Table of Contents
Harmoney Corp: A Promising Microcap Opportunity in Personal Loans
Harmoney Corp (ASX: HMY), with a market capitalisation of approximately $60 million, is a standout player in the personal loan market. Offering both secured and unsecured loans through an entirely digital platform, the company differentiates itself with competitive pricing based on risk-adjusted interest rates. Unlike many microcap firms, Harmoney demonstrates consistent profitability and clarity in its strategic outlook, rendering it an appealing but potentially volatile investment choice.
Strong Half-Year Performance for FY25
On February 20, 2025, Harmoney reported its half-year results for FY25, which led to a remarkable 26% surge in its share price that day. Key takeaways included:
- Cash Net Profit After Tax (NPAT): A notable increase of 350% year-on-year, reaching $2.3 million.
- Cash Return on Equity (ROE): Maintained at 13%.
- Net Interest Margin: Grew by 20 basis points to 9.0%.
- New Customer Loan Originations: Rose by 43%, driven by the Stellare 2.0 platform.
- Guidance for FY25: Revised cash NPAT target set at $5 million, with second-half ROE expected to reach 20%.
- FY26 Projections: Aiming for at least $10 million in cash NPAT and an ROE of 25%.
These results underscore Harmoney’s ability to enhance earnings and margins while exercising financial discipline, a rarity in the microcap landscape.
Stellare 2.0: A Catalyst for Expansion
The launch of the Stellare 2.0 platform in Australia in August 2023 has been instrumental in Harmoney’s growth trajectory. With a focus on customer experience and loan origination enhancement, Stellare 2.0 boasts:
- Fully Automated Processing: Streamlines operations by enabling instant credit decisions and funding, eliminating the need for manual interventions.
- Personalised Pricing: Utilises a machine-learning credit scorecard to provide tailored loan options up to A$70,000 with terms of three, five, or seven years.
The platform has already facilitated a 43% increase in new customer loan originations for the first half of FY25, with plans for a New Zealand rollout in the second half, furthering growth prospects.
Q3 Update: Sustained Growth Momentum
In its update for the nine months ending March 31, 2025, Harmoney revised its FY25 cash NPAT forecast to $5.5 million, reaffirming its FY26 targets. Key Q3 metrics indicated robust performance:
- Loan Book Growth: Up 5% year-on-year, reaching $798 million.
- Net Interest Margin: Increased by 30 basis points to 9.1%.
- Risk-Adjusted Income: Rose by 60 basis points to 5.3%.
- Credit Losses: Decreased by 30 basis points to 3.8%, highlighting effective risk management.
- Cost-to-Income Ratio: Improved by 300 basis points to 18%.
These results reflect not only strong loan book growth and improved margins but also efficient cost management with minimal credit quality deterioration. The company anticipates potential growth to a A$1.2 billion loan book without necessitating an equity raise.
Navigating Illiquid Microcap Challenges
Despite the strong performance, Harmoney’s stock experienced significant volatility after February, plummeting 41% from 69.5 cents to 41 cents between February 20 and April 7, primarily due to general market turbulence and the stock’s illiquid nature. The average trading volume over 20 days has been around 43,000 shares (approximately A$25,000), suggesting that even modest trades can influence prices substantially.
In response to this volatility, Harmoney’s board announced an on-market buyback of up to 5% of its shares, scheduled from May 13, 2025, to April 29, 2026. Management expressed confidence in the equity’s value at current levels, indicative of their belief in the company’s undervaluation.
Conclusion: A Mixed Yet Promising Outlook
Harmoney presents strong fundamentals for its microcap classification. The forecasted FY25 NPAT of A$5.5 million implies a price-to-earnings (P/E) ratio of 11x, which reduces to 5x based on their FY26 target of at least $10 million. With further anticipated loan book growth, improving margins, and decreasing credit losses, the company showcases operational strength, bolstered by Stellare 2.0’s capabilities.
However, concerns remain regarding Harmoney’s small market size, which poses challenges in attracting institutional investors due to its limited liquidity and research coverage. The share price’s recent decline poses a barrier for potential investors as sizable trades can significantly affect stock values.
While the balance sheet supports growth without immediate capital raises, potential future dilution is a risk. Broader economic headwinds—including inflation, recession risks, and potential tariffs—could also impact loan demand and affect investor sentiment towards speculative and microcap stocks.
