Rent.com.au Ltd: Third Consecutive Positive Quarter of Core EBITDA

Equity Bottom-Up

479 Views30 Apr 2021 08:00

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SUMMARY

Rent.com.au Ltd

Third consecutive positive quarter of core EBITDA

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 revenue of $0.797m for Q3 FY21, up 25% on the previous corresponding period (pcp). Core rent.com.au EBITDA was $0.036m, its third consecutive quarter of positive EBITDA and best ever result. Including the investment in developing its soon to be launched RentPay platform, Q3 EBITDA was a loss of $0.19m. Operating cash burn for the quarter was $0.20m. The result demonstrated positive momentum within the business, despite overall rental market conditions being lower than normal in the March quarter. The company reported that March was a record month for its RentConnect product with AGL as well as for advertising revenue, which also booked a quarterly record of $0.33m, up 33% on pcp. The company noted that its sole focus in Q4 was getting RentPay launched to the market, initially via its existing renter channel. On our estimates, Rent.com.au only needs to book revenues of $0.71m and an EBITDA loss of $0.25m to meet our full year forecasts.

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 soon-to-be-launched RentPay app platform will allow 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.

Delivering on Q3 outlook for record Q3 revenue
Rent.com.au has delivered on its Q3 outlook for another quarter of record revenue growth, with a 25% quarter-on-quarter increase in revenue to $0.797m, despite the seasonality in Q3 being more subdued than normal. The revenue growth in the quarter follows similar year over year increases in the previous two quarters. Rent.com.au reported that while Q3 is normally the most active quarter of the year, the March 2021 quarter was lower than normal due to lower interstate and overseas migration as a result of the COVID-19 lockdowns. To achieve such growth against the trend demonstrates the company’s growing traction in the market. We note that the company now only needs to achieve revenue of $0.71m and an EBITDA loss of $0.25m in Q4 to meet our full year expectations. Rent.com.au also reported that despite having invested a net $0.227m in additional expenditure on RentPay in the quarter, on a group basis the EBITDA position has improved by 34% or $0.10m since the same quarter in FY20. The company noted its focus in Q4 was on launching RentPay, initially via its existing renter channel.

Base case DCF valuation of $0.35/share unchanged
Our base case DCF valuation for Rent.com.au is $0.35/share. 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.

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