What: Money3 Corporation Limited (ASX: MNY) successfully doubled its revenue and profit figures in the past year, while its share price has only risen 12% in that time.
This small-cap financier looks like a true bargain with plenty of growth ahead, and here's why:
Highlights:
- Revenue up 90.93% to $43.5 million
- Profit up 114.69% to $7.8 million
- Net Tangible Assets rose to 61.3 cents per share (up from 45.8 previously)
- Total dividends of 4.5 cents per share
- Number of lending centres rose to 70 (up from 30 previously)
- Growth across all lines of business, both in secured and unsecured lending
- Bad debts as a percentage of revenue (established branches) of 13.91%
- Bad debts as a percentage of revenue (new branches) of 21.88%
So What?
Money3 appears to have successfully adapted to new Federal Government legislation covering the fees and rates that can be levied by credit providers, delivering a record profit for FY2014.
More pleasingly, the company managed to strongly grow earnings per share for investors despite a $25.5 million equity raising, and appears primed to continue its growth in 2015.
The 40 new lending centres established are expected to make a significant contribution to earnings in 2015, even more so as the high percentage of bad debts recorded this year traditionally normalises to within the company's target range of 11%-15% of revenue after about 12 months.
Over a longer period the company expects to generate a significant stream of internal referrals (i.e. return business) from its unsecured to its secured lending arm. This kind of return business is great for building a company's customer reputation.
Now What?
Money3 will be funding its FY2015 growth through its recent bond issue and securitised bank debt rather than the previous equity raisings, which may be a cause of concern for some investors.
However debt is generally a less dilutive way of achieving growth, and given Money3's prior track record of increasing earnings I don't believe shareholders have anything to worry about at present.
Moreover Money3 appears to have a very strong corporate culture and empathy for the industry in which it works, and this kind of emotional investment in the business is a big plus for customers and shareholders as it is great for customer engagement, brand building and generating return business.
The company's internal debt management team also provides an important avenue for recovering bad debts, avoiding the necessity of having to sell its debt to external collectors, something which has become all too common in recent years.
Debt collection is already a booming business in Australia and is expected to enjoy a further growth explosion in future years as looser lending practices catch up with consumers.
Several ASX-listed companies already make a handsome living in the business, and one of them is also worth getting to know about.
Boasting a long record of earnings and dividend growth, this small-cap company also tends to sneak under investors' radars, which means it's still trading on a bargain price/earnings ratio.
It's a share I already own, and one I think you might like to have a look at too.
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