Harmoney Share Price Surges on Strong Origination Growth (ASX:HMY)

The Harmoney Corp Ltd’s [ASX:HMY] share price jumped 8% today after delivering strong origination growth in 2H FY21.

Total new originations were 144% up on 2H FY21, with Australian new originations up 260%.

Harmoney shares were up as much as 12.7% in early trade before pulling back somewhat, still up 8.3% at time of writing.

HMY shares rose 50% in the last month, reflecting a recent turnaround in market sentiment.

Despite the uptrend, Harmoney is still down 35% over the last 12 months.

ASX HMY - Harmony Share Price ChartSource: Tradingview.com

Harmoney’s 2H FY21 results

Here are the key highlights from Harmoney’s 2H FY21 release:

  • Total group originations equalled NZ$250 million, representing a 29% increase on 1H FY21.
  • Harmoney delivered its largest ever month of originations in June, totalling NZ$53 million.
  • New Australian customer originations in 2H FY21 grew 260% compared to 1H FY21, totalling $47 million.
  • Total group receivables book reached NZ$501 million, yielding a net interest margin of 11%.
  • Australian receivables book grew 33% since December 2020.
  • As at 30 June 2021, undrawn committed warehouse funding lines totalled NZ$216 million.

Company PresentationSource: Company presentation

Digging deeper, there were some other interesting results in Harmoney’s release.

For instance, while new customer originations in Australia grew by 260% in the second half, repeat customer originations grew 13%.

Repeat customer originations in New Zealand fell 3% in 2H FY21.

And total repeat customer originations were exactly flat, registering 0% growth on H1 FY21.

Further, while total Australian customer originations in 2H FY21 rose by 93%, New Zealand customer originations grew by 11%.

Additionally, while Harmoney’s Australian receivables grew by 33% in the six months since December 2020, New Zealand receivables fell 1%.

This could suggest Harmoney is approaching market saturation in the New Zealand market. Although the lender attributed the decline in the New Zealand receivables book to impacts from ‘strict COVID-19 lockdowns in CY20.

Of course, Harmoney can offset the tapering of New Zealand originations if it can sustain the high origination growth in the larger Australian market.

Recovery to pre-COVID origination levels

It is also informative to compare today’s results with Harmoney’s pre-COVID performance:

Source: Company presentation

While new customer origination growth in 2H FY21 was strong, HMY’s pre-COVID originations show that the 2H FY21 gains benefited from a low base.

Harmoney’s first two quarters of 2021 were affected by the pandemic and came in well below their corresponding quarters in 2020.

That said, CEO and Managing Director David Stevens was buoyed by Harmoney’s performance, saying ‘it’s pleasing to see Harmoney’s new customer originations have surpassed pre-COVID levels.’

Harmoney share price outlook

Harmoney Mr Stevens told the market that:

Harmoney has a clear strategy of growing attractive margin personal loans across Australia and New Zealand, where the total addressable market continues to expand as traditional financiers are contracting and more customers are going online for their financial services.

In FY22, Mr Stevens thinks HMY’s strategy will ‘lead to additional revenue for the Group and add to our existing scale as we further grow our Australian business which has very little fixed cost due to the leverage we are able to achieve from our lower cost New Zealand headquarters.

Today’s response from the market may suggest investors are optimistic about Harmoney’s strategy succeeding.

However, investors will likely keep a keen eye on Harmoney’s repeat customer origination and growth in its established New Zealand market.

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You can download that right here.

Regards,

Lachlann Tierney

For Money Morning

PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here


Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Lachlann is involved in two publications:


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