Rent.com.au Ltd: A Line in the Sand Result
Rent.com.au Ltd
A line in the sand result
Rent.com.au Limited (ASX:RNT) is a purpose-led company seeking to empower home renters through their rental profile, rental bond and payments and through a growing number of aligned transactional services. The company delivered a 24% lift in revenue in H1 FY21 to $1.49m, and better than forecast Gross Profit of $0.95m, an increase of 31% on the previous corresponding period and ahead of our forecast for $0.88m. The underlying EBITDA loss was $0.28m, in line with our expectations, and an improvement on the $0.67m loss reported a year ago. We have made very minor adjustments to our FY21 forecasts to incorporate the result. As we flagged in our recent initiation report, Rent.com.au is about to enter a transformative period with the launch of RentPay, which will give the company an opportunity to extend its relationship with renters into the rental tenancy period and beyond with transactional products such as telecoms, loans and finance products. Our base case valuation of $0.35/share is unchanged.
Business model
Rent.com.au generates revenue from 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 including insurance, telecommunications, loan and finance products.
H1 FY21 as expected, focus is on RentPay
Rent.com.au delivered an interim result largely in line with our expectations. Revenues for the half year were in line with our expectations, although Renters’ products revenue was 10% ahead of our forecasts at $0.88m, and 43% ahead of H1 FY20. The operating (EBITDA) loss for the period was $0.28m, compared with a loss of $0.67m a year before and our forecast for a loss of $0.27m. This result draws a line in the sand between Rent.com.au as a search portal and Rent.com.au, a transactions based business. The imminent launch of RentPay is expected to deliver transformative opportunities for the company as it extends its relationship with renters from the traditional 4-6 weeks before a lease is signed to a financial platform used by renters throughout the term of the lease and potentially beyond.
DCF valuation is $0.35/share
Our base case DCF valuation for Rent.com.au is $0.35/share. Our valuation is predicated on our expectation that Rent.com.au’s new flagship product RentPay will secure 5% of renters on its platform by FY23 and 20% by FY30. In our view this is entirely achievable. We have dimensioned more optimistic cases which add considerable upside in our recent initiation report Transitioning from search to transactions.
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- Rent.com.au Ltd: A Line in the Sand Result26 Feb 2021