HMY-Harmoney

[Shareguy]

Has been on my watch list for sometime. Have never been a holder. The share price has continued to drop. My share broker says don't touch it. The current price is a huge drop from the listing price.

The Australian side seems to be doing well making up for the low growth in NZ. Unsecured loans and the potential recession concerns me though.

Insert from nbr today

The latest facility meant Harmoney had now almost fully transitioned away from being a peer-to-peer lender, Stevens said.

"Within a short span of three years, we have accelerated this to be over 90% warehouse-funded."

Harmoney now has total warehouse facilities of $950m, of which $330m remains undrawn. The new facility provided a lower cost of funding to optimise growth, he said.

The December changes to New Zealand's Credit Contracts and Consumer Finance Act (CCCFA) had affected all consumer financiers, Harmoney said in April.

"The government is currently reviewing the impact of these changes on lenders, and intends to make further changes to curb any unintended consequences," it told the market.

Harmoney's model supplies unsecured personal loans of up to $70,000 entirely online.

In February, Stevens said Harmoney had done a lot of work on its systems to prepare for the CCCFA changes.

"But, obviously, there are some things that have occurred in the changes that weren't ideal and everyone's grappling with that."

Growing Australian book

Harmoney's Australian business is set to overtake its New Zealand lending in 2022, the company has said.

Australian new customer originations were up 218% in the March quarter, compared with the same time last year.

However, New Zealand new customer originations were down 7% in the same period.

[jimdog]

Did your broker articulate his reasons why?

[Shareguy]

All he said some time ago, was he new someone who worked their.  I did not go into it anymore than that. 

[Plata]

Pretty strong growth in todays update, recession fears aside it is looking pretty attractive at the current price. Even NZ originations had decent growth, and Australian originations over 100% growth. Arrears still at historic lows which is interesting, wonder if the magic algo can sustain that in a recession 

[lorraina]

Just love the NIM.[net interest margin]
My history in the book trade installed into me the importance of margins.
Time and space spent in low margin business was the cause of most book shop failures.
The old saying "why bother" saved me a lot of wasted time and effort.
Banking and most businesses the same principals apply.

[Plata]

It does bother me slightly that they say "cash NPAT profitable" but don't quantify how much. They need to get as much positive news out there as possible and leaving it vague like that just causes doubting of the growth story. I'm not a holder but would like to be, only thing causing my hesitation is recession fears. I imagine that their algo is a form/makes use of a neural network, and neural networks are only as good as their training data. If their algo has been trained on data from good times it might do pretty poorly during bad times, especially if whatever patterns it discovers in the good times do not hold true during bad times.

[winner (n)]

Share price on fire today - rewarding the great numbers

Back to 2 bucks before we know it

[Plata]

"Harmoney also operates with a positive statutory cash flow from operations. Harmoney also holds
unrestricted cash at bank of $35m at 30 June 2022, up $3m from 31 December 2021."

This statement continues to bother me. Are they implying that this 3 million was akin to free cash flow?

After the come down from the market update this is looking extremely tempting as a high risk high reward play. Even if the AUS loan book growth slows from here on, it would be slowing from such a high base (over 100%) that it would hardly matter. Now that they are "cash flow positive" they just need another decent year and this will start seriously printing money.

[Basil]

Caution is warranted with this high risk company in my opinion.  The trend is not your friend, just bring up a graph and have a good look..  From my days in the GFC as an investor in some finance companies unsecured lending in a recession ends very badly.  Just ask investors in finance companies that lost $6 Billion during and after the GFC !

I know they will have written sophisticated front end software programs to sort the wheat from the chaff but all they have as security is people's credit rating and if I am right we are facing an unprecedented cost of living crisis.  I think FY23 and FY24 is where the rubber meets the road and we find out if their margins are sufficient to cover loan defaults.

If they can get through the next 2 years successfully and profitably I would say their systems have a pretty good chance of working going forward from there.
Seeing as the share price has halved this year the market seems to be rating them a 50/50 chance of success which seems about right to me but I am too old and well fed to bother gambling on what appears to be little better than backing red or black on the roulette wheel.

I guess for punters that are determined to have a flutter they could shift the green zeros on the roulette wheel in their favour by carefully following the TA and waiting for the confirmed downtrend to end and placing their bet when there's a break up through the 100 day moving average into a confirmed uptrend, (assuming that ever happens which is not necessarily a safe assumption by any means).  More cautious punters might have a half sized bet on a 100 day MA upwards break and put the rest of the flutter on when it breaks up through the 200 day MA.

In the meantime staying out and letting the well established downtrend play itself fully out makes profound common sense in terms of capital preservation and risk management to me.   

[winner (n)]

Basil ....HMY have a high NIM so no real worries

[Basil]

That's what about four dozen finance companies that collapsed thought in the GFC as they flushed six billion of investors money down the toilet..  Just as well this time it's different...or is it ?

[Plata]

That's what about four dozen finance companies that collapsed thought in the GFC as they flushed six billion of investors money down the toilet..  Just as well this time it's different...or is it ?

This time will be different, an artificial intelligence will be doing the flushing

[Basil]

This time will be different, an artificial intelligence will be doing the flushing

All those finance companies that failed in the GFC thought they had robust credit checking and lending procedures designed by very smart people.

Wonder who wrote all the software programming, protocols and algorithm's driving that A.I. ?  I suppose they are very smart people too.  Hope they're not young bucks that weren't even around in the GFC so never had the chance to learn from the school of hard knocks.

Clearly the market thinks this time its going to be different...opps hang on a minute, maybe it doesn't ?

[winner (n)]

"I visualise a time when we will be to robots what dogs are to humans, and I'm rooting for the machines." ....somebody I've forgotten

Supposedly got some hidden meaning re AI

[Auto Rower]

"I visualise a time when we will be to robots what dogs are to humans, and I'm rooting for the machines." ....somebody I've forgotten

Supposedly got some hidden meaning re AI

I was hoping robots will be the new dogs & do the bidding of lazy humans as they worry about global warming  credit checks & woke liberalism etc.