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Why the Money3 (ASX:MNY) share price is up 87% in 6 months

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The Money3 Corporation Limited (ASX: MNY) share price is closing in on pre-COVID-19 levels with an 87% increase since March lows. The Money3 share price jumped up 4.44% yesterday and is trading higher again today at $2.87.

Let’s take a closer look at the company and its share price trajectory.

What’s moving the Money3 share price?

Money3 a non-bank lender operating in secured subprime automotive loans. The company yesterday announced positive first quarter results and a new low cost warehouse securitisation facility expected to save it more than $10 million per year.

New funding facility

The lower cost warehouse facility will start with $250 million from international bank Credit Suisse Group AG (NYSE: CS). Money3 intends to use the facility to help achieve its goal of a $1 billion loan book. The company will also use it to increase market share in both automotive sectors.  In addition, Money3 will be able to offer loans in car repair finance.

Money3 CEO Scott Baldwin, said:

The new funding facility positions Money3 in the strongest position in our history to continue the growth of the Australian loan book. We are delighted with the flexibility and incremental funding this provides for our growing Australian operations.

This facility reflects the quality of our existing loan book and operations, providing significant validation from what is a globally recognised A+ rated bank.

First quarter highlights

In first quarter results, Money3 saw its revenues increase by 12.3% against the previous corresponding period (pcp). Consequently, statutory net profits after tax (NPAT) also increased by 33.3% pcp. This is a continuation of the solid results delivered in the company’s FY20 annual report, despite the pandemic. 

In presenting the results yesterday, Mr Baldwin highlighted the cash collections and improving credit quality. This rose by 31.1% pcp and is attributable largely to government stimulus, and the superannuation capital release in Australia.

Following the easing of Victorian COVID-19 lockdown restrictions, new loan originations continue to improve. In fact, October 2020 produced more loan book growth than the first three months of FY21. Moreover, November 2020 has started with good results and the company loan book now exceeds $456m.

Mr Baldwin referenced the demand for second-hand cars, and the rise in second-hand car prices. He acknowledged that car loans in the subprime sector may increase by an average of $1000 per loan in the short term.

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Motley Fool contributor Daryl Mather 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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