Company Overview: Wisr Limited (ASX: WZR) is engaged in the consumer lending business and underwrites personal loans and secured vehicle loans for 3, 5, and 7-year maturities. The company provides a Financial Wellness Platform comprising of consumer finance products. Further, the Wisr App helps the consumer to pay down debt, provides credit score comparison, to name a few services along with rich content. The Group is focused on enhancing the digital lending experience of its consumers.

WZR Details

Robust Growth in Revenues on the Back of Increase in Loan Originations: The company has been delivering decent results over the past few years, and its differentiated business model and unique Financial Wellness Platform have enabled the company to deliver 20 consecutive quarters of growth. It reported its first operating cash flow break-even in the month of June 2021.

Look at FY21 Performance:

The company reported robust top-line numbers during the year alongside margin benefit owing to its Warehouse funding model.

• The operating revenue stood at $27.2 million during the year, reflecting an increase of ~280% on FY20.
• The growth in revenue was on the back of a rise in loan originations by ~169% to $365.8 million in FY21, backed by the superior loan unit economics of the Wisr Warehouse funding model.
• The Group has witnessed operational leverage with ~280% growth in revenue in FY21, compared to ~43% increase in operating expenses.
• It has witnessed decent demand for its ~$55 million equity raise in June 2021, which was led by Goldman Sachs as Sole Lead Manager and Underwriter.
• WZR reported a total loan book of $432 million as of 30 June 2021, comprising of $379 million Wisr Warehouse and Wisr Freedom Trusts, $48M off-balance sheet, and $5 million other.
• The company seems to be well capitalised, ending the year with $92.4 million of cash reserves as of 30 June 2021, compared to $37.97 million as of 30 June 2020.

Revenue Trend (Source: Analysis by Kalkine Group)

Q1FY22 Key Updates:

As per an announcement on 22 October 2021, the company has reported its 21^st consecutive quarter of loan growth, with originations of ~$132 million of new loans during the period. This reflects an increase of ~113% on Q1FY21.

• The Wisr Warehouse Loan Book balance stood at $451 million, depicting a growth of 239% on the pcp.
• Total loan originations reflected at $743 million as of 30 September 2021.

Top 10 Shareholders: The top 10 shareholders together form around 39.31% of the total shareholding, while the top 4 constitute the maximum holding. Adcock Private Equity Pty. Ltd. and Alceon Liquid Strategies Pty. Ltd. are holding a maximum stake in the company at 12.19% and 10.49%, respectively, as also highlighted in the chart below:

Top 10 Shareholders (Source: Analysis by Kalkine Group)

Key Metrics:  The Group reported significant improvement in the cash cycle to 15 days in FY21, compared to 162.8 days in FY20. It has delivered negative margin performance during the past few years; however, the performance trend seems to be improving. The debt profile stood at ~$394 million as of 30 June 2021.

Liquidity Profile & Profitability Metrics (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to the following risk factors:

• Credit Risk: The Group’s line of business makes it prone to credit & receivables risk, and as such it has to keep a close watch on the credit quality of its consumers.
• Funding Risk: The company’s profitability is also dependent on its access to funds at favourable rates.
• Profitability Risk: Though WZR has been reporting decent revenue numbers, it faces profitability risk and has to look for a turnaround soon in order to be sustainable.

Outlook: The company will focus on building a loan book over ~$1 billion in the long term, owing to its strong balance sheet and market presence. The Group sees immense growth moving ahead, in the markets of auto finance and personal loans as an easing of lockdown restrictions is expected and consumer sentiments to grow. Further, with the new $225 million Wisr Secured Vehicle Warehouse coming into effect in Q2FY22, WZR seems to be well positioned for growth aided by favourable tailwinds from the economy.

Valuation Methodology: P/BV Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: As per ASX, the stock of WZR is trading below its 52-weeks’ average levels of $0.175-$0.340. The stock of WZR gave a positive return of ~16.66% in the past nine months and a negative return of ~26.86% in the past six months. The stock has been valued using a P/BV multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight premium to its peers’ average multiple, considering the impressive rise in loan originations, and favourable funding terms from warehouse facilities. For the purpose of valuation, few peers like MoneyMe Ltd (ASX: MME), Plenti Group Ltd (ASX: PLT), Credit Corp Group Ltd (ASX: CCP) have been considered. Considering the expected upside in valuation & current trading levels, robust growth in revenues & loan origination, new funding warehouse facilities, optimistic outlook and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.24, (as on 23 November 2021, 11:38 AM (GMT+10), Sydney, Eastern Australia).

WZR Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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