IOUpay Limited

IOU Details

Agreement with iPay88: IOUpay Limited (ASX: IOU) provides fintech and digital commerce software solutions & services. The market capitalisation of the company as on 04 March 2021, stood at ~$317.01 million. As per a recent update, the company has partnered with iPay88, to provide the company’s merchants and end-user customers to utilise IOUpay’s BNPL payment services. iPay88 has entered into the given Merchant Referral Agreement with IOU for a one-year renewable term. The companies are planning to commence integrating the systems with BNPL payment processing capabilities in March 2021, and onboarding of merchants and approved customers are expected to start from April 2021.

H1FY21 Financial Update: The company reported revenues from continuing operations of $2.83 million during the period, compared to a revenue of $3.40 million in the previous corresponding period. The total comprehensive loss widened to $1.38 million in H1FY21, compared to a loss of $1.27 million in H1FY20. There was a significant improvement in the cash position of the company to $8.54 million as on 31 December 2020, from $578,063 on 30 June 2020, on the back of fundraising activities during the period.

H1FY21 Financial Performance (Source: Company Reports)

Key Risks: The company is exposed to risks in regards with the use of its financial instruments. It also operates in a sector, where it has to keep itself updated with the latest technological developments for business continuity and contract wins. The company is also exposed to the risk associated with the COVID-19 pandemic.  

Outlook: During H1FY21, IOU went through a rebranding exercise, changing the name of the company and ASX code from Isentric Limited (ASX: ICU) to IOUpay Limited (ASX: IOU). This development repositions the company as an established market leader in the fintech business divisions of Mobile Banking and Digital Payments.

Stock Recommendation: The company has recently completed a placement round of $50 million, which saw decent demand from both new and existing institutional investors. On 9 February 2021, IOU has entered into an agreement with EasyStore to provide IOU’s BNPL payment services to the company. As per ASX, the stock of IOU is trading above its average 52-weeks’ levels of $0.004-$0.850. The stock of IOU gave a positive return of ~733.33% in the past six months and a positive return of ~194.11% in the past three months. On a technical analysis front, the stock of IOU has a support level of ~$0.45 and a resistance level of ~$0.64. Considering the successful repositioning of the company, recent agreements with strategic partners, recent fund-raising activities and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.500, down by 3.847% as on March 04, 2021.

IOU Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

MoneyMe Limited

MME Details

H1FY21 Results Update: MoneyMe Limited (ASX: MME) is engaged in the provision of retail consumer finance. The market capitalisation of the company as on 04 March 2021, stood at ~$272.58 million. The company has announced its H1FY21 results recently and has reported decent financial performance with a ~12% revenue growth to $23.9 million from $21.3 million in the previous corresponding period. Originations grew by ~21% to ~$114 million during the period. The receivables growth exceeded expectations with customer receivables of ~168 million, which is an increase of ~32% on the pcp. The company reported that 47% of the customer originations were driven by returning customers, which further improved the loan unit economics. MME was able to reduce its funding cost to 8.7% from 11.4% on 30 June 2020, with the establishment of a new Major Bank Warehouse Facility. There was an improvement in the core operating cost margin to 11.8% in H1FY21, compared to 13.2% in H1FY20. MME reported a statutory NPAT of $1.3 million during the period under consideration.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The company expects further revenue growth in H2FY21, reflecting impressive originations growth from Q2FY21 and anticipates increased receivables growth in the second half of the year. The contracted revenue for H2FY21 has increased to over $20 million, which is in line with the originations. The company has a diversified suite of products that further enhances its addressable market in the future. It has the benefits of access to low cost of capital and will look to deliver high operating leverage through further automation.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, 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: The company reported decent improvement in provisions at 7.9% from a level of 9.6% in FY20, reflecting an improvement in the loan book performance. As per ASX, the stock of MME is trading above its average 52-weeks’ levels of $0.500-$2.000.  The stock of MME gave a positive return of 7.746% in the past three months and a positive return of 20.948% in the past nine months. On a technical analysis front, the stock of MME has a support level of ~$1.462 and a resistance level of ~$1.6. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a correction of low single-digit (in % terms). For the purpose, we have taken peers such as Eclipx Group Limited (ASX: ECX), Credit Corp Group Limited (ASX: CCP), Money3 Corp Limited (ASX: MNY), to name a few. Considering the current high trading level and indicative valuation, increase in assets to equity ratio in H1FY21 and volatile price movements in the past few months, we are of the view that most of the positive factors have been discounted at current juncture. Hence, we suggest investors to wait for better entry-level and give an ‘Expensive’ rating on the stock at the current market price of $1.530, down by 3.165% as on March 04, 2021.

MME Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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