Weekly Reports | 10:00 AM
This week brokers assess opportunities across online lending, car dealer groups, software and the Big Australian.
- Online lender Harmoney’s technology and scale advantage
- Boost for car dealer groups from trade deal and tax change
- Pro Medicus growth story intact despite macro noise
- BHP’s Chilean copper project progressing toward key milestones
By Mark Woodruff
Given this article’s typical focus on small-cap opportunities, today’s quote comes from legendary American academic and hedge fund manager Joel Greenblatt, renowned for demonstrating how market inefficiencies can reward disciplined investors:
“The less a market is followed, the greater the opportunity.”
Online lender Harmoney’s technology and scale advantage
Moelis forecasts strong earnings expansion and returns on equity (ROI) approaching 30% for Australia and New Zealand’s largest 100% consumer-direct online lender Harmoney ((HMY)); market cap circa $96m.
A strong growth outlook is highlighted underpinned by technology, funding advantages and operating leverage, with a fast credit assessment engine and speed of cash delivery remaining key competitive advantages.
The direct-to-consumer (D2C) online model is another differentiator, according to the broker, enabling fast pricing decisions and flexibility in responding to funding cost changes.
Harmoney benefits from a diversified funding mix, including warehouse facilities and asset-backed securities, with most funding hedged.
Moelis explains loan durations of two to three years help manage margins across interest rate cycles, while stable credit quality has seen cash losses remain consistent at around -3.6% in recent years.
Commentary suggests one key growth driver is accelerating loan origination, supported by the rollout of the Stellare 2.0 platform. This system has improved customer acquisition and lending efficiency, contributing to a 40% increase in new customer lending in Australia in FY25.
The platform launched in New Zealand in the fourth quarter of FY25 and is expected to provide a full-year contribution in FY26.
Future growth for Harmoney will be supported by entry into new verticals, particularly secured auto finance in the used vehicle segment.
Management is targeting a loan book exceeding $900m by FY26, a rise of 8% year-on-year.
Operational efficiency is also considered a key strength.
Harmoney has significantly reduced its cost-to-income ratio to 18.9% in FY25 from 31.9% in FY22, with further improvements expected as scale increases.
The platform-driven model enables repeat lending at minimal acquisition cost, supporting strong cash profit growth, with FY26 guidance recently upgraded to $13m.
Moelis highlights management incentives are closely aligned with shareholder returns with long-term incentive structures tied to ambitious EPS growth and total shareholder return (TSR) targets.
The broker begins its research coverage this week with a Buy rating and $1.28 target price, implying around 73% upside to the 74-cent share price at the time of writing.
Boost for car dealer groups from trade deal and tax change
Jarden assesses an incremental positive for auto dealers with high exposure to European vehicle sales from recent announcements by the Australian government.
A trade deal with Europe includes removal of the 5% import tariff along with an increase in the Luxury Car Tax (LCT) threshold for electric vehicles (EVs) to $120,000 from $91,000.
Noting some degree of prior speculation around these changes, the broker sees benefits for Autosports Group ((ASG)) and, to a lesser extent, Peter Warren Automotive ((PWR)).
The expected outcome are lower vehicle prices. However, it remains unclear how OEMs will approach price pass-through, whether applied broadly or varied by model and price point.
Lower prices could encourage consumers to trade up into European brands or higher-spec models, potentially driving incremental gross profit for dealers.
For Autosports Group, more than 80% of revenue is derived from European OEMs, before accounting for manufacturing origin.
Peter Warren does not disclose OEM mix, and the recent Wakeling acquisition is likely to dilute European exposure, explain the analysts, who estimate exposure below 20%.
Eagers Automotive ((APE)) also does not provide a detailed OEM breakdown, and its exposure is seen as lower again.
While the increase in the LCT EV threshold has the greatest relative impact at the higher end of the market, Jarden suggests it is unlikely to provide a material near-term tailwind for dealer groups, given rising competition from lower-priced EV entrants below the threshold.
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