SVR - Solvar Limited

[Joe Blow]

Money3 Corporation Limited (MNY) is focused on providing financial services specialising in the delivery of small cash loans, personal loans, cheque cashing and international money transfer via the MoneyGram affiliation.

http://www.money3.com.au

 

[Tyler Durden]

100% increase in profit.
Hmmm.

 

[VSntchr]

100% increase in profit.
Hmmm.

Didn't they double their store network though? If I remember they bought a whole heap of "Cash Store" stores, or something like that anyway.

 

[skc]

100% increase in profit.
Hmmm.

Don't just read the top line. They did a large cap raising to fund the acquisition so EPS actually was pretty flat (or slightly lower, probably due to integration costs).

 

[piggybank]

Updated P&F Daliy Update.

​

 

[PinguPingu]

A very decent result last week, but it looks like market disliking the uncertainty of legislation coming from ASIC on pay day loans. However, looking at the report unlike CCV, MNY is more diversified from pay day loans?

 

[PinguPingu]

Another large drop yesterday, quite a steep correction. No news on ASIC, anyone know when the report should be released?

 

[Cashflows]

Famous last words but I think the worst might be behind this business. The new management has affirmed a FY forecast net profit of $18m (Current fully diluted market cap of $139,644,000, making it a forward P/E of 7.8 while experiencing an extremely high growth rate over the last few years) while highlighting that 75% of EBIT came from the secured lending division. Moreover, they intend to phase out only a certain part of the unsecured lending division which is most associated with 'Payday lending'. This should relieve the regulatory and funding pressures off the market's perception of the company and could see a serious re-rating of the value of the company.

I do own shares in this business and am interested to see where it ends up.

 

[Cashflows]

Well today was a good day. I guess this is a good example of when an industry shake up drags down good companies while exposing the weaker and less scrupulous ones. MNY has shown strong growth with more forecast into the future - the increased payout ratio and decision to drop the DRP highlight their increasingly positive cashflows... I'll finish with this:

 

[rnr]

Following a thrust higher to $2.21 on Monday MNY appears to be consolidating within the range of Monday's bar. The daily volumes during the week have not changed excessively so one may wonder if the ATH of $2.31 may be taken out soon.

 

[Huskar]

This is another under the radar little business that has moved on from the more difficult (morally and regulatory) business of lending money to poor people. Now it's focused on auto financing and with the rebound in car usage post-Covid due to less public transport usage I think it still has a bit of runway although starting to look fully priced..

I was originally attracted to it by Ray Malone - formerly of AMA - involvement who is an impressive fellow. He's no longer involved but the tailwind for the business has been good.

Does anyone else follow this business and what are your views on auto growth in the next 6 months - 2 years?

 

[Dona Ferentes]

Money3 Corporation Limited (ASX:MNY) ... Nominated by Peter Bell, Director, Bellmont Securities

Money3 is a well-run, profitable and rapidly-growing niche automotive lender that is only just appearing on many investors’ radars. As a provider of car loans largely for customers with a less than perfect credit history, the company has managed to grow its loan book at a CAGR of more than 32% over the last 5 years, benefiting as the big banks pulled back from this segment of the market to focus only on the most credit-worthy car buyers.

With a compassionate process for dealing with customer arrears and conservative lending practices that see all loans amortise to zero over the loan term (i.e. there is no residual loan left at the end of the term), the company has kept bad debts at modest levels, including an impressive performance during COVID. With a new financing arrangement from an A+ rated global bank due to come into place mid-next year, the company's cost of funds will fall significantly, leading to a step change in profitability, on top of the organic ~20% pa loan book growth the company expects moving forward, and added accretion from a recent acquisition.

Trading on a trailing PE of less than 17 times, and having recently entered the ASX300, the company is a rare example of a high quality, rapidly growing, reasonably priced business, that we think is likely to perform strongly in 2021.

Disclosure: Peter Bell owns shares in MNY personally, as does Bellmont Securities in its client portfolios and managed accounts.

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Earnings (LHS) ..................... and .......................................................... Return on Equity (RHS)

 

[System]

On December 12th, 2022, Money3 Corporation Limited (MNY) changed its name and ASX code to Solvar Limited (SVR).

 

[Tommy Shelby]

SVR has lifted the payout ratio to 90% of NPAT with forecast profit for this FY being $48m. They're about to conclude a $15m buyback and highlighted their capital position below:

- A strong balance sheet including significant unrestricted cash of $101.3m (31 Mar 2023),
• The substantial and growing balance of franking credits of $76.3m (31 Mar 2023),
• Significant headroom in existing warehouse facilities enabling the Group’s gross loan book to increase by approximately 50% to $1.3b without any additional capital requirements, and
• Low financial leverage utilised by the Group whereby the Group’s loan receivables are underpinned by $350.3m of Net Tangible Equity (31 Mar 2023).

It's a really well run business which I've held for quite some time but the outlook of a recession and rising rates is a serious headwind for the business and risk of bad debts rising above the average of 3.5-4.5% defaults.

Trading at a 9 x PE trading which is understated slightly due to drawdown of lending facility prior to providing finance.