Money3 Corporation (ASX:MNY): how we profit in a post-Royal Commission world

February 21, 2020

 

On 17/02/2020, Money3 Corporation (ASX:MNY) reported stronger than the market expected earnings. As a result, the share price jumped by 8%. Glennon Capital started to accumulate MNY in August and it has become one of our large positions. In the past six months, MNY has returned over 50% for us. How do we find this stock and why do we own it?

 

 

In a post-Royal Commission world, banks are targeted by regulators. They are closely monitored and therefore, reluctant to lend money. The main reason is to avoid any further damage to bad publicity. As a result, the supply of loans is reducing. To satisfy the customer demand on borrowing, non-banking is stepping up to fill the gap and gain market share. We looked for listed lenders who are at top quality among other players. MNY is one of them.

 

In our September webinar, our portfolio manager Alan Crozier discussed his thoughts on MNY in detail. MNY got through a transition year in FY19. MNY had two main divisions, automotive loan business and small amount credit contract. The company sold the latter division and focused solely on automotive loans. MNY acquired Go Car Finance, a specialist used auto lender in New Zealand, and grew the loan book quickly.

 

On 17/02/2020, MNY surprised the market with a strong result. The summary of the result is as follow:

 

 

MNY performed well in every metric, for instance, revenue, EBITDA, NPAT, loan book and margin. We are delighted that the credit quality does not deteriorate when the loan book expands. We remain our optimistic view on Money3 and expect the loan book will double in a few years since FY19.

 

If you have further questions on our approach to subprime lenders like MNY, please contact kenny@glennon.com.au.

 

 

 

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