HMY - Harmoney Corp Limited

[whatsup]

But before they do it is a great opportunity for the avg retail investor to pick some up at a dirt cheap price!

Slim pickings without pushing the price up, but that has happened over the last few months and it settles back to current prices, however I have managed to purchase, patience is the word imo.

[Rawz]

Slim pickings without pushing the price up, but that has happened over the last few months and it settles back to current prices, however I have managed to purchase, patience is the word imo.

Yes very very hard. I have been buying $500 a day on avg since Q1 which seems to work.

Not sure what some of you investors with hundreds of thousands/ millions in portfolio size will do, if you want a piece of this fintech. Guess just push that price up :t_up:

I'm expecting Q2 results for Aus to be $62m in originations. 24% UP on Q1 and 130% up on PCP.
Aus Loan book to be a $182m, 18% up on Q1 and 81% up on PCP.

[Muse]

Yes very very hard. I have been buying $500 a day on avg since Q1 which seems to work.

Not sure what some of you investors with hundreds of thousands/ millions in portfolio size will do, if you want a piece of this fintech. Guess just push that price up :t_up:

I'm expecting Q2 results for Aus to be $62m in originations. 24% UP on Q1 and 130% up on PCP.
Aus Loan book to be a $182m, 18% up on Q1 and 81% up on PCP.

Putting some ink on paper there - I like it.

[whatsup]

A share that is flying under the radar here in N Z owing to the mispricing of the IPO imho, not good from the fish heads !!

[Rawz]

https://www.nzx.com/companies/HMY/announcements

CEO and Chief product officer buying shares on market. Reasonable amount.

Its all starting to fall into place now :cool:

[thegreatestben]

Have dropped out of my ANZ holding, looking to move into HMY. Managed to pick up a few today.

[Muse]

Have dropped out of my ANZ holding, looking to move into HMY. Managed to pick up a few today.

...........

[thegreatestben]

Got my fill, sellers showed their cards if I went first :)

[Rawz]

Patience required with this one. Excellent entry point at these levels if this type of stock tickles your fancy

[nztx]

Patience required with this one. Excellent entry point at these levels if this type of stock tickles your fancy

I'm interested in what sort of exceptional results HMY can tickle up for us :)

If they're really really exceptional, then who knows .. a few of the local friendly canines
may even be interested in having a bite or two :)

[Muse]

I'm interested in what sort of exceptional results HMY can tickle up for us :)

If they're really really exceptional, then who knows .. a few of the local friendly canines
may even be interested in having a bite or two :)

c'mon beagle - baptize this bad baby for us

[Rawz]

c'mon beagle - baptize this bad baby for us

This thread has been very quite from some of STs most notable posters. Either;

1) Not interested right now and waiting to see some more runs on the board
2) Happy to have exposure via HGH
3) Quietly buying before posting :p

[Muse]

This thread has been very quite from some of STs most notable posters. Either;

1) Not interested right now and waiting to see some more runs on the board
2) Happy to have exposure via HGH
3) Quietly buying before posting :p

I was #3 for a month or two :)

[winner69]

Lending money to people unsecured is a recipe for disaster regardless of the interest rate charged.

I think their business model is fundamentally flawed so wouldn't be an investor at any price.

This was Beagles view earlier this year

Even if the automated fandangled computer system is so fantastic that it only lends to good safe people who will repay on time I doubt whether his view on lending to people unsecured would have changed much

You never know .... he might be slowly accumulating;) ...stranger things have happened

[mike2020]

There was an article I read this morning on increasing defaults on unsecured lending, maybe he read it too :mellow:

[Rawz]

There is nothing wrong with unsecured lending to the right customer. As long as the fandangled computer system picks the right customer, as Winner says..

Over 50% of HMYs book is to home owners. 90days arrears is 0.47% of book. Most of HMYs lending is for major life events- new car, home improvements, weddings, holidays etc. It smooths the household cashflow. But the cashflow is solid with the right customer.

There will always be a need for unsecured lending and profits can be made. Credit cards, store cards, overdrafts exist for this reason. The market is getting much bigger and banks have dropped the ball. Its moving online and speed is the key.

Unsecured lending via payday lenders.. well that is what i would call risky. That is lending for everyday life. not for major life events.

[thegreatestben]

I think these are all valid points, getting a top up from the bank lately is like getting blood from a stone.

We’re DINK’s with an above average household income a tiny mortgage, amazing credit scores and it takes hours to get a hold of the bank on the phone, full applications, days to reply….

Definitely a space for HMY in the market.

[winner69]

Goodness gracious me. ..HMY one of the handful of stocks whose share price fell on what must have been one of the best days ever on the NZX

[Muse]

Goodness gracious me. ..HMY one of the handful of stocks whose share price fell on what must have been one of the best days ever on the NZX

LOL - yes I noticed that (on $16k of turnover), only other one in my portfolio that did was CEN

Buyers are stuck in the past wanting in at ~1.86 and below, and about 3000 shares available up to 2 bucks. Pretty big illiquid gulf. I should just have a standing order hovering up all shares at up to 2 bucks. Will take some more quarterly origination news demonstrating run rate to get interest back in this one. Fine with me - fundamentally its a good buy well north of spot price.

[Rawz]

Goodness gracious me. ..HMY one of the handful of stocks whose share price fell on what must have been one of the best days ever on the NZX

W69, you are a 5 star ST general but havent really shared you opinion on HMY? Yay or nay for you?

[thegreatestben]

I think these are all valid points, getting a top up from the bank lately is like getting blood from a stone.

We’re DINK’s with an above average household income a tiny mortgage, amazing credit scores and it takes hours to get a hold of the bank on the phone, full applications, days to reply….

Definitely a space for HMY in the market.

Relevant story on stuff:
https://www.stuff.co.nz/business/127220010/new-lending-laws-a-nightmare-for-people-seeking-home-loans

[Rawz]

This time next month we should be reading the half year update which will hopefully report on around 20% qrt on qrt Aussie loan book growth or 81% up on pcp

Should be enough to push the sp well above 2 bucks

[dabsman]

I'm thinking this will move quickly once they show consistent growth over 3 periods which they will next month like you say. $2.50 in short time

[thegreatestben]

HMY signs A$20m corporate debt facility
29/12/2021, 10:13 am MKTUPDTE
29 December 2021

ASX / NZX RELEASE

HARMONEY SIGNS A$20M CORPORATE DEBT FACILITY TO FURTHER SUPPORT ITS LOAN BOOK GROWTH

Harmoney Corp Limited (ASX/NZX: HMY; “Harmoney” or “the Company”) is pleased to announce that it has entered into a A$20 million corporate debt facility through its wholly-owned subsidiary, Harmoney Australia Pty Ltd, to support Harmoney’s accelerating Australian receivables book growth.

In October 2021 Harmoney announced its inaugural ABS transaction, with the top tranche carrying a Moody’s AAA rating, and halving the capital support required by Harmoney compared to its prior warehouse facilities. Building on that achievement, Harmoney has now secured this A$20 million corporate debt facility which will primarily be used to fund the junior notes in Harmoney’s warehouse funding structures, underwriting significant further growth in receivables without the need for Harmoney to contribute further equity.

Since the IPO in November 2020, Harmoney has accelerated both the transition to warehouse funding and lending growth in Australia, with overall warehouse lending growing from $194million in November 2020 to $427million in November 2021.

The facility is arranged and funded by OneVentures together with Viola Credit. It is structured with 60% as term notes and 40% as convertible notes with an exercise price of A$2.40. The maximum shares that would be issued on conversion of the convertible notes would be 3,333,333. The facility can be drawn down in three tranches over a nine-month period, with an initial A$10 million tranche drawdown today.

Commenting on the facility, David Stevens, Harmoney’s CEO & Managing Director said:

“Harmoney’s continued capability to access corporate lending markets to support funding growth of our warehouse facilities is a real testament to the quality of our loan book and underwriting. Additionally, it highlights the capital efficiency and scalability of our consumer-direct lending model, underpinned by our Stellare® platform. We are excited that OneVentures and Viola Credit recognise this growth potential and are partnering with us to deliver it.”

Continues here - https://www.nzx.com/announcements/385399

[Dlownz]

Still waiting for a market update.

[winner69]

so 9.9% interest rate on $8m convertible notes

Good deal or what?

[Rawz]

Reminds me of the deals Buffett did after GFC to the banks. Big rates and could convert to shares on dirt cheap basis. AU$2.40 seems cheap with a 3 year timeframe.

How much will the $20m allow them to raise through the securitization program? Does anybody know?

Insiders bought shares on market early december. Must be a good deal if they did prior to this?

[whatsup]

I couldnt see the interest rate charged, what am I missing ?

[Rawz]

I couldnt see the interest rate charged, what am I missing ?

It was noted on the asx announcement. Under the notice for issue of securities

[Rawz]

A little comparison between Harmoney and its fintech personal lender peers:

Revenue As % Of Loan Book, FY21 Numbers:

Harmoney 16%
Plenti 9%
MoneyMe 17%
Wisr 6%

Harmoney and MoneyMe generate the most income from their loan books.

Market Cap to Revenue Multiple:

Harmoney trading 2.4x
Plenti trading 4.2x
MoneyMe trading 6.5x
Wisr trading 11x

The average across the four is a multiple of 6x revenue.
Harmoney proforma FY21 revenue was $79m.

Harmoney market cap could potentially be $79m x 6= $474m. This is assuming it trades on a fair industry multiple.

$474m market cap is share price today of $4.70 i.e. 147% above todays price.

Harmoney just needs to keep doing what they are doing and grow the Aussie book and I believe its share price will be re-rated to its peers. I am expecting to read about 18% qrt on qrt Aus loan book growth in next months update.

[Rawz]

https://www.stuff.co.nz/business/127412663/fifteenpage-forms-to-do-everyday-banking-this-is-crazy

Kiwibank require their customers to complete a 15 page form for a credit card.

Banks are too big and clunky. No wonder these fintech consumer lenders are growing their books at rapid rates

[thegreatestben]

I remember filling in their digital version (pdf) mortgage application and it was terrible! Whoever set it up created a date field then copy pasted it throughout the document.

Rather than create a new field each time that just clones it so when you fill in the first field (application date) it fills all the other fields over the entire document in with that date too.

If you change one of the dates further down the page it also changes every single date to that too. Infuriating!

Rookie stuff!

[Dlownz]

im officially on the HMY train. been buying on the asx , seems some ok volume there

Looks very similar to the nzx
But I agree with the buying. Good things are coming from this one.

[dabsman]

Last time I looked there was no depth on either. Good if there is some on ASX now

[thegreatestben]

Sellers seemed to appear when I put in my buys, just have to show your cards first it seems.

[Mammoth]

Looks like there is a pre half year results sale going on. Be a bit rude not to.....

[winner69]

Looks like there is a pre half year results sale going on. Be a bit rude not to.....

……..keep buying mammoth. Never be this cheap again

[Rawz]

If half year is good its steak dinners for the Rawz family.
If half year is bad we are looking at baked beans on toast lol

Come on how much longer is this going to hang around sub 2 bucks... Surely there is some sort of base formed and we a primed for an ever continuing uptrend back to IPO price- $3.70. An uptrend would be easy as one would presume every qrt we will be seeing a new record..

[ralph]

If hyr isn't good my kids will be up the chimneys again

[Muse]

some decent volumes today (relatively speaking) - already 38,000 vs last 3 month daily average of 14,479. Bought a wee tranche - might be my second to last - before I reach a nice round number of shares and cut myself off for good. One tranche to go - lets go mid 170s!

[Muse]

If half year is good its steak dinners for the Rawz family.
If half year is bad we are looking at baked beans on toast lol

Come on how much longer is this going to hang around sub 2 bucks... Surely there is some sort of base formed and we a primed for an ever continuing uptrend back to IPO price- $3.70. An uptrend would be easy as one would presume every qrt we will be seeing a new record..

when do you reckon the next announcement is rawz? I did my final on market purchase today - tops off probably 5 months of the odd purchase between 1.65 and I think my top was 1.97. SP on its own now - no longer has a hungry moose underwriting its SP on future dips (sad when a market is that illiquid!)

[Rawz]

when do you reckon the next announcement is rawz? I did my final on market purchase today - tops off probably 5 months of the odd purchase between 1.65 and I think my top was 1.97. SP on its own now - no longer has a hungry moose underwriting its SP on future dips (sad when a market is that illiquid!)

Surely should get Q2 numbers this time next week? 20th Jan.

Its no worries over here. Ill be popping out to the butcher in the weekend looking for some nice steak. Throwing out the tins of baked beans. Wont be needed :p

HMY have given guidance of $600m loan book for FY22. To do that I expect the quarterly updates to go something like this:




Loan Book
PCP Growth


Q2
$ 542,000
16%


Q3
$ 570,000
18%


Q4
$ 605,000
21%








Originations
PCP Growth


Q2
$ 165,000
43%


Q3
$ 172,000
43%


Q4
$ 187,500
44%



Insiders purchased shares end of last year. Guidance is solid I reckon and its likely it will be exceeded. From above you can see the book is growing at an increasing rate, as per my thinking.

HMY has the best model imo. Plenti, Moneyme and Wisr all use brokers, (as well as going direct). The others have been growing their books slightly faster than HMY but for me they are buying the book. I.e. reducing NIM.

If you choose one path to the customer like HMY has with its stellare software that talks to google.. guess what- you become the largest direct to consumer lender in Australasia. Their model is scalable globally. Remember when they launched into Aus and only hired 2 extra FTEs. Amazing. Canada next?

Obviously a very long runway of growth here. Only a matter of time until its re-rated in line with its peers. We will be complaining about it being sub $3 by the end of the year

[KJMLimited]

Last year they updated the market for half year numbers (to Dec) on 20th Jan. then the full half year result was released on 24th Feb. I'd expect similar timings this time around. I'm a little cautious, because of what is happening in NSW and Vic. Covid is causing economic havo. That may not have impacted the Dec half year, but the outlook statement will be interesting. Harmoney will still prove itself to be the best in the sector by far though.

[thegreatestben]

Surprise - a day early
https://www.nzx.com/announcements/386137

HARMONEY ACHIEVES CASH NPAT PROFITABILITY WHILST DELIVERING RECORD GROWTH IN NEW ORIGINATIONS
Harmoney Corp Limited (ASX/NZX: HMY; “Harmoney” or “the Company”) is pleased to provide an update on its performance for the half year ended 31 December 2021 (1H FY22).
Key 1HFY22 highlights:
• Group proforma loan book reaches $557 million, up 19% on pcp
• Achieved profitability on proforma Cash NPAT demonstrating superior economics of Harmoney’s 100% consumer-direct business model
• Australian new customer originations grow to A$71.4 million, up 452% on pcp and up 53% on the prior half
• Australian receivables book grows to A$185 million, up 83% on pcp and up 37% on the prior half
• Key lead indicators of increased account acquisition, new loan originations and net lending margin set to drive increases in receivables and revenue growth in current and future financial years as existing customers return for future needs with minimal additional customer acquisition cost
• High quality receivables book with 90+ days arrears at 44 bps, down from 58bps pcp
• Australian new originations have surpassed NZ new originations, proving the success of a 100% consumer-direct model in the larger Australian market
Commenting on a record half year, David Stevens, Harmoney’s CEO & Managing Director said: “Harmoney continues to deliver on its growth strategy with an outstanding half year. Harmoney Australia’s loan book grew by 83%.
“Our loan book, is just over half a billion dollars, and the business is already Cash NPAT profitable on a proforma basis which demonstrates the power of a 100% consumer-direct business model. The Company’s 100% consumer-direct model and innovative Stellare® lending platform, which uses data from over $8 billion in assessed lending, coupled with its high levels of automation creates operational leverage which drives profitability as our income grows significantly faster than our cost base.”
“Our team, composed largely of data scientists and engineers, continually impress with their drive to deliver on our purpose of helping more Aussies and Kiwis achieve their life goals through financial products that are friendly, fair and simple to use. Harmoney’s consumer-direct marketing technology is world class and consistently generates over 10,000 new customer accounts per month across Australia and New Zealand. This consistent high level of new customer demand enables our team to be solely focused on developing lending and product enhancements that will broaden our ability to provide financial products to more Aussies and Kiwis with no additional customer acquisition cost.”
Total originations for the half years are outlined in the table below. Please note we have restated our “existing customer originations” to only include the “incremental loan origination” taken by existing customers to reflect the originations growth being added to the book. We have provided a table in the appendix that shows this adjustment on prior periods. This change has no impact on the Loan Book size.
[Please see table in attached document.]
Harmoney’s data-driven marketing program leads to a significant increase in new customer originations at a reducing customer acquisition cost. Growth in new customers, attracted to Harmoney’s simplicity, convenience and competitively priced interest rates, typically provide a six-to-twelve-month lead indicator for future existing customer originations. This is due to Harmoney’s unique 100% consumer-direct lending model, which allows Harmoney to support and enhance a customer’s growing borrowing needs without having to pay any customer acquisition cost for those customers like some other models.
LOAN BOOK GROWTH ACCELERATES
At 31 December 2021, Group loan book was $557 million, an increase of 19% on pcp. The Australian loan book grew by 83% to A$185 million, an A$84 million increase on pcp. The New Zealand receivables book was flat as it was temporarily impacted by strict COVID-19 lockdowns in New Zealand in 1HFY22.
[Please see table in attached document.]
HARMONEY IS CASH NPAT PROFITABLE
Harmoney’s unrivalled automation continues to deliver an attractive net lending margin, with personal risk-based interest rates to prime borrowers, low arrears and credit losses and reducing cost of funds as we diversify our funding sources and continue to transition to warehouse funding.
This net lending margin, in conjunction with the economies of scale from automation, are already delivering Cash NPAT profitability on a proforma basis. This is achieved even with full marketing costs expensed as incurred as opposed to being amortised over the life of the loan such as in broker-based origination models.
Additionally, a strong credit performance was maintained due to Harmoney’s high-quality loan book, with Group 90+ day arrears at 31 December 2021 of 44bps, down from 58bps pcp.
HARMONEY REAFFIRMS ITS FY22 MARKET GUIDANCE
• Group pro-forma loan book of at least $600 million (20%+ growth on FY21)
• Group pro-forma revenue of at least $92 million (16%+ growth on FY21)
• Net lending margin of at least 7% (0.2%+ growth on FY21)
• Indirect opex to income ratio of <20% (2%+ reduction on FY21)
• Transition to warehouse funding expected to be ~90% complete by 30 June 2022, (81% complete at 31 December 21)
The above market guidance assumes COVID-19 restrictions in Australia and New Zealand do not have a material impact on originations or customer repayments.
All numbers in this release are preliminary and are unaudited. This release was authorised by the Board of Harmoney Corp Limited.
-END-

[winner69]

Hope that puts a rocket under the share price

Was meant to be well over 2 bucks by now .... heading towards 3 bucks

[Muse]

they are exceptional numbers!
come 30 june 2024-2025 the will just be finishing off a year where they do $30 million cash npat (and outlook of $40m next 12 months) and trading on a PE that puts heartland's to shame. Those are big numbers and imply a big share price. multibagger with an IRR you will struggle to match

broke my rules and have been buying up in the low 180s this week including a wee parcel this morning to complete one I ordered yesterday.

hey rawz they beat your numbers eh!

[Muse]

* group originations up 224% on pcp
* AU originations up 452%
* 1H breakeven at cash npat level and operational leverage kicks with with rapid growth in npat from here
* group book of $557 million beat's Rawz's forecast of $542million
= great result. no matter what the SP does in the short term long term when this is pumping out NPAT, cash and paying dividends it will be happy days for holders who bought at these levels.

Obviously a holder, not advice, DYOR....

[thegreatestben]

* group originations up 224% on pcp
* AU originations up 452%
* 1H breakeven at cash npat level and operational leverage kicks with with rapid growth in npat from here
* group book of $557 million beat's Rawz's forecast of $542million
= great result. no matter what the SP does in the short term long term when this is pumping out NPAT, cash and paying dividends it will be happy days for holders who bought at these levels.

Obviously a holder, not advice, DYOR....

Yep whipped out the CC and grabbed another $1000 (max sharesies CC limit), I see the sellers have upped the ask to 1.90.
I managed to fill my order at $1.82.

[dabsman]

Yep whipped out the CC and grabbed another $1000 (max sharesies CC limit), I see the sellers have upped the ask to 1.90.
I managed to fill my order at $1.82.

I grabbed a few more at 1.82. Very happy holder and happy to add more

[whatsup]

Bought 5 k @ $1.84 but someone keeps feeding the sell side for how long with todays results will be interesting, when will the rerate happens now ?

[Monarch]

I've been pondering getting into this one. One thing I am questioning is why there is such a large price difference between the asx and the nzx listing? Its around 1.76 NZD on the asx and 1.84 NZD on the nzx... Am I missing something?

[clearasmud]

I've been pondering getting into this one. One thing I am questioning is why there is such a large price difference between the asx and the nzx listing? Its around 1.76 NZD on the asx and 1.84 NZD on the nzx... Am I missing something?
I noticed that too. I'd buy where it's cheapest.

[Muse]

I've been pondering getting into this one. One thing I am questioning is why there is such a large price difference between the asx and the nzx listing? Its around 1.76 NZD on the asx and 1.84 NZD on the nzx... Am I missing something?

Aye there will be times when the prices diverge when the stock is illiquid. The spread on the FX is always a bit sharp and never near as cheap as it looks using the spot rates.

For some stocks liquidity often transfers to one exchange so depending on parcel size and aspirations for future liquidity is a consideration.

[clearasmud]

Aye there will be times when the prices diverge when the stock is illiquid. The spread on the FX is always a bit sharp and never near as cheap as it looks using the spot rates.

For some stocks liquidity often transfers to one exchange so depending on parcel size and aspirations for future liquidity is a consideration.

Yes but it's easy to transfer your holdings to the nzx or vica versa

[Muse]

Yes but it's easy to transfer your holdings to the nzx or vica versa

you know i've never actually done that before - how do you actually do it? go to the registry or write to the company secretary?

[winner69]

Harmoney floated at 4.4 times income (based on pro-forma FY20 revenues of $86.8m)

After a down year in FY21 they are on track for FY22 revenues >$92m (not much growth since FY20 is it)

If still valued at IPO multiples share price would be over $4 today

Gives one some hope for big wins eh

[winner69]

So Harmoney currently trading at about 2 times income

Heartland call themselves a fintech - they trading at 4.4 times income

even more hope in big gains from holding HMY --- 5 bucks next year

[thegreatestben]

What will it take to see SP increasing? I thought yesterdays announcement was pretty damn good but it barely made a dent. I wonder if the Harmoney name/brand hurts them a little bit as most people probably associate that name with P2P lending and it's failure to catch on.

[forest]

What will it take to see SP increasing? I thought yesterdays announcement was pretty damn good but it barely made a dent. I wonder if the Harmoney name/brand hurts them a little bit as most people probably associate that name with P2P lending and it's failure to catch on.

I also find the name confusing. Harmoney makes me think about Harmoney homes.
Why not name the company in a way that explains what the business relates to.
Maybe as simple as Loans on Line. LoL

[Ferg]

I wonder if the Harmoney name/brand hurts them a little bit as most people probably associate that name with P2P lending and it's failure to catch on.
Despite having seen the ads on TV, I never knew about the P2P lending until I read about it here. I know I'm only 1 person but maybe it's not a big factor? Instead when I see the ads on TV I immediately think budget/cheap.

[thegreatestben]

Despite having seen the ads on TV, I never knew about the P2P lending until I read about it here. I know I'm only 1 person but maybe it's not a big factor? Instead when I see the ads on TV I immediately think budget/cheap.

Sounds like the same issue but for different reasons. Although I'd guess most users on this forum may not be the type to use the services of HMY so perhaps a good thing that the ads don't appeal. We probably need a broker to put out the word that HMY is a top pick - worked for HGH recently!

[Muse]

Assuming the business can get to $1 billion in average receivables by 30 June 2025 and it can scale the way management have guided (producing $45m in cash EBITDA) it should produce around $30m in NPAT in that financial year. You can take your pick on the appropriate historic or prospective PE multiple to apply, but at least you have an NPAT figure to work with, which will help the market sharpen its views on value. Investors dont have a current or near term npat to work with and the SP has consolidated at the 1.85 level so perhaps investors are waiting for a confirmed uptrend to buy into. The SHAZ are still upset HMY abanonded the p2p model and over the post IPO performance, and Aussie has fintech fatigue, which in the absence of near term earnings makes pricing or rerating this thing difficult. None the less, time and NPAT should solve those issues.

[Ferg]

I wonder if the "Cash NPAT" is a bit of a red herring....? They take out share based compensation, borrower rebates & depreciation. I can't get the numbers to work to get to $30m cash NPAT in FY25. Running a "traditional" P&L on the back of a fag packet, I get the following:

13422

Assumed NIM at 7% is maintained and NIM is based on average of loan book at start of FY and end of FY, $1b loan book at FY25, opex reduces by FY21 IPO costs $3m for FY22, thereafter is +$1m p.a., tax at 29% being half NZ and half Oz

"Indirect opex" per the press release is not all of the opex when I peruse their last AR.

This gives NPAT $14m in FY25. To get to cash NPAT we add back say $10m being shares compensation $4m, depreciation $1m & borrower rebates $4m (plus inflation to get to $10m) that gives an after tax impact of ~$7m and "cash NPAT" of $19m.

What have I missed?

Edit: the SP is a "forecast" based on a price of $1.80 and adding 10% compounding p.a. for the time value of money plus a guesstimated risk premium. Is indicative only. FY21 numbers are per the AR.

[Ferg]

Just had a thought given NIM is traditionally calculated off average of the loan book at the start and of the year per my BOFP forecast....if I extend this out one more year where there is $1b loan book at the start of the year, then we can see cash NPAT of $30m 1 year later in FY26.

13423

[clearasmud]

you know i've never actually done that before - how do you actually do it? go to the registry or write to the company secretary?

Ring the registry you want to transfer to and they will email you a form.

[Rawz]

What an amazing result released the other day. I was in Wellywood for work over the last couple of days so had to rely on trusty old sharetrader to dissect the half year results. Very much enjoyed reading everyone's posts, including the posts wondering why on earth Mr Market hasnt pushed this bad boy over 2 bucks by now. Oh well, just have to be patient.

If it wasn't for omicron HMY would have updated their FY22 guidance, because I cant see how they wont easily beat it. I am thinking the loan book will be $600m by next quarter! And be close to $650m by FY22. Revenue will be over $97m

I base this mostly on continued aussie book growth. I see the aus book growing like this:

Q1 au$20m (actual)
Q2 au$30m (actual)
Q3 au$35m (estimate)
Q4 au$42m (estimate)

Aus book ends FY22 at au$262m.

NZ book growth slower at:

Q1 nz$-2m (actual)
Q2 nz$7m (actual)
Q3 nz$5m (estimate)
Q4 nz$7m (estimate)

NZ book ends FY22 at nz$375m.

As long as there are no lockdowns it should get there.

Its going to be exciting watching the aus numbers. As a percentage of market it is tiny, should at least be 5x the NZ book, i.e. $1.8b. Such a long run-way of growth ahead of it.

90 days arrears down again. The system works. Book is growing rapidly and arrears falling. Excellent.

[Monarch]

What do you make of the total AU originations
Dec 21 90.5
Jun 21 60.2
Dec 20 20.5

In both % terms and absolute terms, the rate of origination growth declined Jun 21 to Dec 21 (~30) compared to Dec 20 to Jun 21 (~40). It will be interesting to see if they can prevent further declines in this growth rate. I'm still quite on the fence about this one, just concerned that failure to grow the loan book whilst keeping costs low and nim high would render this stock very worthless. Souring economic fortunes certainly will make it harder for them to achieve their goals.

If we make some guesses about the average loan term it is probably possible to estimate the maximum loan book sustainable given a certain origination rate. Maybe I'll give it a try another day, sounds like an excel escapade.

[winner69]

Just had a thought given NIM is traditionally calculated off average of the loan book at the start and of the year per my BOFP forecast....if I extend this out one more year where there is $1b loan book at the start of the year, then we can see cash NPAT of $30m 1 year later in FY26.

13423

Even if Revenue is only $300m in 2025 that should result in a share price over $13 at 4 times revenues

That’s what growth plus a bit of rerating will give you

Cool stuff

[Rawz]

What do you make of the total AU originations
Dec 21 90.5
Jun 21 60.2
Dec 20 20.5

In both % terms and absolute terms, the rate of origination growth declined Jun 21 to Dec 21 (~30) compared to Dec 20 to Jun 21 (~40). It will be interesting to see if they can prevent further declines in this growth rate. I'm still quite on the fence about this one, just concerned that failure to grow the loan book whilst keeping costs low and nim high would render this stock very worthless. Souring economic fortunes certainly will make it harder for them to achieve their goals.

If we make some guesses about the average loan term it is probably possible to estimate the maximum loan book sustainable given a certain origination rate. Maybe I'll give it a try another day, sounds like an excel escapade.

Q1 Aus originations were lite for some reason. So HY22 only $90.5m in new originations. However Aus quarterly originations have a CAGR of 27.5%. Last qrt grew 28%. Once the 3r's kick in which should really be felt FY23 the numbers will be even better.

The avg loan term was 57 months FY18, 56 months FY19, 57 months FY20. I dont have FY21 (maybe it wasnt in the AR) but looks steady at 56-57 months. If i was to have a guess at how long the loan actually runs for i would say 42-44 months before it is paid in full via early repayment.

About 22% of the book is repaid every quarter. I.e. $125m last qrt. HMY wrote $165m in originations to grow the book $40m last qrt. Consumer lending/ asset finance lending you write sh!t loads of new business all the time and sh!t loads of the book drops off all the time- just through loan amortization and early repayment. The one thing I know from experience is there is a never ending conveyor belt of consumers wanting finance.... we are many many many years away from the point were we hope HMY just grows the book in line or slightly above inflation like the big banks..

If you are thinking about getting on board as an investor for me the first decision you need to make is if you believe in their direct to consumer model with their stellare software that integrates with google. I am a believer and think it is scalable globally (or wherever google dominate). It is a big market out there and lots of competition but so far HMY is doing good. I did read this morning that one of the big US banks flagged 8% increase in expenses because they were spending an extra $12bill to take on all the fintechs. $12b is a lot of firepower, they should do themselves a favor and just buy HMY for $400m. shareholders would sadly accept for a quick buck ay

[Muse]

Q1 Aus originations were lite for some reason. So HY22 only $90.5m in new originations. However Aus quarterly originations have a CAGR of 27.5%. Last qrt grew 28%. Once the 3r's kick in which should really be felt FY23 the numbers will be even better.

The avg loan term was 57 months FY18, 56 months FY19, 57 months FY20. I dont have FY21 (maybe it wasnt in the AR) but looks steady at 56-57 months. If i was to have a guess at how long the loan actually runs for i would say 42-44 months before it is paid in full via early repayment.

About 22% of the book is repaid every quarter. I.e. $125m last qrt. HMY wrote $165m in originations to grow the book $40m last qrt. Consumer lending/ asset finance lending you write sh!t loads of new business all the time and sh!t loads of the book drops off all the time- just through loan amortization and early repayment. The one thing I know from experience is there is a never ending conveyor belt of consumers wanting finance.... we are many many many years away from the point were we hope HMY just grows the book in line or slightly above inflation like the big banks..

If you are thinking about getting on board as an investor for me the first decision you need to make is if you believe in their direct to consumer model with their stellare software that integrates with google. I am a believer and think it is scalable globally (or wherever google dominate). It is a big market out there and lots of competition but so far HMY is doing good. I did read this morning that one of the big US banks flagged 8% increase in expenses because they were spending an extra $12bill to take on all the fintechs. $12b is a lot of firepower, they should do themselves a favor and just buy HMY for $400m. shareholders would sadly accept for a quick buck ay

good work as always rawz

[Snoopy]

I wonder if the "Cash NPAT" is a bit of a red herring....? They take out share based compensation, borrower rebates & depreciation. I can't get the numbers to work to get to $30m cash NPAT in FY25. Running a "traditional" P&L on the back of a fag packet, I get the following:

NPAT $14m in FY25. To get to cash NPAT we add back say $10m being shares compensation $4m, depreciation $1m & borrower rebates $4m (plus inflation to get to $10m) that gives an after tax impact of ~$7m and "cash NPAT" of $19m.

What have I missed?


I can answer that. Not nearly enough liquor consumed in your cheer over the festive season is where you have fallen down. Your analysis looks to be based on an old fashioned concept called rationality. With plenty of alcohol such thinking can be put aside. If cash NPAT does not add up, of course it makes sense to draw up an alternative measure of profit, excluding certain costs until it delivers the profit figure you want.

Also you need to give up smoking. if you didn't have that trusty fag packet to write on, you wouldn't have been able to write down such figures as you have. No wonder smoking is so damaging to wealth, as well as health!



What do you make of the total AU originations
Dec 21 90.5
Jun 21 60.2
Dec 20 20.5

In both % terms and absolute terms, the rate of origination growth declined Jun 21 to Dec 21 (~30) compared to Dec 20 to Jun 21 (~40). It will be interesting to see if they can prevent further declines in this growth rate. I'm still quite on the fence about this one, just concerned that failure to grow the loan book whilst keeping costs low and nim high would render this stock very worthless. Souring economic fortunes certainly will make it harder for them to achieve their goals.


So if revenue doubles to a billion dollar loan book by 2025, in three and a half years time and NIMs are maintained, that means at $1.90 we are sitting on a future PE in three years time of 14 (traditionally a PE 14 means strong growth is already priced in going well beyond 2025). What could possibly go wrong?

1/ Government regulations forcing lenders to tighten up on their lending criteria.
2/ Existing lenders not just rolling over and giving up their business to Harmoney
3/ Rising interest rates making loans less affordable and desirable.
4/ Someone else writing competitive on line approval loan service software (didn't Heartland pre-date Harmoney in doing this?), and executing their own technically superior fantasy plan before Heartland does,
5/ Shareholder expectation crashing back to reality.

IOW quite a bit



If you are thinking about getting on board as an investor for me the first decision you need to make is if you believe in their direct to consumer model with their stellar software that integrates with google. I am a believer


Wasn't that the line from 'the Monkees' financial consulting service back in the sixties? I am glad to see at least some here hold to more traditional investing values.



Even if Revenue is only $300m in 2025 that should result in a share price over $13 at 4 times revenues

That’s what growth plus a bit of rerating will give you

Cool stuff


Back in the day once a company's market valuation matched annual revenue, I put that company on my watch list to sell. IOW I regarded it a very expensive. Granted software as a service changes this paradigm a bit: because you can give unlimited service from a fixed cost base. And in the Fintech world, it does help if your traditional competitors seek to destroy their traditional advantage of having a branch on the ground you can visit and a person in that branch who knows something about personal service. I do find it interesting that so many listed SOS companies are genuine world beaters in their own niche though. In fact if you look at all of the SOS listed companies at the time of listing they are all world beaters that cannot possible fail - a 100% forecast hype record - wow, just wow! I guess if you make the forecast optimistic enough then any share price can be justified too.

As a shareholder in Heartland, I am very happy for Jeff to manage my indirect holding in Harmoney on my behalf. When is the escrow period for Heartland held Harmoney shares up again?

SNOOPY

discl: hold HGH

[winner69]

Hey Snoopy --- the Aussie banks use a Cash Profit as their headline profit

Wonder if Harmoney calculate Cash Profit the same way

Always a bit confused what that Aussie Cash Profit is anyway

[winner69]

.....................


As a shareholder in Heartland, I am very happy for Jeff to manage my indirect holding in Harmoney on my behalf. When is the escrow period for Heartland held Harmoney shares up again?

SNOOPY

discl: hold HGH

Some are out of escrow .... more this year and the rest next year

Doubt whether Heartland would sell ....and no way would they buy all of them (acquire in other words)

Just remain an interested party

[winner69]

Hey Snoops - what's the hidde message in your signature

[Muse]

Hey Snoopy --- the Aussie banks use a Cash Profit as their headline profit

Wonder if Harmoney calculate Cash Profit the same way

Always a bit confused what that Aussie Cash Profit is anyway

I looked into this a while ago I think HMY is more expansive.
In my own operating model I dont normalise for employee share issue expenses or rebates going forward but I do have specific line items as I like to merry everything up where possible. I'd be shocked & disappointed if employee share issues continued anywhere near FY21 - given it was IPO time not unexpected to see additional remuneration associated with that. It will be most helpful after HMY transitions to a full warehouse model & closes out legacy funding as the proforma adjustments do not make for fun reading when you pick up their financial statements and I agree as hate having to read proforma next to NPAT. to many adjectives preceding earnings always undesirable.

[Rawz]

Back in the day once a company's market valuation matched annual revenue, I put that company on my watch list to sell. IOW I regarded it a very expensive. Granted software as a service changes this paradigm a bit: because you can give unlimited service from a fixed cost base. And in the Fintech world, it does help if your traditional competitors seek to destroy their traditional advantage of having a branch on the ground you can visit and a person in that branch who knows something about personal service. I do find it interesting that so many listed SOS companies are genuine world beaters in their own niche though. In fact if you look at all of the SOS listed companies at the time of listing they are all world beaters that cannot possible fail - a 100% forecast hype record - wow, just wow! I guess if you make the forecast optimistic enough then any share price can be justified too.

As a shareholder in Heartland, I am very happy for Jeff to manage my indirect holding in Harmoney on my behalf. When is the escrow period for Heartland held Harmoney shares up again?

SNOOPY

discl: hold HGH

Snoopy you reckon HMY deserve to trade same revenue multiple as HGH? i.e. 4? Especially considering its rapid growth in revenue.? Currently trading 2x. Not good enough. I bet Jeff wont be parting with any HMY shares until its at least 4x revenue. Maybe even 6x... Jeffs a smart man ay. He bought some more HMY last year for the bank

[winner69]

Snoopy you reckon HMY deserve to trade same revenue multiple as HGH? i.e. 4? Especially considering its rapid growth in revenue.? Currently trading 2x. Not good enough. I bet Jeff wont be parting with any HMY shares until its at least 4x revenue. Maybe even 6x... Jeffs a smart man ay. He bought some more HMY last year for the bank

Way Harmoney going it will be BIGGER (on revenues) than Heartland in a few years ...so answer to your question is Yes

Remember floated at 4.4 times revenue .... punters took up plenty of shares then ...most were pretty 'sophisticated' punters or fund mnagers

[Ferg]

I can answer that. Not nearly enough liquor consumed in your cheer over the festive season is where you have fallen down. Your analysis looks to be based on an old fashioned concept called rationality. With plenty of alcohol such thinking can be put aside. If cash NPAT does not add up, of course it makes sense to draw up an alternative measure of profit, excluding certain costs until it delivers the profit figure you want.

Also you need to give up smoking. if you didn't have that trusty fag packet to write on, you wouldn't have been able to write down such figures as you have. No wonder smoking is so damaging to wealth, as well as health!

...

So if revenue doubles to a billion dollar loan book by 2025, in three and a half years time and NIMs are maintained, that means at $1.90 we are sitting on a future PE in three years time of 14 (traditionally a PE 14 means strong growth is already priced in going well beyond 2025). What could possibly go wrong

Thanks Snoopy, although that fag packet is pretty old now and has multiple scribblings on it since I gave up 20 years, 9 months and 7 days ago.

I was coming to the same conclusion; there need to be no headwinds or tripping on hurdles on the way to growing the loan book to $1b in that timeframe, although with enough efforts they could get there quicker if they want to "buy" customers. IMO they would need a loan book over $1b to justify the SP based on what some might call "traditional" methods. My fear with new methods is we have seen those previously.....as per winner's signature.

Also, there is no "time value of money" built into todays SP with an FY25 PE of ~14. That's worth about 11-16% based on 3.5 years inflation at 3-4% p.a., assuming that a 3.5 year look forward PE ratio of 14 is a roughly correct way of valuing HMY (it could be higher or lower and depends on future growth from that point). Even if inflation was built into the current SP, that puts the share price (starting from $1.90ish today) at $2.10-$2.20 in FY25 which divided into my traditional EPS forecast of 13.9c for FY25 gives a PE ratio 15-16 at that time, which still implies future growth.

To FM's point, if some of the employee share remuneration costs were a one off in FY21, that would definitely help the view I compiled (by having higher NPAT sooner), although it would make no difference to "cash NPAT" per their methodology given it is a non-cash expense. Do we know anything about their employee share scheme?

Disclosure: not currently holding, am an interested observer seeking undervalued shares

[Muse]

Thanks Snoopy, although that fag packet is pretty old now and has multiple scribblings on it since I gave up 20 years, 9 months and 7 days ago.

I was coming to the same conclusion; there need to be no headwinds or tripping on hurdles on the way to growing the loan book to $1b in that timeframe, although with enough efforts they could get there quicker if they want to "buy" customers. IMO they would need a loan book over $1b to justify the SP based on what some might call "traditional" methods. My fear with new methods is we have seen those previously.....as per winner's signature.

Also, there is no "time value of money" built into todays SP with an FY25 PE of ~14. That's worth about 11-16% based on 3.5 years inflation at 3-4% p.a., assuming that a 3.5 year look forward PE ratio of 14 is a roughly correct way of valuing HMY (it could be higher or lower and depends on future growth from that point). Even if inflation was built into the current SP, that puts the share price (starting from $1.90ish today) at $2.10-$2.20 in FY25 which divided into my traditional EPS forecast of 13.9c for FY25 gives a PE ratio 15-16 at that time, which still implies future growth.

To FM's point, if some of the employee share remuneration costs were a one off in FY21, that would definitely help the view I compiled (by having higher NPAT sooner), although it would make no difference to "cash NPAT" per their methodology given it is a non-cash expense. Do we know anything about their employee share scheme?

Disclosure: not currently holding, am an interested observer seeking undervalued shares

I'm on my phone ferg so cant dive into the detail but are you using FY21 as a base to forecast from? If so, I'd adjust out those IPO expenses which were chunky and the share based payments. Could make an ~$8m NPBT difference that compounds over time.

[winner69]

I'm on my phone ferg so cant dive into the detail but are you using FY21 as a base to forecast from? If so, I'd adjust out those IPO expenses which were chunky and the share based payments. Could make an ~$8m NPBT difference that compounds over time.

I'd hazard a guess share based payments will still to some extent be an expense into the future

Does one need to take into account the 8 million convertible shares when doing per share stuff

[Muse]

To FM's point, if some of the employee share remuneration costs were a one off in FY21, that would definitely help the view I compiled (by having higher NPAT sooner), although it would make no difference to "cash NPAT" per their methodology given it is a non-cash expense. Do we know anything about their employee share scheme?

Managed to snip this from the FY21AR: "Under the terms of the historical share-based compensation plan, at IPO, vesting of options was accelerated. This resulted in all unrecognised expense in relation to outstanding options being recognised as an expense in the period. The expense for option related share-based payments is therefore at an elevated level in 2021 and included in the remuneration and other benefits values reported above."

[Muse]

I'd hazard a guess share based payments will still to some extent be an expense into the future

for sure. but not nearly by that much. It was $4.1m in FY21. 700k the year prior.

[Snoopy]

Hey Snoops - what's the hidden message in your signature

Only that the ACC have generally IMO done a good job managing their premium money in their own investment portfolio over the years. So if ACC is buying, you don't want to be selling and vica versa.

SNOOPY

[Muse]

I'm on my phone ferg so cant dive into the detail but are you using FY21 as a base to forecast from? If so, I'd adjust out those IPO expenses which were chunky and the share based payments. Could make an ~$8m NPBT difference that compounds over time.

Yeah I think after rereading some of my old notes I think you have to make a few adjustments ferg to your FY21 cost assumptions if you are going to role that forward as your base:

* Share issue expense: clearly a one off large expense as noted in the AR, and typically seen during IPO's or seen the year a trade or private equity player invests into a company. That's $3.5m, less say $700k (prior year as a proxy for maintainable), for net adjustment to your FY21 cost base of $2.8m;

* IPO expenses of $4.1m, clearly should be adjusted out as non recurring on a roll forward basis

* borrower establishment fee rebate: these relate to the fees charged to borrowers of p2p loans, which is now a legacy & discontinued operation. There was a bit of fanfare about this over the previous years as HMY enterted into a settlement agreement with comcom to return them. The settlement was for $7m - $3m of which was recognised in FY20, and $4m in FY21. Clearly unsatisfactory for the business and the shareholders at the time, but I would consider these to be non recurring and thus it's a fair normalisation

As winner69 alluded to its, for banks, convention to reference cash npat. That's an industry standard for them - but probably as it suits their cause a bit particularly in downyears as they have big swings in non cash provisions & hedges. But it swings in round abouts as they often release unused provisions which will see NPAT higher than cash npat. I'm fine with & prefer good old NPAT.

My spreadsheet wasn't my operational model output I simply used the $45m EBITDA they talked to in their investor day presentation. But you'll recall in my spreadsheet I clearly deducted depreciation & amortisation as anyone would from EBITDA when calculating my NPAT. My figure there a npat figure, not a cash npat in the way harmoney calculate, despite me having 'cash npat' in the spreedsheet.

Probably too much detail, but when I was adjusting the FY21 proforma P&L to try to normalise it as a recurring base to forecast from you have to make the following adjustments FY21 the P&L line items:
* $4m IPO expenses: $3.6m belong in G&A, $0.4m in verification & servicing
* $3.5m employee share issue (lets make it $2.8m to reflect $700k ongoing): personnel expenses
* borrower establishment: these actually relate to proforma interest income as establishment fees are amortised over the expected life under the loan under NZIFRS9, therefore is settling a normalised base year you'd increase interest income by the same amount (being $4m, increasing interest income from $78.6m to $82.6m). If you are pegging FY21 interest income to a loan book size to derive an opening or average interest rate % and use that to roll forward, you'd need to use $82.6m to reflect that as an operating adjustment, and not simply deduct the $4m from overheads. If that seems an awfully specific answer, thats because it is, and the one I was more or less provided when I asked harmoney about it when I started looking at the company.

So when looking at the $45m ebitda management talk to at an average $1 billion book, I think its more or less fair starting point to drill down to npat. For my simple spreadsheet I took off $3.5m depreciation and amortisation - which is 3.3x more D&A than HMY incurred in FY21. I think thats an aggressive forecast and they wont incur that, but I used it as a bit of catchall for other items. Like what's an appropriate share issue expense (say $700k pa), and movement in expected credit loss provision (was $456k in FY21). So my $29m NPAT is a NPAT figure, not a cash npat figure, and while a similar back of the fag packet number, about right.

Cheers, FM

[Muse]

Way Harmoney going it will be BIGGER (on revenues) than Heartland in a few years ...so answer to your question is Yes

Remember floated at 4.4 times revenue .... punters took up plenty of shares then ...most were pretty 'sophisticated' punters or fund mnagers

When I originally read your post w69 my immediate reaction was those sophisticated fund managers bought at ~3.70 and its now what 1.89. But that got me to thinking & it reminded myself why I am here as a recent shareholder over the last 6 months. I just went back and looked at the Shareholder information - 92% of the shares are held by 48 people. As as best as I can tell from looking at the SSNs. from IPO to now none have sold down, and in fact the insiders and major institutions have increased their holdings post IPO.

I recall that sharsies was well oversubscribed and there was significant scaling. Given the complete lack of liquidity, its fair to assume most the decline in SP has been on account of the small retail base losing interest in the company. Of those investors, its safe to say there isn't much knowledge of what the company actually does how its changed or makes its money, a lack of awareness of the operational leverage inherent in HMY's model, the fundamental differences between HMY's model and its Australian comps, the difficult to decipher financials (which overtime will rectify themselves), the discontinuation of p2p, bad press around comcom, mistimed IPO and reinforcing cycle it has created. And all that is understandable, and reflects the risk of a company undertaking an IPO too early.

But the majors and insiders have all stayed, and increased their holdings over that time, and there is a clear set of catalysts and pathway forward to addressing these constraints over the next few years.

So I do think think this business has value well in excess of its share price. There is a lot of execution risk as there is in any early stage business

[winner69]

Moose ….there was some inso selling post IPO ….and some disgruntled investors

Mugs and IPO fatigue mentioned

Harmoney's post IPO share slump prompts investor call for price inquiry
https://www.nzherald.co.nz/business/harmoneys-post-ipo-share-slump-prompts-investor-call-for-price-inquiry/DQ7TCZHNJYUYPGLLZGLADBMNJ4/

[Muse]

Moose ….there was some inso selling post IPO ….and some disgruntled investors

Mugs and IPO fatigue mentioned

Harmoney's post IPO share slump prompts investor call for price inquiry
https://www.nzherald.co.nz/business/harmoneys-post-ipo-share-slump-prompts-investor-call-for-price-inquiry/DQ7TCZHNJYUYPGLLZGLADBMNJ4/

Yeah i know & alluded to it - i just couldnt find any SSNs for the large shareholders selling down

[winner69]

From that article love how Lead brokers came out shortly after IPO with good values …Jarden $3.50 and Ord Minnett. $3.90.Jarden did much the same with MFB;)

Marketscreener suggests they lowered them …. Now $3.31 and $3.46

Keeping the faith ….still believing the story …. that’s good.

[winner69]

Yeah i know & alluded to it - i just couldnt find any SSNs for the large shareholders selling down

They only raised $95m so unlikely any new investor held 5% and no new SSN were filed ….we’ll probably never know if peeved insto’s did sell or not …… disgruntled investor who made the fuss probably one of those ‘sophisticated’ ones.

Whatever HMY down nearly 50% …opportunity eh.

[winner69]

Seems we will have to wait until the next set of pretty charts big numbers is produced to get that much needed boost in HMY share price

[thegreatestben]

Not a lot of volume eh, has gone down far less than other holdings. Stock picks comp is telling me HMY doing just fine :)

[Rawz]

I have been following HMYs competitors christmas qrt announcements and on the back of them I have even higher conviction in HMY.

Will post some analysis once i have time to update, unless someone wants to beat me to it

HMY so cheap but boy oh boy the SP is in a rut. Not sure what more they need to report to get it moving. Patience required and lots of it in this environment.

[Rawz]

The efficient market theory is wrong!! The markets are irrational!!!

[winner69]

The efficient market theory is wrong!! The markets are irrational!!!

Behaving a bit like HUM.ASX …..the better it looks the ‘cheaper’ it becomes

[Muse]

not a single buyer on the asx depth!! why is this so unloved!

haha oh dear. NZX not much better - dropped 2.2% on only $522 of turnover.
Like watching paint dry. That's not a bad thing. You have to ask yourself how important short term SP is or what it really reflects. On one hand you have a $1.2bn marketcap company like briscoes with its SP going up and down a few percent off tiny volumes. Was that highpoint really what the company was worth? Do short term gyrations in a low liquidity stock really indicate anything other than what you might be able to get out at at a given point of time? If you are an investor, with conviction, ignore the daily movements with the exception if you believe it opens up buying opportunities or if you think you have lost the plot completely. I don't listen too much to what a few single share purchases are telling me.

If the company can continue to grow its book, maintain or grow its net interest margin, and scale against its fixed cost base - then earnings should start flowing this year and ramp up quickly in consecutive years. When you see a definable net profit figure, and growth, that will bring interest in investors, and a rerating. Sort of like what happened with Rakon. The company needs momentum in earnings and a small bit of time to do that and if all that is said about the company pans out you'll see the SP pop. The company needs to regain the markets interest and faith, and thats fair enough.

I have great interest in this company because I think it can achieve serious NPAT in 2-3 years time. I wouldn't be interested if that picture expended to 5-10 years. I look at companies like serko or pacific edge trading on far higher marketcaps with earnings far further out than harmoney. Harmoney is about as far afield early stage as I get.

[Rawz]

Behaving a bit like HUM.ASX …..the better it looks the ‘cheaper’ it becomes

HUM should buy HMY for 4x revenue. It would be the best thing they could ever do and might stop their slide

[Muse]

I was amazed they got the float off at the price they did. Great for raising money while preventing dilution at a high premoney valuation but guaranteeing a poor aftermarket. Never list a business too early. That said - for recent investors - I'd say the daily SP is a unique opportunity. I struggle to find any other NZX listed company where you can see a realistic pathway to trebling in value in 3 years. While not without risk and clearly in a down trend - having achieved NPAT breakeven its now time for earnings momentum to carry the day. Fortunately - that isn't years off - and should be reflected in earnings announcements this year and into the future.

[Muse]

Any thoughts on why HGH hasnt kept accumulating if the price is attractive?

Well they have - their initial investment was successful for them and they completed on market purchases of 1.7 million additional shares about half a year ago. That took them from 8.4% to 10.1%. They aren't a trading house however, and their core business of lending is capital intensive, so together with an already successful first investment and non core follow on, would raise some eyebrows if they kept plowing into it

[Rawz]

We just need to get to FY22 when they will have a $650m loan book and do ~$100m revenue (yes above guidance, i am expecting an upgrade next quarter). the transition away from p2p loan book will be 90% complete and the actual financials will look close to the pro-forma financials. Possibly a lot of investors on the sidelines not interested until this point.

[winner69]

Any thoughts on why HGH hasnt kept accumulating if the price is attractive?

I think the reason for buying some last year was just some financial engineering …..ie to manage how much they had to write down their holding ……affects the P&L if you get my gist.

In doing so they went over 10% which could be some strategic importance one day but I doubt that was the motivator.

[KJMLimited]

Like anyone does, they were offered a parcel of reasonable size at a price below their own view of fair value, and took the opportunity.

[winner69]

Interesting chart eh jimdog

Funny that after I mentioned that HMY behaving like HUM you show that it is

Both have amazing fundamentals …..but not liked by market

Maybe the problem is their names ….Harmoney and Humm pretty nondescript names eh ,,,,perception goes a long way to create excitment.

Maybe it’s a permanent thing ….just asker trader_jackson how long Flexigroup/Humm has been unloved

[Rawz]

Was it humm that bought that fintech for 20x revenue to stay alive? Or was it latitude?

HMY 20x revenue one day?

[nztx]

Was it humm that bought that fintech for 20x revenue to stay alive? Or was it latitude?

HMY 20x revenue one day?


ASX: Latitude (LFS) have a proposal to purchase HUM's Humm Consumer Finance

https://www2.asx.com.au/markets/company/hum

https://www2.asx.com.au/markets/company/lfs

the SP of both has gone backwards since this was announced in early January 2022

[Rawz]

Reading through the HUM threads on Hot copper its becoming apparent that i think the merger/offer from LFS and buy now pay later being out of favour in general is probably quite a strong indicator why noone on the asx is interested in harmoney. Completly different business models, but it appears that HUM shareholders are being lowballed hence i think alot of BNPL or non bank lenders are seeing the multiples usually ascribed to the sector reducing substantially.

I think HMY is unloved for a bit of that but also because the loan book is growing very slowly and the market cannot see past it.

Plenti, MoneyMe and Wisr all growing their books above 20% on avg every qrt for the last 4 qrts.
HMY was until recently growing its book only 3% every qrt, but pleasing to see that ramp up to 8% last qrt.

Its the NZ book that is lagging (for reasons unknown to me).
NZ loan book went NO WHERE from FY21 Q2 to FY22 Q2.

Compare that to the Aus long book that just booked 83% pcp growth.
However it is still growing slower than their Aussie peers but HMY growth is increasing qrt on qrt while the others growth is decreasing qrt on qrt.

Two reasons why I chose HMY over the others:

1) Much of HMYs peers growth has come from buying business. I.e. they lowered their rates to the brokers/ car dealers who then pushed business their way. They all generate less revenue from their loan books aside from MoneyMe who is on par with a ratio of 16% revenue/loan book.

2) HMY is the only 100% direct to consumer lender. They dont go through brokers or car dealers who want to clip the ticket. So yes HMY book is growing slower. But it is growing and it makes more and their customers are theirs for life (3Rs kick in at no extra marketing cost). Vs the others that customers will go back to the introducer (broker or car dealer).

[winner69]

rawz

If you go here https://www.rbnz.govt.nz/statistics/c5 it looks like personal consumer lending has been rather flat for the last 5 months and is less than what it was in Dec2020 and not much more than Dec2019

Seems that non-bank lenders are getting a bigger share over time (v banks)

aybe explains your disappointment in Harmoney lack of growth in NZ

[Rawz]

Thanks W69

Looks like HMY NZ market share is 2.7% of all consumer lending and 6% of non bank lending.

A lot of room to grow and not sure why HMY hasnt won market share?

Maybe just holding back funds to lend to our mates across the ditch

[winner69]

Thanks W69

Looks like HMY NZ market share is 2.7% of all consumer lending and 6% of non bank lending.

A lot of room to grow and not sure why HMY hasnt won market share?

Maybe just holding back funds to lend to our mates across the ditch

Seem to spending heaps on TV and other media ….,

….or maybe the data scientists not doing their job

[winner69]

Maybe the CCCFA changes that were incoming meant they actively avoided growing here?

They knew about those changes for quite some time

CEO put it down to covid

[Rawz]

Maybe the CCCFA changes that were incoming meant they actively avoided growing here?

They knew about those changes for quite some time

I see the CCCFA changes as benefiting HMY. Not good for the banks.
HMY have bank scraping tools to do the work vs banks relying on a personal banker.

We do know HMY turned the lending tap off when covid first hit. I think this has had a big impact on the 3r's. I dont know how much. Possibly the lack of growth is down to this and other small factors. Excuses right?..

Next qrt better build on the 2% growth seen last qrt or maybe W69 is right and the data scientists are not doing their job...

[winner69]

Apparently a lot of punters have a lot of cash because they couldnt spend during lockdowns and could do the overseas travel thing …….so overall need to borrow a bit subdued

[Rawz]

Apparently a lot of punters have a lot of cash because they couldnt spend during lockdowns and could do the overseas travel thing …….so overall need to borrow a bit subdued

Less weddings, less used cars, less holidays.. less money needed aye.

All good. HMY maintained their book in very trying times!! OMG the lending is going to go through the roof once Cindy lets us loose. Imagine the NZ book growing the pace of the Aus book!! Wow.

I still reckon they should have grown market share in NZ thou.

[winner69]

Is Harmoney one of these horrible lenders who ask for / insist on you giving them your password to your bank account .... much to the horror of security experts and others. I wouldn't be doing that

[Rawz]

Is Harmoney one of these horrible lenders who ask for / insist on you giving them your password to your bank account .... much to the horror of security experts and others. I wouldn't be doing that

Yes Winner. You either do it all for them manually or you log into your bank via their system

Guess which option ‘generation now’ choose

[winner69]

Yes Winner. You either do it all for them manually or you log into your bank via their system

Guess which option ‘generation now’ choose

Won't help them when 'generation now' runs out money

[Rawz]

Won't help them when 'generation now' runs out money

I hope not Winner grinner. They are going to need all their financial nous to tackle the crippling central govt debt that the boomers are going to leave ‘‘em with 🙃

[Muse]

Another $150m warehouse facility from one of the big 4s to add to the mix. Must be still growing the book fast

[dabsman]

Another $150m warehouse facility from one of the big 4s to add to the mix. Must be still growing the book fast

Must be lending out existing facilities like Muldoon gets thru a scotch bottle. Lots of NIM on that...

[Rawz]

Another $150m warehouse facility from one of the big 4s to add to the mix. Must be still growing the book fast

Should last them 3 quarters. Pretty cool ay

[whatsup]

Must be lending out existing facilities like Muldoon gets thru a scotch bottle. Lots of NIM on that...

why bring Muldoon into the conversation, were you born when he was in the PMship ?

[Rawz]

The Aus loan book grew $30m last qrt.
Probably see it do $35m Q3 and $42m Q4.

A sprinkle of growth from NZ and they will end the year with $650m loan book ahead of their guidance of $600m. Hope to see updated guidance next qrt.

[Rawz]

And they will do $100m rev. And trading on $178m market cap.

1.78X revenue multiple.

Revenue will be up 26.5% yoy

Crazy stuff.

[Muse]

Still no Love for HMY....

Just needs to SHOW US THE NPAT! Not one to check on a daily basis until then (unless you are buying!)

[newbieinvestor]

Just needs to SHOW US THE NPAT! Not one to check on a daily basis until then (unless you are buying!)

why is there so much selling pressure at 1.78-1.81 even after a good result?

[Rawz]

why is there so much selling pressure at 1.78-1.81 even after a good result?

Why does the sun rise in the east and set in the west? Who knows the answer to such questions

[winner69]

Why does the sun rise in the east and set in the west? Who knows the answer to such questions

Apparently the sun doesn't rise .... or set ..... as we orbit around the sun

[newbieinvestor]

Apparently the sun doesn't rise .... or set ..... as we orbit around the sun

Well said Winner! :t_up:

[percy]

Has any one tried to borrow money from Harmoney to buy Harmoney shares,?

[whatsup]

Has any one tried to borrow money from Harmoney to buy Harmoney shares,?

margin trade !! ?

[whatsup]

Looks like we could be heading to the low of the year $1.38 despite me buying all the way down from $2.00, grrrrh !

[Rawz]

Looks like we could be heading to the low of the year $1.38 despite me buying all the way down from $2.00, grrrrh !

Join the club. FM is president and Jimdog is VP. Im the cleaner lol

[percy]

margin trade !! ?

No just to see what their reaction was.

[nztx]

Join the club. FM is president and Jimdog is VP. Im the cleaner lol



Did you guys hold your heads the right way facing the HMY God & mumble the right prayer at time of purchase ? ;)

[Rawz]

Did you guys hold your heads the right way facing the HMY God & mumble the right prayer at time of purchase ? ;)

We clearly buggered it up

Todays SP movement

Harmoney -4.4%
Moneyme +1%
Plenti +5.3%
Wisr +16.7%

[winner69]

We clearly buggered it up

Todays SP movement

Harmoney -4.4%
Moneyme +1%
Plenti +5.3%
Wisr +16.7%

Even HUM was up

[Dlownz]

You know its going to go up. But when. And what's the low point. I thought 1.50 was a steal and I wouldn't see anything close to it again. But today someone sold their holding on low volume of buyers. Institutions will need to see value before this goes up. 😊

[newbieinvestor]

Looks like we could be heading to the low of the year $1.38 despite me buying all the way down from $2.00, grrrrh !

Closed at 1.52AUD on asx .... will be interesting to see how it fares today ....

[Snoopy]

Back in the day once a company's market valuation matched annual revenue, I put that company on my watch list to sell. IOW I regarded it a very expensive.




Snoopy you reckon HMY deserve to trade same revenue multiple as HGH? i.e. 4? Especially considering its rapid growth in revenue.? Currently trading 2x. Not good enough. I bet Jeff wont be parting with any HMY shares until its at least 4x revenue. Maybe even 6x... Jeffs a smart man ay. He bought some more HMY last year for the bank


OK, I made a mistake here suggesting that HMY was 'very expensive' trading at 1xRevenue when, as Rawz has pointed out, it is already trading at 2x revenue. Meanwhile the likes of Heartland, trading at $2.45 today, are trading on an historic revenue ratio of:

($2.45 x 589.843m) / $327.935m = 4.4 times

I put my error down to putting all the financial shares that I hold in the "That will do for now" box, while I went off and researched some of my other investments, and I temporarily forgot about some quirks of analysing finance companies and banks.

I see from iceman's post on the HGH thread (post 14,831), that the Heartland 'Net Interest Margin' was 4.35% over FY2021. Now I know that 'Net Interest Margin' (NIM) is not the right thing to truly judge the profitability of a finance company. To do that you have to subtract the non-interest related running expenses as well. But in the case where a finance company is relatively new and growing (like Harmoney), the establishment costs are likely not representative of the longer term non interest running costs of the company. Thus the quoted profit of a rapidly growing company is likely under-reported, relative to where the profit on similar revenue going forwards is likely to end up. In this instance comparing NIMs between established and growing finance companies has some merit.

Returning to Harmoney, I use Ferg's quoted future estimated NIM of 7.0% (post 313)

The Harmoney group loan book was $501m at EOFY2021 while Heartland gross receivables at the same end of year date was an order of magnitude higher at $5 billion.

I find it a strange quirk of finance companies that they don't include the full value of what they sell (in this case the capital value of the loan book) anywhere on the balance sheet. It is clear that with a higher NIM, a given amount of capital lent through Harmoney will attract more in net interest payments than that same amount of capital lent through Heartland. Albeit you might argue that the Harmoney loan is at higher risk of not getting your loan capital ultimately repaid.

Using the gross value of the loan book as 'revenue' produces rather different market value to 'revenue' ratios:

Heartland: ($2.45 x 589.843m) / $5,000m = 0.2890 times

Harmony: ($1.73 x 100.913m) / $501m = 0.3485 times

These were the kind of calculations I was thinking about when I mused that paying "1x Revenue" for a company was too high. In Heartland terms that would mean paying a price of $2.45/0.2890= $8.48 was too high (it would be a very dutiful disciple of Heartland that would disagree with that). In terms of Harmoney, using the same logic, a price of $1.73/0.3485 = $4.96 would be too high. Given the share was floated at $A3.50 or $NZ (3.50/0.93)= $NZ3.76, some here might consider $NZ4.96 a reasonable price target today.

But on my measure of 'revenue', $4.96 would be looking extremely 'toppy'. I guess the real accountants out there will scowl and dismiss my analysis as corrupt. But I am sticking with it.

SNOOPY

[Muse]

OK, I made a mistake here suggesting that HMY was 'very expensive' trading at 1xRevenue when, as Rawz has pointed out, it is already trading at 2x revenue. Meanwhile the likes of Heartland, trading at $2.45 today, are trading on an historic revenue ratio of:

($2.45 x 589.843m) / $327.935m = 4.4 times

I put my error down to putting all the financial shares that I hold in the "That will do for now" box, while I went off and researched some of my other investments, and I temporarily forgot about some quirks of analysing finance companies and banks.

I see from iceman's post on the HGH thread (post 14,831), that the Heartland 'Net Interest Margin' was 4.35% over FY2021. Now I know that 'Net Interest Margin' (NIM) is not the right thing to truly judge the profitability of a finance company. To do that you have to subtract the non-interest related running expenses as well. But in the case where a finance company is relatively new and growing (like Harmoney), the establishment costs are likely not representative of the longer term non interest running costs of the company. Thus the quoted profit of a rapidly growing company is likely under-reported, relative to where the profit on similar revenue going forwards is likely to end up. In this instance comparing NIMs between established and growing finance companies has some merit.

Returning to Harmoney, I use Ferg's quoted future estimated NIM of 7.0% (post 313)

The Harmoney group loan book was $501m at EOFY2021 while Heartland gross receivables at the same end of year date was an order of magnitude higher at $5 billion.

I find it a strange quirk of finance companies that they don't include the full value of what they sell (in this case the capital value of the loan book) anywhere on the balance sheet. It is clear that with a higher NIM, a given amount of capital lent through Harmoney will attract more in net interest payments than that same amount of capital lent through Heartland. Albeit you might argue that the Harmoney loan is at higher risk of not getting your loan capital ultimately repaid.

Using the gross value of the loan book as 'revenue' produces rather different market value to 'revenue' ratios:

Heartland: ($2.45 x 589.843m) / $5,000m = 0.2890 times

Harmony: ($1.73 x 100.913m) / $501m = 0.3485 times

These were the kind of calculations I was thinking about when I mused that paying "1x Revenue" for a company was too high. In Heartland terms that would mean paying a price of $2.45/0.2890= $8.48 was too high (it would be a very dutiful disciple of Heartland that would disagree with that). In terms of Harmoney, using the same logic, a price of $1.73/0.3485 = $4.96 would be too high. Given the share was floated at $A3.50 or $NZ (3.50/0.93)= $NZ3.76, some here might consider $NZ4.96 a reasonable price target today.

But on my measure of 'revenue', $4.96 would be looking extremely 'toppy'. I guess the real accountants out there will scowl and dismiss my analysis as corrupt. But I am sticking with it.

SNOOPY

Thanks to Rawz, as acting CEO of the Harmoney fan boy & girl club (its a rather small club) I can declare we are prepared to accept a $1 dollar discount off the 4.96 tp (lets call it $4.00) and would be delighted with that as an acceptable target price over the next year or two. hell mate we are sitting here at a buck 70 anything north would be dandy! that said -

[Muse]

We clearly buggered it up

Todays SP movement

Harmoney -4.4%
Moneyme +1%
Plenti +5.3%
Wisr +16.7%

beware the WRATH of the SHAZ. When I was looking into HMY I searched for harmoney on the Sharesies share club page. There is some deep resentment from the p2p lenders who used harmoney before HMY rightly moved to a warehouse model and booted individuals. I haven't bothered to see if it was handled well or poorly - it doesn't matter - as the people were very grouchy and shared their grievences loudly and widely amongst the shaz. Couple that with an IPO that was years too early and dollars too high and thats a toxic combination for any retail aftermarket. No matter the run rate, no matter the scalability and the early days of growing npat, will the smaller end of the retail market take notice of harmoney. But if it can keep growing its book, and do so profitably, scaling and rapidly growing its npat, bigger individual retail investors will creep back in. but eventually it will take an insto or two hovering up cheap shares to confirm an uptrend and the broader retail market will return.

The company just needs to deliver EARNINGS. So I hope management are sensible - don't chase unprofitable growth - and show and deliver what the platform can do. Long gone are the days where people just want topline growth and with Harmoney's baggage they absolutely need to deliver those earnings over the next few years.

If they can we have a multibagger on our hands. If they can't - the club will need a new CEO, if there is anyone left

[Ferg]

The company just needs to deliver EARNINGS. So I hope management are sensible - don't chase unprofitable growth - and show and deliver what the platform can do.
My pick for positive NPAT is second half of FY23, assuming the required tailwinds eventuate.

[Muse]

My pick for positive NPAT is second half of FY23, assuming the required tailwinds eventuate.

According to management they’ve already achieved NPAT profitability

https://www.nzx.com/announcements/386137

You might take issue with cash npat? Its a fair question, though I did follow up on those adjustments in some detail a few pages ago

[Rawz]

$4... just imagine. The club would be popping the Champagne!! One day..

Yes cash npat achieved with a $550m loan book. HMY SP goes down 10% since announcement.

Plenti finally announce cash npat achieved with a $1.1b loan book. PLT SP goes up 10% since announcement.

Wrong.. just wrong.

Also Plenti say they will generate $97m revenue off its $1.1b book.
Harmoney will generate $100m revenue off its $650m book (rawz FY22 est).

Plenti valued at au$209m
Harmoney valued at au$161m

HMY clearly has the better business model and generates more.. its like 2+2= fish

[jimdog31]

$4... just imagine. The club would be popping the Champagne!! One day..

Yes cash npat achieved with a $550m loan book. HMY SP goes down 10% since announcement.

Plenti finally announce cash npat achieved with a $1.1b loan book. PLT SP goes up 10% since announcement.

Wrong.. just wrong.

Also Plenti say they will generate $97m revenue off its $1.1b book.
Harmoney will generate $100m revenue off its $650m book (rawz FY22 est).

Plenti valued at au$209m
Harmoney valued at au$161m

HMY clearly has the better business model and generates more.. its like 2+2= fish

I think Fiorland moose nailed it when he said its the sentiment thats causing the depression of HMY.

Insiders and instos arent selling that I can tell. Just retail that keeps the price down.

I have a massive overweight position in SKT (embarassingly so!) and this was purely based on reading the tea leaves that the business model had turned a corner but the sentiment at retail was overwhelmingly negative.

That has paid off so far, and has been driven by sophisticated investors recognising the same thing and mopping up retail at times.

I’m not going to go so far as saying harmoney is SKY but you can see some interesting correlations

content/finance aggregator
old model transitioning to a new
regulatory hurdles
poorly timed cap raise/IPO
entering new markets (broadband,streaming / aus)
New markets are entered utilising scale

It takes a while for the retail market to recognise that a model has transitioned to a more profitable/growth future.

Anybody reading the tea leaves from their announcements can see this model is transitioning/growing much faster than the market realises.

This depressed price is actually good news as far as I’m concerned!

I aim to build a similar sized overweight position in HMY over the next year or so.

Happy With VP spot 😂

[Rawz]

7 figure!?! Omg you might be taking that president position from FM at the next election lol

[jimdog31]

7 figure!?! Omg you might be taking that president position from FM at the next election lol

*dependent on what happens over at SKT and provided this stock stays <$2

[jimdog31]

7 figure!?! Omg you might be taking that president position from FM at the next election lol

A moose is a much better Masthead than a Jimdog

[Snoopy]

$4... just imagine. The club would be popping the Champagne!! One day..

Yes cash npat achieved with a $550m loan book. HMY SP goes down 10% since announcement.

Plenti finally announce cash npat achieved with a $1.1b loan book. PLT SP goes up 10% since announcement.

Wrong.. just wrong.

Also Plenti say they will generate $97m revenue off its $1.1b book.
Harmoney will generate $100m revenue off its $650m book (rawz FY22 est).

Plenti valued at au$209m
Harmoney valued at au$161m

HMY clearly has the better business model and generates more.. its like 2+2= fish


I have just inspected the 'Plenti' HY2022 presentation, and make the following observations:

1/ Plenti are heavily promoting motor vehicle finance. As Percy has told us, consumers need to keep up their motor vehicle payments above all others: No car, no job. A high quality place for a second tier financer to have their loan book.

2/ Plenti are tapping into government subsidies for renewable energy.

e.g. Continued delivery of the both the S.A. Home Battery Scheme and NSW Empowering Homes Program pilot– We have paid over $70m of subsidies to S.A. households, in addition to our lending, supporting installation of over 175MW of energy storage.

3/ Plenti are set to combine their experience in 1 and 2 to become the leading funder of Electric vehicles, a market that is only just starting in Australia.

4/ The Plenti arm that most closely resembles Harmoney is 'consumer finance'. Slide 18 shows the 90 day default rate of 0.26%, verses 0.47% for Harmoney.

Harmoney generates more profit on $100m worth of loans that Plenti, but clearly they are taking grater risks doing that. Is it any wonder that the market gives a higher relative rating to Plenti in times of uncertainty?

SNOOPY

[jimdog31]

I have just inspected the 'Plenti' HY2022 presentation, and make the following observations:

1/ Plenti are heavily promoting motor vehicle finance. As Percy has told us, consumers need to keep up their motor vehicle payments above all others: No car, no job. A high quality place for a second tier financer to have their loan book.

2/ Plenti are tapping into government subsidies for renewable energy.

e.g. Continued delivery of the both the S.A. Home Battery Scheme and NSW Empowering Homes Program pilot– We have paid over $70m of subsidies to S.A. households, in addition to our lending, supporting installation of over 175MW of energy storage.

3/ Plenti are set to combine their experience in 1 and 2 to become the leading funder of Electric vehicles, a market that is only just starting in Australia.

4/ The Plenti arm that most closely resembles Harmoney is 'consumer finance'. Slide 18 shows the 90 day default rate of 0.26%, verses 0.47% for Harmoney.

Harmoney generates more profit on $100m worth of loans that Plenti, but clearly they are taking grater risks doing that. Is it any wonder that the market gives a higher relative rating to Plenti in times of uncertainty?

SNOOPY

Valid Points Snoops, although 0.26 on a larger loan book works out similar to 0.47 on a lower value loan book. But I take your point.

[jimdog31]

I have just inspected the 'Plenti' HY2022 presentation, and make the following observations:

1/ Plenti are heavily promoting motor vehicle finance. As Percy has told us, consumers need to keep up their motor vehicle payments above all others: No car, no job. A high quality place for a second tier financer to have their loan book.

2/ Plenti are tapping into government subsidies for renewable energy.

e.g. Continued delivery of the both the S.A. Home Battery Scheme and NSW Empowering Homes Program pilot– We have paid over $70m of subsidies to S.A. households, in addition to our lending, supporting installation of over 175MW of energy storage.

3/ Plenti are set to combine their experience in 1 and 2 to become the leading funder of Electric vehicles, a market that is only just starting in Australia.

4/ The Plenti arm that most closely resembles Harmoney is 'consumer finance'. Slide 18 shows the 90 day default rate of 0.26%, verses 0.47% for Harmoney.

Harmoney generates more profit on $100m worth of loans that Plenti, but clearly they are taking grater risks doing that. Is it any wonder that the market gives a higher relative rating to Plenti in times of uncertainty?

SNOOPY

Page 31 of the presentation for Plenti

1H21 1H22
Payments to suppliers and employees (13.3) (33.5)

Their overall costs of lending seem to greatly increase with scale....

Commentary: "Payments to suppliers exceeds P&L expenses primarilydue to cash broker commission which are a alsotreated under the EIR method"

Leading to net cash outflow for the half

Net operating cash flow 2.2 (4.3)

So yes automotive & renewables are a big area of the business, but that part seems to have some commissions that appear to be paid out up front that aren't included in the P&L!

This area of the business is also susceptible to increased competition which can lead to increased commissions.....

Also page 23 from the presentation

• Significant growth in originationsrelative to employee costs, ourmajor cost line

They are trumpeting the fact that employees haven't grown sizably in relation to their originations, but I'd hazard a guess that's because they are relying more on broker network for their loan originations.

Also, it appears they are still engaging in p2p lending?


All in all, I'll take Harmoney's lean/direct approach I think.

[Rawz]

What is HGH 90 days arrears I wonder? As a comparison. I couldnt find it.
Plenti 90 day arrears is market leading. HMY nothing to sniff at

Jimdog i agree. These aussie lenders have been buying business and commission is paid upfront.
The other factor the market is forgetting is when a customer goes through a broker their custom is to the broker. Not the lender.

HMY's direct + 3r's model gets the customer coming back to them. And that second, third, fourth lend has zero marketing costs.

[jimdog31]

What is HGH 90 days arrears I wonder? As a comparison. I couldnt find it.
Plenti 90 day arrears is market leading. HMY nothing to sniff at

Jimdog i agree. These aussie lenders have been buying business and commission is paid upfront.
The other factor the market is forgetting is when a customer goes through a broker their custom is to the broker. Not the lender.

HMY's direct + 3r's model gets the customer coming back to them. And that second, third, fourth lend has zero marketing costs.

Totally agree. This area of the business is also susceptible to increased competition (other lenders muscling in) which can lead to increased commissions to retain the business with the dealers.....

[Ferg]

According to management they’ve already achieved NPAT profitability

You might take issue with cash npat? Its a fair question, though I did follow up on those adjustments in some detail a few pages ago

Thanks FM. I touched on cash versus traditional NPAT in my earlier post and my last post refers to traditional NPAT. I am still unsure why we would use a different NPAT metric purely because this is a "fintech" business. If they want to talk about cash NPAT as some sort of proxy for cash that might be available for shareholders via dividends at a future date, then shouldn't other non-P&L cash costs such as capex also be included? But IMO that makes it MORE complicated. Assuming depreciation is a proxy for capex and the intent is to maintain the base of revenue-producing assets within the business (whereby capex roughly equals depreciation), then I fail to see why we would ignore traditional NPAT...? What scares me with new valuation methods is my memory of the dotcom bubble where similar methods were used to justify outrageous share prices for tech companies. I'm not saying that is happening to HMY, but I can see parallels with these new methods for the fintech industry and the dotcom bubble.

Going back and re-reading what you wrote about one-off costs, it appears I already adjusted future NPAT for the one-off listing costs of circa ~$3m and that no adjustment to overheads was necessary for the borrower rebate given (I think) this was above the nett interest line. I did however miss the non-cash share scheme costs being accelerated and therefore being mostly a one-off cost. I did ask back then what we knew about the exec share scheme....maybe I was not clear but the intent was to look at the future costs of that scheme. Are we any wiser as to what the exec share scheme costs look like going forward?

[Cyclical]

Hey people, as the occasional Harmoney customer, thought I'd office some feedback on the application process. I tend to use the service as a big overdraft if I want to buy a new car. It has served me well for this purpose in the past, for the following reasons...I can get single figure interest rates, the admin fee is about $150 (last time I used it anyway), you can pay it off as quickly as you like without penalty (works for me as I'm probably selling my old car and shuffling money around left right and center and typically have it cleared within a couple of months or so), and lastly, it has been really easy and convenient to arrange.

My current attempt at using it though has been painful. I'm assuming a lot of it has got to do with the recent lending regulation changes. There are a whole lot more questions, some not very clearly written, or pretty ambiguous in their phrasing, the whole logging into your bank accounts doesn't seem to want to pick up out incomes anymore, so that has to be manually entered, which is another 4 or 5 page form which includes stuff that was already covered. One of the frustrating things about trying to enter income manually is if I put a weekly figure in there, it calculates the monthly income as being 4 x that, which it isn't, as there are 4.3 weeks in a month, which equates to a big difference in dollars.

Anyway, gave up on it, and I won't be the first. Can probably expect a phone call next week to guide me through what is now a pretty crappy experience. Anyway, on the bright side, I won't be wasting money on that BMW I was eying up ;-) Does make me wonder though what this type of experience is going to do for Harmoney's business going forward.

[jimdog31]

Hey people, as the occasional Harmoney customer, thought I'd office some feedback on the application process. I tend to use the service as a big overdraft if I want to buy a new car. It has served me well for this purpose in the past, for the following reasons...I can get single figure interest rates, the admin fee is about $150 (last time I used it anyway), you can pay it off as quickly as you like without penalty (works for me as I'm probably selling my old car and shuffling money around left right and center and typically have it cleared within a couple of months or so), and lastly, it has been really easy and convenient to arrange.

My current attempt at using it though has been painful. I'm assuming a lot of it has got to do with the recent lending regulation changes. There are a whole lot more questions, some not very clearly written, or pretty ambiguous in their phrasing, the whole logging into your bank accounts doesn't seem to want to pick up out incomes anymore, so that has to be manually entered, which is another 4 or 5 page form which includes stuff that was already covered. One of the frustrating things about trying to enter income manually is if I put a weekly figure in there, it calculates the monthly income as being 4 x that, which it isn't, as there are 4.3 weeks in a month, which equates to a big difference in dollars.

Anyway, gave up on it, and I won't be the first. Can probably expect a phone call next week to guide me through what is now a pretty crappy experience. Anyway, on the bright side, I won't be wasting money on that BMW I was eying up ;-) Does make me wonder though what this type of experience is going to do for Harmoney's business going forward.

That’ll probably explain the no growth in NZ.

Luckily Aus hasnt tried to find a problem for their solution.

[Rawz]

The NZ book didn't grow FY21 Q2, Q3, Q4 and FY22 Q1.
The major changes in the CCCFA came in 1st Dec.

The HMY NZ book finally grew 2% in FY22 Q2 (ends Dec 31).

I have stated my belief before that the new rules will be a net benefit for HMY as it may be hard through HMY but it will be 10x harder through the bank. No more easily putting that boat or caravan on the mortgage. HMY will pick up bank business.

If we see Q3 (ends 31 march) NZ book growth it will validate this thought

[jimdog31]

The NZ book didn't grow FY21 Q2, Q3, Q4 and FY22 Q1.
The major changes in the CCCFA came in 1st Dec.

The HMY NZ book finally grew 2% in FY22 Q2 (ends Dec 31).

I have stated my belief before that the new rules will be a net benefit for HMY as it may be hard through HMY but it will be 10x harder through the bank. No more easily putting that boat or caravan on the mortgage. HMY will pick up bank business.

If we see Q3 (ends 31 march) NZ book growth it will validate this thought

Yeh in my experience though a lot of the consumer lenders brought in a lot of the compliance changes in advance rather than wait till 1 Dec.

I do agree with you going forward from 1 Dec, hopefully they can streamline the process more.

[winner69]

OMG did I just see share price at 166

[newbieinvestor]

OMG did I just see share price at 166

Indeed Winner69 they held the SHP for a while at NZX now its at the levels at ASX.....

[Rawz]

HGH released their half year just now and value their shares in HMY as at 31/12/21 for AUD $1.90 a share or NZD $2.04 per share

[Muse]

HGH released their half year just now and value their shares in HMY as at 31/12/21 for AUD $1.90 a share or NZD $2.04 per share

thats weird - i would have thought they'd be obliged to value it at market price as of that date - AU$1.80 or the NZ$1.97 close price (or maybe the closing bid price which is usually lower than the final close price)

[Muse]

I'm in the process of updating my financial model for HMY for half year plus full year forecasts. will give some thoughts here before the release. rawz may need your input on final assumptions!

[Rawz]

thats weird - i would have thought they'd be obliged to value it at market price as of that date - AU$1.80 or the NZ$1.97 close price (or maybe the closing bid price which is usually lower than the final close price)

Here you go mate, from their report

The Escrow Restrictions have significantly reduced the available trading pool of shares, resulting in an illiquid market for the instrument, wide bid-ask spreads and volume that is insufficient to meet the definition of an active market under NZ IFRS 13 Fair Value Measurement for purposes of Harmoney shares traded. As such the quoted price of Harmoney as at 31 December 2021 is not considered a reliable evidence of fair value and accordingly HGH’s equity investment in Harmoney has not been measured under Level 1 of the fair value hierarchy.

Aint that the truth..

[Rawz]

I'm in the process of updating my financial model for HMY for half year plus full year forecasts. will give some thoughts here before the release. rawz may need your input on final assumptions!

FY22 going to be $650 loan book and $100m revenue i reckon

[winner69]

Here you go mate, from their report

The Escrow Restrictions have significantly reduced the available trading pool of shares, resulting in an illiquid market for the instrument, wide bid-ask spreads and volume that is insufficient to meet the definition of an active market under NZ IFRS 13 Fair Value Measurement for purposes of Harmoney shares traded. As such the quoted price of Harmoney as at 31 December 2021 is not considered a reliable evidence of fair value and accordingly HGH’s equity investment in Harmoney has not been measured under Level 1 of the fair value hierarchy.

Aint that the truth..

the world of high finance is never simple is it

At least they didn't have to write down the value this time around ...or up

[whatsup]

HMY ticking lower each quote, I thought and bought @ $1.70 thinking that that was the bottom but today its $1.65, grrrrrah!!

[Rawz]

HMY ticking lower each quote, I thought and bought @ $1.70 thinking that that was the bottom but today its $1.65, grrrrrah!!

Its depressing aye. Im like HGH and have just entered the value of my HMY shares in my spreadsheet at $2.04 a piece. ahhh much better :t_up:

[Dlownz]

Its depressing aye. Im like HGH and have just entered the value of my HMY shares in my spreadsheet at $2.04 a piece. ahhh much better :t_up:
Try 1.61. Everything for me performing well except this 😭😭.

[Rawz]

I was pondering last night about HGH comments on the CCCFA and how it has slowed down their vehicle lending.

I have post my thoughts about how this is a win for HMY. If I am right and CCCFA helps HMY then Q3 numbers could be very pleasing indeed. Time will tell.

[KJMLimited]

NZ lending is not the growth story for HMY. It is all about repeat lending in the AU book at low cost.

[Rawz]

NZ lending is not the growth story for HMY. It is all about repeat lending in the AU book at low cost.

Yes that is correct. However the NZ book is 65% of total book at Q2 (down from 77% pcp) so while Aussie has been growing high double digits overall book growth has been mid single digits because the heavy NZ book has been growing at 0%..

Aussie will surpass NZ book Q1 FY23 so all good. Unless NZ starts to grow at meaningful numbers again.

[Cyclical]

I was pondering last night about HGH comments on the CCCFA and how it has slowed down their vehicle lending.

I have post my thoughts about how this is a win for HMY. If I am right and CCCFA helps HMY then Q3 numbers could be very pleasing indeed. Time will tell.

I don't know, Rawz, it's getting harder for all lenders/forms of credit. Sure, might be easier to get a loan from HMY vs a bank for your car/boat, but remains to be seen if that turns out to be a boon for HMY. I reckon all lenders will feel the pain, but the damage may not be so great for HMY...only time will tell aye.

What may well turn things around of course is if the review for the CCCFA loosens things up again, but even then, would it be too little too late as the economy has taken a turn, and interest rates aren't about to come back down anytime soon by the looks. I wonder if the government is quietly weeing their pants thinking about how to maintain the ponzi scheme long enough to get to the next election...probably not factoring yet.

[Rawz]

I don't know, Rawz, it's getting harder for all lenders/forms of credit. Sure, might be easier to get a loan from HMY vs a bank for your car/boat, but remains to be seen if that turns out to be a boon for HMY. I reckon all lenders will feel the pain, but the damage may not be so great for HMY...only time will tell aye.

What may well turn things around of course is if the review for the CCCFA loosens things up again, but even then, would it be too little too late as the economy has taken a turn, and interest rates aren't about to come back down anytime soon by the looks. I wonder if the government is quietly weeing their pants thinking about how to maintain the ponzi scheme long enough to get to the next election...probably not factoring yet.

Possibly mate.. lets see. HMY NZ book grew for the first time last quarter in a long time. It could be a gain due to CCCFA (which i believe it is) or it could be coincidence. Agreed it will hurt all though. Just some more than others..

Some lenders will navigate it better with their technology and HMY is one and the other is another financial stock listed on the NZX- TRA. Oxford finance in for big gains!

[Muse]

Harmoney reports its 1H FY22 result on Monday.

Any picks for the half year result? Here are mine below - and how they compare to 1H FY21:

13562

Will probably regret putting ink to paper. The pertinent financial and operational metrics are highlighted in blue.

In terms of the 1H result this is at least as much a NIM story than simply a growth in originations and receivables story. Whilst I am expecting to see mid single digit growth in interest income (vs. FY21 1H) I am expecting massive growth in NIM $'s and expansion in NIM and % net lending margins.
Another critical piece of the puzzle is marketing expense. I see marketing expense to new customer originations as the key metric and expect it to come down based on some hints made a Q1 FY22 release.

The chunky swinger either is the expected credit loss provision as % of ending gross receivables. When covid initially hit in FY20 they ramped their ECL provision from 4.4% (held in each of the two years prior) to 5.8%. That has stepped down in 10bps increments so I simply assume the same occurs again - although for reference I also look at NPAT ex aftertax movement in ECL to see underlying change.

Another chunky & critical swinger is the % of funding debt provided from P2P vs warehouse. I've done my best to forecast for this using the limited datapoints available but it makes a big difference.

They should comfortably exceed what very limited guidance they have provided. I don't think they will get to the $100m revenue others have forecast - they certainly could if they wanted, but I expect a portion of their rapidly reducing funding costs will be passed through to customers. But I still see them retaining most of it in the form of increased NIM%.

I expect their press release to read something like
* 40% expansion in net lending margin
* 84% improvement in NPAT and 72% growth in cash NPAT
* dramatic reduction in average funding costs
* strong growth in new customer originations and repeat and return originations
* expect to achieve and exceed previous guidance
* give an indication on what 1H NPAT would have been if the book was 100% funded by warehouse and not p2p (IE, i've done the math, it's well profitable). Every month that goes by more p2p debt rolls off and NIM goes up, holding all else equal, and then that is compounding by these amazing new warehouse and ABS facilities being put in place one after another.

My maths and forecasts will be off no doubt but the underlying concepts I believe are absolutely valid. There is significant underlying change occurring in the financial profile of this business and that will only accelerate into the 2H and in FY23.

Its not an easy business to forecast - what started off as a back of the envelope sketch has turned into a full financial model. I have a 2h forecast and annual out till 2028. Look forward to updating it post the actual results.

[Greekwatchdog]

Thanks FM for your efforts. I have this on my watch list trying to find entry point. $1.70 I thought was it, but no she keeps going South. Think I will wait result and review before I pull trigger or walk away.

[Rawz]

Excellent work President FM. Your forecast highlights what a leap HMY has made between periods.

HMY breaking even with half the loan book size of their aussie competitors that are just starting to break even.
Economies of scale is now starting to kick in and every dollar in new lending is now contributing even more to the bottom line.
The 3r's kick in at lower and lower marketing cost. HMY said in their investor update that the multiplier effect is 5x over 6 years. I.e. the $128m in new originations during 1H22 will over the next 6 years generate $640m in further originations at very low (maybe zero) marketing cost.

The Aussie personal credit (non-business, non housing/mortgage) market is A$137B. The total addressable market is humongous and with the HYM loan book only A$185m (0.1% of the market) this can grow and grow and grow. The Aus book grew 19% qrt on qrt in Q2 and there isnt any reason why we wont see this sort of growth right up and past $1b.

Time is HMYs friend and the patient HMY shareholders will be rewarded with multi-baggers over the coming years.

[Sideshow Bob]

1H22 Results Announcement - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/388030)

HARMONEY INCREASES FY22 GUIDANCE OFF THE BACK OF STRONG INTERIM RESULTS
Harmoney Corp Limited (ASX/NZX: HMY; “Harmoney” or “the Company”) is pleased to provide its results for the half year ended 31 December 2021 (1HFY22).
1HFY22 highlights:
● New customer originations increased 224% to $129 million on the prior corresponding period (pcp), demonstrating the ongoing success of Harmoney’s unique 100% consumer-direct (B2C) model
● Record Period end loan book of $557 million; further accelerates to over $600m at the end of February 2022
● Increased guidance on pro-forma loan book to greater than $650m (30% increase on pcp) and now guiding to Cash NPAT profitability at 30 June 2022
● Australian book grows to A$185 million, up 83% on pcp and up 37% on the prior half
● Group 90+ days arrears at 0.46% and losses at 3.8% of principal, remaining at historic lows
● Added funding diversity with four warehouses (incl. 3 of “Big 4” banks) and asset back securitisation, reducing cost of funds by 330bps on pcp.
● Significant undrawn funding capacity of NZ$304 million across Australian and New Zealand warehouse facilities
● Achieved profitability on pro forma Cash NPAT demonstrating superior economics of Harmoney’s business model
• Key lead indicators of increased account acquisition, new loan originations (+224%) and net lending margin set to drive increases in receivables and revenue growth in current and future financial years through Harmoney’s 100% consumer-direct model, with growing numbers of new customers later returning for subsequent needs

[Sideshow Bob]

Results Preso 1H22 Results Presentation - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/388029)

HY Report 1H22 Half Year Report - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/388028)

[Rawz]

Nice upgrade. Loan book will be over $650m as I said.
Revenue above $92m. Not the $100m i wanted by FM said it wouldnt be.

Nice chart in the presentation showing that the doubling of the loan book 45x the EBITDA.

At AU$1B loan book they are predicting $45m cash EBITDA

[Rawz]

Oh wow loan book was at $600m late Feb.

Gee they will smoke $650m by FY22. More like $688m- $700m. Exciting :t_up:

[whatsup]

Market may be slowly catching on about the prospects of HMY ( about time imo ) !!

[Rawz]

If they continue their current growth rates they will be at $1b loan book in 14 months time

[whatsup]

If they continue their current growth rates they will be at $1b loan book in 14 months time

R, what will that do for the S P ?

[Rawz]

R, what will that do for the S P ?

By my calc it means they are trading on a forward 14 month cash npat P/E of 6.. so based on the incredible growth rates its cheap as chips right now and the market is asleep at the wheel.

SP could be $3 right now and still cheap.

[whatsup]

By my calc it means they are trading on a forward 14 month cash npat P/E of 6.. so based on the incredible growth rates its cheap as chips right now and the market is asleep at the wheel.

SP could be $3 right now and still cheap.

fingers crossed for that.

[dibble]

My takeaway from the last meeting was they were roughly profitable at half a billion and the guts of the business is autmated (ish).

The fixed costs are thus largely covered and they gave an acquisition cost per new loan so we can account for that. There will be other related variable costs of course but if they double the loan book, it is fair to assume the profit chart ought be delightfully curved rather than straight.

Quite what the SP does is subject to all manner of variables I suppose but if we start to get a decent dividend it will take care of itself.

[whatsup]

Over the last few months when there has been a seemly good ann made someone keeps loading up on the sell side supressing the upward movement which should have been happening, any ideas who and why ?

[Sideshow Bob]

Over the last few months when there has been a seemly good ann made someone keeps loading up on the sell side supressing the upward movement which should have been happening, any ideas who and why ?

Any major share movements would be covered by disclosures??

[whatsup]

Any major share movements would be covered by disclosures??

5 % + but the selling has been going on for months now ! Grrrr !

[Rawz]

More shares in the free float would be good!! Some liquidity would end up helping the SP

[Cyclical]

Over the last few months when there has been a seemly good ann made someone keeps loading up on the sell side supressing the upward movement which should have been happening, any ideas who and why ?

Something to do with tons coming out of escrow? I'm only taking a stab in the dark, don't really follow the stock that much, but do recall reading there was a fair chunk under some arrangement. Someone more up to speed will be able to shed light on it.

[KJMLimited]

Everything is now out of escrow. Half came out of escrow at the half year, and none were sold. Given that the price has fallen further since then, I would say that it is unlikely any will be, or are being, sold at this price.

[Muse]

Been a bit occupied today but what a great result. First, what a wonderful thing to be profitable at the NPAT level (and not even cash npat - just npat). Though we do have a normalising ECL provision to thank for that, but hey, consistency right?

The guts of what I hoped for and forecast in my previous post were absolutely delivered: both net interest margin & net lending margin in dollar terms were both 300to500k above my forecast, and as a % of average book bang on (above 30 basis points higher). and *miles* ahead of last year.

I was too much of a wuss to forecast the ECL provision unwinding although 100% it deserved too - it remains historically but key macroeconomic data all support that (being unemployment and GDP over the remaining period of outstanding loans).

We also now have a very good idea on the fixed cost base the business will be able to operate with for the next ~3 years.

The two lowlights from my perspective were marketing costs coming in higher than I expected and share issue expense.

In the Q1 FY22 release they said marketing to originations was about 3% - i took that to mean 3% of gross originations (including rewritten loans that do not incrementally add to the portfolio), whereas I think they now refer to originations as new customers plus incremental existing customers. So I rolled that false assumption forward. It still represents significant improvement from 1H FY21 and 2H FY21. I'll dig into this more. Still moving in the right direction though.

The other lowlight was the level of share issue expense. We have limited data on which to draw on to make future assumptions. I had previously assumed for the full year it would be $1.26m - which I derived as the 3 year average of share issue expense prior to the IPO, then rolled forward at wage inflation, with some specific assumptions on 1H vs 2H. Share issue expense came in quite a bit higher. I need to dig into this, but one potential explanation may be the option value associated with the issue of warrants. A $20m corporate debt facility was put in place at the end of last year, with 40% / $8m of that in the form of a convertible note. The terms of the note grant the lender a call option to subscribe for shares to the value of the notes prepaid, with an exercise price of A$2.40, if it is paid off before 36 months. Half of that MCN (A$4m) at the end of the year, representing a potentially call over 1.333m shares. I wouldn't be surprised if their auditor said they had to do some sort of black scholes option pricing model for the options attached to the convertible note. So there could be more than its just higher employment expense in disguise, which I'll figure out in due course.

So overall pretty happy with 1H. There is a clear fixed cost base now which I'm getting comfort on. Net lending margin - the single most important financial metric probably in this business - grew over 40% year on year! Marketing costs have stabilsed post covid/post float and are trending down, credit metrics are sound, book run off (being early preparyments of loans coming from customers using their mortgage to refi consumer debt) is running down. CCCFA will actually lengthen the duration of loans as a direct consequence of this even if it slows new customer originations. That, ironically, is an incredibly profitable combination due to the cash drag from up front marketing investment and lengthening the loan which drops to the bottom line. This will be a short term thing.

The company is also in the process of gaining a asset back securitization programme for its NZ book, which has higher funding costs than in australia. So the company is making fantastic gains in diversifying its funding sources and lowering its cost of funds, some of which it will pass on to customers, and some of which it will keep in the form of higher NIM.

I've got even greater conviction in the reliability of my own financial model and short/medium/long term forecasts. It's bloody difficult to get the model going - basically had to scour every NZX/ASX release for every available datapoint - but once it it is up, the mechanics of how the business works are relatively simple given the right set of assumptions.

Will dig in more.

PS - as an aside - nice this thing has $20m in available tax losses to utilize going forward.

[X630]

Hey, any idea how their net interest income barely changed YoY?

It seems like the interest rate only decreased by 110BPS to 16.30% for an expected interest income decrease of 6% at a fixed loan book. But their loan book grew by 19%, so I would really expect a much bigger increase in interest income, unless the entire loan book was added at the end of the half.

[Rawz]

1.10% of $550m is still $5.5m

[Muse]

Hey, any idea how their net interest income barely changed YoY?

It seems like the interest rate only decreased by 110BPS to 16.30% for an expected interest income decrease of 6% at a fixed loan book. But their loan book grew by 19%, so I would really expect a much bigger increase in interest income, unless the entire loan book was added at the end of the half.

They passed on some of the savings in funding costs to customers in the form of reduced interest rates. But kept the majority it which is why NIM as a % of average receivables went up 221bps.

Actual net interest margin (ie interest income less all their funding expense) expanded by over 40% year on year. NIM is a better 'topline' metric to focus on, rather than gross interest income, from my perspective.

[Dlownz]

Good result. Price goes down 😂. Go figure

[newbieinvestor]

Good result. Price goes down . Go figure

~~~~:)~~~~

[ralph]

Good result. Price goes down . Go figure
A lot of companies in the same boat at the moment, but covid etc cannot be a reason for this one ! just getting hammered ,beginning to lose hope with Harmoney :confused:

[Rawz]

Don't lose hope! Everything is going in the right direction for HMY (except for the SP). Selling now would be a disaster and could very well be the bottom. It is safe to say the majority of holders are underwater right now and frustrated.

The update on Monday said the book was at $600m "late February". That means they grew the book $21m-$22m each month for Jan and Feb. Which is incredible as their record quarter just gone they were growing the book $16m a month.

HGH valued their shares over 2 bucks as at 31/12/2021.

Market screener has two analysts covering the stock with an average target price of $3.43.

HODL. DIAMOND HANDS. And all that guff

[whatsup]

Don't lose hope! Everything is going in the right direction for HMY (except for the SP). Selling now would be a disaster and could very well be the bottom. It is safe to say the majority of holders are underwater right now and frustrated.

The update on Monday said the book was at $600m "late February". That means they grew the book $21m-$22m each month for Jan and Feb. Which is incredible as their record quarter just gone they were growing the book $16m a month.

HGH valued their shares over 2 bucks as at 31/12/2021.

Market screener has two analysts covering the stock with an average target price of $3.43.

HODL. DIAMOND HANDS. And all that guff

Good buying yesterday for me, didnt get my fill @ $1.54 , now I see a blocker @ $1.60 wonder how long he/she will stay there ?

[Muse]

Good buying yesterday for me, didnt get my fill @ $1.54 , now I see a blocker @ $1.60 wonder how long he/she will stay there ?

It's often cheaper to buy on the asx fyi. that's where I often lurk. nothing better (as a buyer) opening up depth and being the only bidder. lob in a bid 5 or 10c lower than lowest offer - usually a seller emerges. last week though I noticed a tracker - there was no other bidder and as soon as I did they did and beat my bid by half cent increments until their bid was filled.

[Ferg]

last week though I noticed a tracker - there was no other bidder and as soon as I did they did and beat my bid by half cent increments until their bid was filled.
On the ASX?

[Rawz]

What is the idea behind using a tracker? Never heard of such a thing

[Muse]

What is the idea behind using a tracker? Never heard of such a thing

I’d never seen something like that before. There were no other bidders shown on the depth before I bid. Then i refreshed the depth and there they were - half a cent or so above me. So i changed my price, and immediately they uped theirs. I did it 2 more times to see what happened and same instant result. I thought perhaps it was the standard market discovery process brokers do when they make a market - in low liquidity stocks if you bid far off the last they often dont show your bid at your limit price and raise it incrementally slowly based on what others are up to - so wondered if that was happening to someone else. Anyway, I withdrew my bid, and theirs vanished too. I sat and waited and bid again and they were back. Never had that happen before - very curious - especially for the company in mind.

I just assumed it was some sort of algo buying

[winner69]

Close 148 today

All time low is 138 I think

[Balance]

Consumer unsecured and asset finance - the most vulnerable sector in the finance industry when times get tough.

Keep an eye on doubtful & bad debts levels.

[nztx]

Consumer unsecured and asset finance - the most vulnerable sector in the finance industry when times get tough.

Keep an eye on doubtful & bad debts levels.


Indeed - agree .. expect plenty of carnage both here & in OZ IMO

No amount of DD or Rating system on borrowers can likely avoid damage inflected in the current times

[Rawz]

What do they say? Never buy into a downtrend.
What does Rawz do? Buy into a downtrend.. one day ill learn.

To be fair the whole russian thing hasnt helped..

Fintech a good bet during times of inflation.
Having looked back at why i invested in HMY which was prior to Q2 results things have exceeded my expectations. Last investor presentation the comment that the loan book was at $600m 'late Feb' was huge.
One can only look at the original investment thesis and if it hasnt changed then carry on. The market will do what the market will do.

Balance is dead right about this type of lending during tough times.. well here is the test for their Stellare software. It's supposed to hunt out the best tier one borrowers..

[Dlownz]

Hey Rawz. Whens this one turning around. I brought onto nzme and HMY. They are both going opposite ways so I'm not getting hit. But I see the fundamentals are good and they are performing above ipo report.
We might need heartland to start snapping up some shares again to get this moving off the bottom.

[winner69]

Consumer borrowing (borrowing from non banks) increasing they say ....as a result of increased cost of iving .... you know the crisis we have

Is that good for Harmoney

[Dlownz]

Consumer borrowing (borrowing from non banks) increasing they say ....as a result of increased cost of iving .... you know the crisis we have

Is that good for Harmoney

3rd quarter trading update in a couple if weeks. Should be interesting probably be growth in Australia continues to succeed nz flat. But hey what market would you want to be succeeding in. I know what I'll choice

[thegreatestben]

Agree, who cares if nz is flat? Australia and maybe more markets like Canada. If they can scale up while keeping the same headcount it all sounds good to me. Wondering where the bottom is though.

[Rawz]

I expect solid lending update in line with previous updates. NZ should be growing.

HMY in their first guidance of the FY said loan book of $600m by 30 June 2022. They hit that Feb 2022.

New guidance is loan book of >$650m by 30 June 2022. Likely going to be update in coming weeks that we are at $623m and then $695m by end of financial year.

If they continue current growth rate they'll exceed revenue guidance of $92m all going well. Maybe get $95m. And will squeeze out a small profit.

The results presentation reads well. Exceeds guidance. Come on SP...

[nztx]

Consumer borrowing (borrowing from non banks) increasing they say ....as a result of increased cost of iving .... you know the crisis we have

Is that good for Harmoney


the real crisis occurs when enough can't cover repayment on what was used for an earlier smaller crisis :)

HMY working a fair chunk of Other People's money - what could possibly go wrong as the prevailing tides
of the economic times can rapidly change ? :)

[nztx]

I expect solid lending update in line with previous updates. NZ should be growing.

HMY in their first guidance of the FY said loan book of $600m by 30 June 2022. They hit that Feb 2022.

New guidance is loan book of >$650m by 30 June 2022. Likely going to be update in coming weeks that we are at $623m and then $695m by end of financial year.

If they continue current growth rate they'll exceed revenue guidance of $92m all going well. Maybe get $95m. And will squeeze out a small profit.

The results presentation reads well. Exceeds guidance. Come on SP...


Unfortunately HMY haven't wised up to reporting certain other more important
to really give meaningful indication of all important bottom line,
impairment stats, etc

These sort of outfits can grow their books all they like but if the bottom line
is negative or deteriorating - then where are they going ? :)

The opposite direction to investor's hopes of dividend prospects perhaps ? :)

Look no further than Aussie ASX Listed Laybuy to see where they are going with
the other sort of bottom line progress..

[Muse]

Unfortunately HMY haven't wised up to reporting certain other more important
to really give meaningful indication of all important bottom line,
impairment stats, etc

These sort of outfits can grow their books all they like but if the bottom line
is negative or deteriorating - then where are they going ? :)

The opposite direction to investor's hopes of dividend prospects perhaps ? :)

Look no further than Aussie ASX Listed Laybuy to see where they are going with
the other sort of bottom line progress..

Well that is a load of rubbish, and a rather disingenuous comparison to Laybuy.

Harmoney don’t provide meaningful impairment stats? Not true.

In its 1H FY22 report they noted group loss rates (actual incurred credit losses - or ICL - as a % of average receivables) of 3.8% - a slight improvement on 3.9% in FY21 and 4.8% in FY20.

Of that group loss rate, its warehouse facilities had incurred credit losses of 2.2% - against down from about 2.3% in FY21A and vs ~2.1% in FY20. Harmoney provide incurred credit losses by country as well.

Legacy peer to peer incurred credit losses are quite a bit higher at 8%, up from 5 to 5.5% and 6.1% in the prior 2 years – for two reasons. One, given the inefficiencies of p2p they necessitated higher lending rates which meant they went to riskier customers, and (2) the book is old and is in run which naturally attracts higher loss rates as the book ages. Peer to peer has been discontinued, at 1H they about $101m of remaining p2p receivables, which is running off at the rate of about 40-45m per quarter. We should naturally see overall incurred credit losses as % of book fall as the p2p book runs off holding all else equal.

Harmoney likewise disclose the provision for future expected credit losses. At the proforma group level this sat at 4.6% (down from 5.7% in FY21), its on balance sheet warehouse facilities 4%, and p2p of 7.3%
In their release they provide monthly charts showing 61+ day arears showing last 24 month performance in both NZ and AU (both at record lows) – with that time frame a good leading indicator for 90 day arrears which we know drives incurred credit losses. Group 90 day arrears at 1H FY22 was 0.46% - a record low for the company.

Not sure what more credit data you could reasonably expect but happy to hear your suggestions

Regarding laybuy, the financial and operational performance between the two companies could not be more stark. Laybuy very recently announced their ‘net transaction margin’ (similar to net lending margin which Harmoney and traditional banks use – basically your gross margin after credit losses) was at breakeven and expected to be negative across its second half. That is shocking. A financial institution that can’t even recover its interest expenses after credit losses may as well close up shop.

When looking at financial instos a lot of investors focus on NIM but net lending margin is without a doubt the most relevant financial metric. And that is where Harmoney happens to shine. In 1H FY22 they clocked $24.2m in NLM – growth of 41% on the prior year – and represented a 9.3% net lending margin on average book. As Winner69 would say – that’s very good.

You’ll get no argument from me that the financials are difficult to understand. That should resolve as the transition from p2p to warehouse is completed before the end of this calendar year.

[Muse]

the real crisis occurs when enough can't cover repayment on what was used for an earlier smaller crisis :)

HMY working a fair chunk of Other People's money - what could possibly go wrong as the prevailing tides
of the economic times can rapidly change ? :)

aye well the elephant in the room for this one and every financial institution on earth that lends money is stagflation.
Conventional wisdom is a rising interest rate environment is a net positive for banks & lenders as it can increase the net interest dollars earned, even if NIM% may fall slightly or slow originations by becoming more expensive. Specific to harmoney, a rising interest rate environment (coupled with regulatory changes) has some positives. One, over the last 18 months or so banks had a bonanza refinancing personal debt as rates fell and home prices rocketed. around half of HMY's customers are homeowners and a lot of consumer lending got refinanced when they took on or refinanced their mortgages, with HMY's average loan duration falling by around 30% from FY19 to the worst impacted period which was 30 june 2021 to 31 december. I expect that trend will have ground to a halt now. Improving the duration of the book back to levels seen 24 months ago has a significantly greater financial impact than growth in originations, minor movements in interest rates, or slightly higher credit losses.

But stagflation is a different kettle of fish to inflation, with persistently high interest rates, low growth, and high unemployment. Unemployment is key when thinking about credit losses. as long as people have jobs they tend to be pretty good about meeting payments

Unemployment is very low and its reasonable to assume unsustainably low. Risk of stagflation is arguably the greatest in america - its not yet expected even by economists like larry summers - but its a growing risk and particularly if the FED don't take strong action soon.

The risks of stagflation in NZ are lower than america, but you'd have to be a bit crazy to think its not at least a possibility with inflation expectations rising. The risks of stagflation are again lower in Australia, where the growth of this business is centred.

There's no doubt in my mind stagflation is a potential risk to harmoney, heartland, every trading bank in the world. The risk is obviously greater to unsecured lenders than to secured lenders. That is potentially weighing on sentiment. But harmoney is in such an entrenched downtrend off miniscule volumes its hard to know. Recessions are inveitable and this business can handle. But no one wants to see a stagflationary recession.

As its a young company we don't have a huge pool of historical data to work with. There was covid in 2020 where unemployment soared and the business performed admirably. If anything they were a bit conservative on writing new business (but thats in retrospect no one knew what the future held) and they lost a bit of marketshare in NZ as a result, but incurred credit losses performed well. I don't think thats a 'normal' baseline to assume though if there was another unemployment shock as wage subsidy support was clearly directed at mitigating the impact of lockdowns.

When Harmoney or any other lending institution write & price a loan they arent doing it on a status quo basis. They price it from the bottom up - what's their funding costs, primarily 3 year swap rates, and I bet you they are hedging every dollar of new business, what's the expectation of credit losses, and price it up from there. They have optionality if they try to maintain, grow or decrease their NIM and net lending margin as variables change. I'd assume some erosion in NIM % as funding costs rise but they will fully price any expected changes in credit performance. What more, the company is still making inroads on optimising its funding structures - p2p is in run off, warehouse facilities are up and running, and asset backed securitizations have commenced in australia, and they are exploring that in NZ as well.

Simply put, HMY have a lot of tools in their toolbelt to offset some of the impact of rising interest rates. Their credit performance for an unesecured lender is very good and the data and capability their data science team have in this regard is likewise is fantastic.

Stagflation has only occurred once before. Lets hope it stays that way....otherwise its a worry.

[Rawz]

If I was to describe HMY to a new investor in one short sentence I would say:

"HMY is a profitable micro-cap operating in the fintech space and growing revenues 20% p.a."

That's fair aye

[nztx]

Has the initial Retail IPO investor seen profit yet ? or still deep underwater ? ;)

might take a long wait to get back the $3.60 or $3.70 Kiwi hard earned :)

[Rawz]

If I was to describe HMY to a new investor in one short sentence I would say:

"HMY is a profitable micro-cap operating in the fintech space and growing revenues 20% p.a."

That's fair aye

Would probably want this said new investor to know that HMY is trading 1.5x estimated F22 revenue

[Dlownz]

Who's ready for some harmony action 😁

[Rawz]

What have you got for us Dlownz?

HMY.nzx up heaps
HMY.asx down heaps

The harmoney would has gone mad
Or always was?

[nztx]

What have you got for us Dlownz?

HMY.nzx up heaps
HMY.asx down heaps

The harmoney would has gone mad
Or always was?


a bit of disharmoney going between ASX & NZX ? ;)

since when was SP ratio to Revenue a yardstick on whether good value or otherwise ? ;)

How about current SP to IPO Price ?

[Rawz]

I agree, should be profits profits profits.
But when you are chasing growth and not profits then what do you do?

[Snoopy]

I agree, should be profits profits profits.
But when you are chasing growth and not profits then what do you do?


As a shareholder, if you have an investment that keeps you awake at night, you should either:

(i) Sell, or
(ii) Outsource such asset management to a professional by buying into a fund that specialises in financial products.

As it happens there is such a fund available in New Zealand, with a compellingly competitive management fee of 'nix' for unitholders. They specialise is seeking out fintech opportunities but also have a more conventional portfolio seeking out opportunities not targeted by the 'big banks.' One of their more successful recent investments has been a push into the reverse mortgage market both in Australia and New Zealand. It is run by a bloke called Jeff, who is dedicated to looking after heartland New Zealanders. Worth a look for investors in fintech who want to outsource their hair loss.

SNOOPY

[Rawz]

Good stuff Snoopy. I like Jeff. He likes HMY. He values HMY at $2.05 per share in his fintech portfolio.

[percy]

As a shareholder, if you have an investment that keeps you awake at night, you should either:

(i) Sell, or
(ii) Outsource such asset management to a professional by buying into a fund that specialises in financial products.

As it happens there is such a fund available in New Zealand, with a compellingly competitive management fee of 'nix' for unitholders. They specialise is seeking out fintech opportunities but also have a more conventional portfolio seeking out opportunities not targeted by the 'big banks.' One of their more successful recent investments has been a push into the reverse mortgage market both in Australia and New Zealand. It is run by a bloke called Jeff, who is dedicated to looking after heartland New Zealanders. Worth a look for investors in fintech who want to outsource their hair loss.

SNOOPY

Do you mean that Jeff's hair loss is solely in shareholders' interests.?

[whatsup]

Good stuff Snoopy. I like Jeff. He likes HMY. He values HMY at $2.05 per share in his fintech portfolio.

Whats his web address ?

[Rawz]

Whats his web address ?

https://shareholders.heartland.co.nz/ (https://shareholders.heartland.co.nz/) :p

[Rawz]

Probably see some Q3 numbers tomorrow or the next day.

My guess:

Aus book: $235m 91% up on pcp
NZ book: $378.5m 5% up on pcp
Total book: $623m 28% up on pcp

All good

[Rawz]

Nztx will probably be feverishly looking through the update trying to sniff out what sort of potential bottom line profit is to be had.. But remember folks, thats not the story. Its how fast can they grow aussie before they launch into Canada ;)

[Muse]

Probably see some Q3 numbers tomorrow or the next day.

My guess:

Aus book: $235m 91% up on pcp
NZ book: $378.5m 5% up on pcp
Total book: $623m 28% up on pcp

All good

Hmm lets see my guesses

AU: A$225m. Q3 originations of A$63m vs A$51m in december.
NZ: NZ$365.4. Q3 originations of NZ$51m vs 56.7m in December. Assume CCCFA & other macros drag down qoq originations. But book still grows slightly with lower runoff.
Group: NZ$607m.

AU could have some upside to my guesses I reckon.

I reckon the book will be 90% warehouse, only 10% left p2p (thank god).

Will be good to watch those credit stats. But p2p impairments are so much higher than warehouse and you can only break them out using the half year and full year accounts.

I am really keen to see if they make any noise on the mooted asset backed securitization on the NZ book.

[Rawz]

HMY CFO having a hard time counting all the money.

Looks like we are going to have to wait until next week for Q3 update

[percy]

HMY CFO having a hard time counting all the money.

Looks like we are going to have to wait until next week for Q3 update

More likely trying to trace delinquent borrowers.?..................

[Rawz]

More likely trying to trace delinquent borrowers.?..................

Unemployment rates still low Percy, no worries ​yet

[percy]

Unemployment rates still low Percy, no worries ​yet

Only posted in jest..

[winner69]

Unemployment rates still low Percy, no worries ​yet

But the media says people are 'fighting for their survival and the cost of living sky rockets'

Food or make the loan repayment that's due .... its tough out there

[Rawz]

But the media says people are 'fighting for their survival and the cost of living sky rockets'

Food or make the loan repayment that's due .... its tough out there

HMY loans get paid in full early historically. Maybe this media beat up, I mean cost of living crisis thingy means HMY loans run full term

[mike2020]

Not exactly hmy but one labor ploy posted on fb about nzers struggling with the high cost of living and war in the Ukraine. I thought how insulting that would be for a Ukrainian but they quickly deleted it. Nzers have choice and have grown soft.

[Ggcc]

But the media says people are 'fighting for their survival and the cost of living sky rockets'

Food or make the loan repayment that's due .... its tough out there
I think small business employers are fighting for their survival. They can't find workers and workers are having a ball with the pick of what they want to earn. An article I read that healthcare workers are receiving more at KFC than where they are working. Fruit Pickers offered up to $60 per hour for kiwifruit. If employers need workers they need to pay them from their salary/wage.

Some employers are working just to eat and getting no wages themselves and for now wanting overseas workers to relieve the situation.

[jimdog31]

HMY CFO having a hard time counting all the money.

Looks like we are going to have to wait until next week for Q3 update

if its a late 4pm release we know thats not good

[Muse]

if its a late 4pm release we know thats not good

Ha I was thinking the same thing.

They didnt do their Q2 FY22 update till the 19th of the following month (19 jan). I assume we will get it on Tuesday.

Hope they give an update on NZ ABS, credit stats by warehouse vs p2p, and would love to know what the P2P/WHS split is by country.

[mike2020]

Some employers are working just to eat and getting no wages themselves and for now wanting overseas workers to relieve the situation.[/QUOTE]

Short of bringing out the guillotine isn't that what a socialist govt would want?

[nztx]

The recent report by AFTERPAY eluded to increasing Bad Debts & provisioning

Presumably HMY would not be immune to the same economic conditions as well

Factor in further tightening of the economy & Interest rate increases and other factors - the issue could
be expected to grow further

Maybe enough to kiss hopes of a Div from HMY out the window for a while, but who knows ? ;)

[jimdog31]

still no update….. cant be good

[jimdog31]

The recent report by AFTERPAY eluded to increasing Bad Debts & provisioning

Presumably HMY would not be immune to the same economic conditions as well

Factor in further tightening of the economy & Interest rate increases and other factors - the issue could
be expected to grow further

Maybe enough to kiss hopes of a Div from HMY out the window for a while, but who knows ? ;)

While that may be true, afterpay is a glorified loan shark. Ive seen first hand the types of ppl they give money too, there is almost no dd, a high level of fraud too.

My impression of harmoney is that as they arent pay day lenders that their exposure wont be anything like what afterpay is and will experience.

[winner69]

still no update….. cant be good

Don't worry jim .... it will be fine ....plenty of big UP numbers

[Rawz]

Its coming Jimdog... remember loan book going to be nz$623m. Ya heard it here first

[Muse]

still no update….. cant be good

I echo jimdogs nervousness. They've never taken this long to release a quarterly update. Could be three reasons

1) simply decided to stop releasing them in favour of half year and full year announcements. that would be a mistake and poor shareholder engagement.
2) working on something positive they want to bundle into the release. Like finishing a securitisation of the NZ book, some acquisition or major product release
3) dealing with something bad and locked down until it is resolved.