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Harmoney Investor Hub | (ASX: HMY)

Hanken Grotesk

Harmoney (ASX:HMY) Investor Hub

harmoney-2025-02-21-1h25-result-operational-leverage-overture.pdf

Harmoney (HMY) reported a strong 1H25 result, underpinned by continued operational scalability and improving credit performance. Key highlights for 1H25 included: (1) a +50 bp sequential improvement in net interest margin (NIM) to 9.0%, now back within the targeted 9%–10% range and driven by new lending NIM at ~10%; (2) a -50 bps reduction in incurred credit losses versus 1H24 to 3.7% despite a soft economic backdrop; and (3) Stellare® 2.0 drove a +43% increase in Australian new customer originations, reinforcing its effectiveness in scaling loan volumes. These positives outweighed the weak NZ loan book performance (-6% on pcp). HMY is positioned to unlock operating leverage as its loan book expands, with newly introduced Cash NPAT guidance for FY25 (A$5m) and FY26 (A$10m+), reinforcing our near-term earnings expectations. We make minor amendments to our earnings forecasts and lift our spot valuation by +1% to A$1.30, representing 10.6x our revised FY26 Cash NPAT estimate.

Earnings: FY25 Cash NPAT estimate rises +3% to A$5.6m, whilst FY26 and FY27 rise +0% and +2% respectively

Spot valuation: Our blended spot valuation lifts +1cps to A$1.30.

Heading in the right direction—1H25 result overview

HMY delivered a strong 1H25 performance, reporting a Cash NPAT of A$2.3m and a Statutory NPAT of A$2.0m. This result marks the sixth consecutive half-year of positive Cash NPAT and demonstrates the growing scalability of HMY's tech-driven platform in a stabilising macroeconomic environment. Loan book growth of +4% (over pcp) to A$783m was driven by a +14% increase in Australian loans, now comprising 57% of the total book, which helped offset a -6% decline in the New Zealand loan book. HMY's cash return on equity (ROE) reached 13% in 1H25, positioning HMY well to achieve its 2H25 run-rate target of 20%.

HMY is well positioned for earnings growth

HMY is well-positioned to deliver significant earnings growth as the interest rate cycle turns. This reflects: (1) higher risk-adjusted income yields, supported by NIM expansion from reduced funding costs and declining credit losses, and (2) HMY's highly scalable business model, with the cost-to-income ratio falling further to just 18% in 1H25. The combination of these factors means incremental book growth will be highly accretive for HMY's profitability. While HMY needs to execute on growing its scale, strong growth in Australian new customer loan originations (+43% versus pcp) is a constructive trend. HMY's capital position could support loan book growth to A$1.2b (+53% from current levels), with further growth able to be funded through operational earnings.

HMY provided its first Cash NPAT guidance, targeting A$5m for FY25 and at least A$10m for FY26, reflecting management's growing confidence in its earnings trajectory. Our new estimates for FY25 and FY26 are largely consistent with this new guidance, but are +12% and +23% ahead of HMY's guidance/targets respectively.

Any financial advice given in this email is given on behalf of Forsyth Barr Limited, a licensed financial advice provider. Any advice in this email is specific to the particular securities discussed and does not take into account other investment opportunities or your personal financial situation or investment goals, so may not be suitable for you. If you wish to receive personalised financial advice, please contact your Forsyth Barr Investment Adviser.

Forsyth Barr: 1H25 Result—Operational Leverage Overture📈