Rent.com.au Ltd - Strong Performance Against Current Rent Market Headwinds

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13 Views02 May 2022 08:00

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SUMMARY

Rent.com.au Ltd

Strong performance against current rent market headwinds

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 record Q3 FY22 revenues of $0.853m, an increase of 7.0% on the previous corresponding period (pcp) and up 7.3% on Q2 FY22. The core Rent.com.au delivered positive EBITDA of $0.048m, a 33% increase on the same quarter in FY21, despite the headwinds being generated by Australia’s tight rental market. Including RentPay, the group EBITDA loss was $0.359m, an improvement on the $0.414m loss reported in Q2 FY22, due to the $0.407m invested in the marketing and operation of RentPay. The platform now has 2,649 active customers transacting payments out of a core universe of 10,450 registered customers and 18,650 app downloads. To date, customers have paid ~$22m in rent via RentPay, with the platform now handling around $1m a week in rent payments. The company noted that despite challenges in the broader market where rental listings are down 30%, it had experienced a strong quarter and the increasing mobility interstate, overseas and back to cities was boding well for coming quarters. We have made no changes to our forecasts and our valuation is maintained at $0.29/share, which is predicated on RentPay securing 20% of renters on its platform by FY24.

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 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 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.

RentPay increases active customers by ~30%, traction grows

Rent.com.au delivered Q3 revenues of $0.853m, a 7.3% improvement on Q2 FY22 and up 7.0% on the pcp. The company reported an EBITDA loss of $0.359m for the quarter with the loss from RentPay narrowing slightly to $0.407m in the quarter. EBITDA from the core Rent.com.au search business was $0.048m, its seventh consecutive positive quarter. RNT noted that advertising revenues had continued its growth trajectory, up 19% on the pcp and driven by longer-term agreements and new opportunities in the home loan lead generation space. RentPay continued to demonstrate strong growth and traction with an almost 30% increase to 2,649 active customers transacting payments, a 39% increase in registered customers to 10,450 and 18,650 app downloads. In the quarter, Rent.com.au expanded its agreement with payments partner Novatti (ASX:NOV) to enable compliant secure payments from cryptocurrency exchanges and digital wallets such as Alipay, WeChat Pay and UnionPay.

Base-case DCF valuation of $0.29/share

Our base-case DCF valuation for Rent.com.au is $0.29/share and 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 together with the expansion of RentPay into other transactional products will likely result in our forecasts being revisited.

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