MOC - Mortgage Choice

[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%

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%

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.

 

[skc]

The market didn't like MOC's announcement today.

The H1 result is down by 25% compared to pcp. They blamed that on a 35% increase in expense, on a higher revenue.

H1 FY10/11 MOC reported profit of $8.785m on $68.5m revenue and $47m operating expenses.

If expense went up 35% it would be $63.5m. Add to that borrowing costs ~$8m from pcp, total expense for H1 FY11/12 is ~$71.5m.

If reported profit is down 25%, the number would be $7m.

Add the downgraded profit to the increased expense, you get revenue ~$78.5m. That's a 14.6% increase from pcp which is definitely much higher than the system growth.

If this analysis is correct and the increased costs are in fact one-offs, then today's sell off might be an over-reaction.

 

[Knobby22]

Hmmm
I'm thinking they may have booted the previous figures and left expenses to this half to increase Counts price to CBA. But that wouldn't happen would it? Lousy disclosure in any case.

 

[McCoy Pauley]

I wonder what could cause the jump in expenses. Having procured my mortgage through MOC (worst decision I made, incidentally), I reckon most expenses would be mostly fixed.

Further, correct me if I'm wrong, but MOC works on a franchise model, which would (IMO) have the effect of pushing the operational expenses onto the franchisees and leaving the head company with the expenses of managing the franchise.

Something doesn't quite add up for me.