Rent.com.au Ltd: Positive Response to RentPay in Its First 30 Days

Equity Bottom-Up

802 Views11 Jun 2021 08:00

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SUMMARY

Rent.com.au Ltd

Positive response to RentPay in its first 30 days

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 provided an update on the first 30 days of its transaction engine RentPay with 2,400 downloads of the app to date and a 54% activation rate. This is in line with the company’s expectations for the app at this point. Rent.com.au is targeting to have 200,000 paying customers on RentPay by June 2023, which is just under 10% of rental households. This is a higher penetration rate than we have applied to our base case valuation of $0.35/share. The company also announced that it has appointed former New York based brand strategy director Hayley Parker as General Manager - Marketing for the company. In previous roles, Ms Parker launched JP Morgan Chase’s US investing app, and led brand strategy at both US and Australian financial and consumer brands including eToro, National Australia Bank, Kmart and Macys. Ms Parker will now oversee a much broader marketing campaign for RentPay, initially focused on Rent.com.au’s existing channel of 700,000 monthly users and then extending to the entire rental community of 2.5m+ households. In our view, the current share price of $0.155/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 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, telco, loan & finance products.

Positive start to transactional transition
Rent.com.au has announced that in the first 30 days of RentPay, the app was rated 4.9 (out of 5 stars) in both the Google and Apple stores, that there had been 2,400 downloads of the app, 2,200 registered customers, 1,300 activating customers, and 100 paying customers. The company is now focusing on a faster conversion of activating to paying customers by streamlining the verification process (fraud and anti-money laundering) and customer security. RNT expects a significant lift in the number of paying customers through the balance of June and into July as it begins marketing to its existing customer base.

Base case DCF valuation of $0.35/share is conservative
Our base case DCF valuation for Rent.com.au of $0.35/share is predicated on our expectation that 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, particularly given the company’s target for 200,000 RentPay customers by FY23. As we demonstrated in our report of 18 May 2021, if Rent.com.au achieves its ambitions, our base case valuation rises to $0.91/share. Ongoing evidence of faster than forecast takeup together with the expansion of RentPay into other transactional products will likely result in our forecasts being revisited.

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