Main Menu

HMY-Harmoney

Started by Shareguy, Jun 30, 2022, 07:24 AM

Previous topic - Next topic

0 Members and 1 Guest are viewing this topic.


Plata

So if losses are ~4%, is that reflected in NIM? IE is NIM after those losses?



lorraina

RIM CAPITAL: Initiation: New platform. New outlook

Read Trim Capital Group's research report on Harmoney (ASX: HMY), published on July 29th 2024.

Trim Capital Group is an independent Australian advisory and asset management firm specialising in corporate advisory, equities, and private lending.

Initiation: New platform. New outlook
Harmoney is a warehouse funded personal lender, distinct from incumbent
lenders by its 100% direct to consumer, highly automated digital platform, Stellare.
We initiate on Harmoney with a valuation of $1.42.
Key Takeaways
Proven and resilient business model: Demonstrating profitable growth on a cash
basis during the 4 consecutive half-years, while maintaining a 9-10% NIM (Net
Interest Margin) and 5-6% RAI Yield (Risk Adjusted Income / Average Gross Loans),
has evidenced that Harmoney's model is resilient to tightening credit conditions.
Diversified funding with plentiful headroom: Harmoney has warehouse facilities
provided by 3 of the 'Big 4' banks with $246m in available funding, indicating the
capacity for a ~33% expansion from its 3Q24 ending loan book of $757m.
Solid balance sheet with no forecast equity raise: Harmoney finished 1H24 with
unrestricted cash on hand $20.7m and a $30m corporate debt facility with $7.5m
of undrawn financing to support growth expenses.
Earnings and Valuation
Valuation suggests 263% upside: Our primary valuation method is a general
residual income model, which we cross check with a theoretical book multiple.
Using a cost of equity of 11.75%, we initiate on Harmoney with a price of $1.42.
Approaching 20% Cash ROE run-rate in late FY25: Our forecasts are broadly
consistent with managements' guidance of Harmoney nearing a 20% Cash ROE run-
rate in late FY25, with forecast generation of $8.1m in of Cash NPAT in FY26 and on,
on a stable $43m average equity driven by capital structure optimisation with
utilisation of the upsized corporate debt facility.
Investment Thesis
Peer leading Risk Adjusted Income (RAI): Automatically generated, personalised
risk-adjusted interest rates enable a peer leading RAI yield, despite having the
smallest loan book. We highlight this as a pivotal driver of forecast profitability.
Direct to consumer approach creates annuity income streams: Harmoney's self-
service, automated platform creates recurring revenue streams once a customer is
acquired, with near zero acquisition costs for returning customers – who in 1H24
represented 32% of Australian originations and 57% of New Zealand originations.
Catalysts and Risks
Roll-out of Harmoney's next gen proprietary lending platform: Harmoney
launched the 2nd generation of their platform in 1H23, with broader roll-out
continuing in FY25. We forecast this to accelerate growth and profitability via
enhanced customer experience, and the capability to launch new credit products.
Risk to the Investment Thesis: Being a finance company, Harmoney has a range of
risks applicable including macroeconomic conditions, liquidity and funding risks,
credit risk, fraud, cybersecurity, asset-liability mismatch and compliance risks.
Harmoney is a warehouse funded personal
lender, distinct from traditional non-bank
lenders by its 100% to consumer, digital
distribution model. Harmoney's current
portfolio of credit products include
unsecured and secured personal loans up to
$70,000, for purposes including debt
consolidation, business loans, wedding
loans, medical expenses, holiday loans and
education loans.
https://www.harmoney.com.au/
Key Data
Valuation (A$) 1.42
Current Price (A$) 0.39
Market Cap (A$m) 38.7
30 Day Average Turnover (A$m) 0.01
Trim Capital forecasts
FY Year End 23A 24E 25E 26E
Cash NPAT (m) 4.7 1.0 2.9 8.1
EPS Cash (c) 4.7 1.0 2.8 7.9
EPS adj gwth 2593% -78% 172% 185%
Cash PE adj (x) 9.8 10.8 11.8 12.8
DPS (c) 0.0 0.0 0.0 0.0
Div yield (%) 0% 0% 0% 0%
Cash ROE (%) 8% 2% 6% 19%
PB (x) 0.7 0.8 0.9 0.9
12- Month Relative XAO Performance
Glen Wellham, Senior Analyst
glen.wellham@trimcapital.com.au
Isaac Meincke, Analyst
isaac.meincke@trimcapital.com.au



TGB

From Forsyth Barr:

Harmoney's (HMY) 1Q25 trading update showed robust performance across key metrics, driven by the implementation of its Stellare® �������2.0 lending platform in the Australian market. Loan book growth, net interest margins (NIM) and credit losses are all tracking in line with, or slightly ahead of, our expectations for FY25. Additionally, HMY's cost-to-income ratio (which fell to 21% in 1Q25 from 24% in FY24) continues to decline faster than anticipated. The outlook for the remainder of FY25 appears positive, underpinned by >+50% growth in Australian new customer loan originations in 1Q25 versus 1Q24. The growth in originations should support an acceleration in loan book growth in 2H25, and ultimately, HMY's target of a 20% cash ROE run rate in 2H25. HMY has total warehouse capacity of over A$900m to facilitate growth, with its loan book currently A$769m. We increase our short-term earnings expectations to reflect marginally improved NIMs and management efficiency. Long-term forecasts are largely unchanged and our blended spot valuation rises +5cps to A$1.29.

Plata

So the reason for net assets declining YoY and negative NPAT is due to them making immediate impairments of a few % of each new loan right? And the idea is we are supposed to look past this because it is a symptom of a growing loan book? How do you explain the loan book barely growing from FY23 to FY24 yet NPAT is still deeply negative, but somehow "cash npat positive"?

Forrestdun

My understanding is that they wrote off stellar 1 intangible assets of around $10 million

Scooter

I'm guessing no holders here anymore 😉.  Wondering what the latest results will show since they don't seem to be provided a update like they normally would around now