AFR article confirms that MoneyMe is looking for $30m, approximately the current market cap - ouch. Seemingly necessary however as $25m of debt needs to be refinanced pronto.

Link (paywall): https://www.afr.com/street-talk/morgans-knocks-together-30m-moneyme-syndicate-20230327-p5cvpd

MME is now suspended from quotation pending an announcement about a capital raising and changes to its debt facilities. Ominous, because they have plenty of headroom. I wonder whether market cap is a condition of one or more of the facilities. None of this will be good news.

edit: I have gone back and done some more digging (I am terribly behind in my research / updates!) and there is a particular debt facility that requires refinancing or a large repayment this year. The auditors refer to it as creating a going concern issue. Joy.

Trading halt announced today. I can’t find any scuttlebutt, however as annualised Price to NPAT is now something like 2x, I suspect someone is trying to snap them up.

Otherwise, what has been a horror investment may just continue in that vein and announce massive loan book wrote-offs!

4Q22 update (posted on Strawman 25/07/22)

MME has posted its 4Q trading update today and the SP has popped about 18% at the time of writing.

Highlights:

• Revenue of $93m for the half (150% of my estimate), of which only $15m came from the SocOne acquisition.  

• Guidance of $200m revenue for FY23 which is about 10% below my estimates and indicates slowing growth which has been foreshadowed (and is happening - originations were flat for the first time).  This should result in statutory profitability (already cash profitable - this is the AASB9 issue dealt with in previous valuations).

• Net losses are steady at 3%.

• AutoPay continues to grow as a share of originations (49% vs. 46% 3Q, 7% pcp).  Secured asset finance is now 38% of receivables (vs. 30% 3Q, 2% pcp).

• Individual loans are bigger, for longer terms and to better credits -  Equifax (credit) score has increased again (704 vs 695 3Q, 650 pcp).  Average loan term is now 50 months (vs. 37 months pcp) and average origination is $18,475 (vs. $9,125 pcp).

• Synergies of $7m achieved with SocOne acquisition, ahead of schedule.

• $384m of undrawn facilities remaining which allows for further growth.

Funding rate was not dealt with and I will be keen to see this in the full year results. I will wait for those results to do a full valuation.

edit: clarifying period for $93m revenue as half not quarter

After a bit of Googling and further thought, I think the recent announcement means that MME has secured funding 3.1% above some floating rate, maybe the 90-day swap rate or similar. Without knowing the base rate, it’s impossible to know the overall funding rate for sure and we will need to wait for Q4 results to grind out. However, I have a sneaking suspicion that they would have announced the funding rate if it was lower than the Q3 rate (4.5%). If that’s right, it would be a disappointing showing from management. There can’t be a person on earth who isn’t aware of rising rates and management should just be up front about it.

MoneyMe has announced a new funding and securitisation deal. It has extended funding to $1.65b and will securitise $200m of its loans via 3x big banks. This leaves $388m undrawn which allows growth without the $20m cap raise reported by the AFR - and in response the SP has popped by 22%.

The announcement says this reduces the “securitisation cost of funds drawn margin to c. 3.1%”. I must admit I don’t quite know what that means - is it the net cost of the $200m facility after securitisation income? If this funding rate applied to $200m only this would increase my valuation. Unless one of the brains trust can school me on the concept, I’ll wait to see the full year results before updating properly.

MME has responded to the AFR article denying it and stating there are no equity raising plans. It stops short of saying there won’t be a raising, but that seems like prudent option preservation. This gives me some comfort and is more in line with the sensible capital allocation demonstrated by raising debt not equity earlier this year. Still, something to keep an eye on.

AFR reporting today that MME is considering a $20m cap raise. This would be disastrously dilutive. Current SP is about 70c and market cap is about $165m. Purpose is apparently to grow the loan book - the opportunity would have to be VERY compelling to justify this move. Somewhat comforted by management’s large holding (although diluted by SocOne merger) but frankly concerned that this indicates trouble on the horizon. I’m not selling yet but will be looking carefully at the company’s response.

MoneyMe in the AFR discussing its new marketing push. CEO says that he expects the spend ($10m) to generate $1b in value within 12 months. Presumably he means it will increase their contracted revenue by that sum, which would be significant

https://www.afr.com/companies/media-and-marketing/moneyme-splashes-millions-to-cement-itself-as-challenger-brand-20220311-p5a3x0