Rent.com.au Ltd: Outperforming Our Forecasts and Setting the Tone for FY22

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.

Top line a little higher, costs a little lower, forecasts upgraded
Rent.com.au delivered revenues a little ahead of our expectations and operating costs containment was also a feature of the result. COGS were a little higher (3.5%) than we had forecast but the total EBITDA loss for the year was $0.69m, a 39% improvement on the $1.13m loss reported in FY20 and better than our forecast for a $0.72m loss. The core Rent.com.au business generated $2.946m in FY21, an increase of 23% on pcp and reported its maiden operating (EBITDA) profit of $0.117m, compared with the loss of $0.772m in FY20. RentPay generated $0.149m in revenue in FY21, including from its legacy system the customer base for which is being migrated onto the new platform. We have upgraded our FY22 and FY23 forecasts by 1-2% after taking into account the FY21 result. We expect to continue to address our forecasts as more detail on the RentPay rollout emerges.

Base case DCF valuation of $0.35/share
Our base case DCF valuation for Rent.com.au is $0.35/share (12% discount rate, 1.5 beta, 2.2% terminal growth rate). 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.