𝛼SK or SearchRent.com.au Ltd - Record H1 FY22 Operating Profit for Core Search Platform
Rent.com.au Ltd
Record H1 FY22 operating profit for core search platform
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 delivered its best-ever EBITDA performance from its core search business, Rent.com.au, in H1 FY22. The platform delivered $1.57m in revenues and EBITDA of $0.137m in H1 FY22, an increase respectively of 11.7% and 552% on the previous corresponding period (pcp). On a group basis, the company announced H1 FY22 revenues of $1.64m, an increase of 10.1% on the pcp. Including RentPay, the group underlying EBITDA loss was $0.82m, up from the EBITDA loss of $0.28m in H1 FY21 due to an increased investment in marketing and people for the RentPay start-up. The platform now has more than 2,500 active customers transacting payments out of a core universe of 9,000 registered customers and more than 16,000 app downloads. RNT also released a web version of the platform in the half, and this now accounts for around 50% of customer interactions. RentPay is currently handling >$1m in rental payments a week and has attracted aggregate daily wallet balances of more than $300,000. Progress has been slower than modelled and as a consequence, we have pushed out our expectation for RentPay to reach 5% of the renting population to June 2024 (previously June 2023). We still, however, anticipate that RNT will secure a 20% share of this target market by June 2030. This has resulted in our DCF-derived base case valuation reducing to $0.26/share (previously $0.29/share).
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 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.
Earnings adjustments made to timing of RentPay market share
Rent.com.au delivered its best-ever result from the core search platform with its third consecutive half of positive EBITDA of $0.137m, a five-fold increase on the same period in H1 FY21. The result was driven by strong advertising revenues, up 51% to $0.83m on the pcp, which offset a 14% decline in revenues from renter products to $0.68m due to the slower, COVID-19-impacted rental market. The company noted that renter product-adoption rates had improved, helping renters stand out in a tough market, and that this would assist RNT as some normality returns to the market. The investment in RentPay generated an EBITDA loss of $0.96m for the period, bringing the group EBITDA loss to $0.82m (excluding non-cash and one-time payments). We have adjusted our FY22 and FY23 forecasts to push out the take-up of RentPay, with our revised forecasts now anticipating that RentPay will secure 5% of renters as customers by FY24 (previously FY23) and 20% by FY30.
Base-case valuation of $0.26/share (previously $0.29/share)
Our DCF valuation for Rent.com.au is $0.26/share (previously $0.29/share) after pushing out our forecasts for RentPay by 12 months. Evidence of faster-than-forecast take-up of RentPay together with expansion into other transactional products should underpin the share price.
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- Rent.com.au Ltd - Record H1 FY22 Operating Profit for Core Search Platform28 Feb 2022