Rent.com.au Limited: Moving into a Transactions-Based Business

Business model
Rent.com.au generates revenue from both advertising and from rental products, with revenue for the latter derived from RentCheck, which verifies a renter’s identity and checks their record against the National Tenancy Database, from RentConnect which delivers an integrated utility connection and $100 gift card to renters in conjunction with AGL, and from RentBond, RNT’s “move now pay later” product which helps renters bridge the gap from one rental property to another by financing their bond online. The company’s soon-to-be launched RentPay app platform will allow renters total financial flexibility in terms of how they make their rent payments while giving agents and landlords surety of payments on time. It also aligns Rent.com.au to the tenancy period, giving it an opportunity to engage with its audience for longer and extend the relationship into other revenue lines.

Positive operating cashflow in Q1, core business profitable
Rent.com.au delivered its best-ever quarter in Q1 FY21, reporting a 22% improvement in quarterly revenue to $0.75m, driven by a 41% increase in renter products and 12% increase in traffic. The company is operating close to break even on an operating cashflow basis. Q1 FY21 operating cashflow was $0.53m, which included $0.68m in government stimulus and grants, including JobKeeper and R&D tax incentives. RNT also reported that its core business, excluding the investment in RentPay, delivered its maiden operating profit (EBITDA) in Q1 FY21. Rent.com.au noted that the Q1 result was delivered despite the short-term cyclical downturn in advertising revenue in Q1, which subsequently improved in October, and a weaker than usual take-up of RentBond due to alternate sources of funding such as access to superannuation and a greater caution among renters to take on debt.

Look to purpose-led companies, online classifieds for peers
There is growing evidence that purpose-led companies perform better operationally than those which are not. To that end, we consider peers to be other early stage companies with a purpose-led focus. These include finance platforms Douugh (ASX:DOU) and Wisr (ASX:WZR). We also look to single focus online classifieds sites such as iCar Asia (ASX:ICQ) and the much larger and more mature Carsales (ASX:CAR) for the metrics that we can expect from Rent.com.au as its business grows. With an element of BNPL in its RentBond product, we would look to a smaller BNPL peer Ioupay (ASX:IOU) for peer discussion.