Rent.com.au Ltd - Origin Energy Partnership to Benefit Renters, Boost RentPay

Business model

Rent.com.au generates revenues from advertising and from rental products, with revenues 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 now through Origin Energy, and provides customers with a $100 gift card; 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 growing 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, and through the “Bill Smoothing” solution, will be providing similar financial flexibility on energy bills. 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.

New deal expected to boost RentPay take-up

Rent.com.au has forged a partnership with Origin Energy for an initial 24-month term with options to extend by further 12-month periods. Origin Energy now becomes Rent.com.au’s RentConnect product’s exclusive energy provider, allowing Rent.com.au to earn a commission for each customer that signs up to Origin’s electricity and/or gas plans. In addition, RentPay will receive a commission for each customer paying amounts towards their Origin Energy bills via its “Bill Smoothing” feature and in turn will rebate these “Bill Smoothing” customers with a $5-a-week rebate if they pay towards both electricity and gas services, or $3 a week for those only taking one service from Origin. Rent.com.au estimates that based on $2,000 a year in energy costs, customers using the “Bill Smoothing” solution will be credited up to $260 a year (or 13% of their energy bills) through their RentPay wallets. We note that the $2000 is an averaged estimate, so for smaller households (couples, singles) or those with lower consumption, the savings could be even greater. The company estimates that based on a 30% take-up of RentPay’s customer base, the initiative could generate ARPU of $7.50 per month.

Base-case DCF valuation of $0.23/share

Our base-case DCF valuation for Rent.com.au is $0.23/share, after applying a 3.5% risk-free rate to reflect the increase in the 10-year government bond rate (previously 2.0%). Our valuation is predicated on our expectation that RentPay will secure 5% of renters on its platform by FY24 and 20% by FY30. Evidence of faster-than-forecast take-up of RentPay and its expansion into other transactional products will likely result in a forecast review.