View Full Version : HMY - Harmoney Corp Limited
4) Q2 was released 19th of the month. We are only 21st... and this month we have three back to back 4 day working weeks because of Easter and ANZAC holidays.
Be patient :)
jimdog31
22-04-2022, 09:16 AM
4) Q2 was released 19th of the month. We are only 21st... and this month we have three back to back 4 day working weeks because of Easter and ANZAC holidays.
Be patient :)
surely today??
mike2020
22-04-2022, 09:43 AM
Wed next week.
CEO/CFO probably already at the beach house for an extra long weekend. Like Mike says above, we might have to wait until next week :cool:
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.
I rather look at scenarios that may occur when using OPM (Other People's Money)
which this outfit are clearly doing by many very large basketfuls ;)
What could possibly go wrong ? :)
I rather look at scenarios that may occur when using OPM (Other People's Money)
which this outfit are clearly doing by many very large basketfuls ;)
What could possibly go wrong ? :)
Just curious if you apply that same logic to a bank? For financial institutions debt is a raw consumable like inventory is for a retailer
Old Heartland, which like harmoney very much indeed as one of its largest shareholders, uses deposits (other peoples money), securitised debt, and unsubordinated notes to fund its receivables, in addition to a small proportion of equity they use to fund their receivables. I haven't checked how much equity they have directly invested in their receivables book but I recall they had about a 14% regulatory capital ratio at the end of end of December.
Specific to harmoney, off balance sheet p2p debt is running off and I doubt harmoney will have much/any left by the end of this calendar year.
That means all lending will be funded by on balance debt from either warehouse or asset backed securitisations and their attendant equity requirements. HMY's warehousing arrangements require harmoney to fund and own the junior tranche within each warehouse, which is usually at least 10%. Securitisations drop the equity requirement by roughly half. As best I can tell, harmoney has funded over 9% of its warehouse receivables with equity at the end of 31 dec 2021.
Funding and funding requirements for banks an area most investors never bother to look at and it has interesting implications for banks, particularly Heartland going forward. From 1 July this year the minimum total capital ratio for banks will lift from 10.5% to 16% over 7 year phased transition. Heartland was at 14% and ahead of its phased plan but given it has debt funded its aussie acquisition, this could set its capital ratio back a % point or two. This has dividend payout implications and potentially even additional equity requirements starting in probably 3 or so years from now as they will need to either retain more (even after DRIP) or raise equity to meet those requirements. Nothing to worry about now but its on the horizon.
Just curious if you apply that same logic to a bank? For financial institutions debt is a raw consumable like inventory is for a retailer
Old Heartland, which like harmoney very much indeed as one of its largest shareholders, uses deposits (other peoples money), securitised debt, and unsubordinated notes to fund its receivables, in addition to a small proportion of equity they use to fund their receivables. I haven't checked how much equity they have directly invested in their receivables book but I recall they had about a 14% regulatory capital ratio at the end of end of December.
Specific to harmoney, off balance sheet p2p debt is running off and I doubt harmoney will have much/any left by the end of this calendar year.
That means all lending will be funded by on balance debt from either warehouse or asset backed securitisations and their attendant equity requirements. HMY's warehousing arrangements require harmoney to fund and own the junior tranche within each warehouse, which is usually at least 10%. Securitisations drop the equity requirement by roughly half. As best I can tell, harmoney has funded over 9% of its warehouse receivables with equity at the end of 31 dec 2021.
Funding and funding requirements for banks an area most investors never bother to look at and it has interesting implications for banks, particularly Heartland going forward. From 1 July this year the minimum total capital ratio for banks will lift from 10.5% to 16% over 7 year phased transition. Heartland was at 14% and ahead of its phased plan but given it has debt funded its aussie acquisition, this could set its capital ratio back a % point or two. This has dividend payout implications and potentially even additional equity requirements starting in probably 3 or so years from now as they will need to either retain more (even after DRIP) or raise equity to meet those requirements. Nothing to worry about now but its on the horizon.
Different kettle of fish :)
I like banks which have lots of OPM paying a miserable usary rate to most, possessing a deflated SP & sporting a good Div yield :)
The big Aussie banks have provided a fairly good upwards slope out of the mire of the past couple of years
for those who noticed :)
Back on HMY
When the kaboodle is mostly funded on borrowed capital, with lower interest rate times
then a rapid change & pain in the economic times can result in higher impairment & loss
rates - the adverse effects flow direct to bottom line as more of the profit from unimpaired
is needed to cover loan & interest revenue losses - am I wrong ? ;)
What were HMY's impairment rates pre-Covid & what do they look like now ? :)
Look no further than other players in the game for suggestion of what may be the result.
It's taken HMY a fair while to even hit positive bottom line times & economic swings
and roundabouts going to worse wont be helping.
Different kettle of fish :)
I like banks which have lots of OPM paying a miserable usary rate to most, possessing a deflated SP & sporting a good Div yield :)
The big Aussie banks have provided a fairly good upwards slope out of the mire of the past couple of years
for those who noticed :)
Back on HMY
When the kaboodle is mostly funded on borrowed capital, with lower interest rate times
then a rapid change & pain in the economic times can result in higher impairment & loss
rates - the adverse effects flow direct to bottom line as more of the profit from unimpaired
is needed to cover loan & interest revenue losses - am I wrong ? ;)
What were HMY's impairment rates pre-Covid & what do they look like now ? :)
Look no further than other players in the game for suggestion of what may be the result.
It's taken HMY a fair while to even hit positive bottom line times & economic swings
and roundabouts going to worse wont be helping.
As you can tell I like my banks too, including heartland, and a range of other financial institutions. HMY is an interesting little company that I invested into only in the last 6 months on a spec basis and have learnt heaps which I've applied to my core holdings.
Debt is a raw material for HMY as it is for heartland, and that is that.
There is no doubt impairments will rise as households struggle. And there can be no doubt that it will impact HMY more than heartland given the nature of lending.
Impairments are much lower at 31 December 2021 than anytime pre covid.
HMY technical capabilities in lending assessment through there new libra score card has shown some pretty significant improvements. I pulled the Moodys rating assessment on the aussie securitised book and it was there assessment it would show a static loss rate (IE the cumulative all time loss rate, not the pa loss rate) of 4.4%. That compares to the 6.5% static loss rate for the first lending cohort when they expanded to australia.
anyway - technical nouse can't overcome macroeconomics if there is a recession, and sure as rain, if there is one impairments will rise.
if people were feeling wary of consumer discretionary and the macro environment, now wouldn't be a bad time to bail.
As you can tell I like my banks too, including heartland, and a range of other financial institutions. HMY is an interesting little company that I invested into only in the last 6 months on a spec basis and have learnt heaps which I've applied to my core holdings.
Debt is a raw material for HMY as it is for heartland, and that is that.
There is no doubt impairments will rise as households struggle. And there can be no doubt that it will impact HMY more than heartland given the nature of lending.
Impairments are much lower at 31 December 2021 than anytime pre covid.
HMY technical capabilities in lending assessment through there new libra score card has shown some pretty significant improvements. I pulled the Moodys rating assessment on the aussie securitised book and it was there assessment it would show a static loss rate (IE the cumulative all time loss rate, not the pa loss rate) of 4.4%. That compares to the 6.5% static loss rate for the first lending cohort when they expanded to australia.
anyway - technical nouse can't overcome macroeconomics if there is a recession, and sure as rain, if there is one impairments will rise.
if people were feeling wary of consumer discretionary and the macro environment, now wouldn't be a bad time to bail.
For sure ..
The Covid Safety nets are off - Inflation is on
The effects of any increased Wages will be swallowed without trace, if not already
at higher tax cost to the reciprients of the increases with inflated other deductions.
There will be affected areas of the economy (some worse than others) as this rolls out
Businesses will close for those on or near the edge who are for whatever reasons
unable to adapt to the approaching adjusted Landscape,
With that Jobs will go, Housing will become more difficult
Inflation and added fuel costs will track into most if not all corners of the
changing economic landscape
HMY weren't at Bottom Line positive with protective measures in place
so the ensuing periods will be interesting whether on increased lending exposures
off higher borrowings, the formula can make it across the line and to what extent the
bottom line rewards patient punters, if it does at all in near future ;)
For sure ..
The Covid Safety nets are off - Inflation is on
The effects of any increased Wages will be swallowed without trace, if not already
at higher tax cost to the reciprients of the increases with inflated other deductions.
There will be affected areas of the economy (some worse than others) as this rolls out
Businesses will close for those on or near the edge who are for whatever reasons
unable to adapt to the approaching adjusted Landscape,
With that Jobs will go, Housing will become more difficult
Inflation and added fuel costs will track into most if not all corners of the
changing economic landscape
HMY weren't at Bottom Line positive with protective measures in place
so the ensuing periods will be interesting whether on increased lending exposures
off higher borrowings, the formula can make it across the line and to what extent the
bottom line rewards patient punters, if it does at all in near future ;)
I dont necessarily disagree with any of that.
But for context its worth noting the business IPO’d waaaay to early and is finally on the verge of scaling against its relatively fixed cost base. It has a net lending margin (ie after interest expense and incurred credit losses) of 9.7% which is truely exceptional - and at its run rate getting close scaling.
I would guess HMY will respond to rising risk environment in NZ by pricing the risk up which will ultimately slow growth in NZ which has been low growth for a while now. It wouldnt be able to price for all the excess risk and I’d have though NZ’s net lending margins will compress.
AU’s book will be bigger than NZ’s in a year and that is where all the growth is. Macro environment outlook much more benign.
But if worrying about the cycle and where one sits in it this isnt the stock for you.
There are many ways a business like this can catch a stray bullet. You have to be a true tactician to navigate turbulent waters well and come out unscathed. Avanti finance is an example of that - sailing thru the gfc - and are smashing it now.
I dont necessarily disagree with any of that.
But for context its worth noting the business IPO’d waaaay to early and is/was on the verge of scaling against its relatively fixed cost base. It has a net lending margin (ie after interest expense and incurred credit losses) of 9.7% which is truely exceptional - and at its run rate was about to scale.
I would guess HMY will respond to rising risk environment by pricing the risk up which will ultimately slow growth in NZ.
AU’s book will be bigger than NZ’s in a year and that is where all the growth is. Macro environment outlook much more benign.
But if worrying about the cycle and where one sits in it this isnt the stock for you.
I'm interested in at what point the financing cost on their Borrowings gets repriced & hiked upwards ? :)
Has to happen doesn't it ?
Sooner or later the RB here & in OZ are going start sucking some bath water back in as well ..
I'm interested in at what point the financing cost on their Borrowings gets repriced & hiked upwards ? :)
Has to happen doesn't it ?
Sooner or later the RB here & in OZ are going start sucking some bath water back in as well ..
we sorta went thru this already - post 468 page 47
that happens everyday but will take a bit of time to manifest in the financial results.
the NZ book has had durations of between 2 and 3 years. So some of the loans in the book today are a blended compilation of loans written anywhere from up to say 2.5 years ago and now. the old loans fall out as they run off and replaced by newly priced loans.
An application comes in and gets priced. The price depends on what the swap rate is of the day, the warehouse providers margin, and then whatever HMY's chosen margin is on top of that.
lots more detail in 468.
page 47
This is page 13 for me so I might be waiting a while to get to page 47......you can change the number of posts per page under Forum Actions > General Settings > Thread Display Options > Number of posts to show per page: choices are 5, 10, 20, 30, 40 & 100. 40 works for me. I believe the default is 10.
This is page 13 for me so I might be waiting a while to get to page 47......you can change the number of posts per page under Forum Actions > General Settings > Thread Display Options > Number of posts to show per page: choices are 5, 10, 20, 30, 40 & 100. 40 works for me. I believe the default is 10.
ah i didnt know you could do that. still a newb.
post 468 then for the avoidance of doubt
Impairment expense was 4.5% FY18, 4.1% FY19, 4.8% FY20. Then dropped to 3.9% last year, FY21.
Half year FY22 was 3.80% So safe to say FY22 will be similar to last year.
It will be interesting to see where FY23 and 24 comes in and yes it wont be a record low.. however I do think the book is relatively clean, 90day arrears have been consistently falling. I do believe HMY are cautious lenders, their initial reaction during the onset of covid was to turn the lending tap off. lots of their competitors didnt do that. Their risk committee are clearly cautions lenders.
Half of HMYs story is using their superior technology to hunt down and market to premium A grade borrowers.... the coming couple of years is going to test this story. I have said it before and ill say it again, consumer lending is a never ending conveyor belt.. and on the conveyor belt is lots of good customers wanting a holiday, or car or money to build a new deck or whatever.. HMY say they can pick these ones out..
Lots of people hear unsecured consumer lending and they get the ****s.. but just remember if it was really bad the AA rated banks wouldnt be doing it.. tell me again what my ANZ platinum visa card with a $20k limit is secured against - yes nothing, only my good name, just like HMY borrowers (btw i only have the card for the airpoints ;))
Impairment expense was 4.5% FY18, 4.1% FY19, 4.8% FY20. Then dropped to 3.9% last year, FY21.
Half year FY22 was 3.80% So safe to say FY22 will be similar to last year.
It will be interesting to see where FY23 and 24 comes in and yes it wont be a record low.. however I do think the book is relatively clean, 90day arrears have been consistently falling. I do believe HMY are cautious lenders, their initial reaction during the onset of covid was to turn the lending tap off. lots of their competitors didnt do that. Their risk committee are clearly cautions lenders.
Half of HMYs story is using their superior technology to hunt down and market to premium A grade borrowers.... the coming couple of years is going to test this story. I have said it before and ill say it again, consumer lending is a never ending conveyor belt.. and on the conveyor belt is lots of good customers wanting a holiday, or car or money to build a new deck or whatever.. HMY say they can pick these ones out..
Lots of people hear unsecured consumer lending and they get the ****s.. but just remember if it was really bad the AA rated banks wouldnt be doing it.. tell me again what my ANZ platinum visa card with a $20k limit is secured against - yes nothing, only my good name, just like HMY borrowers (btw i only have the card for the airpoints ;))
aye - 3.8% incurred credit losses to average proforma book. But get this rawz: on actual statutory receivables (lets ignore the irritating & temporary proforma adjustment) it is 2.18% ( 2.3% for FY21). that's crazy good for an unsecured lender. and the disestablished and off balance sheet peer to peer business had 8% credit losses (which was way up on previous half and full year periods).
That's why they should have waited longer before the IPO'd but I suppose they wanted the capital and the markets for fintech were hot - these proforma adjustments drive me and everyone else crazy. It suited them at the time (hey - what if peer to peer debt was on balance sheet what would our accounts look like then) as it adjusted for an accounting anomoloy but core lending and p2p have such vastly different economic and credit outcomes and mashing the two together in proforma figures hides the true impact of both.
thank f*** they don't facilitate peer to peer lending anymore and the book should wind up this calendar year
Oh my goodness! Wow that is very pleasing to read. I have only ever looked at the proforma numbers.. yes 2.18% is incredible compared to their NLM.
very much looking forward to that peer to peer rubbish to fall off. Not long now. I suspect a lot of investors are not interested until such time.
Oh my goodness! Wow that is very pleasing to read. I have only ever looked at the proforma numbers.. yes 2.18% is incredible compared to their NLM.
very much looking forward to that peer to peer rubbish to fall off. Not long now. I suspect a lot of investors are not interested until such time.
statutory/warehouse net lending margins are even better than the proforma NLMs
10.9%!
1H FY22 Warehouse NIM and NLM
interest income: $31.343m
interest expense: ($6.772m)
incurred credit losses: ($4.105m)
net lending margin: $20.466m
average stat receivables: $376.603m
annualised net lending margin: 10.9%
A while ago they had this investor day preso that said if we hit $1bn average book what sort of PBT can we expect to do. That started with the assumption that NLM would be 10%, but at the time the proforma book had done something like 6 & 7% in FY20 & FY21 and I was wondering how on earth they expected to do that (only two ways, lower interest expense while maintain interest income and lower credit losses). As I dug into it I saw the warehouse business has a fundamentally different economic profile from p2p and the proforma adjustments were completely masking what was happening and particularly as the entire business would transition to warehouse. And then the asset backed securitisation (albeit only one so far) which I don't think anyone really understands how cheap it is (1.45% margin over hedged base rate) and is only showing up in 2 months of financial results so far (November and December). The proforma results which ulimately grab all the attention will be phased out and holding all else equal will shoot up significantly as the transition to warehouse is complete.
So that got my interest big time.
NLM's in the mid single digits is considered good. NLM's in the high single digits are extremely good. double digit is exceptional.
jimdog31
26-04-2022, 11:38 AM
how hard would it be to tell us how big the loan book is currently? bemused
percy
26-04-2022, 11:47 AM
statutory/warehouse net lending margins are even better than the proforma NLMs
10.9%!
1H FY22 Warehouse NIM and NLM
interest income: $31.343m
interest expense: ($6.772m)
incurred credit losses: ($4.105m)
net lending margin: $20.466m
average stat receivables: $376.603m
annualised net lending margin: 10.9%
A while ago they had this investor day preso that said if we hit $1bn average book what sort of PBT can we expect to do. That started with the assumption that NLM would be 10%, but at the time the proforma book had done something like 6 & 7% in FY20 & FY21 and I was wondering how on earth they expected to do that (only two ways, lower interest expense while maintain interest income and lower credit losses). As I dug into it I saw the warehouse business has a fundamentally different economic profile from p2p and the proforma adjustments were completely masking what was happening and particularly as the entire business would transition to warehouse. And then the asset backed securitisation (albeit only one so far) which I don't think anyone really understands how cheap it is (1.45% margin over hedged base rate) and is only showing up in 2 months of financial results so far (November and December). The proforma results which ulimately grab all the attention will be phased out and holding all else equal will shoot up significantly as the transition to warehouse is complete.
So that got my interest big time.
NLM's in the mid single digits is considered good. NLM's in the high single digits are extremely good. double digit is exceptional.
That NIM is incredible.Never seem one above 10.
how hard would it be to tell us how big the loan book is currently? bemused
Aye - there are no accounts to close off and review. Lots of long weekends between quarter end and now as rawz points out, but I wouldn't be surprised if management know what the book size is and originations on a day to day basis.
Which is why I suspect tomorrow's release may contain some 'news' .
thegreatestben
27-04-2022, 10:20 AM
https://www.nzx.com/announcements/391075
27 April 2022
ASX / NZX RELEASE
HARMONEY LOAN BOOK REACHES $627 MILLION; FURTHER RECORD QUARTER LOAN ORIGINATIONS; REAFFIRMS FY22 GUIDANCE
Harmoney Corp Limited (ASX/NZX: HMY; “Harmoney” or “the Company”) is pleased to provide an update on its performance for the quarter ended 31 March 2022 (Q3 FY22).
Key Q3FY22 highlights (vs Q3FY21):
• Group loan book reached NZ$627 million up 29%; up 13% quarter on quarter (QoQ)
• Group originations up 80%; up 24% QoQ
• FY22 proforma Cash NPAT demonstrates superior economics of Harmoney’s 100% consumer-direct business model and success in the Australian market
• Australian new customer originations up 218% to A$63.8 million; up 58% QoQ
• Australian loan book up 107%; up 29% QoQ to A$239 million
• Australian originations have now materially surpassed NZ originations, proving the success of Harmoney’s 100% consumer-direct model in the larger Australian market
• Key lead indicators of increased account acquisition, new loan originations and net lending margin set to drive cash profitable growth in FY23 and onwards as existing customers return for future needs with minimal customer acquisition cost
• Australian existing customer originations annuity building; up 176% to A$16.8m (21% of Australian originations). Existing customers generate ~50% of New Zealand originations, with New Zealand showing the benefits of a longer-established consumer-direct portfolio
• High-quality loan book with 90+ days arrears at 0.46%, down from 0.53%
[Please see table on page 1.]
Commenting on Harmoney’s Q3FY22 performance, CEO & Managing Director David Stevens said:
“Harmoney continues to deliver outstanding results. With our loan book now at $627 million, the business is already Cash NPAT profitable on a proforma basis. This was another successful quarter for Harmoney as we continue to expand our business in the Australian and New Zealand markets.
“Australia’s market opportunity is nine times larger than New Zealand, and Harmoney’s Australian new customer originations grew 218% on the prior corresponding period. This coupled with a high level of automation on our proprietary Stellare® lending platform, positions us for further scalability and will drive higher cash profitability for Harmoney in FY23 and beyond.
“Harmoney’s consumer-direct marketing technology is world-class and consistently generates over 10,000 new customer accounts per month. This enables our team to focus solely on developing lending and product enhancements that broaden our ability to provide financial products to more Aussies and Kiwis with no additional customer acquisition cost.”
Total quarterly originations are outlined in the table below:
[Please see table on page 2.]
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 provides a nine-to-twelve-month lead indicator for future existing customer originations. This is due to Harmoney’s unique 100% consumer-direct lending model, which supports and enhances a customer’s growing borrowing needs without having to pay a customer acquisition cost for those customers, unlike other origination models.
LOAN BOOK GROWTH FURTHER ACCELERATES
At 31 March 2022, Harmoney’s loan book was NZ$627 million, an increase of 29% on pcp. The Australian loan book grew 107% to A$239 million. The New Zealand loan book grew by 2%, however was impacted by changes to consumer credit law that came into effect on 1 December 2021. These changes apply to all providers of consumer credit in New Zealand (including banks). The Government is currently reviewing the impact of these changes on lenders, and intends to make further changes to curb any unintended consequences.
[Please see table on page 3.]
Additionally, a strong credit performance was maintained due to Harmoney’s high-quality loan book, with Group 90+ day arrears at 31 March 2022 of 0.46%, down from 0.53% pcp.
Harmoney at 31 March 2022 has over $200m in undrawn debt funding lines to facilitate loan book growth which is provided by three of the Big 4 banks.
In Harmoney's 31 December 2021 half year report, the review of operations on page 8 incorrectly reported pro forma funding debt (period end) as $482million, this amount should have been $525million. This correction doesn’t impact any published pro forma ratios or the statutory financial statements.
FY22 GUIDANCE REAFFIRMED
Given the Company’s performance for the 9 months to 31 March 2022, Harmoney is pleased to reaffirm previous FY22 guidance of:
• Group pro-forma loan book greater than NZ$650 million (30%+ growth on FY21)
• Group pro-forma revenue of at least NZ$92 million (16%+ growth on FY21)
• Net lending margin of at least 8.3% (150bps+ growth on FY21)
• Pro-forma Cash NPAT profitable for the year ending 30 June 2022
• Transition to warehouse funding is expected to be ~90% complete by 30 June 2022 (87% complete at 31 March 2022).
All numbers in this release are unaudited. This release was authorised by the Board of Harmoney Corp Limited.
-END-
Rawz you win the golden gong I was too conservative on Aussie growth
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
Yes fairly close. Aussie is creaming it
Aus book: $239m 94% pcp growth
NZ book: $370m 2% pcp growth
Total book: $627m 29% pcp growth
Aussie is a super star. 29% qrt on qrt growth. Record quarterly growth.
Q3 growth higher than Q2 (christmas quarter) which is usually its largest. The numbers are quite incredible.
90 day arrears 0.46%
jimdog31
27-04-2022, 10:38 AM
Yes fairly close. Aussie is creaming it
Aus book: $239m 94% pcp growth
NZ book: $370m 2% pcp growth
Total book: $627m 29% pcp growth
Aussie is a super star. 29% qrt on qrt growth. Record quarterly growth.
Q3 growth higher than Q2 (christmas quarter) which is usually its largest. The numbers are quite incredible.
90 day arrears 0.46%
Boom!! Expected market reaction - MEH. When will the tipping point occur in sentiment I wonder? I keep quietly accumulating on the ASX as its always substantially discounted to the NZX.
How much impact is the lack of liquidity affecting the SP i wonder.
Boom!! Expected market reaction - MEH. When will the tipping point occur in sentiment I wonder? I keep quietly accumulating on the ASX as its always substantially discounted to the NZX
Who knows ay,. ive given up on the SP and just going to enjoy the company growth. The SP can do whatever it wants to do lol.
Aussie book is growing exponentially over the last 4 quarters:
Q4 FY21: 10% qrt on qrt growth
Q1 FY22: 15% qrt on qrt growth
Q2 FY22: 19% qrt on qrt growth
Q3 FY22: 29% qrt on qrt growth
The traction is incredible. The Aussie book at $239m is a fraction of total addressable market of $137b (australian personal lending market- covers all personal credit excluding housing mortgages)
winner69
27-04-2022, 12:06 PM
The thing that puzzles me is that if Revenue is $92m FY22 they will have only grown at 3% pa over the last two years ($87m to $92m) ....in spite of all the huge big numbers and talk of exponential this and that
I now this time is different and we should be forward looking blah blah b=....so I hope past performance is not indicative of future performance
W69 might be better to look at net lending margin which will be up 64% in the same period
$30m to $50m
The thing that puzzles me is that if Revenue is $92m FY22 they will have only grown at 3% pa over the last two years ($87m to $92m) ....in spite of all the huge big numbers and talk of exponential this and that
I now this time is different and we should be forward looking blah blah b=....so I hope past performance is not indicative of future performance
That's the topline financial impact from lower than historical interest rates (I suppose thats why bank investors like rising interest rates), and also the change in mix of customers being leant to.
For instance 1H FY22 vs 1H FY21 only saw interest income rise from $41.5m to $42.6m (3%). NIM on the other hand rose by $8.3m (32%) and net lending margin (ie after incurred credit losses) rose by 41% year on year.
Interest income as % of average book was 13% annualised. That's way down on the ~17% plus they were lending at only a few years ago. That's from the rates that fell but more importantly the roll off of the peer to peer lending which was structurally more risky and leant at higher interest rates to reflect the higher incurred credit losses associated with them
If things are progressing better than expected and it looks so wonderful. Why are HGH not buying more shares if this share is perceived undervalued?
If things are progressing better than expected and it looks so wonderful. Why are HGH not buying more shares if this share is perceived undervalued?
Well HGH did buy more last year but us cynics will have a view on the underlying reason for that. But I'd say two areas
Modestly rising interest rates are net net a positive for financial institutions. Rapidly rising inflation and rapidly rising interest rates (that still aren't keeping up with inflation) aren't. If discretionary spending turns off people won't need as many loans or harmoney's service. More relevant are inflations impact on peoples ability to service their debts and later on if interest rates create higher levels of unemployment - both those influence incurred credit losses, which impacts the bottom line. The wholesale funding HMY and other instos rely on also have certain credit quality covenants, which if breached could see undrawn funding lines withdrawn. Stagflation is getting mentioned more and more, so not surprising to see sentiment wane.
The other item is Heartland is a capital constrained business. It has prudential capital adequacy rules it must follow. It pays out high levels of profit in the form of dividend. And they recently acquired an australian business and probably debt funded it which may reduce their last reported capital adequacy stats. The capital adequacy requirements are lifting and its possible in a few years heartland may have to either reduce their dividend payout ratio or raise capital (or some combination of both) in order to meet them. So probably not the best use of its scarce resources to further invest into an early stage, high risk fintech that won't be paying dividends for the new several years.
See post 506 for more on heartland - one that I have a personally meaningful position in and doing a lot of work on in a personal capacity.
EDIT - apols on re-reading I know that all read negatively, not my intention on a day where the q3 release had excellent credit stats and record growth etc and not saying stagflation is going to happen, just how the market may perceive it and how it could impact the business. and i think its good to have eyes wide open at the moment
jimdog31
27-04-2022, 12:53 PM
If things are progressing better than expected and it looks so wonderful. Why are HGH not buying more shares if this share is perceived undervalued?
theyll have internal limits on weighting of investments. No different to the big banks weighting in particular sectors ie rural, commercial, residential
jimdog31
27-04-2022, 01:12 PM
Well HGH did buy more last year but us cynics will have a view on the underlying reason for that. But I'd say two areas
Modestly rising interest rates are net net a positive for financial institutions. Rapidly rising inflation and rapidly rising interest rates (that still aren't keeping up with inflation) aren't. If discretionary spending turns off people won't need as many loans or harmoney's service. More relevant are inflations impact on peoples ability to service their debts and later on if interest rates create higher levels of unemployment - both those influence incurred credit losses, which impacts the bottom line. The wholesale funding HMY and other instos rely on also have certain credit quality covenants, which if breached could see undrawn funding lines withdrawn. Stagflation is getting mentioned more and more, so not surprising to see sentiment wane.
The other item is Heartland is a capital constrained business. It has prudential capital adequacy rules it must follow. It pays out high levels of profit in the form of dividend. And they recently acquired an australian business and probably debt funded it which may reduce their last reported capital adequacy stats. The capital adequacy requirements are lifting and its possible in a few years heartland may have to either reduce their dividend payout ratio or raise capital (or some combination of both) in order to meet them. So probably not the best use of its scarce resources to further invest into an early stage, high risk fintech that won't be paying dividends for the new several years.
See post 506 for more on heartland - one that I have a personally meaningful position in and doing a lot of work on in a personal capacity.
EDIT - apols on re-reading I know that all read negatively, not my intention on a day where the q3 release had excellent credit stats and record growth etc and not saying stagflation is going to happen, just how the market may perceive it and how it could impact the business. and i think its good to have eyes wide open at the moment
hey moose, in your workings, have you looked into what potential credit losses flow from the 90 day arrears?
how do they calculate the 0.46% of arrears ? is it based on total book value? I guess while the loan book value is increasing qoq its easy for this figure to come down as the base thats being calculated against is increasing?
Whats your best guess at incurred credit losses for 2022 and 2023? (all things being equal, not necessarily weighting 2023 higher based on the current state of the world)
Heartland probably will be looking at an exit FY23+ once the peer to peer lending is well and truly gone and HMY is tuning out a solid 8 figure profit
Like FM says they will need the capital for their bank requirements and also they now have a good pathway of expansion into Aus with reverse mortgages + livestock. Next step asset finance. so best to put the money into that growth one would have thought. rather than a slice of another listed company
One thing for sure is HGH will be wanting over $2 for their holding.
hey moose, in your workings, have you looked into what potential credit losses flow from the 90 day arrears?
how do they calculate the 0.46% of arrears ? is it based on total book value? I guess while the loan book value is increasing qoq its easy for this figure to come down as the base thats being calculated against is increasing?
Whats your best guess at incurred credit losses for 2022 and 2023? (all things being equal, not necessarily weighting 2023 higher based on the current state of the world)
When they say 0.46% that will be of the total book. So customer payments are behind $2.8m ish and have been behind for 90+ days.
Then there will be payments behind for less than 90 days and this % will be higher than 0.46% But most of them will be caught up before they get to 90 days.. Under 90 days include some arrears that would never actually result in a credit loss. For example an A+ borrower changing banks and forgetting to update their direct debits.. this is why 90 day arrears is what is reported. It captures those that are most likely to lead to a credit loss.
HMY will of course attempt to work out an arrangement with the customers in arrears.. often this will work. Could just be a customer in-between jobs for example. If it looks bad a provision will be placed on the account. I.e. HMY guesses how much they will lose on it. If no resolution HMY will write off the debt (impairment expense) and send it off to TRAs debt collection agency (or similar).
FY21 impairment expense was 4% of avg book or $18.6m
FY22 impairment should be close to 3.8% of avg book so ~$22m
FY23.. best to watch unemployment numbers. Hmy says that will be the best guide to how the book will perform. Or lets see the provision rate in FY22 annual report. Maybe they increase it
Im going off the proforma numbers.. FM will have a much better idea on the real numbers, he's a very smart Moose..
Well HGH did buy more last year but us cynics will have a view on the underlying reason for that. But I'd say two areas
Modestly rising interest rates are net net a positive for financial institutions. Rapidly rising inflation and rapidly rising interest rates (that still aren't keeping up with inflation) aren't. If discretionary spending turns off people won't need as many loans or harmoney's service. More relevant are inflations impact on peoples ability to service their debts and later on if interest rates create higher levels of unemployment - both those influence incurred credit losses, which impacts the bottom line. The wholesale funding HMY and other instos rely on also have certain credit quality covenants, which if breached could see undrawn funding lines withdrawn. Stagflation is getting mentioned more and more, so not surprising to see sentiment wane.
The other item is Heartland is a capital constrained business. It has prudential capital adequacy rules it must follow. It pays out high levels of profit in the form of dividend. And they recently acquired an australian business and probably debt funded it which may reduce their last reported capital adequacy stats. The capital adequacy requirements are lifting and its possible in a few years heartland may have to either reduce their dividend payout ratio or raise capital (or some combination of both) in order to meet them. So probably not the best use of its scarce resources to further invest into an early stage, high risk fintech that won't be paying dividends for the new several years.
See post 506 for more on heartland - one that I have a personally meaningful position in and doing a lot of work on in a personal capacity.
EDIT - apols on re-reading I know that all read negatively, not my intention on a day where the q3 release had excellent credit stats and record growth etc and not saying stagflation is going to happen, just how the market may perceive it and how it could impact the business. and i think its good to have eyes wide open at the moment
Thanks for your well explained opinion.
I do agree that HGH recent purchase might hold back any opportunity to invest elsewhere, unless they capital raised beforehand.
If Harmony are doing well it will benefit shareholders and HGH shareholders. I just believe if Harmony are doing better HGH should jump on board with more shares and maybe capital raise.
Of course that is a story for another day.
hey moose, in your workings, have you looked into what potential credit losses flow from the 90 day arrears?
how do they calculate the 0.46% of arrears ? is it based on total book value? I guess while the loan book value is increasing qoq its easy for this figure to come down as the base thats being calculated against is increasing?
Whats your best guess at incurred credit losses for 2022 and 2023? (all things being equal, not necessarily weighting 2023 higher based on the current state of the world)
hey jimbo - see my current FY22 credit loss forecast for harmoney below
13746
I'm pretty sure the arrears numbers they provide are for the total proforma book.
I'm confident FY22 total incurred credit losses (banks sometimes call them 'charge offs') will be inline to slightly below FY21 levels (I actually see them decreasing from 3.88% of average book to ~3.73%). For my shorter term forecasts I tend to look at the movement in half year ICL losses and segment them by warehouse/statutory and p2p as the differences are large, thinking about how the environment has changed, and keeping in my mind the arrears ratio for each period and how that compares to the ICL % trend.
I see FY22 2nd half ICL expenses as % of average book rising a little bit from the first half of the year - like 15bps or so - for the proforma group. But I actually see both warehouse and p2p increasing - the decreasing proforma is simply a function changing weighed average between the two.
Warehouse/statutory ICL's % have been pretty stable. I assume a slight increase in the second half of FY22 relative to the first half but think the full year number will be similar to FY21
P2P a different bag. This book is run off and I expect will be at or close to zero by 31 December 2022. The book is old, relatively higher risk, in run off, and ICL's are clearly on the rise. I infer what the actual incurred credit losses will be based on the closing 'total expected credit loss' provision provided at 31 december 2021, and phase that based on how I see that book running down as it is repaid.
I sense check my 2H group/proforma ICL expense as a % of average receivables by noting 31 march 2022 +90day arrears were the same as the 31 December/1H FY22 figures.
For my longer term forecasts, I am still to update my model for FY23 and beyond. But in summary incurred credit losses are a function of 3 things: macro factors, the age of the book, and changes to the mix or riskiness of the lending (ie p2p which used to dominate the book vs warehouse which is much more credit worthy)
When I forecast any financial institution I always at the top of my assumptions have a little baseline of economic indicators (interest rate forecasts, unemployment, wage inflation, CPI, etc) I keep in mind when setting my operating assumptions (change in receivables, interest income & expense assumptions, credit losses, overhead inflation etc). I use the average of the 4 big bank forecasts (but sometimes over ride their longer term forecasts with long term averages). Unemployment and real wage growth the two most important when thinking about credit losses.
The age of the book is the other big thing. When originations are really strong the average ICL expense tends to be lower. People don't tend to take out a loan and then default on it a few weeks later. So a fast growing book should have relatively low expenses and as it matures those %'s should rise even if the macro environment remains identical.
When I get a chance to update my model I'll post / PM you some of the outputs
hey moose, in your workings, have you looked into what potential credit losses flow from the 90 day arrears?
how do they calculate the 0.46% of arrears ? is it based on total book value? I guess while the loan book value is increasing qoq its easy for this figure to come down as the base thats being calculated against is increasing?
Whats your best guess at incurred credit losses for 2022 and 2023? (all things being equal, not necessarily weighting 2023 higher based on the current state of the world)
I also think harmoney has a pretty good shot at reaching/surpassing a $700m gross receivables book by the end of june. even when updating for further QoQ declines in NZ originations
jimdog31
28-04-2022, 11:14 PM
hey jimbo - see my current FY22 credit loss forecast for harmoney below
I'm pretty sure the arrears numbers they provide are for the total proforma book.
I'm confident FY22 total incurred credit losses (banks sometimes call them 'charge offs') will be inline to slightly below FY21 levels (I actually see them decreasing from 3.88% of average book to ~3.73%). For my shorter term forecasts I tend to look at the movement in half year ICL losses and segment them by warehouse/statutory and p2p as the differences are large, thinking about how the environment has changed, and keeping in my mind the arrears ratio for each period and how that compares to the ICL % trend.
I see FY22 2nd half ICL expenses as % of average book rising a little bit from the first half of the year - like 15bps or so - for the proforma group. But I actually see both warehouse and p2p increasing - the decreasing proforma is simply a function changing weighed average between the two.
Warehouse/statutory ICL's % have been pretty stable. I assume a slight increase in the second half of FY22 relative to the first half but think the full year number will be similar to FY21
P2P a different bag. This book is run off and I expect will be at or close to zero by 31 December 2022. The book is old, relatively higher risk, in run off, and ICL's are clearly on the rise. I infer what the actual incurred credit losses will be based on the closing 'total expected credit loss' provision provided at 31 december 2021, and phase that based on how I see that book running down as it is repaid.
I sense check my 2H group/proforma ICL expense as a % of average receivables by noting 31 march 2022 +90day arrears were the same as the 31 December/1H FY22 figures.
For my longer term forecasts, I am still to update my model for FY23 and beyond. But in summary incurred credit losses are a function of 3 things: macro factors, the age of the book, and changes to the mix or riskiness of the lending (ie p2p which used to dominate the book vs warehouse which is much more credit worthy)
When I forecast any financial institution I always at the top of my assumptions have a little baseline of economic indicators (interest rate forecasts, unemployment, wage inflation, CPI, etc) I keep in mind when setting my operating assumptions (change in receivables, interest income & expense assumptions, credit losses, overhead inflation etc). I use the average of the 4 big bank forecasts (but sometimes over ride their longer term forecasts with long term averages). Unemployment and real wage growth the two most important when thinking about credit losses.
The age of the book is the other big thing. When originations are really strong the average ICL expense tends to be lower. People don't tend to take out a loan and then default on it a few weeks later. So a fast growing book should have relatively low expenses and as it matures those %'s should rise even if the macro environment remains identical.
When I get a chance to update my model I'll post / PM you some of the outputs
As always Moose, you illuminate the numbers, I love it.
Interested to know both yours and Rawz underlying thesis for why youve bought in.
I’ll go first!
My thesis is that Harmoney isnt really selling loans . They are proving their underlying system, stellare, for customer acquisition.
once they hit $1 billion of loans and if they can keep their ICL lower or relative to the big banks, for the same customer profile, while maintaining a low overhead acquisition structure, then they have a product that all 4 banks want to own.
The banks that wholesale to them, are also watching to see how good it works.
If im right, and they execute over the next 2 years, they could have multiple bidders that have very deep pockets.
Very exciting to hold this stock.
Hey Jimdog i largely agree with your thesis. Especially potential takeover target, lets hope it doesn't get to that though.. this should be a very good long term compounder.
I have invested in HMY because i believe they have the best model out of all the new fintechs on the block. All of HMYs competitors like plenti, moneyme, wisr etc use brokers (as well as going direct to market). HMY have chosen a direct to consumer model. This model is scalable globally. They have built (and continue to refine) Stellare which is the technology that profiles potential customers using many many data points.. originally via google but now also via the meta social media platforms (FB and instagram). When their target profile searches 'car finance, house renovation finance, consumer finance' etc HMY will bid more than its competitors to be the top search result. And when the dodgy profiles search for finance HMY dont bid.. amazing stuff. All their competitors have a shotgun marketing approach hitting all profiles that search finance..
Better Margins: If i was to have a guess a broker is going to typically want 1.00% - 2.00% cut of the rate (i.e. funder provides 10% rate to broker who sells it to the customer at 11-12%) for placing a deal with a funder for consumer finance, not mortgage finance.. So straight away HMY has this great advantage where they do not need to pay this. They can either enjoy higher margins (which they do as they reported being cashflow positive on a much smaller book than their competitors), or they can secure more A+ customers by offering a 1-2% lower rate to win the deal.
Better Customer Retention If a broker places a customer with a funder who controls the customer? I say the broker. I say the next time that customer needs additional consumer finance they go to their broker and the broker places the finance where ever the next best deal is (or next best margin for them). This is where HMYs 3 Rs business comes in. They control the customer and can remarket to the customer at no cost. Easy for the customer to stay with HMY rather than go through the process of setting up a new account elsewhere.
In a nutshell I believe HMY is better at finding and retaining A+ customers. As each quarter goes by the model is proven even more than the last. Aussie is remarkable. Next quarter we could see book growth of $70m based on current run rate. That will mean it has grown from $135m at the start of the financial year to $309m at the end. The total book will be around $700m. Their original guidance earlier in the financial year was to grow the book by $100m and end at $600m. Wow they are going to smash that. Obviously even management didnt expect Aussie to be such the success story it is.
The fintechs are the future and the big banks are slow to react and change their models. Everything is going online and being automated. HMY are in the right space and executing. Shareholders will be rewarded in time.
Dlownz
30-04-2022, 12:04 PM
Hey Jimdog i largely agree with your thesis. Especially potential takeover target, lets hope it doesn't get to that though.. this should be a very good long term compounder.
I have invested in HMY because i believe they have the best model out of all the new fintechs on the block. All of HMYs competitors like plenti, moneyme, wisr etc use brokers (as well as going direct to market). HMY have chosen a direct to consumer model. This model is scalable globally. They have built (and continue to refine) Stellare which is the technology that profiles potential customers using many many data points.. originally via google but now also via the meta social media platforms (FB and instagram). When their target profile searches 'car finance, house renovation finance, consumer finance' etc HMY will bid more than its competitors to be the top search result. And when the dodgy profiles search for finance HMY dont bid.. amazing stuff. All their competitors have a shotgun marketing approach hitting all profiles that search finance..
Better Margins: If i was to have a guess a broker is going to typically want 1.00% - 2.00% cut of the rate (i.e. funder provides 10% rate to broker who sells it to the customer at 11-12%) for placing a deal with a funder for consumer finance, not mortgage finance.. So straight away HMY has this great advantage where they do not need to pay this. They can either enjoy higher margins (which they do as they reported being cashflow positive on a much smaller book than their competitors), or they can secure more A+ customers by offering a 1-2% lower rate to win the deal.
Better Customer Retention If a broker places a customer with a funder who controls the customer? I say the broker. I say the next time that customer needs additional consumer finance they go to their broker and the broker places the finance where ever the next best deal is (or next best margin for them). This is where HMYs 3 Rs business comes in. They control the customer and can remarket to the customer at no cost. Easy for the customer to stay with HMY rather than go through the process of setting up a new account elsewhere.
In a nutshell I believe HMY is better at finding and retaining A+ customers. As each quarter goes by the model is proven even more than the last. Aussie is remarkable. Next quarter we could see book growth of $70m based on current run rate. That will mean it has grown from $135m at the start of the financial year to $309m at the end. The total book will be around $700m. Their original guidance earlier in the financial year was to grow the book by $100m and end at $600m. Wow they are going to smash that. Obviously even management didnt expect Aussie to be such the success story it is.
The fintechs are the future and the big banks are slow to react and change their models. Everything is going online and being automated. HMY are in the right space and executing. Shareholders will be rewarded in time.
Thanks guys I enjoy all this reading and the research and info is great. I really appreciate it. I'm a little overweight on this one now... Certainly brought into the dip recently I'm still down around 10% but comparing to how everything else is going its fairing reasonably well. Still hoped this would be above 1.70 by now but usual story nothing really moves till the instos get on board. Patience like with nzme and sky is needed.
My mistake this year was not selling the rest of my nzme when it hit 1.70 and watching it track down. Really thought with the share by back I was going to see it stay stable but oh well still a great hold. On another note I'd love it if beagle got on in this but as he's said he has HGH which has shares in this alreasy so HGH is a safer hold. 😁
Yes Dlownz we need the instos and I guess they won’t be interested until they can read a report without all the proforma crap. End of this financial year can’t come soon enough- one more qrt to go!
Beagle won’t touch this in the current economic environment lol. He’s a very risk adverse accountant
Also- pretty sure 99% of HMY investors are underwater so nobody should be too hard on themselves for taking a position. End of the day the business is tracking nicely and that is the main thing
Balance
01-05-2022, 09:17 AM
400,000 borrowers now behind on their loan repayment.
Mostly on unsecured loans.
https://www.stuff.co.nz/business/128479669/about-400000-borrowers-behind-on-a-loan-payment-after-5-rise-in-arrears
400,000 borrowers now behind on their loan repayment.
Mostly on unsecured loans.
https://www.stuff.co.nz/business/128479669/about-400000-borrowers-behind-on-a-loan-payment-after-5-rise-in-arrears
interesting article, thanks balance.
Dlownz
01-05-2022, 01:58 PM
400000 seems like mostly credit card type ecpenditure
Balance
17-05-2022, 08:54 AM
https://www.newshub.co.nz/home/money/2022/05/complaints-against-non-bank-lenders-double-amid-cost-of-living-crisis.html
Pressure continues to pile on unsecured loans as the cost of living crisis deepens.
Not a good space to be in.
winner69
17-05-2022, 09:32 AM
https://www.newshub.co.nz/home/money/2022/05/complaints-against-non-bank-lenders-double-amid-cost-of-living-crisis.html
Pressure continues to pile on unsecured loans as the cost of living crisis deepens.
Not a good space to be in.
But Harmoney has a computer that weeds out the riff raff
Their data scientists make sure it’s working well.
Balance
17-05-2022, 09:54 AM
But Harmoney has a computer that weeds out the riff raff
Their data scientists make sure it’s working well.
The next 12 months will test the computer and see if it lives up to its promise!
jimdog31
25-05-2022, 01:57 PM
This thread has drifted into obscurity.... Fiordland moose, you still believe? or on the Balance of probabilities you out?
Dont leave me and Rawz here alone :)
This thread has drifted into obscurity.... Fiordland moose, you still believe? or on the Balance of probabilities you out?
Dont leave me and Rawz here alone :)
Slow / no news times.
I sold ~ 30% of my shares, intend to keep the rest. I expect sentiment to weigh heavily on this the next 12mnts or so.
jimdog31
25-05-2022, 02:06 PM
Slow / no news times.
I sold ~ 30% of my shares, intend to keep the rest. I expect sentiment to weigh heavily on this the next 12mnts or so.
U exit at a loss?
U exit at a loss?
Yeah :) i got itchy fingers
Ill watch it closely tho. Still have 70% and interested in it
jimdog31
25-05-2022, 02:35 PM
Yeah :) i got itchy fingers
Ill watch it closely tho. Still have 70% and interested in it
I feel the bottom drawer is probably the best place for them
winner69
25-05-2022, 02:44 PM
Coming up to June 30 so Jeff probably contemplating what he has to do to justify the $2.15 he's planning to value them at in Heartlands books
Factors considered are observed trading volumes, bid-ask spreads, market prices of Harmoney’s shares, revenue multiples, analyst valuations, etc etc when assessing fair value at reporting date.
jimdog31
25-05-2022, 02:51 PM
Coming up to June 30 so Jeff probably contemplating what he has to do to justify the $2.15 he's planning to value them at in Heartlands books
Factors considered are observed trading volumes, bid-ask spreads, market prices of Harmoney’s shares, revenue multiples, analyst valuations, etc etc when assessing fair value at reporting date.
What was market price at last fair value point?
winner69
25-05-2022, 03:38 PM
What was market price at last fair value point?
Heartland valued HMY at A$1.70 share in June 21 accounts .... yahoo says share price on 30/6/21 was A$1.70
jimdog31
25-05-2022, 03:50 PM
Heartland valued HMY at A$1.70 share in June 21 accounts .... yahoo says share price on 30/6/21 was A$1.70
Where are you getting the $1.70 from?
"The fair value measurement of HGH’s equity investment in Harmoney was AU $1.90 per share as at reporting date. This was a 6%premium to the market closing price of AU $1.80 as at 31 December 2021, which if used as the basis for measuring fair valuewould result in a $1.1 million lower fair value than that reported. The fair value of the Investment was previously measured at AU$1.90 per share at 30 June 2021."
If the share price hovers around the $1.10 mark or lower until 30 June, What sortve a loss will that generate for HGH 6 Half year?
winner69
25-05-2022, 03:54 PM
Where are you getting the $1.70 from?
"The fair value measurement of HGH’s equity investment in Harmoney was AU $1.90 per share as at reporting date. This was a 6%premium to the market closing price of AU $1.80 as at 31 December 2021, which if used as the basis for measuring fair valuewould result in a $1.1 million lower fair value than that reported. The fair value of the Investment was previously measured at AU$1.90 per share at 30 June 2021."
If the share price hovers around the $1.10 mark or lower until 30 June, What sortve a loss will that generate for HGH 6 Half year?
My bad .... typed wrong number -- yes $1.90 was the number
jimdog31
25-05-2022, 03:56 PM
My bad .... typed wrong number -- yes $1.90 was the number
am I right in assuming a loss of approx. $5m at $1.10?
Will they sit idly by?
winner69
25-05-2022, 04:13 PM
am I right in assuming a loss of approx. $5m at $1.10?
Will they sit idly by?
Interesting question if HMY share price stays down 1.10 …answer who knows what finance engineering might take place.
Common Jeff do us long suffering HMY shareholders a favor and bid this up to nz$1.80 so my spreadsheet looks better
winner69
25-05-2022, 04:21 PM
Interesting question if HMY share price stays down 1.10 …answer who knows what finance engineering might take place.
The HMY share price at December 31 was A$1.80 which was closer to HGH value of A$1.90
Jeez A$1.10 is 40% down in last five months .....wow
The fair value measurement of HGH’s equity investment in Harmoney was AU $1.90 per share as at reporting date. This was a 6%
premium to the market closing price of AU $1.80 as at 31 December 2021, which if used as the basis for measuring fair value
would result in a $1.1 million lower fair value than that reported. T
jimdog31
25-05-2022, 04:25 PM
Interesting question if HMY share price stays down 1.10 …answer who knows what finance engineering might take place.
83% of shares are held by top 20 holders.
91% are held by top 50 holders
so that means there are 850 holders who have approx 9,000,000 shares
It really is an illiquid market
Holding Size
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001+
Total
No. of Shareholders
146
310
185
220
48
909
clearasmud
25-05-2022, 08:41 PM
Common Jeff do us long suffering HMY shareholders a favor and bid this up to nz$1.80 so my spreadsheet looks better
Guys, just averaged down today at $1.10 after filling my boots at $1.80 last year.
No more.
This will reverse when the tech stocks reverse.
jimdog31
25-05-2022, 10:18 PM
Guys, just averaged down today at $1.10 after filling my boots at $1.80 last year.
No more.
This will reverse when the tech stocks reverse.
There with ya bud. Ive managed to average mine down to $1.55
jimdog31
31-05-2022, 05:23 PM
There with ya bud. Ive managed to average mine down to $1.55
I'm starting to get the feeling someone is deliberately pushing this SP down further. Almost every day there is someone on ASX whose selling 10,000 shares at whatever price is available
I'm starting to get the feeling someone is deliberately pushing this SP down further. Almost every day there is someone on ASX whose selling 10,000 shares at whatever price is available
Rawz - is there anything you want to say?? :)
jimdog31
31-05-2022, 05:45 PM
Rawz - is there anything you want to say?? :)
Rawz, are you leaving me hanging??
jimdog31
31-05-2022, 06:55 PM
92.5c aud!
clearasmud
31-05-2022, 07:01 PM
92.5c aud!Ouchy ouchy.
One of the early holders who got them at 35c??
92.5c aud!
it's only going one way jimbo....fear + illiquidity are not friends to those who are desperate to bail. I'd sit on my hands and see what happens if you are keen to average in, but in my view there is every reason to suspect the price will be less in the future than it is now
as for existing shareholdings - it is like a bit of a hangover...sometimes you need to close your eyes for 8 hours (or a few years) before it feels better. always a small risk of it being an aneurism though...
within two years all will be answered: has there been a recession, did the libra scorecard do what meant to and secure high quality customers that could withstand headwinds. the business made it through covid extremely well but there was huge government support, unlikely to be as much this time. but if it can make it through the next recession well, then there really is something special. the company was on the verge of scaling - its possible that gets shifted out a few years if there are less credit quality borrowers about, and thus a fall in SP could be warranted.
anyway - just musings. selling wasn't me, i already did mine and happy to hold my residual thru thick and thin.
jimdog31
31-05-2022, 07:10 PM
it's only going one way jimbo....fear + illiquidity are not friends to those who are desperate to bail. I'd sit on my hands and see what happens if you are keen to average in, but in my view there is every reason to suspect the price will be less in the future than it is now
as for existing shareholdings - it is like a bit of a hangover...sometimes you need to close your eyes for 8 hours (or a few years) before it feels better. always a small risk of it being an aneurism though...
within two years all will be answered: has there been a recession, did the libra scorecard do what meant to and secure high quality customers that could withstand headwinds. the business made it through covid extremely well but there was huge government support, unlikely to be as much this time. but if it can make it through the next recession well, then there really is something special. the company was on the verge of scaling - its possible that gets shifted out a few years if there are less credit quality borrowers about, and thus a fall in SP could be warranted.
anyway - just musings. selling wasn't me, i already did mine and happy to hold my residual thru thick and thin.
I completely agree with the above.
The illiquid environment does us shareholder no favours unfortunately.
I was already averaging in but this is getting ridiculous!
jimdog31
31-05-2022, 07:12 PM
Ouchy ouchy.
One of the early holders who got them at 35c??
Surely! Like i said it seems to be relatively the same size parcels most days
Sitting at $92m Market cap, EV/sales 1.00x
EV / Sales 2023 forecast 0.71x
Madness
I completely agree with the above.
The illiquid environment does us shareholder no favours unfortunately.
I was already averaging in but this is getting ridiculous!
closer to YE i'll update my 2H FY22 and full year FY22 forecast (guess)
thinking thru how the new environment could impact the financials
* NZ originations probably to have more weakness. AU run rate probably to stay strong
* don't expect large increases in incurred credit loss expense, but provisions likely to increase a bit
* book durations to increase - low interest rates allowed a lot of prepayments. expanding duration is very profitable
* increased interest income, but increased expense. NIM $ higher, but nim % could compact a bit
* full period (in 2h) impact of the AU asset backed securitation. good for NIM. dont expect to see any more of these in the short term.
* will be interesting to see how marketing costs as % of originations go
all up i expect FY22 to be in line to slightly above management forecast
FY23 is what matters most. to early to say at this point
Beagle
31-05-2022, 07:18 PM
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.
Posted Feb 2021 when the share price was roughly double what it is today. My view remains the same today and this was a very easy decision from the outset. Some business models are pre-destined to perform badly...others it takes longer to work out whether they will work or not because you're told a bunch of crap.
Posted Feb 2021 when the share price was roughly double what it is today. My view remains the same today and this was a very easy decision from the outset. Some business models are pre-destined to perform badly...others it takes longer to work out whether they will work or not because you're told a bunch of crap.
Harmoney's actual business model is clearly working- Aus book experiencing near on 100% pcp growth... clearly online direct to consumer lending is successful.
The model of lending funds without the security of a house, car, truck or whatever is not unusual. (BTW- The security is your credit record). If unsecured lending was not profitable the banks, inc HGH, wouldnt offer personal loans or credit cards..
Rawz - is there anything you want to say?? :)
Rawz, are you leaving me hanging??
I never got to answer the question before the site went down…
Of course not me selling lol. Not when the full year result are just around the corner. I’ve always said a lot of investors will be on the sidelines until we don’t need to rely on proforma’s.
FM has outlined the risks really well and unfortunately the SP could still drift lower with weak hands giving up right at the worst time- capitulation. All I would say is HMY are executing and there is long term value and also short term value- the tech, scorecard data etc that some members like to mock has real value to larger financial institutions.. it wouldn’t surprise me if someone tried to snap HMY up.
Balance
06-06-2022, 08:39 AM
Harmoney's actual business model is clearly working- Aus book experiencing near on 100% pcp growth... clearly online direct to consumer lending is successful.
The model of lending funds without the security of a house, car, truck or whatever is not unusual. (BTW- The security is your credit record). If unsecured lending was not profitable the banks, inc HGH, wouldnt offer personal loans or credit cards..
Credit losses as the economic conditions tighten are the focus of the market with unsecured lenders as the likes of Afterpay & Zip show.
Growth in the loan book with credit losses growing as well is not a good thing.
https://www.smh.com.au/business/banking-and-finance/afterpay-posts-huge-loss-as-bad-debts-mount-20220412-p5acvr.html
jimdog31
06-06-2022, 08:53 AM
Credit losses as the economic conditions tighten are the focus of the market with unsecured lenders as the likes of Afterpay & Zip show.
Growth with losses growing is not a good thing.
https://www.smh.com.au/business/banking-and-finance/afterpay-posts-huge-loss-as-bad-debts-mount-20220412-p5acvr.html
You are right about the sentiment for this sector. Afterpay is quite different to harmoney in that theyll lend to anybody, huge amounts of fraud apps.
Lets see how Harmoneys lending scorecard works.
winner69
06-06-2022, 09:20 AM
Harmoney only deals with high value consumers
And the system has billions of data points to weed out the chaff
No worries about excessive defaults
They have even lowered their provisioning % recently ... confidence in what the data scientists are achieving
Balance
06-06-2022, 09:30 AM
Harmoney only deals with high value consumers
And the system has billions of data points to weed out the chaff
No worries about default
Why would high value customers borrow from Harmoney?
Surely they can access cheaper credit from banks?
You are right about the sentiment for this sector. Afterpay is quite different to harmoney in that theyll lend to anybody, huge amounts of fraud apps.
Lets see how Harmoneys lending scorecard works.
Yes agree. After pay and Zip are like those payday lenders. Shocking stuff really. I think HGH have some exposure to them via their wholesale lending. Game over once they are brought under the CCCFA legislation
winner69
06-06-2022, 09:35 AM
Why would high value customers borrow from Harmoney?
Surely they can access cheaper credit from banks?
Maybe people running banks are really bad .... let a machine do it
Sort of funnny story
https://www.stuff.co.nz/business/128802412/stop-saving-if-you-want-a-credit-card-anz-tells-highearning-wellington-woman
winner69
06-06-2022, 09:41 AM
With a chart like this HMY should be trading close to its IPO price .... what was that again
Something weird though - the HMY share price chart has a different shape - almost like there's a negative correlation between income and share price
Classic bank story.. homeowners, good jobs, perfect repayment history= decline. Lol.
now apply that experience to wanting to borrow some money to reno the backyard or have a wedding or go on holiday… no worries for HMY
winner69
06-06-2022, 09:53 AM
Origination CAGR +152%
HMY share price CAGR -50%
Wow $3.75 to $1.20 in 18 months
If share price driven out of Australia it seems that Aussies have no clues at all - not surprising
Habits
06-06-2022, 09:57 AM
Maybe people running banks are really bad .... let a machine do it
Sort of funnny story
https://www.stuff.co.nz/business/128802412/stop-saving-if-you-want-a-credit-card-anz-tells-highearning-wellington-woman
That's a crackup, am glad they told their story thanks Winner
It’s highly confusing Winner
BTW- your new signature is very good
Balance
06-06-2022, 09:59 AM
Origination CAGR +152%
HMY share price CAGR -50%
Wow $3.75 to $1.20 in 18 months
If share price driven out of Australia it seems that Aussies have no clues at all - not surprising
Double edged sword listing on ASX?
Done much much better than Zip which has dropped 91% in 1 year?
jimdog31
06-06-2022, 10:22 AM
Double edged sword listing on ASX?
Done much much better than Zip which has dropped 91% in 1 year?
Zip is essentially a pay day lender, so a much higher exposure to the wrong types of customers
My impression of the way Harmoney lends is based on actually checking credit scores etc, not just making sure the applicant has a job.
curious to know why Harmoney gets lumped in with these guys when they are very different customer profiles.
Why would high value customers borrow from Harmoney?
Surely they can access cheaper credit from banks?
Australian bank behaviour and lending practices changed significantly after the Royal Hayne Commission and since then there has been a dramatic and enduring shift to non bank lenders for consumer finance in Australia. NZ wasn't part of the Hayne Commission but some of those new practices filtered through from their Australian parents to their NZ subsidiaries. Now we have CCCFA which has changed things again but likely to be reformed later this year.
Unsecured consumer lending from banks not meaningfully higher than from Harmoney, but decision outcomes were, often relying on binary yes/no based 3rd party credit scores.
It wasn't so much the competitive threat from banks with cheaper sources of funds that was put HMY on the back foot the last few years but consumers doing really early repayments on HMY loans when they refinanced their homes, when house prices shot up and interest rates hit rock bottom. Those two factors have reversed and CCCFA has made it more difficult for banks to refinance other debts. All that is good for the duration of HMY's book which is an important contributor to financial performance (especially given the how expensive new customer originations can be).
Anyway this business is for all intents & purposes an Aussie one (at least the future growth is). Lending is capital intensive as HMY has to put c10% of its own equity behind every loan it writes, and it only has so much, so it has chosen to use that capital in australia. CCCFA in NZ has compounded the issue so I don't see HMY putting all its focus and capital into aussie originations rather than NZ originations for the next few years. swap rates are a lot lower in australia, inflation a bit lower, and for whatever reason I see their economy as being more resilient so not a bad call in my view.
I wouldn't say HMY's customers are "high value" as Winn69 says, (IE certainly not high net worths), but they are relatively high quality - IE ~45% own their own home, have decent jobs (~55% are professionals & office based, 20% trade, with the highest density of lending to 40-49 year olds), and processed using libra's scorecard (but cross referenced against standard credit checks). HMY's credit performance has been very good, both absolutely and relative to peers operating in similar sectors, but in a benign environment. If there is a stagflationary recession in 2023 that libra score card will get a proper stress test.
Double edged sword listing on ASX?
I haven't been a fan of smaller cap companies doing dual listings on the NZX and ASX (particularly for companies where there are large long term shareholders who don't budge) as all it does is further split liquidity. The theory I guess behind it was it broadens the shareholder base and Aussies are seen to be more active and rate companies more highly, and thats fine for big companies like A2M or whatever (but liquidity invariably always transfers to one exchange), but I think the results are it hasn't worked for small caps and in fact has been counter productive.
I think HMY would be wise to at least consider consolidating their register onto the ASX. be better for liquidity and its an aussie growth story anyway. Pains me to say that as I'm sick of companies being delisted from NZ and how woeful the NZX has become.
jimdog31
06-06-2022, 10:32 AM
Australian bank behaviour and lending practices changed significantly after the Royal Hayne Commission and since then there has been a dramatic and enduring shift to non bank lenders for consumer finance in Australia. NZ wasn't part of the Hayne Commission but some of those new practices filtered through from their Australian parents to their NZ subsidiaries. Now we have CCCFA which has changed things again but likely to be reformed later this year.
Unsecured consumer lending from banks not meaningfully higher than from Harmoney, but decision outcomes were, often relying on binary yes/no based 3rd party credit scores.
It wasn't so much the competitive threat from banks with cheaper sources of funds that was put HMY on the back foot the last few years but consumers doing really early repayments on HMY loans when they refinanced their homes, when house prices shot up and interest rates hit rock bottom. Those two factors have reversed and CCCFA has made it more difficult for banks to refinance other debts. All that is good for the duration of HMY's book which is an important contributor to financial performance (especially given the how expensive new customer originations can be).
I wouldn't say HMY's customers are "high value" as Winn69 says, (IE not high net worths), but they are higher quality - IE ~45% own their own home, have decent jobs (~55% are professionals & office based, 20% trade, with the highest density of lending to 40-49 year olds), and processed using libra's scorecard (but cross referenced against standard credit checks). HMY's credit performance has been very good, both absolutely and relative to peers operating in similar sectors, but in a benign environment. If there is a stagflationary recession in 2023 that libra score card will get a proper stress test.
Id be interested to know what % of lending is spent on what. Personal loans are shall we say “personal”. If i was in a situation where I needed to borrow funds for say, A wedding, a holiday, a trip to see a sick relative, a questionable personal purchase, the thought of having to justify myself to a generic personal bank manager at a branch would make me look for alternatives.
And if the difference of say a couple of % points of interest (especially on a smaller loan) meant i could deal with a machine/computer and get a yes or no without the judgement, and it meant I knew without having to go thru the BS of an appointment, signing etc etc I would definitely go with someone like Harmoney.
I don’t think the convenience factor of Harmoney (harmoney lneder types) gets considered enough, instead they just get bundled in with all the pay day lenders which are essentially quick money for the wrong types.
jimdog31
06-06-2022, 10:34 AM
Id be interested to know what % of lending is spent on what. Personal loans are shall we say “personal”. If i was in a situation where I needed to borrow funds for say, A wedding, a holiday, a trip to see a sick relative, a questionable personal purchase, the thought of having to justify myself to a generic personal bank manager at a branch would make me look for alternatives.
And if the difference of say a couple of % points of interest (especially on a smaller loan) meant i could deal with a machine/computer and get a yes or no without the judgement, and it meant I knew without having to go thru the BS of an appointment, signing etc etc I would definitely go with someone like Harmoney.
I don’t think the convenience factor of Harmoney (harmoney lneder types) gets considered enough, instead they just get bundled in with all the pay day lenders which are essentially quick money for the wrong types.
Further, a lot of banks are shutting down their branches , so the ability to actually go to appts becomes more and more of a hassle.
Id be interested to know what % of lending is spent on what. Personal loans are shall we say “personal”. If i was in a situation where I needed to borrow funds for say, A wedding, a holiday, a trip to see a sick relative, a questionable personal purchase, the thought of having to justify myself to a generic personal bank manager at a branch would make me look for alternatives.
And if the difference of say a couple of % points of interest (especially on a smaller loan) meant i could deal with a machine/computer and get a yes or no without the judgement, and it meant I knew without having to go thru the BS of an appointment, signing etc etc I would definitely go with someone like Harmoney.
I don’t think the convenience factor of Harmoney (harmoney lneder types) gets considered enough, instead they just get bundled in with all the pay day lenders which are essentially quick money for the wrong types.
check out page 32-33 - got the answer there
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/HMY/388029/365640.pdf
debt consolidation & home improvements represent ~50%.
historically holidays were a big contributor but that obviously went to nil during covid and until recently for kiwis. that should turn back on.
jimdog31
06-06-2022, 10:40 AM
check out page 32-33 - got the answer there
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/HMY/388029/365640.pdf
debt consolidation & home improvements represent ~50%.
historically holidays were a big contributor but that obviously went to nil during covid and until recently for kiwis. that should turn back on.
there you go! I definitely wouldnt want to explain to my bank manager why I need a holiday !
Then theres the surprise factor, alot of travel is a “gift” or a “surprise” for loved ones. You dont exactly want the bank manager checking in with the mrs ��
jimdog31
06-06-2022, 10:52 AM
check out page 32-33 - got the answer there
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/HMY/388029/365640.pdf
debt consolidation & home improvements represent ~50%.
historically holidays were a big contributor but that obviously went to nil during covid and until recently for kiwis. that should turn back on.
The debt consolidation % interests me. I remember a younger Jimdog tried to do a debt consolidation of some credit cards that were strangling me. Bank wasnt overly helpful in trying to help me transition to a lower % loan…. I remember changing banks to do it in the end.
An online lending platform (which didnt exist then) wouldve been ideal! no awkward conversations with your existing bank, or the hassle of changing to a new one.
The % of debt consildation in the portfolio also points to a particular customer type… someone who is actively pursuing a better outcome , and hints to a client type who has or is beginning to have some financial literacy.
Again, not just a pay day lend.
winner69
06-06-2022, 11:47 AM
I haven't been a fan of smaller cap companies doing dual listings on the NZX and ASX (particularly for companies where there are large long term shareholders who don't budge) as all it does is further split liquidity. The theory I guess behind it was it broadens the shareholder base and Aussies are seen to be more active and rate companies more highly, and thats fine for big companies like A2M or whatever (but liquidity invariably always transfers to one exchange), but I think the results are it hasn't worked for small caps and in fact has been counter productive.
I think HMY would be wise to at least consider consolidating their register onto the ASX. be better for liquidity and its an aussie growth story anyway. Pains me to say that as I'm sick of companies being delisted from NZ and how woeful the NZX has become.
That Dangerous Goods Ltd has done OK ..... but will do better when only listed on ASX
winner69
06-06-2022, 11:50 AM
FM - I got the 'high value consumers' from a recent HMY presentation ..... their words
Suppose it could mean anything .... even high value to them ... like borrowing over and over again
there you go! I definitely wouldnt want to explain to my bank manager why I need a holiday !
Then theres the surprise factor, alot of travel is a “gift” or a “surprise” for loved ones. You dont exactly want the bank manager checking in with the mrs ��
yeah, particularly if you were taking someone else...jimDAWG :)
Credit losses as the economic conditions tighten are the focus of the market with unsecured lenders as the likes of Afterpay & Zip show.
Growth in the loan book with credit losses growing as well is not a good thing.
https://www.smh.com.au/business/banking-and-finance/afterpay-posts-huge-loss-as-bad-debts-mount-20220412-p5acvr.html
Balance I'd agree 100% that as and when the economy cools & unemployment rises you will see higher incurred credit losses as a % of average book than before. That's just how it works - no debate. And even if that doesn't happen, when you grow your book ridiculously fast (as HMY is), your provision at year end for all future expected credit losses (IE not what you actually incurred during the period, but the provision for ALL future expected ones over numerous future years) in dollar terms rises fast and causes stat NPAT to be negative when in growth mode (although I tend to look at NPAT after adding back the aftertax impact of the provision to see what underlying NPAT is & use that instead). If you grow really fast, AND raise your provision %, the statutory impact is even more pronounced. So I hear what you are saying.
But on HMY's comparison to laybuy and afterpay and all that jazz...I just refer you to my post responding to a previous comparison to Laybuy by a different poster. The operational and financial performance between HMY and BNPL couldn't be more stark...one earns damn year 10% net lending margin (interest income less interest expense and credit losses) and the other is negative. The operational and financial nature of HMY's lending is far closer to heartland than it is to BNPL, but obviously still quite different to heartland in that it is unsecured, scaling, and consumer focused.
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.
whatsup
07-06-2022, 12:22 PM
Is this a sub $1-00 share, the selling is relentless, I thought the bottom was a long time ago but how wrong was I , pity the fish heads who bought @ $3-00 + !!
Balance
07-06-2022, 12:51 PM
Balance I'd agree 100% that as and when the economy cools & unemployment rises you will see higher incurred credit losses as a % of average book than before. That's just how it works - no debate. And even if that doesn't happen, when you grow your book ridiculously fast (as HMY is), your provision at year end for all future expected credit losses (IE not what you actually incurred during the period, but the provision for ALL future expected ones over numerous future years) in dollar terms rises fast and causes stat NPAT to be negative when in growth mode (although I tend to look at NPAT after adding back the aftertax impact of the provision to see what underlying NPAT is & use that instead). If you grow really fast, AND raise your provision %, the statutory impact is even more pronounced. So I hear what you are saying.
But on HMY's comparison to laybuy and afterpay and all that jazz...I just refer you to my post responding to a previous comparison to Laybuy by a different poster. The operational and financial performance between HMY and BNPL couldn't be more stark...one earns damn year 10% net lending margin (interest income less interest expense and credit losses) and the other is negative. The operational and financial nature of HMY's lending is far closer to heartland than it is to BNPL, but obviously still quite different to heartland in that it is unsecured, scaling, and consumer focused.
Thanks for the various replies which put HMY’s business in perspective vs that of Afterpay and Zip.
I believe I am simply pointing out the obvious - that HMY is lumped along with the unsecured lender sector which is well and true out of favour in the market. It’s sp benefited when the sector was in favour and now it’s not.
Could indeed represent an opportunity for those who understand HMY a lot better than the likes of me and the market.
Thanks for the various replies which put HMY’s business in perspective vs that of Afterpay and Zip.
I believe I am simply pointing out the obvious - that HMY is lumped along with the unsecured lender sector which is well and true out of favour in the market. It’s sp benefited when the sector was in favour and now it’s not.
Could indeed represent an opportunity for those who understand HMY a lot better than the likes of me and the market.
We have exposure to Harmony via Heartland...so took a quick look at their reports...as I am wondering what is driving down the HGH price and if it might be exposure to Harmony. A couple of things have me scratching my head a bit.
Firstly...the salaries seem high. See page 75 of AGM ? Or am I hopelessly out of touch with reality ?
13874
Secondly...HGH's ownership of Harmony's shares = 8.44% as at 30 June 21
I might be "happy" with this level of exposure .....no more.
And I have a further question that someone may be able to quickly help with.
Is Heartland additionally exposed to Harmony via financing their lending ?
Yes HGH have big warehouse facility for HMY.
HGH also have a lot of big WHS facilities for 2nd tier NZ car lenders that a lot of HGH shareholders wouldnt know about (im guessing). It's hugely profitable for HGH. Often HGH provide funds when the big banks wont- because they have appetite.
Only a guess but I would say HGH would be close to withdrawing their funding lines to HMY because HMY can now get funding much much cheaper from the big banks. Therefore its not profitable enough for HGH. Better to give it to Go Car Finance et al
....and now I see this. Current valuation HMY: A$1.01
Not ideal !
13875
RTM- HMY employ very expensive data scientists to build complex globally leading technology (some google VP actually said this). These gurus command top dollar. Cool ay lol
Yes HGH have big warehouse facility for HMY.
HGH also have a lot of big WHS facilities for 2nd tier NZ car lenders that a lot of HGH shareholders wouldnt know about (im guessing). It's hugely profitable for HGH. Often HGH provide funds when the big banks wont- because they have appetite.
Only a guess but I would say HGH would be close to withdrawing their funding lines to HMY because HMY can now get funding much much cheaper from the big banks. Therefore its not profitable enough for HGH. Better to give it to Go Car Finance et al
Thanks...maybe I have enough HGH at this time as well ! Think I'll head outside for a while ....
RTM- HMY employ very expensive data scientists to build complex globally leading technology (some google VP actually said this). These gurus command top dollar. Cool ay lol
THx....yes...probably a lot of analytics going on behinds the scenes that I never considered. Even so. Seems pretty solid.
winner69
07-06-2022, 02:22 PM
RTM- HMY employ very expensive data scientists to build complex globally leading technology (some google VP actually said this). These gurus command top dollar. Cool ay lol
Billions of data points to make credit assessments Harmoney says
winner69
07-06-2022, 03:38 PM
Seems that the data scientists work to the Harmoney premise that one’s credit rating is the security for the loan.
If times get really tough I wonder if people sacrifice their food, mortgage / rent, power or their credit rating ?
Bought a small parcel today:scared:
Australian bank behaviour and lending practices changed significantly after the Royal Hayne Commission and since then there has been a dramatic and enduring shift to non bank lenders for consumer finance in Australia. NZ wasn't part of the Hayne Commission but some of those new practices filtered through from their Australian parents to their NZ subsidiaries. Now we have CCCFA which has changed things again but likely to be reformed later this year.
Unsecured consumer lending from banks not meaningfully higher than from Harmoney, but decision outcomes were, often relying on binary yes/no based 3rd party credit scores.
It wasn't so much the competitive threat from banks with cheaper sources of funds that was put HMY on the back foot the last few years but consumers doing really early repayments on HMY loans when they refinanced their homes, when house prices shot up and interest rates hit rock bottom. Those two factors have reversed and CCCFA has made it more difficult for banks to refinance other debts. All that is good for the duration of HMY's book which is an important contributor to financial performance (especially given the how expensive new customer originations can be).
Anyway this business is for all intents & purposes an Aussie one (at least the future growth is). Lending is capital intensive as HMY has to put c10% of its own equity behind every loan it writes, and it only has so much, so it has chosen to use that capital in australia. CCCFA in NZ has compounded the issue so I don't see HMY putting all its focus and capital into aussie originations rather than NZ originations for the next few years. swap rates are a lot lower in australia, inflation a bit lower, and for whatever reason I see their economy as being more resilient so not a bad call in my view.
I wouldn't say HMY's customers are "high value" as Winn69 says, (IE certainly not high net worths), but they are relatively high quality - IE ~45% own their own home, have decent jobs (~55% are professionals & office based, 20% trade, with the highest density of lending to 40-49 year olds), and processed using libra's scorecard (but cross referenced against standard credit checks). HMY's credit performance has been very good, both absolutely and relative to peers operating in similar sectors, but in a benign environment. If there is a stagflationary recession in 2023 that libra score card will get a proper stress test.
Thank you FM - excellent post
RTM- HMY employ very expensive data scientists to build complex globally leading technology (some google VP actually said this). These gurus command top dollar. Cool ay lol
Can they provide us with close forecasts of EBITDA & Dividends for the next 3 years as well ? ;)
This Guru is freshly sold out until I see the quality of this expensive forecasting talent :)
Cyclical
07-06-2022, 10:28 PM
I wouldn't say HMY's customers are "high value" as Winn69 says, (IE certainly not high net worths), but they are relatively high quality - IE ~45% own their own home, have decent jobs (~55% are professionals & office based, 20% trade, with the highest density of lending to 40-49 year olds), and processed using libra's scorecard (but cross referenced against standard credit checks). HMY's credit performance has been very good, both absolutely and relative to peers operating in similar sectors, but in a benign environment. If there is a stagflationary recession in 2023 that libra score card will get a proper stress test.
I'm a Harmoney customer and sit somewhere within spitting distance of the demographic portrayed above, and if that's typical of your average Harmoney customer, then I've got no qualms investing in them. Trouble is, being in that demographic means that it's not hard for me to get a single figure interest rate, and when I do borrow off them, it's usually because I've spotted a car that I have to buy, and the loan gets paid off rapidly with no penalty, maybe because I've sold the old one, or have just put my mind to paying it off pronto. So I don't know that that would make me a particularly lucrative customer, but in these tough times, hopefully those are the ones the algorithms are chasing.
Anyway, minor toe in the water holding, currently down ~25%, much bigger holding indirectly via HGH. Tempted to throw some more at them directly, but the chart looks ugly...surely plunging south of 1 buck? Makes me wonder if there is something more than just negative sentiment driving it down...
Why sell?
1) HMY are executing its business model with great success.
2) FY22 done and dusted after this month. Let’s wait for the results and then see what comes from it. Who knows what happens post the release
Holders and non holders have highlighted the risks HMY face on this thread. But that’s the game.. all financial institutions will face the same risks.
Balance
08-06-2022, 09:58 AM
Why sell?
1) HMY are executing its business model with great success.
2) FY22 done and dusted after this month. Let’s wait for the results and then see what comes from it. Who knows what happens post the release
Holders and non holders have highlighted the risks HMY face on this thread. But that’s the game.. all financial institutions will face the same risks.
That's true except that the banks got out of unsecured lending of the HMY type a long time ago so they will weather the downturn much better.
This will be HMY's first challenge in a rapidly deteriorating credit environment.
That's true except that the banks got out of unsecured lending of the HMY type a long time ago so they will weather the downturn much better.
This will be HMY's first challenge in a rapidly deteriorating credit environment.
Banks and HMY both target the same consumers for personal lending. I.e. working professionals in steady jobs, home owners, clean credit history etc. If you think HMYs book is full of the last resort borrowers you have a very shallow understanding of the company.
Its true however that HMY will also lend to others with blemishes on their credit record and they will price that lend accordingly.
Balance
08-06-2022, 10:26 AM
Banks and HMY both target the same consumers for personal lending. I.e. working professionals in steady jobs, home owners, clean credit history etc. If you think HMYs book is full of the last resort borrowers you have a very shallow understanding of the company.
Its true however that HMY will also lend to others with blemishes on their credit record and they will price that lend accordingly.
Fair comment Rawz and helpful for understanding HMY.
The real test for HMY is not the year gone but the next 2 years ahead however.
[QUOTE=Balance;960992
This will be HMY's first challenge in a rapidly deteriorating credit environment.[/QUOTE]
This is somewhat chilling and it will apply to many lending companies...(General Finance ? Turners ? ).
The salaries I mentioned yesterday will have been worth while paying if their algorithms can respond appropriately.
Balance
08-06-2022, 12:03 PM
This is somewhat chilling and it will apply to many lending companies...(General Finance ? Turners ? ).
The salaries I mentioned yesterday will have been worth while paying if their algorithms can respond appropriately.
Indeed they will all be tested - just as property developers are already being tested currently and some have been found wanting.
From what I read from posters and shareholders here, HMY seems to have a good credit appraisal system. So that’s a great comfort to shareholders as the credit crunch out there bites.
mike2020
08-06-2022, 12:52 PM
I'm not sure about Turners, one dealer told me supply issues on a few cars that are currently out of stock will be worse after the next lot due to arrive in September and that was two leading brands he knew of. I'm guessing they could just repo the car anyway?
winner69
13-06-2022, 11:03 AM
I know Harmoney is not BNLP but the sentiment about lending money to people unsecured must spill over to the likes of Harmoney
Hope these amazing data scientists have done an amazing job in weeding out the chaff
Also hope this doesn’t end in tears
Buy now, pay later on the brink: ‘The entire market is collapsing’
https://www.smh.com.au/business/companies/buy-now-pay-later-on-the-brink-the-entire-market-is-collapsing-20220602-p5aqkf.html
winner69
13-06-2022, 11:19 AM
Suppose this quote from above article applies to Harmoney as well
Any hope of profitability depends on overextended consumers somehow making their payments and continuing to mash the buy button.’
Bjauck
13-06-2022, 11:38 AM
Suppose this quote from above article applies to Harmoney as well
Any hope of profitability depends on overextended consumers somehow making their payments and continuing to mash the buy button.’
A bit of levity on another grim day on the NZX - Irish comedian Tommy Tiernan on debt and money!
https://www.youtube.com/watch?v=VMQ_HSyLUgI
Suppose this quote from above article applies to Harmoney as well
Any hope of profitability depends on overextended consumers somehow making their payments and continuing to mash the buy button.’
Winner has his big surf caster out and has put all his effort into a very long cast out into the harmoney sea. so far no bites. Bait a bit average i guess lol
Good article thou winner. thanks for posting. the BNPL industry is a mess. Lending under $500 and sometimes under $100!!! not exactly targeting the home owners, stable job, clean credit types ay
whatsup
13-06-2022, 05:10 PM
Is Harmoney tied to Heartlands S P or is Heartland tied to Harmoneys ? both in free fall so to speak !!
winner69
19-06-2022, 01:41 PM
Was reading an interesting article on the future of bank risk management
Besides the traditional 'risks' in the sector risk managers now need to assess if their models (credit checking) actually do the job properly / ask themselves is AI doing what it should / cyber security is often not give high priority
Seems Harmoney have all these areas covered
winner69
19-06-2022, 01:46 PM
Is Harmoney tied to Heartlands S P or is Heartland tied to Harmoneys ? both in free fall so to speak !!
Don't think either's SP is tied to the other --- they can move in the same direction because of general sentiment to banking / fintech at the time
Harmoney share price can affect Heartlands profit but shouldn't affect the share price that much
Balance
19-06-2022, 02:03 PM
Don't think either's SP is tied to the other --- they can move in the same direction because of general sentiment to banking / fintech at the time
Harmoney share price can affect Heartlands profit but shouldn't affect the share price that much
If Harmoney gets into trouble (a possibility however remote), the market will question Heartland’s credibility to invest in Harmoney.
whatsup
20-06-2022, 08:50 AM
If Harmoney gets into trouble (a possibility however remote), the market will question Heartland’s credibility to invest in Harmoney.
Dont think that will happen what with their credit researching and the dominance in their Aust loan market %.
Balance
20-06-2022, 09:30 AM
Dont think that will happen what with their credit researching and the dominance in their Aust loan market %.
When the tide goes out, who has been swimming naked :
https://www.stuff.co.nz/business/opinion-analysis/128942682/how-laybuy-investors-lost-250m-a-spectacular-fall-from-lofty-heights
whatsup
26-06-2022, 01:48 PM
When the tide goes out, who has been swimming naked :
https://www.stuff.co.nz/business/opinion-analysis/128942682/how-laybuy-investors-lost-250m-a-spectacular-fall-from-lofty-heights
Bal, wrong , a falling tide catches all boats !!
percy
28-06-2022, 09:45 AM
Well one of the BIG Four Aussie banks give them more warehouse funds.
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/HMY/394379/373528.pdf
Well one of the BIG Four Aussie banks give them more warehouse funds.
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/HMY/394379/373528.pdf
Nice announcement. A shame its not an asset backed security.
Would be good to see the NZ book grow. Its been a story about Aus this past year. If NZ can increase its growth rate and Aus continues at its current rate the book will be $1b by this time next year.
End of financial year in 3 days for HMY. Looking forward to seeing the final numbers. No worries with the unemployment numbers right now. Arrears and impairments should be very low. Final loan book should come in at $688,888,888.8888889
jimdog31
28-06-2022, 12:53 PM
Nice announcement. A shame its not an asset backed security.
Would be good to see the NZ book grow. Its been a story about Aus this past year. If NZ can increase its growth rate and Aus continues at its current rate the book will be $1b by this time next year.
End of financial year in 3 days for HMY. Looking forward to seeing the final numbers. No worries with the unemployment numbers right now. Arrears and impairments should be very low. Final loan book should come in at $688,888,888.8888889
Yeh was waiting for an announcement around this as they hinted at it a while back.
Talk me through what an asset backed security would/could look like? (excuse my ignorance on this)
Also based on the following statement for anyone who wondered how Rawz could be so precise;
"950m, of which over $330m remains undrawn."
If we currently have $620m warehousing book, and we are currently 90% warehouse funded $620/90% = $688,888,888.8888889"
Rawz, does this line up with growth rates weve been seeing?
$627m as at 27 April vs $689m as at 30 june? approx a $1m a day being shovelled out the door?
Yeh was waiting for an announcement around this as they hinted at it a while back.
Talk me through what an asset backed security would/could look like? (excuse my ignorance on this)
Basically my understanding is below. FM would be more clued up on this.. so he may like to also comment/clarify
HMY can package up specific loans and use them as income generating assets and sell them to wholesale clients at an even cheaper rate than what they get from the bank warehouse facilities. The loan data like payment history, credit scores, internal scores, borrower status is available. If HMY goes into liquidation the ABS purchaser can take over those loans.
Ever watch the big short? Mortgage backed securities... kinda like that but safer :p
jimdog31
28-06-2022, 01:08 PM
Basically my understanding is below. FM would be more clued up on this.. so he may like to also comment/clarify
HMY can package up specific loans and use them as income generating assets and sell them to wholesale clients at an even cheaper rate than what they get from the bank warehouse facilities. The loan data like payment history, credit scores, internal scores, borrower status is available. If HMY goes into liquidation the ABS purchaser can take over those loans.
Ever watch the big short? Mortgage backed securities... kinda like that but safer :p
Got ya, yep I sure have.
Understandably in this environment a warehouse lending facility would be easier to get?
jimdog31
28-06-2022, 01:09 PM
And based on $689 what are your esteemed guesses as to NPAT?
I thought they would get $697m. Close enough. Well ahead of original forecast of $600m.
I dont know what the NPAT will be. I started working on it and then never completed it. Too many non cash & proforma stuff for my little brain to think through lol.
Basically everyone knows i like HMYs model, i think it is the best in the industry. I like the growth to date. Especially in Aus. So i am not too focused on the profits, i always thought they should grow as quickly as possible and turn to profits later. They are carrying an expensive army of complex data scientists. Do they really need them now? Like they could cut most of them them and be a normal lender and make normal profits. Some people want that now in the current economic environment. I would prefer they just keep growing and refining the model and develop new products for car lending or home loans and then later on down the track when the book is a couple of billion really focus on profits and head office cost ratio's etc.
winner69
28-06-2022, 03:04 PM
'market' not like announcement .... down heaps eh
That 90 cents must be a new all time low?
'market' not like announcement .... down heaps eh
That 90 cents must be a new all time low?
How low can it go? Apparently lower if you look at the Aus Sp :scared:
Ive lost so much paper money on this stock. Learnt a lot thou.
But because i am a glass half FULL type of guy i reckon it'll be paper profits again one day
winner69
28-06-2022, 03:29 PM
How low can it go? Apparently lower if you look at the Aus Sp :scared:
Ive lost so much paper money on this stock. Learnt a lot thou.
But because i am a glass half empty type of guy i reckon it'll be paper profits again one day
Must be priced at about 1 times income now
Wasn’t it about 4 times when floated
percy
28-06-2022, 03:40 PM
How low can it go? Apparently lower if you look at the Aus Sp :scared:
Ive lost so much paper money on this stock. Learnt a lot thou.
But because i am a glass half empty type of guy i reckon it'll be paper profits again one day
Well if they can keep growing at the present rate, and with a NIM of 8.3% and low arrears and defaults, you should be in a"paper profit" in the not too distant future.
disc hold via HGH.
current market cap is NZ$90M.
Geneva finance market cap is $38m.
Now i am not saying Geneva finance is a third tier garbage lender..... but the closer HMY market cap gets to GFL.nzx the more one should buy. just my opinion...
W69 its trading 0.94x revenue.
Percy. Yes when the book is $3b and NIM OF 13% or NLM of8.40% then yes this should be a multi multi bagger from todays levels one day. just my opinion... might do one of those told you so posts one day in 2024 lol
percy
28-06-2022, 03:48 PM
current market cap is NZ$90M.
Geneva finance market cap is $38m.
Now i am not saying Geneva finance is a third tier garbage lender..... but the closer HMY market cap gets to GFL.nzx the more one should buy. just my opinion...
W69 its trading 0.94x revenue.
Percy. Yes when the book is $3b and NIM OF 13% or NLM of8.40% then yes this should be a multi multi bagger from todays levels one day. just my opinion... might do one of those told you so posts one day in 2024 lol
I look forward to it.
At that time I will reply that I am not surprised...lol.
Snow Leopard
28-06-2022, 04:30 PM
Just bought a few of these at AU$0.7375 each. That is basically NZ$0.8113
Not sure where from, the current sell on the ASX was $0.79 and I sized my order on that basis.
[Update: it was the ASX:
13926 ]
Could have/should have bought more.
PS: I blame Rawz posts for leading me into it :t_up:
percy
28-06-2022, 05:57 PM
Just bought a few of these at AU$0.7375 each. That is basically NZ$0.8113
Not sure where from, the current sell on the ASX was $0.79 and I sized my order on that basis.
[Update: it was the ASX:
13926 ]
Could have/should have bought more.
PS: I blame Rawz posts for leading me into it :t_up:
I must not follow Snow Leopard every where.
I must not follow Snow Leopard every where.
Crikey I just bought xxxx HMY at .73 cents on the ASX.
I must not follow Snow Leopard every where.
Oh gosh I going to have to hit the rainy day fund.Well it has been raining here all day.
I must not follow Snow Leopard every where.
Why do I follow Snow Leopard.?.....................May be because it is the profitable thing to do......
ps.Have not bought any DDH............ yet.
Snow Leopard
28-06-2022, 06:10 PM
....
Why do I follow Snow Leopard.?.....................May be because it is the profitable thing to do......
....
You probably do not want to hear my record on recent ASX buys :D
But even at it's worst, you will lose 0.75 cents per share less than me :scared:
percy
28-06-2022, 06:30 PM
You probably do not want to hear my record on recent ASX buys :D
But even at it's worst, you will lose 0.75 cents per share less than me :scared:
Hopefully we are well ahead to Rawz and Fiordland Moose,and others who have lead us astray....lol
Hopefully we are well ahead to Rawz and Fiordland Moose,and others who have lead us astray....lol
aaaaaaarrrrrghhhhhhhhhh well ahead - so far ahead.
unless it goes to zero - then we are all equals :)
Balance
28-06-2022, 06:40 PM
Basically my understanding is below. FM would be more clued up on this.. so he may like to also comment/clarify
HMY can package up specific loans and use them as income generating assets and sell them to wholesale clients at an even cheaper rate than what they get from the bank warehouse facilities. The loan data like payment history, credit scores, internal scores, borrower status is available. If HMY goes into liquidation the ABS purchaser can take over those loans.
Ever watch the big short? Mortgage backed securities... kinda like that but safer :p
Depends on whether the warehouse facilities are non recourse or full recourse back to HMY.
I have seen warehouse facilities where the funding bank picked the 'eyes' out of the securitized loans but with no recourse and I have also seen those with full recourse - ie. less credit worthy situation.
Basically my understanding is below. FM would be more clued up on this.. so he may like to also comment/clarify
HMY can package up specific loans and use them as income generating assets and sell them to wholesale clients at an even cheaper rate than what they get from the bank warehouse facilities. The loan data like payment history, credit scores, internal scores, borrower status is available. If HMY goes into liquidation the ABS purchaser can take over those loans.
Ever watch the big short? Mortgage backed securities... kinda like that but safer :p
that's more or less how I understand it. They don't provide the underlying documents so I can't be sure. But broadly speaking the ABS is structured via a trust and organised via a number of difference classes of notes by credit worthyness. IE class A at Aaa, class B at Aa2, down to class F, and finally class G notes which are notes held by Harmoney, and incrementally subordinated to each other. There is a bit of a repayment waterfall structure as stepdown conditions are satisfied
HMY's first ABS was in October last year. It was ~A$100m or about 60% of the aggregate australian book at the time. What it did to the cost of funds was incredible: they paid only 1.45% margin ontop of the base rate they hedged . That's an incredible margin - I checked in with some friends active in the market and they were seeing 1.80% margins for long term mortgages securitisations, and 3% for short term (less than 18mnth) mortgages. Credit enhancements (ie how much cheaper you loans get once moving to an ABS structure) are usually 15-30% - this was a lot more.
Warehouse get the name because they are designed to hold loans while sufficient quantities are built up to then term them via some securitisation structure like an asset backed security. Warehouses aren't always termed out but its usually the goal as securitisations typically provide lower cost of funds and a higher advance rate. Re the later point, for warehouse lending HMY typically writes loans with 10% equity and 90% drawings on a warehouse facility - an ABS cuts that in half to only 5% equity required from HMY
ABS' amortise as they repay so its a closed pool of funds, so all else equal they amortise to zero, and another ABS is required at some future point (thats why they get referred to as an ABS programme, or securitisation programme). Not unusual to have several securitisations running concurrently at different stages of run down. While that's a bit of hassle (and cost due to up front & bookrunner fees, legals) because its a closed pool it allows it to be rated by a ratings agency. Last years ABS was rated by Moody's.
Been a while since I last looked but I think the ABS market for non bank lenders has slowed a lot - the only things I last saw getting written were for vehicle secured lending.
The way wholesale costs have risen I think margins will have risen so the credit enhancement from getting an ABS could have waned from last year. Plus, the securitisation market wants big books, usually +$100m, so likely the NZ book could also be just to small at the moment. They were keen on a NZ ABS but CCCFA came in and slowed the market down.
Its encouraging though to see a big new warehouse facility for new zealand.
Basically my understanding is below. FM would be more clued up on this.. so he may like to also comment/clarify
HMY can package up specific loans and use them as income generating assets and sell them to wholesale clients at an even cheaper rate than what they get from the bank warehouse facilities. The loan data like payment history, credit scores, internal scores, borrower status is available. If HMY goes into liquidation the ABS purchaser can take over those loans.
Ever watch the big short? Mortgage backed securities... kinda like that but safer :p
If HMY goes into liquidiation or gets terminated for whatever reason, the back-up service provider steps in to service the loans while they amortise. Perpetual is the back-up provider.
jimdog31
28-06-2022, 08:22 PM
If HMY goes into liquidiation or gets terminated for whatever reason, the back-up service provider steps in to service the loans while they amortise. Perpetual is the back-up provider.
Theyd have to have a horrible year or 2 for that too happen yeh?
If they provision correctly and appropriately I can’t see it happening.
Theyd have to have a horrible year or 2 for that too happen yeh?
If they provision correctly and appropriately I can’t see it happening.
Ha sorry jimbo I was only mentioning that by way of how asset back securitisations work - not meaning to cause any alarm!
jimdog31
28-06-2022, 08:54 PM
Ha sorry jimbo I was only mentioning that by way of how asset back securitisations work - not meaning to cause any alarm!
I thought balance had tipped you to the dark side for a second there!
Balance
28-06-2022, 10:11 PM
I thought balance had tipped you to the dark side for a second there!
Never! He knows his stuff and acknowledges he likes to be tested and challenged on his assessments.
jimdog31
28-06-2022, 10:34 PM
Never! He knows his stuff and acknowledges he likes to be tested and challenged on his assessments.
don’t get me wrong Balance, love your views, even when they are contrary to mine.
It does definitely make ones conviction take a second look. a check and “balance” :p
don’t get me wrong Balance, love your views, even when they are contrary to mine.
It does definitely make ones conviction take a second look. a check and “balance” :p
Yes its always good to be tested. and particularly on a share like HMY.
and while I don't share all of Balance's politics or how he communicates them, when it comes down to pure business and investments, I do read and listen to what he has to say. and that's what I am here for.
Snow Leopard
29-06-2022, 11:07 AM
Important question is:
Have Percy and I set a floor price and the uptrend now commences?
The disconnect between the SP on the ASX & NZX is weird.
percy
29-06-2022, 11:13 AM
Important question is:
Have Percy and I set a floor price and the uptrend now commences?
The disconnect between the SP on the ASX & NZX is weird.
Perhaps ASX selling is for tax reasons,ie their tax year ends end of June.
HMY should delist from ASX...
percy
29-06-2022, 11:38 AM
HMY should delist from ASX...
I think HMY,HGH and TRA are listed in Aussie, as a lot of Aussie intos can only lend to Aussie listed companies.
I think HMY,HGH and TRA are listed in Aussie, as a lot of Aussie intos can only lend to Aussie listed companies.
Ah okay that makes sense.
Problem for the SP is that the aussie side has dragged the nz side down since listing. NZ price always higher but ends up following the aus down down down
Balance
29-06-2022, 11:47 AM
Ah okay that makes sense.
Problem for the SP is that the aussie side has dragged the nz side down since listing. NZ price always higher but ends up following the aus down down down
Means that the ASX is the driver of the sp - just as it is with stocks like ATM & FBU.
jimdog31
29-06-2022, 11:56 AM
that's more or less how I understand it. They don't provide the underlying documents so I can't be sure. But broadly speaking the ABS is structured via a trust and organised via a number of difference classes of notes by credit worthyness. IE class A at Aaa, class B at Aa2, down to class F, and finally class G notes which are notes held by Harmoney, and incrementally subordinated to each other. There is a bit of a repayment waterfall structure as stepdown conditions are satisfied
HMY's first ABS was in October last year. It was ~A$100m or about 60% of the aggregate australian book at the time. What it did to the cost of funds was incredible: they paid only 1.45% margin ontop of the base rate they hedged . That's an incredible margin - I checked in with some friends active in the market and they were seeing 1.80% margins for long term mortgages securitisations, and 3% for short term (less than 18mnth) mortgages. Credit enhancements (ie how much cheaper you loans get once moving to an ABS structure) are usually 15-30% - this was a lot more.
Warehouse get the name because they are designed to hold loans while sufficient quantities are built up to then term them via some securitisation structure like an asset backed security. Warehouses aren't always termed out but its usually the goal as securitisations typically provide lower cost of funds and a higher advance rate. Re the later point, for warehouse lending HMY typically writes loans with 10% equity and 90% drawings on a warehouse facility - an ABS cuts that in half to only 5% equity required from HMY
ABS' amortise as they repay so its a closed pool of funds, so all else equal they amortise to zero, and another ABS is required at some future point (thats why they get referred to as an ABS programme, or securitisation programme). Not unusual to have several securitisations running concurrently at different stages of run down. While that's a bit of hassle (and cost due to up front & bookrunner fees, legals) because its a closed pool it allows it to be rated by a ratings agency. Last years ABS was rated by Moody's.
Been a while since I last looked but I think the ABS market for non bank lenders has slowed a lot - the only things I last saw getting written were for vehicle secured lending.
The way wholesale costs have risen I think margins will have risen so the credit enhancement from getting an ABS could have waned from last year. Plus, the securitisation market wants big books, usually +$100m, so likely the NZ book could also be just to small at the moment. They were keen on a NZ ABS but CCCFA came in and slowed the market down.
Its encouraging though to see a big new warehouse facility for new zealand.
http://research.iress.com.au/IDS/old/20220614/02531069.pdf?uid=A0926BFAB85B5AF8AEFA3611A82347578 0480000101CD232D1D8E540093D250091850000&ppv=
The competition WZR just got an ABS Facility recently.
How does this stack up to our latest announcement?
http://research.iress.com.au/IDS/old/20220614/02531069.pdf?uid=A0926BFAB85B5AF8AEFA3611A82347578 0480000101CD232D1D8E540093D250091850000&ppv=
The competition WZR just got an ABS Facility recently.
How does this stack up to our latest announcement?
ooh that is good to see - unsecured consumer too.
The facility HMY announced yesterday was a warehouse facility, which is sorta the intermediate step before moving some of the funds housed in it to an ABS, and as far as I know from the announcement they didnt provide any terms. This WZR one is an ABS so I've compared it to HMY's ABS from oct 2021.
weighted average margin of 2.23% here vs 1.45% harmoney achieved last year. Impossible to know if Harmoney's margin is lower because it did a better job at securing it, or if margins just have drifted up (and lenders now demanding more return for their lending). I suspect the later plays a big part in it
WZR's margin over a 3 month bank bill rate, vs harmoney on the 1month bank bill rate. traditionally a 1 month bill rate will be cheaper in a rising interest rate
environment, but regardless both will have been hedged. I'm pretty sure westpac hedged harmoneys (which i read in some moody report).
the weighted average credit enhancement from WZR's abs looks to be 35% which is about the same HMY's achieved (34%)
good to see these still occurring at good levels of credit enhancement even if margins are going up. These can do so much to optimise and loser HMY's cost of funds and widen NIM. Lenders want to see a track record and some history
that's a big ABS - $250m. probably the size banks are after.
Balance
30-06-2022, 12:37 PM
New low.
What's happening?
Serious question.
dubya
30-06-2022, 12:49 PM
New low.
What's happening?
Serious question.
It was me buying :sleep:. I put the order in the other day..... didn't think a seller would come down.
Bit of a punt.
NZ SP catching up (down?) to the Aus price.
I bought some more HMY on Aus side. $0.72. Already down lol. Feels normal
Snoopy
30-06-2022, 02:04 PM
New low.
What's happening?
Serious question.
One thing I have learned about investing in financial entities is that it is always more complicated than you think it is. Thankfully I have a top bloke called Jeff managing my Harmoney holding via his 'Heartland' investment fund, that I own shares in. I am very happy to let Jeff do the job for me on this one. But I did take a peek under the Harmoney hood myself, via reading the HY2022 presentation. Slide 34 is very telling.
There is a real half year NPAT profit there of $1.170m, which is good to see. But keep moving down the line and you will see $2.730m in a credit loss provision. So net profit does not cover the credit loss provision, and that puts the company into an underlying cashflow negative position. Yes, I know some of that 'cashflow crisis' is undone because some of the share based remuneration payments are not cash items. But if the company is not being recognised as doing well by the market in the future, then I imagine employees will be taking cash rather than shares in the future, or maybe not earning any share based remuneration (because these share based payments may be bonus payments, contingent on an advancing share price).
The company adds back Depreciation and Amortisation when calculating their 'cash profit'. But if the software needs tweaking and the hardware needs upgrading, this strikes me as a disingenuous adjustment from an operational cashflow business cycle perspective. The Harmoney loan approval software has not been tested in a real recession. So there must be a question mark over the provisioning levels, which in turn casts a question mark as to whether Harmoney makes any money at all on a business cycle after tax basis.
Yes I get the argument that the business is scaling up and you wouldn't expect a growth company like this to be profitable from the get go. But heading into a potential recession in both NZ and Australia, with the longer established market indicating NZ loan book already no longer growing, I can see why the market might be discounting the 'growth dream'. Doesn't Heartland itself operate on line loan approval itself via algorithms rather than people? Obviously these Heartland algorithms are not as good as the Harmoney ones, other why invest in Harmoney? So maybe Heartland are playing a smart game here.
Outcome 1/ Harmoney recovers from its market mire, profits soar to the stratosphere and Heartland has a first mover stake in the next financial big thing.
Outcome 2/ Harmoney software is found wanting in a recessionary market and the company is put into liquidation. Heartland then buys all the software for next to nix from the receiver, to technically boost its own on line loan approval offering.
Either way, Heartland ends up winning. But Harmoney shareholders will only be winners under Outcome 1.
Smart man that Jeff, from my 'Heartland' investment fund!
SNOOPY
Good post Snoopy.
Market needs the full year results. They are maybe 3 weeks away?
Then the market really really needs the annual report.
One thing I have learned about investing in financial entities is that it is always more complicated than you think it is. Thankfully I have a top bloke called Jeff managing my Harmoney holding via his 'Heartland' investment fund, that I own shares in. I am very happy to let Jeff do the job for me on this one. But I did take a peek under the Harmoney hood myself, via reading the HY2022 presentation. Slide 34 is very telling.
There is a real half year NPAT profit there of $1.170m, which is good to see. But keep moving down the line and you will see $2.730m in a credit loss provision. So net profit does not cover the credit loss provision, and that puts the company into an underlying cashflow negative position. Yes, I know some of that 'cashflow crisis' is undone because some of the share based remuneration payments are not cash items. But if the company is not being recognised as doing well by the market in the future, then I imagine employees will be taking cash rather than shares in the future, or maybe not earning any share based remuneration (because these share based payments may be bonus payments, contingent on an advancing share price).
The company adds back Depreciation and Amortisation when calculating their 'cash profit'. But if the software needs tweaking and the hardware needs upgrading, this strikes me as a disingenuous adjustment from an operational cashflow business cycle perspective. The Harmoney loan approval software has not been tested in a real recession. So there must be a question mark over the provisioning levels, which in turn casts a question mark as to whether Harmoney makes any money at all on a business cycle after tax basis.
Yes I get the argument that the business is scaling up and you wouldn't expect a growth company like this to be profitable from the get go. But heading into a potential recession in both NZ and Australia, with the longer established market indicating NZ loan book already no longer growing, I can see why the market might be discounting the 'growth dream'. Doesn't Heartland itself operate on line loan approval itself via algorithms rather than people? Obviously these Heartland algorithms are not as good as the Harmoney ones, other why invest in Harmoney? So maybe Heartland are playing a smart game here.
Outcome 1/ Harmoney recovers from its market mire, profits soar to the stratosphere and Heartland has a first mover stake in the next financial big thing.
Outcome 2/ Harmoney software is found wanting in a recessionary market and the company is put into liquidation. Heartland then buys all the software for next to nix from the receiver, to technically boost its own on line loan approval offering.
Either way, Heartland ends up winning. But Harmoney shareholders will only be winners under Outcome 1.
Smart man that Jeff, from my 'Heartland' investment fund!
SNOOPY
Companies produce statutory NPAT and often provide underlying adjustments, and investors should always carefully examine if there is any need to deviate from npat, and the validness of any adjustments.
Re HMY for instance, in my own spreadsheets for my own investment decisions, I absolutely do not add back depreciation or share based employee remuneration. They are both real expenses and I think its ridiculous to adjust for them, It's been my experience that early stage companies tend to add back as much as they can, and also rationalise it by saying its what their industry peers do (who also do it for reason 1, and perpetuates a self reinforcing cycle amongst the industry). But they are just amendments to the stats, and can be accepted or rejected freely.
Within HMY accounts there are the credit losses actually incurred during the financial period, and then a provision for all future credit losses expected from the book as at the closing date (ie those credit losses can be over 3 years). If the book grows incredibly fast, the movement in provision (IE the expense) is massive, even if the % of receivables falls. The provision expense from growing your book fast can be a double digit factor vs growing a book at GDP (some banks dont bother to break out the movement in provision expense in P&L and just lump it with ICL, though you can work it out by examining the balance sheet). So I do tend to add back the after tax impact from movement in provision, whether positive or negative. I care more about the credit losses incurred during the period. And when looking at the company on this basis I am mindful of how much were those incurred credit losses, vs what do I think is a maintainable level through the cycle, or how would it look if in the middle of a recession.
Re the point on cashflows, movement in provision for future expected credit losses is a non cash expense so its movement doesn't actually impact cashflows. And for that matter, incurred credit losses are actually non cash as well (but are a very real expense).
winner69
30-06-2022, 02:51 PM
Does much in the way of ongoing development costs gets capitalised .... like straight to the balance sheet as an intangible
Does much in the way of ongoing development costs gets capitalised .... like straight to the balance sheet as an intangible
yup. and in excess of the depreciation & amortisation charge of intangibles. hence, do not add back D&A.
I've been involved in other investments though where ongoing capex was a fraction of depreciation. So I kinda thought of that particular company's EV/EBIT as a multiple of EV to ebitda less capex.
Snow Leopard
30-06-2022, 05:51 PM
....There is a real half year NPAT profit there of $1.170m, which is good to see. But keep moving down the line and you will see $2.730m in a credit loss provision. So net profit does not cover the credit loss provision, and that puts the company into an underlying cashflow negative position. Yes, I know some of that 'cashflow crisis' is undone because some of the share based remuneration payments are not cash items. But....
Is it important that those numbers are from the pro-forma stuff and the 'real' profit was a loss of $5M ?
Asking for a friend.
Is it important that those numbers are from the pro-forma stuff and the 'real' profit was a loss of $5M ?
Asking for a friend.
yup. but the stats should look a lot more like the proformas after the p2p is wound down.
they should have never IPO'd when they did. too early.
jimdog31
30-06-2022, 07:02 PM
yup. but the stats should look a lot more like the proformas after the p2p is wound down.
they should have never IPO'd when they did. too early.
I hear you, but wouldnt that have made it harder for them to get the level of warehousing facilities they have since? the extra compliance that a public company has would surely help them when it comes to accessing these facilities.
I hear you, but wouldnt that have made it harder for them to get the level of warehousing facilities they have since? the extra compliance that a public company has would surely help them when it comes to accessing these facilities.
yeah probably.
They needed to raise as they were early stage, and to lend out. A private round would have been too small. Being listed gives more cred to a young lender trying to attract wholesale lending, let alone the ABS market. And I think it was percy who told me that the reason HGH and HMY are dual listed because it makes it easier to get wholesale funds that can only be leant to or thru aussie companies or listed companies
so i'm probably wrong. i'll just rephrase - their IPO pricing was madness.
Snoopy
30-06-2022, 08:26 PM
Is it important that those numbers are from the pro-forma stuff and the 'real' profit was a loss of $5M ?
Asking for a friend.
I don't follow HMY closely, and today was the first time I had dived into an actual result presentation since they listed.
The 19th January 2022 half year profit announcement on Stocknessmonster is titled.
"HARMONEY ACHIEVES CASH NPAT PROFITABILITY"
Granted this is only a half year result, so it probably wasn't audited. But quoting from the half year result presentation made on 28th February 2022, on the bottom of page 34, the bottom of the profit and loss statement presented, looks like this:
Profit Before Income Tax$1.624m
Income Tax (@26.1%)($0.424m)
Profit After Income Tax$1.170m
Non cash and other normalisation adjustments$0.0
Movement in Expected Credit Loss Provision($2.730m)
Share based payment expenses$1.467m
Depreciation and Amortisation Expenses$0.714m
IPO Expenses$0.0m
Income Tax treatment of adjustments($0.154m)
Cash Profit$0.774m
If tax was paid, this would suggest to me that the profit was indeed real. One of the reasons I haven't been following this one was that, I thought the company was racking up massive losses while it grew, and it would take years before it got to the point of paying any tax. However, now I see HMY is actually paying tax, maybe I should give it more attention?
I can't explain why income tax only came in at 26.1% of profits. The income tax treatment adjustment to cash profits of $0.154m added back is an odd thing too.
If I add up all of the cash profit adjustments, excluding the income tax adjustment, I get:
-$2.730m + $1.467m + $0.714m = -$0.529m
Now examining the income tax adjustment in proportion:
$0.154m/$0.529m = 29.1%
That number is between the NZ company tax rate of 28% and the Aus company tax rate of 30%. So at least it sounds a ball park believable figure. Except the whole concept of a 'cash profit' sounds fictional to me. 'Positive cashflow' is a concept I understand. But 'cash profit' seems to be 'positive cashflow' with a 'taxation adjustment' which is not paid in practice, added back (?). I will have to leave it to the students of Harmoney to explain what is going on there.
I am not sure where that $5m pro-forma loss you mentioned comes in Snow Leopard. Could it relate to FY2021?
The blank slots in the above table, representing IPO costs that might apply to previous periods, and normalization adjustments of which there are none. This would suggest the HY2022 result is clean. No pro-forma adjusting required. Even if none of this answers the question of what happened to all the tax losses built up in previous years. Another one for the 'students of Harmoney' to answer!
SNOOPY
Im going to buy more before Snoopy dives in and figures out what a high margin gold mine HMY is ;)
Snow Leopard
30-06-2022, 08:37 PM
....I am not sure where that $5m pro-forma loss you mentioned comes in Snow Leopard....
Hi Snoopy.
You are playing with the the pro-forma from the pressie. I read the the Income bit of the actual accounts in the HY Report.
I can throughly recommend it.
Cheers
Snoopy
30-06-2022, 09:18 PM
Hi Snoopy.
You are playing with the the pro-forma from the pressie. I read the the Income bit of the actual accounts in the HY Report.
I can throughly recommend it.
Cheers
I never considered that Harmoney would not bother reporting their actual result in their half year presentation. I am astonished Snow Leopard. You are quite right and the truth is revealed for all to see on the statutory to pro-forma reconciliation on p11 of the half year 2022 report! It looks like the half year presentation is fiction. No tax was paid, and as you say the company made a $5.089m dollar loss for the period.
The excuse for this pro-forma stuff is that IF the peer to peer funder loans were converted to warehouse funded loans THEN the pro-forma profit would be indicative of what would happen. Except this isn't happening yet. So the real position is a $5.089m dollar loss as we head into recession with a loan algorithm that has not been tested in a recession? The market doesn't like uncertainty. So is it any surprise that the HMY share price has collapsed?
It is getting near bed time for this mutt. But Daddy won't need to read me a bed time story tonight, as I have just read the greatest work of fiction to be published in 2022 so far. How will I sleep having just read such an exciting and startling tall tale?
SNOOPY
So is my forecast (post 391 (https://www.sharetrader.co.nz/showthread.php?11927-HMY-Harmoney-Corp-Limited&p=940642&viewfull=1#post940642)) of positive NPAT in the 2nd half of FY23 still in play? Not "cash NPAT"; actual NPAT. Except now the requisite tailwinds have possibly become headwinds...?
winner69
05-07-2022, 09:15 AM
Does this bit in the news mean anything to Harmoney
The latest data from credit reporting company Centrix showed all new household lending in May was down 33% on May last year and business credit demand was down 13%.
2 or 3 weeks away until we see how the year washed up.
Cant wait to see that big juicy cash ebitda pro forma non audited industry specific PROFIT
thegreatestben
05-07-2022, 03:03 PM
Rawz, is it not end of August?
Will get H2 and commentary in few weeks 👍
dabsman
06-07-2022, 11:20 AM
Doubled my holding at AUD0.71 I'm pretty comfortable buying at that level. My last purchase was just about NZD1.40
dubya
06-07-2022, 11:33 AM
Doubled my holding at AUD0.71 I'm pretty comfortable buying at that level. My last purchase was just about NZD1.40
Yeah. I did the same last week. My figures not quite as good as yours, but I think there's a lot of unreckognized potential and value there. I guess time will tell whether we are right or wrong?! :cool:
dabsman
06-07-2022, 12:04 PM
Time has told that I have been very wrong :scared: I do think I am right about the company... hopefully...
HMY has been punished as if the nz/aus economies are heading into a hard landing and unemployment rates are going to triple
If its a soft landing its well oversold
percy
08-07-2022, 11:49 AM
Positive HMY can attract such high calibre directors.
https://www.nzx.com/announcements/395099
Positive HMY can attract such high calibre directors.
https://www.nzx.com/announcements/395099
Yes look like very good appointments. Lending experience and technology experience.
Hope they start buying shares on market.
Happy i got a top up the other day at 71 AU cents
Yes look like very good appointments. Lending experience and technology experience.
Hope they start buying shares on market.
Happy i got a top up the other day at 71 AU cents
Ole David Flacks on the out. He had a solid bio, and although I know nothing about him other than what I read, I always had the feeling he fell on his sword for the whole comcom fine issue from a few years ago. I note he is on AFT Pharma as well.
It would be FANTASTIC if both Mgmt and the Board reached into their back pocket and bought some meaningful shareholdings on market once the results are released. And no, none of this $15k on market purchase stuff. You can't have a SP fall as much as it has and for the Board/SMT to go out there and put on a happy face without buying some shares.
Has the tide turned????? Looking at the aus side market depth there are only 3 sellers up to $1.10.
Could see a quick reversal back over a buck.
Just on that NZX release re: the new warehouse facility we never picked on the blurb about updating Neil Roberts (founder and Chief Product Officer & exec director) employment agreement, which triggers the redundancy compensation in his original employment agreement. I check the prospectus and that sum is equal to 12 month salary - which in 2019 was $450,000! So call it ~+500k hit the company will be taking in the form of increased salaries and wages. Very unusual - I wonder what prompted the need to update his employment agreement to the new standard agreement given it triggers a half a million dollar payment - I can think of a few, most of them are negative, with the only plausible positive is the company is tiddying up its financial affairs before any takeover/M&A activity. Ignoring the later scenario, its a bit short sighted on his part for demanding or accepting the payment - as such a large owner of the business, his wealth is more denominated by a multiple of earnings (ie a multiple of $500k), rather than a one off payment of $500k. I guess good to get it tucked away in FY22 so FY23 and FY24 are increasingly clean with p2p rolling off and the business scales up.
But I still don't like it. :t_down:
jimdog31
14-07-2022, 06:12 PM
Just on that NZX release re: the new warehouse facility we never picked on the blurb about updating Neil Roberts (founder and Chief Product Officer & exec director) employment agreement, which triggers the redundancy compensation in his original employment agreement. I check the prospectus and that sum is equal to 12 month salary - which in 2019 was $450,000! So call it ~+500k hit the company will be taking in the form of increased salaries and wages. Very unusual - I wonder what prompted the need to update his employment agreement to the new standard agreement given it triggers a half a million dollar payment - I can think of a few, most of them are negative, with the only plausible positive is the company is tiddying up its financial affairs before any takeover/M&A activity. Ignoring the later scenario, its a bit short sighted on his part for demanding or accepting the payment - as such a large owner of the business, his wealth is more denominated by a multiple of earnings (ie a multiple of $500k), rather than a one off payment of $500k. I guess good to get it tucked away in FY22 so FY23 and FY24 are increasingly clean with p2p rolling off and the business scales up.
But I still don't like it. :t_down:
Well we could get a trading update tomorrow, given the same on last year was 14th?
thegreatestben
19-07-2022, 09:38 AM
https://www.nzx.com/announcements/395544
winner69
19-07-2022, 09:45 AM
https://www.nzx.com/announcements/395544
What does it say Ben
Good news I hope
thegreatestben
19-07-2022, 09:55 AM
HMY delivers FY22 Cash NPAT Profitability
19/7/2022, 9:32 am MKTUPDTE
[Please note that this is a text version of a release and so may be missing formatting, tables, images and other graphical elements that are not necessarily indicated here. We strongly suggest reading the PDF version to preserve full comprehension.]
19 July 2022
ASX / NZX RELEASE
HARMONEY DELIVERS FY22 CASH NPAT PROFITABILITY AND EXCEEDS LOAN BOOK GUIDANCE
Harmoney Corp Limited (ASX/NZX: HMY; “Harmoney” or “the Company”) is pleased to provide an update on its performance for the year ended 30 June 2022 (“FY22”).
Key FY22 highlights:
• Achieved profitability in FY22 on proforma Cash NPAT demonstrating superior economics of Harmoney’s 100% consumer-direct business model
• Group proforma loan book reaches $685 million, up 37% on pcp
• Australian loan book grows to A$287 million, up 113% on pcp
• Key lead indicators of increased account acquisition, new loan originations and net lending margin set to drive Cash NPAT growth in FY23 as existing customers return for future needs with minimal customer acquisition cost
• High quality loan book with 90+ days arrears at 45 bps, down from 58bps pcp
• Australian loan book expected to surpass New Zealand loan book in H1FY23
• 94% of loan book now funded by warehouses (guidance of >90%); given this faster transition Harmoney to report only statutory financials from 1 July 2022 onwards
Commenting on a record year, David Stevens, Harmoney’s CEO & Managing Director said:
“Harmoney continues to deliver on its high margin, consumer-direct growth strategy, with its Australian loan book growing by 113%, whilst achieving an enviable Net Interest Margin of 12%, Net Lending Margin (after losses) of 8.4% and delivering proforma Cash NPAT profitability.
“Our platform is currently attracting over 12,000 new customer accounts per month, with over 8,000 per month providing bank statement information. These statements allow Harmoney to gain access to deep customer data about the Australian and New Zealand consumer. Importantly, this is all achieved without any above the line brand advertising through our 100% consumer-direct/B2C channel.
“In response to rising interest rates this year, in April we passed through a weighted average interest rate increase of more than 100bps on new lending, with no reduction in demand. In fact, in June, we delivered our second highest month of originations in what is typically a seasonally quiet month.
“Our credit performance has remained strong with losses and arrears at historic lows. The group loan book comprises a diverse group of borrowers with more than 40% being homeowners and 99% in regular employment or self-employed, and among those at least 74% employed in either professional, office or trades roles.
“With the second half of the year and the likelihood of increasing central bank rates putting upward pressure on funding costs, Harmoney’s hedging program, with around 73% of floating rate borrowings hedged, dampens this impact over the course of the year. Overall funding rates have reduced from the prior year with the near completion of the transition to warehouse funding and continued improvements to our funding facilities.
“As signalled, we are now seeing strong growth (152% on pcp) in our Australian existing customer originations, which typically accelerate from twelve months following the new customer origination. We expect Australia to follow the same trend as we have experienced in New Zealand, where we have been operating for several more years, and where existing customer originations are more than half of all originations. The Australian business is now building the same large annuity stream from existing customers, but in a nine times larger market. Importantly, these originations have a minimal (if any) customer acquisition cost due to our consumer-direct relationship and high customer approval ratings.”
[See table.]
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 funding sources are diversified, now being funded by three of the Big 4 banks and an ABS program.
Additionally, a strong credit performance was maintained due to Harmoney’s high-quality loan book, with Group 90+ day arrears at 30 June 2022 of 45bps, down from 58bps pcp.
This net lending margin, in conjunction with the economies of scale from automation, has delivered FY22 Cash NPAT profitability on a proforma basis.
Harmoney also operates with a positive statutory cash flow from operations. Harmoney also holds unrestricted cash at bank of $35m at 30 June 2022, up $3m from 31 December 2021.
LOAN BOOK GROWTH ACCELERATES FURTHER
At 30 June 2022, the group proforma loan book was $685 million, an increase of 37% on pcp. The Australian loan book grew by 113% to A$287 million, an A$152 million increase on pcp. The New Zealand loan book grew by 3%, impacted by the strict COVID-19 lockdowns in the first half of the financial year and subsequent new lending regulations applied to all consumer lenders in December 2021.
[See table.]
FY22 Results Announcement
Harmoney intends to present its full year FY22 results to the market on Wednesday 31 August 2022 at 10am AEST and 12pm NZST.
All numbers in this release are preliminary and are unaudited. This release was authorised by the Board of Harmoney Corp Limited.
percy
19-07-2022, 10:10 AM
https://www.nzx.com/announcements/395544
BINGO,full house.....lol.
Love the NIM.[net interest margin]
What does it say Ben
Good news I hope
It basically says they are getting on with it. Growing the book and the growth is quality with arrears still low. 40% of customers are home owners and 99% in regular employment or self employed.
Pro forma stuff soon to be a distant memory. If I had my time over this is the stage when i should of invested.
But who hasnt had a 50% drawdown on one of their investments to then watch it rebound and become a star.
Being cashflow positive is very important. Onwards and upwards.
Loan book $685m. Pretty close to my guess of $688,888,888.8888889 lol
Snow Leopard
19-07-2022, 10:15 AM
So this 'Proforma Cash NPAT' is the real deal?
Or we made a loss but.... thing?
Disc: Happy holder
So this 'Proforma Cash NPAT' is the real deal?
Or we made a loss but.... thing?
Disc: Happy holder
There will be a real loss. But market is always forward looking, SP up 7.2% initially
whatsup
19-07-2022, 10:25 AM
I thought that last years result was on a growth path but since then the S P has halved, I now think that it really is on a growth path and again I am topping up ( read averaging down ).
I thought that last years result was on a growth path but since then the S P has halved, I now think that it really is on a growth path and again I am topping up ( read averaging down ).
Yes it has been a strange one. Book has grown 37% Net lending margin grown 52%.
But SP decreased 63%
This year will likely see same growth metrics but the SP number will be a much much different story. Just my opinion
whatsup
19-07-2022, 10:51 AM
Yes it has been a strange one. Book has grown 37% Net lending margin grown 52%.
But SP decreased 63%
This year will likely see same growth metrics but the SP number will be a much much different story. Just my opinion
So which fish head has been a net seller since they listed at $3-70 18 months ago a 77ish% decrease !!?
jimdog31
19-07-2022, 11:24 AM
Enterprise value of $34m!!
dabsman
19-07-2022, 11:26 AM
Waiting for the Aussie open. I moved all mine to the ASX but depth is awful on both exchanges. Will only take someone with a lazy 100k to move this 20%!
thegreatestben
19-07-2022, 12:14 PM
25% on the ASX!
whatsup
19-07-2022, 12:20 PM
25% on the ASX!
31+%, about time !
The low is in. Only blue skies from here folks.
Its going to be a beautiful thing to watch over the next 3-4 years.
As the Aussie market is 9x bigger than NZ... i will not be thinking about selling a cent until the total loan book reaches at least $3bill.
whatsup
19-07-2022, 01:05 PM
The low is in. Only blue skies from here folks.
Its going to be a beautiful thing to watch over the next 3-4 years.
As the Aussie market is 9x bigger than NZ... i will not be thinking about selling a cent until the total loan book reaches at least $3bill.
I think that what we are al here for !!
Loan book $685m. Pretty close to my guess of $688,888,888.8888889 lol
99.435% accuracy is unacceptable rawz - over counting by 0.565%
model update time - what are your picks for FY23 originations
NZ: new and existing customer
AU (AUD): new and existing customer
99.435% accuracy is unacceptable rawz - over counting by 0.565%
model update time - what are your picks for FY23 originations
NZ: new and existing customer
AU (AUD): new and existing customer
Rawz household about to welcome another baby Rawz sometime this week so the number crunching wont get done anytime soon.
Might setup a kids shareies account and put $500 in it for him. Of course all into HMY shares :t_up:
Rawz household about to welcome another baby Rawz sometime this week so the number crunching wont get done anytime soon.
Might setup a kids shareies account and put $500 in it for him. Of course all into HMY shares :t_up:
:t_up:
congrays & best of luck those first few weeks rawz! since you wont be getting any sleep for the next month you'll have plenty of time to number crunch. just in between those feeding, change nappy, feed other side, sleep, repeat, 8x a day, everday, for hundreds of days
living the dream
ralph
19-07-2022, 07:23 PM
Rawz household about to welcome another baby Rawz sometime this week so the number crunching wont get done anytime soon.
Might setup a kids shareies account and put $500 in it for him. Of course all into HMY shares :t_up:
Congrats Rawz to you, & Harmoney shareholder's nice a double whammy I should have listened to you & got some more damn . Still time eh
Any sign of a Dividend among all the usual reported feel good HMY mumbo jumbo ? ;)
Any guesses on when IPO price will be reached ?
$3.70 odd wasn't it - back in mid Nov 2020 ? ;)
Any sign of a Dividend among all the usual reported feel good HMY mumbo jumbo ? ;)
Any guesses on when IPO price will be reached ?
$3.70 odd wasn't it - back in mid Nov 2020 ? ;)
Investing in HMY is all about the fine art of sniffing out debits and credits hidden under the carpet, it can pay dividends...
HMY about to break through the 50day ema
whats going on?
dabsman
20-07-2022, 01:47 PM
Investing in HMY is all about the fine art of sniffing out debits and credits hidden under the carpet, it can pay dividends...
I think divvy will be years away...
I think divvy will be years away...
I agree, likely after the expansion into Canada
silverblizzard888
20-07-2022, 06:46 PM
This stock will be the market darling next year!
Dividends will likely be 2024
silverblizzard888
20-07-2022, 08:05 PM
Going over the last announcement it seems the golden geese is already beginning to lay its eggs, quite the statement without saying too much:
"Harmoney also operates with a positive statutory cash flow from operations. Harmoney also holds unrestricted cash at bank of $35m at 30 June 2022, up $3m from 31 December 2021."
If they can keep growing as they are now, that profit next year will be a juicy one! Especially given the $102 million Market value currently.
This stock will be the market darling next year!
Dividends will likely be 2024
and some of the poor investors who bought the IPO bunkum will still be deep under water :)
Darlings may be in short supply next year .. particularly on the local turf
Investing in HMY is all about the fine art of sniffing out debits and credits hidden under the carpet, it can pay dividends...
more interesting carpet is elsewhere :)
Try this sort of thing for size (seen elsewhere) :
I will potentially get my whole initial investment back in dividends in FY22 which has never happened ...
and likely 30%+ Div Yield going forward into future..
clearasmud
22-07-2022, 04:42 PM
Going over the last announcement it seems the golden geese is already beginning to lay its eggs, quite the statement without saying too much:
"Harmoney also operates with a positive statutory cash flow from operations. Harmoney also holds unrestricted cash at bank of $35m at 30 June 2022, up $3m from 31 December 2021."
If they can keep growing as they are now, that profit next year will be a juicy one! Especially given the $102 million Market value currently.
Thanks for that Silverblizzard. Us underwater shareholders need this.
Good to see you posting again!
silverblizzard888
23-07-2022, 07:16 AM
Thanks for that Silverblizzard. Us underwater shareholders need this.
Good to see you posting again!
Thanks! Yeah I had a bit of a break from the markets because it was clear rising interest rates would reduce the amount of capital in the market as well as reduce consumer spending so there wasn't much opportunity in the market. (Basically what Buffett would call the lowering of the tides and revealing every company to be naked at the high valuations they were at, too much growth and optimism built into the values.) Still not a big fan of the current market because interest rates continue to rise along with inflation, but I do like Harmoney at the current value and where they are heading.
The NZ market has allowed Harmoney to basically cover their cost and use as a testing ground to build a good foundation, next Australian market will be where the profits come from. At this stage most of the extra buisness just translates to the bottom line hence why I think the profits next year will be a good one.
FY22 calculations
Just some rough calculations, their interest income averages around 7% ($42 million interest income/ $585 million loans in the 1H FY22 Pro forma), their cost are about 2/3 of the interest income since they have covered their fixed cost, so mainly just variable cost. From a added $100 million added loans in 2H, thats about $2.3 million before tax or about $1.65 million after tax. Add in $1.1 from the 1h FY22 pro forma income and its around $2.65 million profit for FY22 pro forma.
FY23 calculations
Now for FY23 if we build on FY22, if we assume Harmoney grows their book by $250 million added loans ( mostly coming from Australia), then take that average 7% interest income which will be $17.5 million, minus expenses which I place around 50%, the extra loans leaves us with $8.75 million before tax. After tax thats $6.3 million from the extra $250 million in loans. Add in the FY22 profit base of $2.65 million. Thats $8.95 million profit for FY23 based off a simple and rough calculation, it could be lower if they see higher rate of defaults and expenses increasing beyond expected. Could be higher if they run themselves well and control loans going into arrears and cost are lower than expected.
Overall the company is building up quite nicely into the future and likely to continue to accelerate their growth in Australia as they build a stable base.
winner69
25-07-2022, 05:29 PM
HMY share price seems to go down almost as fast as it goes up.
Dlownz
25-07-2022, 06:34 PM
The liquidity of this stock means it doesn't take much to move it up and down. Traded on very small volumes. Who knows how many updates it will take before a big player starts eating up the shares. Untill then I guess it's about sitting back and waiting.
silverblizzard888
26-07-2022, 09:56 AM
The liquidity of this stock means it doesn't take much to move it up and down. Traded on very small volumes. Who knows how many updates it will take before a big player starts eating up the shares. Untill then I guess it's about sitting back and waiting.
Exactly! Particularly when theres not much news going around, smaller companies tend to get sold down out of investor boredom and few people accumulating. I remember talking to brokers who didn't know Pushpay too well when it was a $500m company, so don't be surprised that no big fish is buying at this level. At the current value its for the small players, until Harmoney starts paying dividends to prove its a stable company with good cashflows most of the market probably won't take notice because theres no short term reward for holding it.
winner69
01-08-2022, 04:00 PM
HMY share price back to where it was before that outstanding announcement
What's up guys
dabsman
01-08-2022, 04:12 PM
HMY share price back to where it was before that outstanding announcement
What's up guys
My blood pressure
silverblizzard888
01-08-2022, 05:40 PM
HMY share price back to where it was before that outstanding announcement
What's up guys
Just a very illiquid stock being pushed around by small volume, it will continue until next announcement.
freddagg
01-08-2022, 06:28 PM
HMY share price back to where it was before that outstanding announcement
What's up guys
Nothing to worry about, Jeff says they are worth $2 - Jeffs always right, isn't he.:eek2:
Snoopy
01-08-2022, 07:22 PM
Nothing to worry about, Jeff says they are worth $2 - Jeffs always right, isn't he.:eek2:
Of course Jeff is always right. I trust him to manage my Harmoney holding through his Heartland fund that I am invested in. He got we Heartlanders through the Covid-19 hit after all. He will get us through an disHarmoney in the market today too. Then he can announce his surprise resignation from business for his tilt at politics.
Jeff wouldn't do a Luxon though. That National party has too much baggage. Instead I expect him to start the 'Jeff' party. After all Fred, if it is good enough for you to tout at the political game under your own name, then Jeff will be a shoe in.
He might be just the man we need to sort out the country too. 'Vote Jeff'!
SNOOPY
Has Trev issued his take on this yet .. or are the sheep still all out in the back paddock ? ;)
winner69
02-08-2022, 09:42 AM
Don’t know if this means much re HMY but interesting from BusinessDesk
The number of credit accounts in arrears was up 14% in July compared to July last year but down slightly from May with vehicle arrears beginning to creep up, the latest data from credit reporting company Centrix showed.
Products like mortgages and vehicle loans – secured lending products – are usually the last credit payments people let slip, which indicates we could be starting to see signs of financial stress,” said Centrix managing director Keith McLaughlin.
And
Overall, demand for new credit products was down 6% in July with mortgage applications down 29% on July last year while new mortgage lending was down 18%.
winner69
02-08-2022, 09:56 AM
Hey Snoops
You'll know - how much did Jeff pay for his 10% shareholding in HMY
Probably peanuts .... lot less than the $9m its worth (on market) at the moment?
Thanks
Don’t know if this means much re HMY but interesting from BusinessDesk
The number of credit accounts in arrears was up 14% in July compared to July last year but down slightly from May with vehicle arrears beginning to creep up, the latest data from credit reporting company Centrix showed.
Products like mortgages and vehicle loans – secured lending products – are usually the last credit payments people let slip, which indicates we could be starting to see signs of financial stress,” said Centrix managing director Keith McLaughlin.
And
Overall, demand for new credit products was down 6% in July with mortgage applications down 29% on July last year while new mortgage lending was down 18%.
14% up seems reasonable, W69. Only because it is off a record low base.
Certainly one to watch if arrears increase 100%, 200%, 300% etc
From what I see in the market the portfolios, which are asset finance, the 30-60 days and 60-90 days are increasing but the 90days arrears still record low
winner69
02-08-2022, 12:30 PM
Snoops
I think Jeff paid about $6.2m for his Heartland shares
Average cost about 61 cents -- original ones back in 2014/2015 at about 41 cents (adjusted) and then last years lot at $1.61
Jeez - did our Jeff really pay $1.61 for something worth 90 cents now
Tony Two Gloves
17-08-2022, 11:01 AM
Hi Everyone - long time watcher of HMY and feel the time is right to start building a position. Just wondering whether doing on the NZX or ASX is best - any opinions?
dabsman
17-08-2022, 11:12 AM
Hi Everyone - long time watcher of HMY and feel the time is right to start building a position. Just wondering whether doing on the NZX or ASX is best - any opinions?
I've done both and both exchanges have no depth. I just bought on whatever exchange was cheaper at the time
I was thinking about how the great tech companies of the world like google and meta are sending warning shots out to their over paid data scientists saying the free ride is over and you now need to earn your keep.
Wonder if the Harmoney wiz kids crunching the data have been given the same message? Or maybe HMY management have aspirations to continue with growth rather than give into market pressure for profits.
As most know a half a billion dollar book can be profitable if you want it to be
winner69
23-08-2022, 05:27 PM
I see Heartland faced up to reality and valued HMY at A$0.71 as at June 30th
$14m or so hit .....but profit in the future eh
clearasmud
23-08-2022, 11:56 PM
I see Heartland faced up to reality and valued HMY at A$0.71 as at June 30th
$14m or so hit .....but profit in the future eh
Yes, I'm holding them as well as Heartland.
whatsup
24-08-2022, 09:17 AM
Yes, I'm holding them as well as Heartland.
So how did they get a $3.00+ price tag from days of yaw ?
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