Rent.com.au Ltd: Strong Performance in a Seasonally Weaker Quarter

Business model
Rent.com.au generates revenue 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 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.

RentPay gaining traction
Rent.com.au delivered Q2 revenues of $0.795m, an 8.4% improvement on Q2 FY21 and a little ahead of the $0.81m revenue generated in Q4 FY21. EBITDA from the core Rent.com.au search business was $0.062m, its sixth consecutive positive quarter. RNT noted that advertising revenue had continued its strong growth with the second-highest-ever ad sales quarter driving the overall group result, although some softening in the market for new home builds and delays in land titles and releases had emerged. The key takeaway from this result was the traction that RentPay is beginning to demonstrate. The EBITDA loss from RentPay slowed to $0.476m in Q2 from the EBITDA loss of $0.481m reported in Q1 FY22, while the platform demonstrated significant growth with a 52% increase in active customers q-o-q to 2,050, and more than $10.5m in rent now paid into RentPay, $6.7m of this in Q2 FY22. The platform now as 7,500 registered customers, up 36% on Q1 FY22.

Base-case DCF valuation of $0.29/share (previously $0.31)
Our base-case DCF valuation for Rent.com.au is $0.29/share (previously $0.31/share) as a result of incorporating the additional shares issued in the January share placement. Our valuation is predicated on our expectation that RentPay will secure 5% of renters on its platform by FY23 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.