.6 million in off-balance sheet loans which are serviced by Wisr.
New funding model
The company recently transitioned to a warehouse funding model which approximately triples average margin compared to previous loan unit economics. The warehouse funding facility is backed by National Australia Bank Ltd. (ASX: NAB) and replaces the off-balance sheet wholesale funding model which had been in place since Q2FY18.
Foolish takeaway
Wisr is reporting strong growth in loan originations and revenues as the expanding Wisr ecosystem comes to fruition.
