MOC - Mortgage Choice

[galumay]

Because I hold and am thinking of adding, long term.

I hold too. If I was considering increasing my position I wouldn't be worried about the price volatility. I would be looking at my calculated range of IV and seeing whether MOC was currently trading at a significant discount to my IV range ( it is ).

Then I would revisit my rationale for investing originally and reflect on how that had played out. I would probably read thru the last couple of reports again to refresh my memory about MOC and finally I would ask myself whether it was the best home I could find for the capital I was looking to allocate.

If all of that holds up then I will buy more at the current price, regardless of volatility in the short term.

When you look back at MOC aver the last 10 years its a pretty stable record, they havent grown particularly fast, but they havent issued many more shares, they still have no debt and they have a great yield. No doubt the price would suffer in any significant downturn in the housing market - but as 2007 showed, the actual impact on the business was not very significant.

Anyway, thats just a sketch of my process - not suggesting its what you or anyone else should do!

 

[Muschu]

Thank you ... and contemplating...

 

[JTLP]

Few questions from me:
- who are their main competitors? Is it comparator websites like infochoice et al? If so, are people essentially using a broker via laziness or convenience?

- Is it a win/win situation in any environment? Interest rates up = people shuffling their mortgages for a better deal / interest rates down = people happy to hold their product and MOC picks up commissions?

Trying to figure out the right time for this. Yield doesn't hurt.

 

[galumay]

JLTP, not really sure what their competition is, non-aligned brokers and to some extent comparison sites? I used a MOC broker to buy my current IP - before I was a shareholder. I had some specific issues being in a remote location and I felt the broker was very helpful and was able to deal with issues that while I might have been able to resolve, would have added stress and extra expense and time to the deal.

So I dont think its just about getting the best rates, its about understanding the processes and having relationships across the board - with banks, agents, local governments, conveyancers etc.

 

[Knobby22]

Well we should try to ignore the daily movements, but that drop didn't last long. Quite bullish in my view.

 

[Knobby22]

10% increase in profits. A rise of 1c in dividends.
Fantastic result.

 

[galumay]

Yep, steady as she goes.

 

[peter2]

10 mths later and it's not looking so steady.
Sold off today as MOC announced they were reviewing their franchisee remuneration structure.
The chart shows a reversal BO setup. This one failed to go higher.

 

[galumay]

True Peter! I think the market is very jittery round franchises since the RFG event, also Fairfax did a number on MOC today, a bit like their other stuff, its badly written, factually inaccurate and tapping into the emotions of people who probably should never have been in 'business'.

I had considered selling earlier in the year because I wondered how they would weather a housing downturn, but I was always reminded that they managed to make their way through 2007 continuing to pay a divvy - and the divvy stream has nearly exceeded my capital cost in not too many years so I have kept them.

I wouldn't have the conviction to average down at this stage, but will sit on the sidelines and watch what develops.

 

[luutzu]

True Peter! I think the market is very jittery round franchises since the RFG event, also Fairfax did a number on MOC today, a bit like their other stuff, its badly written, factually inaccurate and tapping into the emotions of people who probably should never have been in 'business'.

I had considered selling earlier in the year because I wondered how they would weather a housing downturn, but I was always reminded that they managed to make their way through 2007 continuing to pay a divvy - and the divvy stream has nearly exceeded my capital cost in not too many years so I have kept them.

I wouldn't have the conviction to average down at this stage, but will sit on the sidelines and watch what develops.

If about half their franchisees are losing money, not making money, consider suicide (literally)... and all that during what is probably the biggest property/mortgage boom with easy finance in at least a generation... The chances of MC coming out alive after the coming GFC II is pretty much zero, if you ask me.

Don't take it the wrong way, I'm not rubbing it in or intend to offend you in any way. I mean, I've made plenty of bad calls. Just thought I add my 2 cents to a discussion.

I don't think Australia was affected, much if any, by the last GFC. Definitely not its property market. I remember it took a slight dip, maybe 5% then quickly recovers to the recent property boom.

So mortgage-related businesses would have done very well in AUstralia because of policies following the GFC.

The coming one might not be so well.

 

[Knobby22]

Well the report is out. I only own half the amount of shares I previously owned as sold at $2.00 on the way down but still own to my chagrin.

I didn't mind the report, dividend still at 9c. Forecast still for a drop of 30% profit under the new share scheme with franchisors, I like the comments made about regulation, hopefully there will be a reasonable result there but still risk from government regulations.
I like the emphasis on growth of franchisees, if this can be successfully done in association with the financial planning advice then this company will look cheap.

So what are the shares worth? I think with the risks at present it is hard to work out but I would have thought at least $1.60 after post dividend, which translates to a yield of close to 9% with the possibility of a bit growth if the new brokers come on board.

 

[galumay]

I think the future potential may be in the financial planning/advice sector of the business, with the spin out of the Banking RC the big four are actively looking to divest themselves of this division within their businesses, its one of the things that interests me about CUP going forward and MOC are well positioned with licenses in place, to franchise/roll up this sector.

 

[luutzu]

I think the future potential may be in the financial planning/advice sector of the business, with the spin out of the Banking RC the big four are actively looking to divest themselves of this division within their businesses, its one of the things that interests me about CUP going forward and MOC are well positioned with licenses in place, to franchise/roll up this sector.

Yea, it'll do really well if it load up on new businesses and make lots of money.

People will abandon the banks and AMPs due to dishonest and bad financial advise. So they can't wait to take it from freakin real estate brokers.

 

[galumay]

I have had time to update my spreadsheets and check valuations, obviously the changes to the business and accounting practices make for a very skewed set of results and its a little difficult to unpick, but as usual cash flow tells whats really going on. The absence of debt is another thing that I have always liked about the business. As I have said previously, its basically a free carry for me now, dividend stream has now exceeded my initial capital allocation, in only 5 years.

I have them trading at just below my range of fair value, and given the situation I am happy to continue to hold, collect when we pass go and see how the financial services division performs over the next few years.

 

[greggles]

Mortgage Choice enjoying a nice 14.47% bounce to 91c today. No doubt because of Labor's defeat in the election, ensuring that their planned changes to negative gearing will never see the light of day.

 

[Zaxon]

Mortgage Choice is in a long term decline though. Whether they can grow out of that, I think it's too early to assume so.

 

[Knobby22]

The bounce is more due to the franking credits remaining. The yield is impressive. The future, less so.

 

[greggles]

Mortgage Choice is in a long term decline though. Whether they can grow out of that, I think it's too early to assume so.

Definitely agree with you on this. I just thought the bounce might present a good short term trading opportunity. It's up another 6% to 96.5c today and I suspect it might get above $1 in the near term.

 

[greggles]

I suspect it might get above $1 in the near term.

That was quick.

MOC hit a high of $1.065 today and closed at $1.05. The 12 month downtrend has been broken but there looks to be some serious resistance at $1.20 that it will struggle to get through.

 

[notting]

Get ready to short it.
Numbers were terrible simply on the market weakness thus far.
There was definitely the Shorter terror a also being anticipated but gut tells me this will see 61c