bullish
Rent.com.au Ltd: NPV of $0.91/Share if RentPay Secures 200k Users by FY23
SUMMARY
Rent.com.au Ltd
NPV of $0.91/share if RentPay secures 200k users by FY23
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 has recently launched its
transaction engine RentPay with an ambitious target of 200,000 users, which is just
under 10% of rental households, and $12 per month spend by June 2023. Our forecasts,
which underscore our $0.35/share DCF valuation, are predicated on 5% penetration
(~120,000 users) and just under $8 per month spend by its RentPay customers. We have
applied the company’s target to our forecasts with the scenario yielding a Net Present
Value (NPV) of $363m or $0.91/share. In our view, the current share price of $0.185/share
houses little for the company’s move to a transactions-based business.
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 recently launched
RentPay app platform allows 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.
Company’s RentPay ambitions translate into significant upside
Rent.com.au has a stated ambition to secure 200,000 RentPay customers by June 2023, with
average revenue per user of $12 per month. This equates to just under 10% of Australian
rental households. We estimate that translates into an annualised revenue opportunity of
$29m. Our forecasts for RentPay have been significantly more conservative, with takeup by
5% of households, and ARPU of $8 per month by June 2023, although we model 20%
penetration by FY30. This underpins our DCF valuation of $0.35/share or $138m. Applying
the company’s target, we arrive at revenues of $23.9m for RentPay for FY23 ($29m
annualised), based on 200,000 users by June 2023 and $10-12 ARPU over the course of the
year. This yields a Net Present Value of $363m or $0.91/share.
Base case DCF valuation of $0.35/share is conservative
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 and may well
prove too conservative. Ongoing evidence of faster than forecast takeup of RentPay together
with the expansion of RentPay into other transactional products will likely result in our
forecasts being revisited.
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