Online consumer lender MoneyMe plans to use the funds raised in its initial public offer to increase its marketing spend, invest in product innovation and expand into new markets. The company says it is testing the US market.
MoneyMe Ltd has lodged a prospectus with ASIC and will launch its IPO next week. It is seeking A$45 million. At the offer price of $1.25 a share the company will have a market capitalisation of $211.8 million.
The company was founded in 2013. It claims that its point of difference is that its Horizon Technology Platform allows applications to be completed in five minutes and funds disbursed “shortly after”.
It has originated $340 million of consumer loans to more than 80,000 customers over six years. Loan originations increased by 66 per cent in 2018/19. At June 30 the loan book was worth $87.5 million.
Average loan size is a little over $5000, with a weighted average term of around 20 months.
It has two products – an unsecured personal loan and a line of credit called Freestyle Virtual Credit Account. Personal loans are for amounts of $2100 up to $25,000 for terms ranging from three months to three years.
It has a new product, ListReady, which allows homeowners to defer payment of their vendor paid advertising until closer to settlement of the sale of their property. The average spend on selling a house is $6400.
The loan, which is distributed by real estate agents, is for a term of four months. It is interest free but the borrower pays 4 per cent upfront.
The company uses risk-based pricing for the personal loan, with interest rates ranging from 8.99 per cent to 29.99 per cent.
Freestyle Virtual Credit Account offers a line of credit up to $10,000, with simple interest rates ranging from 16.99 per cent to $25.99 per cent.
Distribution is a combination of direct and merchant partnerships.
The company had revenue of $31.9 million in 2018/19 – an increase of 32 per cent over the previous year. It made a loss of $1.6 million. Interest income accounted for 86 per cent of total revenue.
It is forecasting revenue of $45.8 million for the current financial year and a loss of $200,000.
Funding is via two warehouses, which have a total limit of $117.5 million, of which $102 million is utilised.
To assess credit outcomes, the company uses a measure called static loss rate – the principal not recovered on a given cohort. Credit originated in the first half of the 2016/17 financial year has a static loss rate of more than 10 per cent.
Looking at credit quality on a more conventional basis, the pro forma financial report shows a loan impairment expense of $11.8 million in 2018/19 – 13.5 per cent of the gross loan book at financial year end.
The company says consumer credit originated by traditional lenders is expected to fall but originations by non-traditional lenders such as MoneyMe have been forecast by Euromonitor International to grow by more than 30 per cent a year over the next two years.
The prospectus says: “It is our view that changing consumer behaviours, the increasing role of new technologies and increased regulation and public scrutiny following the Banking Royal Commission have made areas of the consumer credit sector more difficult and less attractive for traditional lenders than they have historically been.”