Raiz Invest Limited leveraging revenue diversification to tackle market volatility

Raiz Invest Limited (ASX: RZI), a holding company for a micro-investment services group, is focussed on providing clients with innovative and extremely relevant products and continued financial market education and an understanding that regular, small investments will grow into a substantial nest egg over time. The company’s proprietary investment platform, a mobile-led financial services platform, has made micro investing possible.

What is Micro-investing?

Investing small sums to build an investment portfolio, is not known as Micro-investing. To do this, one needs to open an account with micro-investment provider and link it with your bank account. After that innovative technology platforms come into play and they start withdrawing money from the bank account and invest into the market. The amount can be withdrawn via round-ups or one can set up of a recurring investment amount and schedule. Raiz app and its website are among the popular Micro-investing platforms in Australia.

Solid Growth in monthly customers and FUM

Since launching in 2016 Raiz has achieved solid growth in active monthly customers and funds under management. As at 29 February 2020, Raiz had 220,643 active customers with total funds under management of $464.67 million. During the December 2019 quarter, the company generated positive operating cash flow and as at 31 December 2019, the company has $12.2 million in cash.

Active Customers and Funds Under management (Source: Company’s Report)

Well placed to manage the volatile market conditions

“Raiz is well placed to manage the volatile market conditions with 66% of revenue being generated from the $2.50 a month management fee from active customers, 14% of revenue coming from fees related to funds under management, and the rest from other income, advertising and netting” said Raiz Invest CEO George Lucas while providing the update on customers and total funds under management. Notably, the diversified sources of revenue are keeping the company in a stronger position compared with businesses that only generate income from fees related to FUM.

Product Innovation in 2020

• Raiz bundll- A digital card that enables eligible Raiz customers to use funds in their account to pay for everyday expenses, interest free.
• Raiz Insure- An insurance platform that provides customers with the option of insuring single items.
• iSelf- Raiz has partnered with iSelf Health Insurance, to provide customers with a simple, and more personalised approach to health insurance.
• Offsetters- For just $3.70 a month, half a tonne of carbon will be offset each month of their membership.
• Sapphire Portfolio- The Sapphire portfolio is weighted to Australian and international equities, fixed income and cash as well as including a holding in Bitcoin.

Half-year Performance

In Australia, Raiz offers its customer base of over 200,000 a choice of six portfolios to store wealth; the ability to build wealth for retirement through Raiz Invest Super; and soon the ability to spend wherever Mastercard is accepted and manage cashflow with the use of the My Finance and the Raiz bundll co-branded card.

In the first half of FY20, the company reported a revenue growth of 47% to $4.46 million. Over the period, the company’s active customers increased by 21% on pcp, average revenue per customer grew by 76% on pcp (refer below image). During the December quarter, the company completed a placement and share purchase plan raising over $7.5 million with support from new and existing investors. Work continued during the quarter on progressing its strong product pipeline which will allow it to launch four new products in early 2020 in Australia.

(Company’s Report)

Recent Strategic initiatives

• The Raiz bundll co-branded Mastercard with Flexigroup (ASX:FXL) to be launched in February 2020 which will give Raiz customers the ability to better manage their cashflow with the ability to buy now pay later with the Raiz bundll card everywhere Mastercard is accepted.
• The company is planning to launch Raiz Insure, single item general insurance, by February 2020.
• Raiz Offsetters carbon offset program to be launched in Q3 FY2020; Offsetters will be Australia’s first carbon offset platform with an Australian disaster relief fund for the Raiz community.
• Raiz portfolio that includes a weighting towards Bitcoin with plans to launch the portfolio by June 2020 after satisfying many regulatory hurdles.

Meanwhile, the company’s official Indonesian launch is building momentum as it overcomes some technical issues with its local service providers. After receiving over 100,000 pre-launch registrations in just 10 weeks, the company is on track to convert these to active customers with over 11,000 investment accounts and 40,000 signs-ups, despite restrained marketing spend.

Focus for current quarter and beyond

• The company is focussed on increasing the life-time value of domestic customers by continuing to grow revenue per customer.
• As mentioned earlier, the company intends Launch the Raiz co-branded bundll card with Flexigroup in February.
• The company is looking forward to dinalise the Raiz product for the launch of a portfolio with an allocation to Bitcoin.
• Raiz also intends to finalise the agreement with its Indonesian cornerstone investor to accelerate market penetration.
• Finalise the App for deployment in Malaysia for Q3 2020 and work with its Malaysian strategic partners, PNB and Maybank, to add customers to the Malaysian App.

Recently, the company’s Director, David Robert Gordon acquired additional 10,000 shares of the company at a price $0.745 per Share, taking the total shares to 1,543,885.

On the stock performance front, RZI stock has declined by over 20% in the last three months. At market close on 4 March 2020, RZI stock was trading at a price of $0.790, down by $1.25 with a market cap of around $59.96 million.