Christmas has come early for the bank’s shareholders with the decision to slightly increase the 2024 dividend – despite a single-digit decline in the net profit and cash earnings.
Beating the market benchmark is never easy, with 72 per cent of Australian actively managed global equity general funds trailing the S&P World Index in the six months to June 30, 2024. Domestic equity funds performed slightly better, albeit against a significantly lower bar set by the S&P/ASX 200 Index.
Aussie Broadband and Plenti shine at the ASX conference
The annual ASX Small and Mid-Cap Conference took place this week, albeit in a virtual setting, over two days. The conference showcased a diverse mix of quality small-mid cap companies with names such as Mydeal.Com.au (ASX: MYD), Laybuy Group Holdings (ASX: LBY), Plenti Group (ASX: PLT), hipages Group (ASX: HPG) and Aussie Broadband (ASX: ABB).
From a Buy Now Pay Later payment system to a tradesman services platform, over 20 companies presented their story together with an investment proposition, via a 15-minute live stream presentation plus Q&A.
From the 20-odd small cap companies that presented, two stood out to us, for their unique stories:
Aussie Broadband (ASX: ABB) – The newly listed internet service provider is only six months old, yet has almost tripled its IPO price of $1 to $2.90, and is making a clean sweep of the NBN market. Given that almost three-quarters of sign-ups are existing NBN users, Aussie Broadband’s growth in residential broadband has been phenomenal, and it has come largely from NBN users that have become “disenfranchised” with their existing provider and are looking to make a switch. ABB is definitely not the cheapest NBN provider, but as CEO Phillip Britt explained, “it’s not about being cheap and it’s not a price play. This is more about the experience and consistent speed.”
After doing some ‘Google’ research, besides Telstra there aren’t too many NBN providers that are doing a decent job of delivering broadband at quick speeds. Most of the flakey service providers tend to state ‘100Mbps’ speeds, but during peak time they tend to slow down to a snail’s pace. Others lose out not because of price, but because of service. Britt explains that to Aussie Broadband, “service” means, at the very least, that someone that is there to pick up the phone to talk to a customer. Most NBN players don’t even have a call centre, which was surprising. NBN provider Belong is a good example. No one answers the phone, a customer can’t even get through and no-one calls back. During the peak times of 8pm-10pm, how much bandwidth a provider is given will determine whether it can deliver the 100Mbps claimed. Britt reassured investors that “Aussie Broadband will and can deliver the 100Mbps speeds at any time of the day or night, especially during peak times.” On the financial front, the company as expected is loss-making, but at its recent results, ABB’s revenue was up 89%, to $157.4 million, on the back of
- 81,273 net broadband additions in 1H21
- Growth in mobile, fetch TV and VoIP
- Strong growth in business broadband and Hosted phone
- Increase in retail broadband prices and lower than expected churn
In Britt’s finishing comments, he said the company is accelerating its investment in marketing in the current half, which impacts short-term EBITDA but drives long term growth. The company expects an impact from the NBN HFC stop sell which has been allowed for in guidance. The following updated guidance is for FY21. And looking at the table below, Aussie Broadband looks set to beat its prospectus guidance for both revenue and Normalised EBITDA driven by a higher-than-expected uptake in broadband numbers.
Plenti Group (ASX:PLT) – The second company that caught our attention was Plenti Group, the fintech lender that provides Aussies faster and fairer loans through smart technology. Listed roughly around the same time as Aussie Broadband, in September 2020, Plenti also rode the “move to digitisation” wave that hit during the pandemic-forced lockdowns. In short, Plenti is a peer-to-peer lender (P2P) that connects investors with borrowers. Investors seek a higher return on their money than the banks offer for lending out their money to borrowers. Investors determine the target rate, amount and loan term. The platform then matches you with a portfolio of borrower loans that match these preferences. Debt has shifted directly to the private lenders, giving them a high return benefit for risking their money. Platforms earn fees for each transaction.
So it’s a ‘bank’ then? P2P lending platforms are not banks, and their products are classified as a managed investment products. This form of investing should deliver a higher return than any banking product because the risks are higher. Plenti has tried to alleviate this risk by conducting creditworthiness checks. Plenti says all investors have, to date, received 100% of their principal and interest payments.
How has the year progressed?
Despite making a jumpy start following its recent listing, the platform delivered a record profit result for the quarter ending December 31, 2020. Loan originations were up 58% to $130.9 million, the loan book grew by 48% to $508 million, and the company is cashed-up. The non-bank lender provides car and personal loans and has recently started offering “green energy” loans. It has also launched a buy now, pay later (BNPL) finance option for renewable energy technology, in the form of a new zero-interest payment plan to fund the installation of residential renewable energy technology such as solar panels and batteries. Costs of the investment are spread over as many as 72 interest-free monthly payments. The decision to propose a BNPL offering that props up the renewable energy market significantly improves the appeal of the company.
While loan originations (new loans) are back on the rise, there has been a noticeable push by start-up P2P lenders to take on the big banks. Leading the charge is MoneyMe (ASX:MME), Wisr (ASX:WSR), Harmoney (ASX:HMY) and SocietyOne. But Plenti (ASX:PLT) has been in the game long before these recent start-ups. The company is six years old (until August 2020 it was known as RateSetter), and has lent out $870 million in loans to 55,000 borrowers. However, it seems that despite all the buzz and brouhaha, the market just isn’t sold on PLT.
