HiL a case of BuyJustNow, maybe
Homechoice has become a major player in fintech, but the group might be too tightly held for most investors
Homechoice International (HiL) has evolved from a catalogue retailer catering to lower- and middle-income households into a diversified fintech operator with ambitions to be recognised as “private bankers to the mass market”.
In less than a decade HiL has moved from earning the bulk of its keep from specialist retail to generating 92% of operating profit from Weaver Fintech’s digital credit, insurance, payments and merchant services offerings.
The one-time snail-mail catalogue retailer says 84% of its transactions and 57% of its revenue are now digitally based.
In the reporting period to endDecember, Weaver’s revenue increased 30.5% to R1.9bn, and this was converted into a 42% increase in operating profit to R622m (at a margin of 33%).
HiL said Weaver’s customer base stood at 1.6-million — an eightfold increase since 2019 with an 84% retention rate of active loan customers. Repeat customer business accounted for 86% of disbursements and 75% of gross merchant value (GMV).
Even more impressive is that recently acquired PayJustNow saw GMV more than doubling to R1.5bn. This generated buynow-pay-later fees of R81m (2022: R41m). Since its establishment three years ago, PayJustNow has digitally acquired nearly 1.3-million customers, with 100% growth in 2023. HiL said recurring customers account for 75% of total transactions.
But the market is yet to be seduced. Despite HiL delivering double-digit profit growth, the share price is down more than 40% over five years. With a market cap of R2.35bn, the group trades on a historic p:e of 7.25 and a yield of 6.8%. The multiple is more akin to fashion retailers Truworths and TFG than a fintech play. The yield is hardly reflective of a high-growth company.
One possibly negative factor is that more than 90% of its shares are held by two entities: GFM Holdings (the Garratt family) owns 70% and UK-based Development Partners International owns about 22%. A chunk is owned by management, which means less than 5% is in free float.
As a retailer HiL has always sold largely on credit — though these days the old catalogue has been displaced by showrooms, sales agents and a contact centre. The group’s ecosystem, though, is primed for cross-selling an array of financial products such as personal loans, insurance products and payment options (it already sells data, airtime and electricity value-added services). The longer-term plan is to augment lending income with more fee-based income and grow the array of products such as funeral cover.
“Increasingly we see ourselves as a fintech business, and that’s where all our growth is coming from,” says Sean Wibberley, CEO of Finchoice and Weaver. “My