An expanded credit facility and new credit alert features are two reasons to like Mogo (TSX:MOGO) says Mackie Research Capital analyst Nikhil Thadani.
On Monday, Mogo announced a new credit facility of up to $40-million from funds managed by affiliates of Fortress Investment Group LLC. which will be used to repay and replace Mogo’s existing $30-million facility with Fortress.
“Fortress continues to be an excellent partner as we grow our high-yielding loan portfolio alongside the ramp of our new fee-based products,” said Greg Feller, president and chief financial officer of Mogo. “This new facility increases our available loan capital on more favourable terms and extends the maturities of all of our funding facilities to 2020.”
Thadani says this facility provides extra room to grow loan book revenue for Mogo, He also believes a recent high profile development in the U.S. spells opportunity for the Canadian fintech.
“(Its) product roadmap helps Mogo benefit from Canadian FinTech adoption,” the analyst says. “As we have previously indicated, it is still early days for FinTech usage in Canada. On Sept 19th, we attended a Mogo investor luncheon. We believe Mogo’s product roadmap could help drive fee based revenue growth and include new credit alert features, which could alert members when there is a new credit bureau inquiry and help detect fraudulent activity. This feature could be timely, as the recent Equifax hack may have impacted upto 100K Canadians, according to Equifax. The breached data may have included names, addresses, social insurance numbers and in some cases credit card numbers. Potential additional products could include robo-advisor products as we have previously suggested.”
In a research update to clients Tuesday, Thadani maintained his “Speculative Buy” rating and one-year price target of $7.00 on Mogo, implying a return of 73 per cent at the time of publication.
Thadani thinks Mogo will generate EBITDA of $1.22-million on revenue of $47.8-million in fiscal 2017. He expects those numbers will improve to EBITDA of $8.28-million on a topline of $69.4-million the following year.