Undervalued? A $60 million market cap lender targets $10 million profit by FY26

Harmoney Corp (ASX: HMY) is a $60 million market cap company that offers fast, competitively priced personal loans — both secured and unsecured — through a 100% digital platform with risk-adjusted interest rates.

Unlike many microcap companies, Harmoney stands out for delivering consistent profitability, clear guidance, and ambitious medium-term targets, making it an intriguing yet volatile opportunity.

Robust FY25 Half-Year Results

On February 20, 2025, Harmoney’s half-year FY25 results showcased significant progress, driving a 26% share price surge on the day of the result. Key metrics included:

• Cash net profit after tax (NPAT) of $2.3 million, up 350% year-on-year

• Cash return on equity (ROE) of 13%

• Net interest margin increased 20 basis points to 9.0%

• New customer loan originations grew 43%, fueled by the Stellare 2.0 platform

• FY25 cash NPAT guidance of $5 million, with second-half cash ROE targeted at 20%

• FY26 cash NPAT target of at least $10 million, with cash ROE of at least 25%

These results highlight Harmoney’s ability to grow earnings and margins while maintaining a disciplined outlook, positioning it as a rare profitable microcap.

Stellare 2.0: The Growth Engine

The Stellare 2.0 platform, launched in Australia in August 2023, has been pivotal to Harmoney’s growth. Designed to enhance customer experience and boost loan originations, its key features include:

• Fully Automated Processing: 100% straight-through processing delivers instant credit decisions and funding within seconds, eliminating manual steps

• Personalised Pricing: A machine-learning credit scorecard assesses borrower profiles, offering tailored, risk-based pricing for loans up to A$70,000 with three, five or seven-year terms

The platform supported a 43% surge in Australian new customer loan originations in 1H FY25, with plans for a New Zealand rollout in 2H FY25 to further drive growth.

Q3 Update: Sustained Momentum

Harmoney’s year-to-date update for the nine months ended March 31, 2025, upgraded its FY25 cash NPAT guidance from $5 million to $5.5 million, while reaffirming its FY26 targets. Key Q3 metrics showed continued improvement:

• Loan book grew 5% year-on-year to $798 million.

• Net interest margin rose 30 basis points to 9.1%.

• Risk-adjusted income increased 60 basis points to 5.3%.

• Credit losses fell 30 basis points to 3.8%.

• 90+ day arrears edged up 2 basis points to 0.69%.

• Cost-to-income ratio dropped 300 basis points to 18%.

These figures reflect strong growth in loan book size, margins, and cost efficiency, with minimal deterioration in credit quality. Harmoney also projected potential loan book expansion to A$1.2 billion without requiring an equity raise.

Illiquid Microcap Dynamics

Despite the strong results, Harmoney’s share price faced significant volatility post-February, dropping 41% from February 20 to April 7 (from 69.5 cents to 41 cents) amid broader market volatility and the stock’s illiquidity. With a 20-day average trading volume of just 43,000 shares (approximately A$25,000), even small trades can significantly move the price, contributing to the steep selloff.

Harmoney year-to-date price chart (Source: TradingView)

In response, Harmoney’s board announced an on-market buyback of up to 5% of its outstanding shares, running from May 13, 2025, to April 29, 2026. Management stated, “The board and management see significant value in Harmoney’s equity at current levels,” signaling confidence in the company’s undervaluation.

Putting it all together

Harmoney’s fundamentals are impressive for its microcap status. The upgraded FY25 cash NPAT of A$5.5 million implies a price-to-earnings (P/E) ratio of 11x, dropping to just 5x based on the FY26 target of A$10 million.

Further loan book growth, improving margins, and declining credit losses highlight operational strength, while Stellare 2.0 supports its ambitions to reach a A$1.2 billion loan book without additional equity.

However, Harmoney’s small size presents significant challenges. As a A$60 million market cap stock, it struggles to attract institutional investors due to its illiquidity, limited research coverage, and inability to support large-scale accumulation.

Despite strong results, Harmoney’s share price fell 41% from 69.5 cents to 41 cents between February 20 and April 7, 2025, driven by broader market volatility and the stock’s illiquidity. Buying or selling sizable parcels can significantly move the stock price, posing challenges for investors.

While Harmoney’s balance sheet supports near-term growth without a capital raise, the risk of future dilution remains. Additionally, broader economic headwinds — such as potential tariffs, recession risks, and persistent inflation — could dampen loan demand and weigh on appetite for speculative/microcap stocks.