ISU - iSelect Limited

[System]

iSelect is a leading Australian online-driven comparison service. Its service provides comparison of both price and product features for a range of:

• Private health insurance and car insurance products; and
• Household utilities and financial products, including life insurance, broadband, home loans, personal financial and energy products.

Proposed listing date: 24 June 2013

http://www.iselect.com.au

 

[Chris1zillion]

I don't like how they don't have a sister site for comparing meerkats!!

 

[McLovin]

These guys have recorded profits since 2009 but every year they have had negative OCF. The accounting around recognition of revenue looks "interesting" too. If I'm reading note 2(e) correctly, they have, in the last fy, changed their revenue recognition on trail commission from being when the customer starts paying to the fund, to the point at which the customer is referred to the fund. A little too creative for my liking.

Their single biggest asset is npv of trail commissions, this is a somewhat rubbery number with plenty of room for adjusting to make things look a little better.

These guys paid $33.5m for Infochoice last year. Infochoice had revenue of ~$5.3m and made a loss of $0.5m.

It's a pass for me.

 

[DJG]

It's a pass for me.

Or a good short if it becomes available...

When I first read they were being floated I found it somewhat a stupid idea, without even reading any financial statements.

 

[McLovin]

They reported yesterday, missed revenue. Hard to believe you can do that when you float with 8 days to go before EOFY.

Interesting article in the AFR about there accounting practises. And some of the other inner workings of the company...

In its prospectus, iSelect describes this policy of booking trailing commissions as: “Ongoing fees related to consumers referred to individual insurance funds or applied for mortgages via iSelect . . . On initial recognition, trail revenue and receivables are recognised at fair value, being the present value of expected future trail revenue receivables discounted to their net present value using discounted cash flow valuation techniques.”

The payments are only received in the event the member does not churn (switch to another insurer) over a certain period of time. The payment structure meant that revenue numbers for iSelect, which receives about $800 from its health fund customers for each new member it signs up to a new health fund, could be more positive than it looked. Three years ago, the company received half its commissions as upfront payments and half as trail commissions, where the payment is staggered over an agreed period.

One fund manager labelled iSelect’s financial accounts “fiction”. “It’s a bit of a *furphy, the whole thing,” says the fund manager who declined to be identified.

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Another point of contention for investors is the group’s relationship with NIA or health.com.au, the first health insurer to have set up in more than a decade.

NIA has appointed iSelect as a distributor of health.com.au’s private health insurance products. Under the distribution arrangement with health.com.au, iSelect is entitled to receive an upfront fee for each completed sale of a private health insurance product.

iSelect agreed to provide a secured facility, capped at $75 million and expiring on July 2014, to NIA to enable NIA to defer the time of payment of upfront fees that it owes to iSelect for referred sales – in effect helping fund NIA’s entry into the market.

NIA is a customer of iSelect’s but iSelect is in turn a lender to NIA. Effectively, iSelect lends NIA the money NIA then pays iSelect in fees. What is not disclosed is that NIA chief Andy Sheats, a former head of strategy and corporate development at runaway dotcom success REA Group, is the brother-in-law of iSelect chief executive Matt McCann and that Leslie Webb, a director of iSelect, is also a shareholder in NIA.

McCann would not be drawn on this on Thursday, but the company does not believe these relationships need to be disclosed.

Hmm...lending money to someone to buy stuff off you...I believe in the 1980's they called that a round robin payment.

http://www.afr.com/p/business/finan..._rollercoaster_ride_of_sRWUpMxhAr0mazrtrZ6aJK

 

[craft]

They reported yesterday, missed revenue. Hard to believe you can do that when you float with 8 days to go before EOFY.

Interesting article in the AFR about there accounting practises. And some of the other inner workings of the company...



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Hmm...lending money to someone to buy stuff off you...I believe in the 1980's they called that a round robin payment.

http://www.afr.com/p/business/finan..._rollercoaster_ride_of_sRWUpMxhAr0mazrtrZ6aJK

Ebitda 25 Million vs OCF of 832 Thousand.

107 Million Trail commissions on the balance sheet and a corresponding 32 Million in Deferred tax liabilities. (If it ain't good enough for the tax man.....)

Customer financing

Who buys this junk?

 

[McLovin]

Ebitda 25 Million vs OCF of 832 Thousand.

107 Million Trail commissions on the balance sheet and a corresponding 32 Million in Deferred tax liabilities. (If it ain't good enough for the tax man.....)

Customer financing

Who buys this junk?

EAX don't look so bad now, does it!

 

[skc]

They reported yesterday, missed revenue. Hard to believe you can do that when you float with 8 days to go before EOFY.

Interesting article in the AFR about there accounting practises. And some of the other inner workings of the company...

Hmm...lending money to someone to buy stuff off you...I believe in the 1980's they called that a round robin payment.

I'd be wrestling rhinos if I bought shares in iSelect's IPO...

 

[ROE]

Yeah those articles keep me away too many red flags

AFR do some good stuff sumarise it all in a few pages and save you lot of time researching

 

[ROE]

http://www.afr.com/p/business/finan...ct_failure_to_disclose_DvO0rY7Fp3zzI9OuVQg51L

 

[pixel]

Insurance must be a tough business, especially for an upstart.
I always found their TV ads annoying anough to press the "Mute" button...

So I was quite surprised when ISU popped up as the only result in today's Trinity scan. In the absence of chart history to indicate the reliability (or otherwise) of support and momentum, I guess I'll give it a miss.

 

[Knobby22]

The meerkat guys are British. They have proven hard for iSelect to knock off.

 

[McLovin]

Insurance must be a tough business, especially for an upstart.
I always found their TV ads annoying anough to press the "Mute" button...

I'm not sure I'd call them upstarts, they've been around since 2000.

The accounts are a bit of joke, tbh. They pretty much book revenue when someone visits their website.

 

[DJG]

The accounts are a bit of joke, tbh. They pretty much book revenue when someone visits their website.

Haha. That sums up my view perfectly!

 

[pixel]

I guess I'll give it a miss.

Just as well I did.
There was a little upswing after the green T-signal, but it didn't last long.



http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01489860
Today's announcement boasts a contract extension, but at a significantly lower rate...

 

[McLovin]

In an announcement made to the market on Monday, iSelect said the lower commission rates will drag down revenue and earnings before interest, tax, depreciation and amortisation in the second half of 2013-14 by $1 million to $2 million.

That's $1-$2m for the HY. $3-$4m for the full year. For a company that makes ~$25m EBITDA/year that's a fair whack. Very little detail on how exactly this will drive more customers to them either. Tbh, it looks more like they're spinning it as some sort of growth initiative because A&G have told them that's the new commission rates.

 

[skc]

That's $1-$2m for the HY. $3-$4m for the full year. For a company that makes ~$25m EBITDA/year that's a fair whack. Very little detail on how exactly this will drive more customers to them either. Tbh, it looks more like they're spinning it as some sort of growth initiative because A&G have told them that's the new commission rates.

My thoughts exactly.

I have recently been shopping around for a home equity LOC as well as new electricity supplier, and I looked at iSelect in both instances. Here's my lay person's view of their business operation from the outside.

1. Before showing the product comparisons, you need to provide your contact details. I did but I can see how this may turn a lot of people away. I wonder if there's a away to avoid leakage from that early part of the customer engagement.

2. In both instances, someone called me back the next day to follow up. Both sales rep were courteous and knowledgeable. Although I also see that as quite an expensive servicing model.

3. In the case of my LOC, they pretty clearly understood my needs and were able to offer something that's quite competitive. I haven't make a decision yet but the overall experience was positive.

4. In the case of electricity, their offerings were the same as the supplier's website. And since there was some details that was unclear on the ISU website, I went directly to the supplier's website and signed up there. So while my experience wasn't negative, they offered no real advantage.

5. It feels (although I can't verify) that their comparison list has a fairly large skew towards certain products/suppliers. While you can't blame them, anyone who consults more than a single source will see that and question if they are getting the best deal.

So overall verdict: Good place to check out if you are a consumer, nothing to suggest massive competitive advantage if you are an investor.

 

[pixel]

While the volume is still too small to really hang a hat on, today's candle suggests our concerns are shared by other investors/ traders. The double top may well play out way beyond the standard 200% level :1zhelp:



Looks bad enough for me to stay away.

 

[McLovin]

I'm not sure I'd call them upstarts, they've been around since 2000.

The accounts are a bit of joke, tbh. They pretty much book revenue when someone visits their website.

And it looks as though they overstated their expected trail commissions...What a surprise.

iSelect said it will take a one-off hit to its full-year net profit of up to $14 million because it has overstated the commissions it will receive from people who have switched health funds using its comparison website.

In an embarrassing admission, which comes one year after the newly online company missed revenue forecasts contained in its prospectus, iSelect said it has downgraded the amount it expects to receive from commissions in future by $16 million to $20 million.

http://www.afr.com/p/business/companies/iselect_downgrades_guidance_again_2ZyjXLvP0dapGvrNIwrUhJ

 

[VSntchr]

And it looks as though they overstated their expected trail commissions...What a surprise.



http://www.afr.com/p/business/companies/iselect_downgrades_guidance_again_2ZyjXLvP0dapGvrNIwrUhJ

Well, the "materially" worse result..is now forecast to become a "significantly" worse result.
They are probably crossing their fingers and toes that the takeover bid is actually serious and something they can back!