WZR Significantly Undervalued vs Market Leader, page-3

Hi madjae,

That is certainly plausible. I guess it depends on SocietyOne’s performance at the time. Regardless, if they do IPO it will be a big number compared to WZR’s current market cap. Lets hope its closer to $400m than $200m.

“Rather, SocietyOne is aiming for aggressive loan growth over the next 12 months, expecting to break even in March, and an initial public offering remains on the cards.”

If M&A is part of their strategy then the valuation gap is even more likely to be compressed as the market looks at WZR’s tiny cap vs Society One despite good momentum.

“Growth by merger or acquisition also remains a possibility. Mr Yetton said it seems inevitable that over the next year there will be some consolidation of the P2P sector, although these would need to be carefully managed to ensure the right cultural fit.”

Note WZR is not really a pure P2P lender anymore, but there is obviously plenty of crossover. WZR owning their platform end to end is also key.

Link below: https://www.copyright link/business/banking-and-finance/societyone-picks-new-ceo-plans-aggressive-growth-20180819-h145tv

Outside of that, there are a lot of tailwinds for WZR that the market doesn’t seem to be pricing in just yet.With the changes to credit card repayment requirements I think we’ll see the credit card continue to be used as a payment tool but consumers will refinance at lower rates with companies like WZR. There is a lot of pent up demand for this amongst borrowers that may not even know its an option.

Open banking/Comprehensive credit reporting will be meaningful too. Look to NZ for an example of this as they are further ahead than us. The two biggest players in the space increased loan originations by double digits with the same marketing expense and bad debts because they could pick and choose their customers better. 

With the slowdown in property, I think brokers will increasingly look at the personal loans channel. A tiny fraction of brokers today actually do personal loans, that will likely increase. Society One have also recently started pushing the broker channel.

Ultimately as an early stage growth business this one will need good news flow and ongoing solid growth to get the market to really start pricing in the upside, but that upside opportunity is sufficiently large to make it look quite attractive here.

WZR also talk a bit about the strength of their tech platform. If that is validated by some big partnerships this year then that is when the market should get really excited.

Worth noting that management have part of their bonus tied to a higher share price - 6c and 12c. So their incentives should be aligned with ours.

Keen to re-assess after the quarterly.