Adcock Private Equity, the largest shareholder, has been selling down their holdings over the last 6 months. Since 6th Feb they have sold down approx 49.3M shares. They did participate in the cap raise and bought 3.5M shares but have sold a significant stake of their holding. They still have around 215M shares or about 19% of total shares on issue.

The CEO of Adcock is John Nantes, also the Executive Chairman of Wisr.

The red flags that have convinced me to Sell Wisr.

Directors performance rights:

All of the performance rights for the directors are linked to share price targets. This is too easily manipluated for such an early stage company with positive announcments, broker recommendations and fund mananger recommendations.

When the directors' 5M rights @ 18c lapsed in Novemeber the board decided at the AGM to set the base for the next set of rights at 14c. By the time this was announced the conditions had already been met and they recevied around 5M rights straight anyway. All the current targets are still linked to share price targets, no targets for actual business performance.

At its height the SP was around 34c, during the pull back in March it went as low as 7c, it since bounced back to around 15c. Not 1 director has made an on-market purchase.

Loan Growth is slowing

Q2FY20 had QoQ growth of 36%, Q3FY20 had QoQ growth of 23% and the company has indicated this will be much lower in Q4 as they raise stress test criteria for new loans in response to the econmic pull back caused by Covid19. They have about $35 cash on hand after the recent capital raising but that may be burnt through pretty quickly for a company that isnt yet cashflow positive. 

One of the highlights of the annoucment of the Loan Funding facility with NAB in Novemeber 2019 was the tripling of the margins they receive on the loans. They have used the initial 50M warehouse and instread of continuing with thext 150M they are now returnng to the off balance sheet funding model for which they receive only a loan maintence fee. This may have been NAB reducing their exposure to unsecured consumer lending or Wisr spreading the risk to additional funding channels either way this will a significant impact on predicted revenues going forward.

Wisr's loan book is the primary source for its revenues and for it to slow down so quickly it the biggest red flag.

Loan arrears are growing inline with its Loan book

90 days+ loan arrears are still about 1.66% this has stayed pretty constant. This indicates that bad debts are growing as fast as the loan book. As the economy goes into recession and unemployment rises this number is more likely to grow then reduce. Not a good combination with falling revenues.  

Wisr may survive this recession and turn it around to be come profitable but for me there are better opportunites to invest at the moment. Will keep watching it. 

Wisr Announces they have surpassed $200M total loan origiantions

The 4th 50M tranche too approx 4 months compared to 6 months for the perious.

Loan originations were $38.9M for Q3FY20 a 23% increase on Q2.

They have used 50M of the loan funding warehouse from NAB and are returning to the hybrid model of off balance sheet funding which they take a small managment fee of.

Loan orginations are expected to slow in Q4 as their risk appetite reduces.

Full announcment here:

https://www.asx.com.au/asxpdf/20200415/pdf/44gyv96qbb0bp9.pdf

17/03/20

Wisr provided a business update today

https://www.asx.com.au/asxpdf/20200317/pdf/44g41w56c638cs.pdf

Highlights include:

• $31.6M new loans written in the first 10 weeksof Q3FY20 - equal to Q2FY20
• On track for 15-25% growth QoQ - should see $200M total originations by end of Q3.
• $10.2M cash at 31 Dec 19 plus capital raise of $36.5M in Jan sees enough cash on hand for multiple years of Opex.
• Loan facility drawn out to $80M, with an additional $120M available.
• Arrears on Loan book funding are at 0.24% on 30+
• Company has conducted remote working with no disruptions to normal business operations.

Thoughts:

Company shareprice has taken a signficiant fall from ATH of 34c to 6.6 at time of announcment. Mainly due to the previous valuation being stretched, current ecconimic downturn and concerns about the business abiltiy to ride out a recession.

This announcement should aleviate that somewhat. The capital raise came at the perfect time be it by design or by luck. I suspect a lot of Wisr's competitors wont be so well funded and will really struggle over the next few months. This will provide an optunity for WIsr to increase market share.

I suspect loan growth with significatly pull back over the next few months as Australia deals with the Coronavirus and most lilkey goes into a recession.   

No mention of the secured vehicle loans due to commence in Q3, I suspect because no one in Australia is buying cars at the moment.

Its reassuring to see the loans in arrears are still quite low, I suspect these will increase signifcantly over the next few months, something to keep an eye on.

Hard to see them reaching the predicted $240-$260M loan originations by FY20, but there is no point providing guidence at the moment. 

Neo Lender specialising in unsecured consumer and secured vehicle financing.

Hybrid financing model via wholesale lending and a financing warehouse via NAB Australia. Moving away from peer to peer.

Low customer aquistion costs via traditional broker channels, Wisr's ecosystem of 3rd party partners, Wisrcredit, Wisr@work and WisrApp and traditional and online media marketing. 

Huge user growth and loan orgination growth as per latest market update.

Reducing costs / scaling efficenies.

Loan defaults are below targets of 2%. . 

31/01/20 Q2 FY20

Highlights

-$31.6M new loan originations for the QTR (36% QoQ)

-$54.9M loans for H1FY20 (35% HoH)

-Suprassed $163.8M total orginations.

-New funding when live halfway through the QTR (22.5M of total 50M already used)

-$33.5M institional CR in Jan with a $1.5M SPP.

Thoughts:

Its tricky to determine how much cash is being used each quarter as loans generated in the previous quarter sometimes get onsold after the month ends as we have seen in previous quarters. This should become clearer as they take on more loans through the NAB funding facility.

Going of reduction of Cash in the Bank they used $1.7M this quarter compared to $2M the previous. Happy to see this and it should improve as margins increase from new funding. 

Increase in loans is a great result, probably slighty above what i was expecting. 

Credit Raise came earlier then I was expecting.  Probably an ideal time with recent run up in share price and coverage from stock picking services and newsletters.

Half of the inital 50M funding facility form NAB has already been used, the other half will easily be used in Q3. Best case scenerio is they get the extension of $200M or use part of the credit raise to fund the lending themselves.

Alternative and more likey is they use Funding facitly, onsell the loans and take managment fees and partially fund loans from cash generated from the credit raise. Management have previously indicated this would be the case when they first announced the NAB deal.  

4c here:

https://www.asx.com.au/asxpdf/20200131/pdf/44dp63blwcwjgr.pdf

Company commentary here:

https://www.asx.com.au/asxpdf/20200131/pdf/44dp6jrl7wpx4x.pdf

31/07/19 Q4 FY19

Financial Highlights

1. Total loan originations $108.8M 
2. Loans for Q4 $21.9M (up 17% from Q3) 
3. Total loans for FY19 $68.9M (up 281% from FY18)
4. Total FY19 rev $2.9M (82% increase from FY18)
5.  Q4 cash burn was circa $2.8M (Report shows $4.2 though $1.5 was loans not yet onsold) 
6. $12M cash on hand.

Highlights from Managment Commentary

1. Looking at long term sustainable loan book growth instead of taking on higher risk profile clients for short term loan orignations and increased default risk.    
2. Managment looking at funding partners to increase loan book capital and to improve margins.   
3. Signed 3 year agreement with Smartgroup to provide B2B and financial ecosystem to 4000 employer clients (1M potential employees)
4. Partnership with HCF is progressing, more details to come once finalized.
5. Wisr App has 25,000 downloads.
6. Wisr credit has 35,000 active users.

All in all a pretty positive result. Interested to see some figures around the products outside of the loan book and partnerships in the coming updates.

Wisr reached $150M total loan orginations mid way through Q2FY20.

Wisr has announced a significant increase in daily loan settlements to around $500k per day in the current quater. At this rate they should see ~$35M worth of new loans for the quater.

This combined with the increased margins provided by the new NAB funding facility should provide some encouraging numbers in the half yearly report.

I will look at revising vaulation when the half yearly is realeased.  

Full Annoumnent here:

https://www.asx.com.au/asxpdf/20191122/pdf/44bv94l5frp4j5.pdf

Were seeking $10million @ 6.8c/ps. Acheived $15million @ 6.8c. This was an 8% premium to last share price.

220 million additional shares issued for a total of around 750 million. 

Great outcome, should see them not have to raise again for about 12 months.

New Wisr app released 18/03/19.

App connects to your existing bank account and rounds up purchases to the nearest dollar to pay off any debt of your choice, not only Wisr loans.

Costs $1.25 per month for every month you use it to round up and pay off debts, if you suspend the round ups you dont get charged for the month. 

4000 downloads during trial period, no 7 in finance apps on App store.

iOS only at the monment, Android in development.

 Full announcment here:

https://www.asx.com.au/asxpdf/20190318/pdf/443l387wyxm0sk.pdf

Wisr announces new debt facitily partnership with NAB.

$50M option initally with potential to extend to $200M.

This funding option will increase Wisr' margin roughly 3 fold on new loans. Increacing margins was has been one of the main goals idenified by the company for FY20. This along with continued loan growth should bring the company close to profitabilty in the not to distant future.

Full announcment below.

https://www.asx.com.au/asxpdf/20191028/pdf/449y2sc1k1k3yr.pdf