MOC - Mortgage Choice

[malachii]

Have read the Mortgage Choice prospectus and think its a goer. However prospectus says you have to be either morgage choice franchisee/employee or stock broker sponsored to get stock in the float. Any ideas as to where I can go to get an allocation in the float?

[RichKid]

The prospectus normally has a tel no for queries- Try calling some of the phone numbers in the prospectus- they should have a suggestion if anyone does.
Hope this helps.

[RichKid]

Oops! forget to mention: have you tried floattank.com.au I found it useful for reviews but they only review a few floats and I don't think it's as good as it could be but they would have something on mortgage choice. Good luck with it.

[waytogo]

Mortgage Choice - Go you good thing! Everyone who piled out when the ANZ and CBA cut commissions a while back, sending the price down to $0.90, will be a bit upset now. It's $1.55!

MOC is getting stronger all the time as a business, there seems to be no shortage of banks cusing it to access new loan customers and while the housing boom has moderated, it can still be considered fairly healthy. There has been no crash, and first homebuyers are coming back into the housing market. MOC needs to pick up its act on franchise growth and diversify its product offerings quicker, though. The dispute over commission structures (concerning those franchisees who own multiple franchises) needs resolution.

I am not qualified to offer financial advice. You should seek recommendations through someone who is.

[michael_selway]

Mortgage Choice - Go you good thing! Everyone who piled out when the ANZ and CBA cut commissions a while back, sending the price down to $0.90, will be a bit upset now. It's $1.55!

MOC is getting stronger all the time as a business, there seems to be no shortage of banks cusing it to access new loan customers and while the housing boom has moderated, it can still be considered fairly healthy. There has been no crash, and first homebuyers are coming back into the housing market. MOC needs to pick up its act on franchise growth and diversify its product offerings quicker, though. The dispute over commission structures (concerning those franchisees who own multiple franchises) needs resolution.

I am not qualified to offer financial advice. You should seek recommendations through someone who is.

wow this seems to be a nice growth stock atm, low PE and good div!

[malachii]

This is one stock that was going to be a good one from the start! At the float price ($1.05) it was offering a 9% fully franked div. It gets a trailing commission from any loans it writes therefore if you read the annual reports you can work out at least 55-60% of their earnings for the next 15-20 years - then you have on top of that any organic growth both from writing new loans or selling new franchises. It has no major machinery or anything to constantly update as the whole business is really worked around a computer spreadsheet that calculates the best loan for you on a laptop provided by the franchisee.

Currently the commission earned from previously written loans covers all expenses so anything new falls straight to the bottom line (and then onto shareholders!!). It is well positioned if there is any consolidation in the industry and with the new regulation that is coming out it is becoming harder to set up in competition. And as previously mentioned it still has a fairly high yield and low PE.

I'm normally a trader but to me this stock is a bit of a warren buffett type hold (great co., great management which has a lot of equity in the business, product that doesn't go out of date or require constant reinvestment of profits, good return, low PE etc etc).

Did I say I love this stock!!!

Malachii

WARNING: I bought this stock immediately it floated ($1.05) and then purchased more at 90 cents and then more again as it went back up to $1.02 so I got it at a great price - I'm not saying that you should go out and buy at current price.

[waytogo]

Mortgage Choice is definitely a rarity. Financial industry stocks are usually winners, and the company has a great niche market position, competitive strength and brand recognition.

The performance of MOC should turn out to be very stong over the coming year given the stabilisation of the housing market and it scaleable and growing low-cost distribution platform.

I have seen articles saying it's undervalued still, even at today's $1.60 close.
The share is probably valued at around $2.00+ when its various strengths
are more appropriately priced in.

I am not qualified to provide financial advice - please seek your own recommendations.

[waytogo]

$1.69 close today - looking good for passing $2.00.

[michael_selway]

$1.69 close today - looking good for passing $2.00.

True but Volume today is only 6500? Hm seems like the SP of this stock can be easily "played"?

[malachii]

Your right Michael - this stock would be easy to play with - the volume is quite frequently fairly low. However if you look at the chart it is has (until recently) not had any real trouble holding around the $1.50. Dont think it will hold the $1.69 but you never know - there does seem to be a small amount of depth building in the $1.60s.

Like I said in a previous post - I'm a bit of a believer in this stock so anything I say should be taken with a large bucket of salt!

malachii

[waytogo]

It's definitely true that volume is low, but that's a good thing. Occasionally there are days when in fact nothing is traded, while there are days when a million shares are traded, at the other end of the spectrum. In terms of being 'played', this would be quite difficult, because buyers and sellers generally stalk each other for a day or more, before committing.

If you have a good quality share, why would you want to give it away cheaper? Companies with less robust brand names, business models technicals and fundamentals do jump around and get played more easily. Simply buying something which people want to hold onto leads to better price appreciation, and brings low volumes.

The company itself purchases shares for its directors superannuation, which must contribute to volume.

A large portion of the MOC shares are held by the franchisees themselves, so they have an aligned interest in both the business and the share price doing well (the IPO was not offered to the general public, but to franchisees and staff). People who bought in at the IPO price of $1.05 are getting a 9.33% fully franked dividend - why sell? The p/w, based on the IPO price is just 9.63 - compare these stats to the banks!!!

Most of us don't usually go for shares with such low liquidity, but they have been able to sustain their price and move quickly back up after major setbacks (being the ANZ and CBA cut in commissions, and the initial news about the commission dispute). For example, the price dropped around 20c when the commission dispute arose, and quickly regained that amount.

As for $1.69, MOC has been there before, just before the whole market got hammered at the start of October just gone. MOC has a good business story/theme, but its technical aspect and fundamentals stack up too. A rare hat trick!

Please ensure you get independent recommendations - I am not a qualified financial adviser.

[waytogo]

MOC hit $1.68, minutes after opening. On three trades so far, 5870 shares have traded at this price.

An interim dividend is approaching, with the shares going exdividend early April. Their present price will incorporate at least a 3.8c dividend (assuming the same as last time unless it is higher).

Hey - stop pulling my chain!!! MOC has just hit $1.69 (now a total of five trades on a volume of 14870). Will a new record high be set today?


I am not a financial adviser - please seek independent recommendations

[waytogo]

10 Trades, 41370 volume. 15000 of these shares were traded at the new all-time high - 1.70. MOC has upward traction.

[malachii]

Good day today - all trades except for 1 at $1.74/5.

malachii

[waytogo]

MOC hit $1.80 yesterday - new all time high.

[michael_selway]

MOC hit $1.80 yesterday - new all time high.

Im still a little worried about thw low volume (liquidity) on certain days

But yeah ill just keep an eye on this one :)

[michael_selway]

MOC hit $1.80 yesterday - new all time high.

it dropped big time today, any ideas? $1.62

[ob1kenobi]

it dropped big time today, any ideas? $1.62

Below is Tuesday's Market analysis from Aspect Huntley. I suspect the data on housing may have had an impact on some property related stocks. It's only a hunch though!



ASX Market Report Local Market Ends HigherTuesday, January 17 - The Australian share market climbed higher Tuesday, despite US markets being closed for the Martin Luther King Jr holiday.

The All Ordinaries rose 31.4 points (0.66%) to 4,817.3 while the ASX 200 firmed 29.7 points (0.61%) to 4,866.1.

Campbell Brothers (CPB) acquired two laboratory groups, Enviro-Test Laboratory Group (ETL) in Canada for $57m and Ecochem a.s. in the Czech Republic for $18m. The acquisitions have been funded by the money raised from the 1:5 rights issue. Directors now expect the full year result will show an increase of approximately 35 percent on the underlying profit achieved for the year ending March 2005. CPB firmed 49 cents (4.47%) to $11.45.

Excel Coal's (EXL) subsidiary, Wambo Coal, entered into a contract with Taiwan Power Company (TaiPower) to supply 3Mt of coal at the rate of 500,000tpa for 6 years starting 1 January 2006. Excel Coal has also entered into a contract with Cargill International to supply 1.8Mt of Excel Blend coal over 3 years, with 300,000 tonnes to be delivered in 2006, 600,000 tonnes in 2007 and 900,000 tonnes in 2008. EXL lost 7 cents (0.99%) to $6.98.

Hardman Resources (HDR) provided a progress report on its drilling at Block 2 Mputa-1 Wildcat, Uganda, reporting that the rig has completed repairs and drilled the well to total depth of 1,186m. The well encountered oil shows over two intervals within a deep objective and as of midnight on 16 January oil samples have been recovered from the upper interval, a sand of approximately 10m gross thickness at 965m with the sampling and pressure testing programme is continuing. Upon completion of the Mputa-1 exploration well operations, the rig will move to the Waraga-1 location. HDR strengthened 7 cents (3.69%) to $1.97.

United Group's (UGL) rail and infrastructure businesses has been awarded rolling stock and track and signalling works contracts worth over $90m. UGL gained 11 cents (0.96%) to $11.60.

Metal Storm (MST) has been awarded a two year contract worth approximately $975,000 from the US Army's Armament Research, Development and Engineering Centre (ARDEC) for the design, prototyping and demonstration of Metal Storm less-than-lethal munitions. MST rose 2 cents (7.69%) to 21 cents.

Babcock & Brown Japan Property Trust (BJT) revalued 11 of the 12 original properties of the trust by 8.2%, representing an increase of approximately $47m. The revaluation of the 11 properties takes the total value of the Trust's interests in its portfolio at 31 December 2005 to $731m. BJT fell 2 cents (0.88%) to $1.69.

Queensland Gas (QGC) reported that the Berwyndale South Project is on target to supply CS Energy with coal seam gas several months ahead of the contractual deadline of 31 July 2006. It added that the drilling program remains on track with 16 of 25 wells drilled and 9 wells completed for gas production. QGC firmed 2 cents (2.8%) to 74 cents.

Gunson Resources (GUN) reported first batch of assay results from Chianti Prospect, Mount Gunson Project. Significant intersections include: 2m @ 3.4% Cu and 0.2g/t Au; 6m @ 1.4% Cu and 0.1g/t Au. The company advised that the second of the two hole program at Chianti Prospect was completed yesterday at a depth of 561m. The company added that the drill rig has been released from the project today and a more suitable rig is scheduled to commence the remainder of its Mount Gunson drilling program, at Moseley Dam Prospect, next week. Further drilling at Chianti Prospect will await a geophysical study focused on the northern portion of the area. GUN weakened 3 cents (7.69%) to 36 cents.

In economic news, the number of housing finance approvals in Australia rose a seasonally adjusted 0.4% in November from October, the Australian Bureau of Statistics said Tuesday. Economists surveyed ahead of the announcement on average had expected no change from October. The value of investment housing loans in November fell 3.7% from October. The bureau said its trend estimate for the number of housing finance approvals, which further smoothes seasonally adjusted data, rose 1.3% in November from October. In a breakdown of the data, the bureau said the number of finance approvals to build houses rose a seasonally adjusted 1.1% in November from October and the number of approvals to buy newly built houses fell 3.4%. The number of approvals for the purchase of established houses increased 0.5%. The total value of housing finance commitments, which feeds directly into the Reserve Bank of Australia's credit aggregates data, was A$18.3bn, down 0.4% from October.


The NZSX50 fell 3.21 points (0.1%) to 3,348.36 while the Nikkei weakened 334.17 points (2.05%) to be last quoted at 15,933.86 and the Hang Seng eased 26.58 points (0.17%) to be last quoted at 15,751.14.

The Australian dollar was last quoted at 75.41 US cents. from: http://www.aspecthuntley.com.au/af/marketdatastories?xsl-story=aust&xtm-licensee=aspecthuntley&xsl-markmenu=ASX+Market+Report

[michael_selway]

Amazing week

its $2 now! was 1.60 2 weeks ago

huge volume today

cant believe it, yeild also good

thx

MS

[malachii]

Finished at $2.05 - great report this morning - Interim Div gone from 3.8 cents last year to 5 cents + a 2 cent special div this year!!!

What more could you ask - this has been a great little money spinner for me!

malachii

[malachii]

Well - 12 months on and still going strong - I thought this one looked toppy when it hit $2 now we are looking to break $3 - who would have thought.

If you look at the weekly chart all the way back to March 06 it seems to trade in a fairly tight upsloping channel. And no signs of breaking it yet!

My big concern is CBA seems to be building a serious stake (in excess of 10% now - been building since last October). Hope they're not thinking of taking it over as it's a great business and I dont really want to sell.

malachii

[malachii]

Closed above $3 today ($3.02) - only another 4 cents and we're back into blue sky territory again.

Did I mention I love this stock??!!!

malachii

[michael_selway]

Well - 12 months on and still going strong - I thought this one looked toppy when it hit $2 now we are looking to break $3 - who would have thought.

If you look at the weekly chart all the way back to March 06 it seems to trade in a fairly tight upsloping channel. And no signs of breaking it yet!

My big concern is CBA seems to be building a serious stake (in excess of 10% now - been building since last October). Hope they're not thinking of taking it over as it's a great business and I dont really want to sell.

malachii

If property market crashes, does this company get affected?

thx

MS

[malachii]

If the property market crashes will people stop buying houses to live in? Will people still need mortgages? Will the people who have mortgages be able to pay their mortgage out over night so it no longer exists?

Of course I'm being a bit sarcastic and I apologise - it's late and I should be in bed. However there is a degree of truth (my belief anyway) in what I said above. Companies like MC get paid on the mortgages they have written - you can calculate 50-60% of their income for the next 15-20 years based on the mortgages on their books. They can actually pay all their expenses with the loans they already have - any extra they write goes straight to the bottom line (ie shareholders). And if the market crashes sure - some loans will default - but the majority of loans will still be paid because most people still want to live in their house and will do everything they can to make sure that happens. Why do you think banks are so keen to lend you money for your house. It is probably the most secure loan they can make.

I remember when interest rates first started going up and their was a big press feeding frenzy on how the property market would crash. MC went down 30% to something like 75 cents. A little while later they came out and said that a profits were up on what the expected - the share price went up above where it was and life went on. Every interest rate rise since MC has dropped 15-25 cents that day and then been back up or higher within a week or so.

Their income is fairly predictable. Sure they may have a period where their income plateaus for a while (hasn't happened yet!) but over the longer term they will keep tracking upwards while they have such good managers and the other pluses people talk about. They have expanded away from the east coast (mainly NSW) base which has protected them a bit from the "real estate crash" of Syd. And they talk about consolidating in Oz and maybe expanding O/S so that may change things a little.

I'm normally a trader but I'm holding these for the long term - they seem pretty dependable although I bought mine for an average entry price of $1.02 so I'm well and truely in the money (in fact they owe me nothing because I sold a small stake that paid for all of my remaining stake.). I compare them a little to the banks. Would you have been happy to have bought any bank 5 years ago and held it till now - even though it has gone up and down - paid dividends - and might be effected by a real estate "crash"??

malachii

[malachii]

Broke into blue sky territory today - will be interesting to see what happens over the next while. Still tracking onwards and upwards.

malachii

[ROE]

I bought in Today :-)
been on my radar for a while and it about the right price and CBA and PPT just increase their stake so the big boys is confirming with me this is a good stock at this price :D

[Judd]

Hope you do well. By the way when you read the PPT and CBA announcements did you happen to notice on whose behalf they were purchasing?

[ROE]

CBA bought for their Colonial Investment arm so I guess some Colonial Funds
and PPT bought for their funds as well... three internal funds they manage I assume.

Doesn't bother me too much, the price I'm willing to pay look right and I may be right, I may be wrong but it nice to see other big players buy as well.

[kirtdog]

Whats every1s view on this company?? Why is it so cheap, little debt and with the 'first home buyers grant' won't there be a lot of mortgage advice needed..? Thinking of buying when the price is right..

[oldblue]

Whats every1s view on this company?? Why is it so cheap, little debt and with the 'first home buyers grant' won't there be a lot of mortgage advice needed..? Thinking of buying when the price is right..

Rightly or wrongly, the market thinks that the big banks have got the mortgage market pretty much to themselves these days and that the brokers and smaller players will struggle to survive, let alone compete.

[kirtdog]

i dont see how australias biggest mortgage broker can go under, im likely buying in question is when..

[oldblue]

i dont see how australias biggest mortgage broker can go under, im likely buying in question is when..

Well, if they were to go under it would be for the same reason that Australia's biggest maker of buggy whips, or possibly kerosene table lamps, would have failed - not adapting to a changing market.

;)

[Seek$ucce$$]

Hi all

Does anyone know the COU (Count financial) takeover? what is the latest development?
When the takeover is announced, MOC went to around $1 mark and now trading in the range of 75c
I assume COU is no longer interested but I cannot find any announcements...

Any input is highly appreciated

[resourceboom]

I started looking at this company again today, there is a bit of mention of the COU interest in the MOC agm pres. take a geez at that. It looks like COU are not too interested in getting more, and marking their shares to market.

I think i'll avoid this company for time being. This is probably a great chance to buy a decent company at a low price, but I think there are so many other cheap companies I can find more with less risk.

[Seek$ucce$$]

I think this business is fundamentally sound and the fear has been over done...property market (residential only) is not as bad as US and UK...comission has been slashed but it should be reflected in the share price at the moment.

With or without COU takeover...this is a good company with good earnings and stable dividend...if COU takeover, it's a bonus....

Anyone...opinion?

[malachii]

My opinion on this company hasn't really changed in 3 years. It is a sound company with fairly predictable earnings. They deal in mortgages so a lot (probably 50-60%) of their income is pretty stable over the next 5-10 years. If property goes up - people need a mortgage. If property goes down - guess what - people need a mortgage to take advantage. It is unusual for people to buy a house outright with out getting a mortgage. Even if you already own a house you are usually up sizing and need a loan. It is only a small percentage of people who are downsizing (I know - I'm generalizing!!).

Sure - they may not write as many mortgages this year (as they seem to be saying in their latest report) but they will still write a sizable chunk. Their earnings are down but still respectable and they will still deliver a decent dividend this year - maybe down 20% or so. This will still give a total fully franked dividend of around the 10% mark so not too shabby!

Shortly after this company first floated the Reserve Bank increased interest rates and the share price dropped into the 0.70s - kind of like now. People were worried about the stability of the company. Within 18 months or so the were up in the $3 range. Now the Reserve Bank is dropping interest rates and guess what - the market is worried about the stability of the company. I'm not saying they will be worth $3 in 18 months but in MY opinion I think the company has good long term potential.

It earns good cashflow, doesn't need to spend large amounts of money in developing new technology or updating equipment, it's simple and well managed and upper management holds large slabs of shares. All good signs to me.

GIANT SELF INTEREST WARNING - I OWN SHARES IN THIS COMPANY - If you look at previous posts by me I state that a large chunk of my holdings in this company are free held. I have also recently purchased another 25 000+ shares in this company at an average of about 75 cents so I have a pretty big interest in making this company look good - PLEASE DON'T JUST BELIEVE ME - DO YOUR OWN RESEARCH!!!!!

[ROE]

Hi all

Does anyone know the COU (Count financial) takeover? what is the latest development?
When the takeover is announced, MOC went to around $1 mark and now trading in the range of 75c
I assume COU is no longer interested but I cannot find any announcements...

Any input is highly appreciated

Count want to take over at $1.05 .. MOC said no too cheap..then they increase their stake a little bit more
still MOC ignore them and treat them like any other share holders...

to sum up count not going to get it for $1.05 when the founder hold a large chunk of the stock and said no.

so Count either have to sell down their stake or keep them as an investment for their free cash and if it can generate higher return than what count can make then why sell them....

in the mean time count can send all their clients this way while they have a large share holding and share the profit :D ...

[Seek$ucce$$]

That's a good point...

COU wanted to takeover because of a good synergy between the two businesses.
Failed to take over but holds a significant shareholdings would entice them to refer clients to MOC...it is for COU's own best interest anyway.

We'll see what's the effect on MOC of the next interest rate cut next month

[Seek$ucce$$]

MOC gets trashed today after the rate cuts....***confused***
rate cuts --> means more business for mortgage brokers right?

[chiraag]

Can anyone explain to me why MOC has dropped 5% today after announcing what I thought were some quite good finacial year results - profit up almost 40% :confused:

Going ex dividend on Monday as well for 5.5c per share, which is about 4.6% yield at current prices.

[oldblue]

Can anyone explain to me why MOC has dropped 5% today after announcing what I thought were some quite good finacial year results - profit up almost 40% :confused:

Going ex dividend on Monday as well for 5.5c per share, which is about 4.6% yield at current prices.

Pricing reactions following profit announcements are all about expectations either being met, exceeded or missed. It seems that the expectation was for a better result, although the general weakness of the market today probably has something to do with it too.

[ROE]

Can anyone explain to me why MOC has dropped 5% today after announcing what I thought were some quite good finacial year results - profit up almost 40% :confused:

Going ex dividend on Monday as well for 5.5c per share, which is about 4.6% yield at current prices.


are you going to sell this stock if it hasn't dropped 5%
then why be bother if it dropped 5%. :)

If you buy good business, over time it will generate you far greater return
than daily stock price movement

I got lot of stocks that sometimes drop 20%, 30% or 40%
Great good time to buy more and lock in future return

[Rainmaker2000]

Loved the result and outlook today........Love the MOC business.....love the rich vein of divvies.......they are certainly an extreme example of a resilient, low capitalisation business model

Even so, investing is about looking at detail........the so called 40% earnings lift carried by the Murdoch paper headlines taken into account an actuarial analysis of the 'run rate' on their mortgage book which is apparently better than expected......

Even the company was honest enough to point to a 10% plus drop in cash earnings........like the banks, that's what matters and where MOC wonderful stream of 100% franked divvies are sourced from....

With the housing cycle turning, MOC has done pretty well slightly above system growth........and will be paying a 10%ish yield for some time into future:)

[Knobby22]

I've got, for me, a very large holding.

I bought a bit lower than the present price and it dropped quite a bit before coming back. The yield alone has paid for the investment.

No debt and they still have Count Financial buying shares. They were the ones who promised to take the company over. I think they have left it too late now but who knows??

btw What happened to your blog Rainmaker?

[Rainmaker2000]

Don't know if Count will ever takeover, as they seem happy now to perhaps have a few product alliances and reap the divvies.....

Count has a much higher PE than MOC and just loves issuing more shares at that higher valuation, some of which has gone into MOC which is a very 'swift' way of boosting EPS using cheap capital........

Don't have time for blog these days as took on more onerous and lucrative day job and commenced Phd...........

Still love the stocks, albeit, there were some pretty heavy losses for a while there.......most have turned around amazingly quickly.......FLT and MOC are two:)

[chiraag]

MOC has taken a bit of a hammering this week, and I haven't seen any news that would provide a reason.

Does anyone else know what's going on?

[Knobby22]

MOC has taken a bit of a hammering this week, and I haven't seen any news that would provide a reason.

Does anyone else know what's going on?

I'm sure its not anything sinister.
Many good stocks have dropped this week. There appears to be no buyers for stocks at present. Volumes have really dropped.

[Rainmaker2000]

I think the market is a bit surprised the interest rate cycle has turned so quickly which may be perceived as a threat to house cycle....

Still, it's a very small part of picture.......interest rates are reflecting our great economy with the shock low unemployment figure coming out the other day........and as we know, employed people tend to be able to get home finance.........

For those students of MOC, you may have noticed that the share of lending among big banks in relation to the minor banks has reverted back to pre GFC levels.........

It was a bit of surprise that happened so quickly and is actually a big aspect of MOC business model and keeping mortgage commissions up.........

[coffee_snob]

I thought i sent in a post but it mustn't have worked.

I just invested $3000 into this one. Long term I hope it will perform well.

Anyone out there still holding

[malachii]

This one has been quiet for a while but an interest release this afternoon. Earnings only down 12.5% instead of the previous release stating 30-35%. This is an increase in profit by about 9mil. Should be an interesting end of year result released later this week.

malachii

[Knobby22]

It is very nice to see an upgrade in the right direction.
'
Great company to hold, some capital growth with great dividends. It is becoming less volatile.

[malachii]

Kinda excited about the financial results release tomorrow. With the announcement the other day it could be a corker with any luck. Not sure if there will be an increase in div but it certainly has to be a possiblility.

malachii

[Knobby22]

Another good set of financial results with a good dividend.

Price has been slowly appreciating and with the fantastic dividend the total return has been good.

I don't expect there will be any traders owning this company, only fundys.

[snowking]

market definitely likes the results. Up 3% this morning after a strong close yesterday and with the overall market being down.
Good to see growth in their loan book as well as information in the presentation highlighting research that suggests people are likely to use brokers in the future as the industry becomes more regulated.

Long term holder

[skc]

MOC Mortgage Choice - Huge dividend and growth. What more does anyone want!

Hmm. How about some cash flow? Last year operating cash flow of $18.8m against a reported NPAT of $23.4m (80%). This year operating cash flow of $14.3m turned into a reported NPAT of $27.5m (52%).

Where's the profit come from?


In addition, assumptions used to value the future trailing commissions were changed to reflect an extension of the current economic environment for the short to medium term. These refinements to the valuation of trailing commissions resulted in a $17.6 million positive adjustment before tax to the Group’s profit and loss for FY 2011.

So the real profit is ~$10m while the rest are future trailing commissions. Kind of like an asset write up I suppose. On that $27.5m profit, EPS is 22.9c. So the market is pricing PE ~6. Or may be people are saying only $10m (8.3c) is real and a slightly generous PE ~15 to capture those potential future cashflows.

Not sure I am confident in taking that to the bank but I am no expert in loan book valuation.

[Knobby22]

Hmm. How about some cash flow? Last year operating cash flow of $18.8m against a reported NPAT of $23.4m (80%). This year operating cash flow of $14.3m turned into a reported NPAT of $27.5m (52%).

Where's the profit come from?



So the real profit is ~$10m while the rest are future trailing commissions. Kind of like an asset write up I suppose. On that $27.5m profit, EPS is 22.9c. So the market is pricing PE ~6. Or may be people are saying only $10m (8.3c) is real and a slightly generous PE ~15 to capture those potential future cashflows.

Not sure I am confident in taking that to the bank but I am no expert in loan book valuation.

OK P/E of 6 and yield of about 10%.
Consistent but a little bit lumpy single digit growth. The growth slowed one year due to the banks changing the commission structure.
MOC are brokers so they get money from their network of franchisees for selling a loan and from trailing commissions. They are also now getting into insurance btw.

The company grows in good times and in bad and does not take the risk of the loans.
If you look at the revaluation of the trail commissions you would have to say they seem to have a natural hedge on the housing market. In boom times they pick up more origination commission but their trail drops as people churn loans faster but in a downturn people hold their property so the trail increases as the length of time they hold the loan increases and the loan length bonuses kick in.

These future trailing commissions are real, not imaginary. There are a lot more companies with much shakier profit projections. If the property market starts churning... they get more money. If it doesn't the loan book keeps increasing and those commissions keep coming even as the market slows.

I am getting a fat check soon because of the 10% yield. They could increase the yield on present cashflow if they wanted. If you can get this with growth and and no company debt worries, why wouldn't you? In my opinion this company is cheap.

[skc]

OK P/E of 6 and yield of about 10%.
Consistent but a little bit lumpy single digit growth. The growth slowed one year due to the banks changing the commission structure.
MOC are brokers so they get money from their network of franchisees for selling a loan and from trailing commissions. They are also now getting into insurance btw.

The company grows in good times and in bad and does not take the risk of the loans.
If you look at the revaluation of the trail commissions you would have to say they seem to have a natural hedge on the housing market. In boom times they pick up more origination commission but their trail drops as people churn loans faster but in a downturn people hold their property so the trail increases as the length of time they hold the loan increases and the loan length bonuses kick in.

These future trailing commissions are real, not imaginary. There are a lot more companies with much shakier profit projections. If the property market starts churning... they get more money. If it doesn't the loan book keeps increasing and those commissions keep coming even as the market slows.

I am getting a fat check soon because of the 10% yield. They could increase the yield on present cashflow if they wanted. If you can get this with growth and and no company debt worries, why wouldn't you? In my opinion this company is cheap.

I think the churn in loan book is more related to the interest rate environment (I would want to switch when my fixed rate loan is higher than market) as opposed to the rise and fall of the property market. And of course to do with what the competitive landscpe looks like (e.g. everyone offering free exit fees).

MOC isn't that expensive based on their "real" profits alone so if those trailing commission write-ups turned out to be real and sustained then that will be a bonus.

The yield is attractive and pays out of operating profits so appear sustainable as well.