Rent.com.au Ltd - Solid Q1 Performance, Rights Issue Underway

324 Views02 Nov 2022 08:00

Issuer-paid

SUMMARY

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 announced a solid Q1 FY23 result with revenues of $0.825m, down 2.0% on the same quarter a year ago, with interest rate rises having an effect on advertising revenues. The core Rent.com.au business delivered its ninth consecutive quarter of positive EBITDA of $0.035m while the investment in the RentPay platform was $0.476m for the quarter, a little less than the investment made in Q1 FY22. RentPay now has 3,537 active customers transacting payments on the platform, almost a four- fold increase on the number of active customers a year ago. Concurrently, the company has undertaken a fully underwritten rights issue to raise $2.9m, before costs, at $0.04/share, which is at a 29% premium to the last traded share price before the announcement. The company’s largest shareholder, Bevan Slattery, has agreed to sub-underwrite $1.0m of the issue, while directors announced they intended to participate for $0.2m via sub-underwriting and entitlement acceptance. Funds raised will be used to accelerate sales and marketing of RentPay. We have made some minor adjustments to our forecasts, chiefly to RentPay which is securing higher ARPU but adding customers at a more cautious pace than we had envisaged. We have also incorporated the rights issue. Our base case DCF valuation is $113.5m or $0.22/share and is now predicated on RentPay securing 4% (previously 5%) of renters on its platform by FY24 and 20% by FY32.

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 and $100 gift card to renters in conjunction with Origin Energy; 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. 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.

Strong growth in RentPay customers

Rent.com.au delivered Q1 FY23 revenues of $0.825m in a seasonally quiet quarter. Revenues were down 2% predominantly due to advertising sales declining in the face of rising interest rates and the impact on the new build homes sector. Advertising accounts for half of the Rent.com.au portal revenue. The portal delivered its ninth consecutive positive EBITDA quarter of $0.035m with group EBITDA a loss of $0.441m due to the $0.476m in RentPay. The transaction platform finished the quarter with 3,537 active customers transacting on the platform, up from 908 in Q1 FY22 and 3,007 in Q4 FY22. More than $1.3m a week in rent in now being paid via RentPay and the company has now gone live with its ‘Bill Smoothing’ feature which is part of the new Origin Energy partnership on energy bills. We have conducted an interview with CEO Greg Bader following the result and this can be accessed here RaaS Rent Interview 28 October 2022.

Base-case DCF valuation of $0.22/share post entitlement offer

Our base-case DCF valuation for Rent.com.au is $0.22/share after incorporating the entitlement offer and our minor earnings adjustments. Our forecasts assume RentPay will secure 5% of renters by FY26 (previously FY25) and 20% by FY32 (previously FY30).

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