This story introduces PLENTI GROUP LIMITED. For more information SHARE ANALYSIS: PLT
Non-bank lender Plenti Group stands out, paving the way for FinTech sector as it approaches $ 1 billion loan portfolio
-Credit quality has improved with the shift to secured auto loans and domestic renewables
-Warehouse facilities significantly reduce financing costs
-Increased consumer interest has improved credit score and risk score
By Eva Brocklehurst
Lending money is the raison d’être of Plenti Group ((PLT)), having experienced substantial growth in original loans in the automotive sector, renewables and personal finance. The advice has been very well received and will be closely watched by brokers as it includes achieving a net profit by June 2022 and a $ 1 billion loan portfolio by March 2022.
If these ambitions are realized, Plenti Group will be the first fintech lender to do so, says Bell Potter, while Moelis notes a $ 1 billion loan portfolio would represent around 1% of the consumer loan market. The company has also set a target of reducing its cost / income ratio to 35%, compared to 55% in FY21.
Plenti Group improved its credit standing by switching to secured auto loans and household renewables and moving away from unsecured personal loans. The increased use of warehouse finance has also reduced the costs of issuing new loans.
The main growth opportunities envisioned are the new commercial automotive portfolio, the expansion of renewable energy lending, and the cross-selling of products and services to existing customers, and the company appears well positioned to meet the demand for automotive financing. which should occur once the blockages are lifted. .
Warehouses have been set up with national institutions which considerably reduce financing costs. Moelis expects margins to increase as financing costs are recalculated under the new warehouse structure (increased to $ 450 million from $ 350 million) and costs are amortized over the duration of the loan portfolio.
The broker, initiating a hedge with a buy rating and a target of $ 1.93, predicts that funding costs will be reduced to 3.0% from 5.7% and cash margins will increase to 1. , 3% instead of 1.5%. All from here FY24.
Bell Potter points out that the lack of senior bank wholesale debt issues has led to increased demand for securitization issues in both RMBS (residential mortgage backed securities) and ABS (asset backed securities). The broker assesses that accelerating the loan portfolio will in turn increase profitability and maintain a buy rating with a target of $ 1.85.
Wilsons agrees that the $ 1 billion loan portfolio will be a catalyst, as will the first month of break-even and a second securitization deal. Plenti Group’s recent ABS transaction set the standard for other transactions, requiring only 0.5% equity financing, which will improve cash flow returns.
Additionally, the deal’s price appears to be higher, given that Moody’s preliminary ratings suggest the price could be up to 100 basis points better than expected.
The broker, who maintains an overweight rating and a target of $ 1.75, notes that the Plenti Group has been able to attract considerable consumer interest in recent years and subsequently improve its average credit score. and its risk rating.
The company’s first quarter (year ending March) was a record in terms of origination and gross lending and Shaw and Partners believes the market is underestimating the current execution rate. The broker is considering multiples of the current stock price over the medium term if the company can achieve its growth ambitions and maintains a buy rating and a target of $ 1.90.
Shaw and Partners calculates that the June execution rate, in terms of origination and current loan portfolio size, when combined with estimates of yield, repayment rate and costs, suggests a portfolio scale of loans of $ 1.8 billion (excluding any increase in fixtures), and over $ 180 million in sales and $ 40 million in net income.
Moelis also expects the stock to reassess as key milestones are reached, even despite the potential for pandemic disruption in the second quarter, and stresses that the main catalysts are the new securitization deals and the renegotiation of securities. storage conditions. The main risks revolve around competitive pressure on prices and macroeconomic factors such as financing costs or rising unemployment.
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