RHG - RHG Limited

Re: RHG - Rams Home Loans

Pager said:

Sold my 2000 parcel at 36 cents today bought at 32 cents, made a profit of $80 minus brokerage .

Its anyones bet as to what happens next, good luck to everyone else who still holds, you will either do very nicely or see your hard earned get flushed.

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Not sure why you want to do this but buy a couple hundred bucks of shares is not good move as brokerage takes a large percentage of your capital.
you pay a few percentage point for every trade and that is very very expensive..
that is if the shares is going up, if it go down and you have to sell it a double whamming ...

you may need to reconsider your minimum parcel, just my 2 cents.

Re: RHG - Rams Home Loans

roland said:

.I would agree with sentiment that RAMS is also to be considered for long term gain - hey Westpac thinks so too....

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Are you sure westpac thinks Rams are considered for long term gain. Remember Westpac is buying( or trying to buy) only a portion of the business ( the best part). RHG will be left with the part Westpac obviously do not want. The payment RHG would get from westpac would mostly be used to retire debt. The question is " will RHG be able to profit from the existing mortgage loans."

Re: RHG - Rams Home Loans

Agreed. And there must be a reason why RAMS had no choice but to accept such a cheap offer. I don't thinkit would have sold its main revenue generators on the cheap if it didn't have too.

If the share price goes above the $140 million market-cap level, then for some reason the market thinks RHG can utilize that cash to fix up their balance sheet and become net-profitable again.

Too little information still i.m.o., plus the management, and more importantly, the business, doesn't have a track record.

A punting stock still if you ask me. Just risk your market-speculating money on it.

Re: RHG - Rams Home Loans

ROE said:

Not sure why you want to do this but buy a couple hundred bucks of shares is not good move as brokerage takes a large percentage of your capital.
you pay a few percentage point for every trade and that is very very expensive..
that is if the shares is going up, if it go down and you have to sell it a double whamming ...

you may need to reconsider your minimum parcel, just my 2 cents.

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Yes, I would agree, but in Pager's defence, I would say any trade that results in a gain is a good trade. I would suspect that Pager wasn't entirely committed to the transaction, went in light out of impulse for a quick gain and got out quick with a profit - suggests a bit of inexperience, but a successful (albeit very small) gain.

Having said that, I would agree with Roe, it probably would be better to apply some maths and calculate the return on investment, brokerage is a real bugger and makes a big difference on low value trades.

Re: RHG - Rams Home Loans

nioka said:

Are you sure westpac thinks Rams are considered for long term gain. Remember Westpac is buying( or trying to buy) only a portion of the business ( the best part). RHG will be left with the part Westpac obviously do not want. The payment RHG would get from westpac would mostly be used to retire debt. The question is " will RHG be able to profit from the existing mortgage loans."

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Point taken, and obviously you know more about the ins and outs of the details of the Westpac deal than I do.

I would suggest that market perception of Westpac's confidence would support a medium term SP improvement. In my opinion, there are far more emotional traders than technical traders.

Re: RHG - Rams Home Loans

ROE said:

Not sure why you want to do this but buy a couple hundred bucks of shares is not good move as brokerage takes a large percentage of your capital.
you pay a few percentage point for every trade and that is very very expensive..
that is if the shares is going up, if it go down and you have to sell it a double whamming ...

you may need to reconsider your minimum parcel, just my 2 cents.

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Im not a stock trader rather investor, bought RHG on the spur of the moment for a bit of excitment, then reality set in, no plan, no idea and i realised WTF am i doing , so i got out .

I trade futures for a living and it doesnt matter if your risking $100 or $10,000 its all money and none of it not even $1 is worth throwing away on a punt.

Good luck to everyone who believes its got plenty of upside, hope your right and you make a few $$$$.

Re: RHG - Rams Home Loans

Consider this senario. Rams directors can not continue to allow the company to trade if they have any doubts that they can meet their commitments if and when they fall due. This would happen if they do not find lenders to refinance loans. The company would then go into recievership and trading in shares would cease. This may not be all bad as the receivers may be able to trade the company through to returned profitability with a moratorium on immediate debt repayments.
Now I'm not suggesting this will happen because I'm not privy to the state of their finances and this is one of the worse case senarios. However if it was to occur there would be no notice giving a chance to exit and it could be some time before the shares would be traded.
Those thinking of making a quick buck day trading this stock should take this into consideration.

Re: RHG - Rams Home Loans

It seems that even the smart folk over at Intelligent Investor mag see RHG as a great value at "thirtycents-something" levels. Here is the relevant part of their newsletter I have been subscribed for a while (of course they have not forgotten to plug in their subscription/paid report links ):

RAMS share price is down 86% since its $2.50 float just a few months ago. Most people wouldn’t touch it with a barge pole. It’s too risky, right?

Wrong. This stock was risky at $2.50, but at thirty-something cents we think there’s far less risk. Are we mad calling RAMS a buy when everyone is running scared?

Frankly, we’ve seen it all before. Back in 2002, dot.bomb stock SecureNet had seen its share price fall from $20 to 80 cents. Everyone thought it was going broke, right at the time we started recommending it. But the company was sitting on $1.30 a share in cash and had no debt (it’s hard to go bust on a mountain of cash). As value investors, opportunities like this, and RAMS, are what we live for.

$99 for our RAMS research and a three-month subscription to The Intelligent Investor

RAMS doesn’t have the same pile of cash but it does have an asset that’s pretty certain to generate substantial income. And for $99 we’ll tell you all about it in a pdf that contains all our RAMS research.

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I wonder if anyone has read that particular RHG report as I think at $99 its pretty costly considering all the known info is already out there.

Re: RHG - Rams Home Loans

$99 for a report on RAM, s , get a couple of hundred takers and that’s nearly $20K, not bad for a few hours work writing the report.

Be interested to know what sort of valuation they have on it and price target, if they get it even half right they will be crowing about it for months/years to come.

It could well double but could well lose another 50%, be interesting to see what Monday brings although I wouldn’t be surprised to see it make new lows before or if it turns around.

A high risk punt at best, those in it will either kiss goodbye to there hard earned or get a very handsome return.

Re: RHG - Rams Home Loans

Well lets just see how Intelligent Investor explain the dump again in the US overnight and more sub-prime woes on thier way, not to mention the possibilty of a further 2 interest rate rises in OZ over the coming months. Surely RHG will be punished again come Monday. This is really high risk investing to say the least.

My mum just got a silent half a percentage point increase on her loan, (She is not with RHG but another low doc lender) wonder how many Rams Home Loan morgagtes went up by half a percent too.

The credit cycle is tightening like a vice over my head...

DEFFAULT HOME LOANS DONE DIRT CHEAP....OUCH!:

Re: RHG - Rams Home Loans

I still don't understand the RHG business concept 100% but I could see a reasonable value in holding a book of 14.5bn of quality mortgages + pretty decent franchise looking forward (the part WPC is after) per se.

Surely a well funded financial institution could squeeze at least 0.5%pa return on those existing mortgages for at least couple of years to come + benefit from the existing established mortgage franchises by getting some new mortgages behind their belt.

0.5% of 14.5bn is about 72mln. a year ie. about 20c/share omitting the future years' earnings (however dismal they may be) and a network of about 90+ established retail locations.

So I do see where Intel Investor is probably coming from BUT would not fork $99 for it

Another question nobody seems to raise pops in mind though: How come RHG was even allowed to float at $2.50? I mean don't we have any kind of shareholders protection watchdog/office to oversee the IPO levels? Or can anyone with a fish and chip joint pay seasoned marketeers to create a buzz and than float at whatever level he/she feels like? Surely the levels needs to be somehow tied up to the balance sheet and past performance.

PS.
In case you wonder I have not participated in this IPO but if I was in shoes of those who did (and perhaps haven't done their due diligence on this stock) I would feel cheated out of my money by greedy RHG management (do they still hold this stock or sold out shortly after float?) and whoever was responsible for this IPO.

Re: RHG - Rams Home Loans

Hi All,

Think of positive way, RAMS can always pass its cost to customers by increasing rate. If customers cant repay the loan then they go for default, RAMS would sell the assets/collaterals to recover its money. RAMS can easily force the customers to go default before it goes bankrupcy.

Surely the total assets of RAMS would worth more than 0.40/share
Good luck to all RHG shareholders. What a bargain stock!!!!

cheers

Re: RHG - Rams Home Loans

qr2007 said:

Hi All,

Think of positive way, RAMS can always pass its cost to customers by increasing rate. If customers cant repay the loan then they go for default, RAMS would sell the assets/collaterals to recover its money. RAMS can easily force the customers to go default before it goes bankrupcy.

Surely the total assets of RAMS would worth more than 0.40/share
Good luck to all RHG shareholders. What a bargain stock!!!!

cheers

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The big question is whether or not Rams can refinance their short term debt at a rate that can be passed on or even if they can finance it at all. At this stage I suggest that the Rams directors may be stalling for time and hoping to be able to do just that. If they can it is a bargain stock. If they don't then it may be worth zilch. That may not be thinking positive but it is looking at the possibilities. I hate to invest my money where I can not see that a positive outlook is a high probability. I am still watching this one closely.

Re: RHG - Rams Home Loans

jkool said:

Now how much would anyone value 14.5bn of OZ home loans? Your guess is as good as mine but by any measurements if a financial institution can't achieve at least 0.5% return on capital it needs to be placed into the "worse than average financial services business" category.

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No lender in the country is making 0.5% return of its resi mortgage loan book (excluding reverse mortgages in isolation).
Most major banks write loans at a loss (to later cross sell profitable products) and have large deposit bases to place loans on balance sheet, so funding issues are not as severe as they can be patient and ride out any short term treasury issues. RAMs have neither this luxury, or the real leverage available to many other large financial instiutions to corss sell profitable business off the back end of it's loan book.

It may turn around in a hurry, but there the old TA adage "picking bottoms leads to smelly fingers".

Re: RHG - Rams Home Loans

Mofra said:

No lender in the country is making 0.5% return of its resi mortgage loan book (excluding reverse mortgages in isolation).
Most major banks write loans at a loss (to later cross sell profitable products) and have large deposit bases to place loans on balance sheet, so funding issues are not as severe as they can be patient and ride out any short term treasury issues. RAMs have neither this luxury, or the real leverage available to many other large financial instiutions to corss sell profitable business off the back end of it's loan book.

It may turn around in a hurry, but there the old TA adage "picking bottoms leads to smelly fingers".

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I don't think most banks write loan at a lost ... Most major banks make lot of profit on loan book, take CBA for instance

Interest Income: 23 862 Mil
Interest Expense: 16 823 Mil

That is a healthy number if you ask me, it wont be just housing but all form of borrowing... they take cheap deposit from you and I and lend it out at market
rate. but that got nothing to do with RAMS and RAMS could be worse but for a company that survive a decade long I some how doubt this little trouble could put it in its resting place but then again it just my opinion.

Put the number crunching a side I tell another story from another place that actually fit into this situation pretty well..

I don't know if anyone hold FLT stocks here but I do, I bought in around 11-11.50 when it was trading at 11-13 bucks..the private equity come along and paint a very bad pictures for the company ..increase competition from all
sides, reduce margin from Qantas etc... this is a perfect opportunity for us to buy you out at $17, we pay a nice premium for it.
some how the management convince that FLT is going through a rough time
and need to take it off the market for short term pain for long term gain and recommend everyone take up the offer.. .one thing lead to another and the offer got rejected by the shareholders... they come back with another offer shortly after and again this time the management got independent report and found the offer was way under value and reject the offer once again..it now trading at $24 and the pictures is a very bright sun ray for FLT now, one announcement after another with record profit and increase revenues...all this happen in a space of 12 months

how is this apply to RAMS?..well Westpac can use the same story and pain a very bad pictures with the credit market and offer all the senior management jobs at westpac...why else the management would not accept the offer?
they have everything to gain and nothing to lose.

I'm a little more skeptical with Westpac offer and I will surely have my little say and reject it. RAMS may not be a bright star like FLT but I dont think it's that bad as people make it out to be especially at 35 cents stock...
at $2.50 I definitely avoid but at this price I couldn't help but buy

Amen

Re: RHG - Rams Home Loans

ROE said:

I don't think most banks write loan at a lost ... Most major banks make lot of profit on loan book, take CBA for instance

Interest Income: 23 862 Mil
Interest Expense: 16 823 Mil

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Howdy ROE,

I'm only talking about the mortgage loan book - many other structured lending products have customer margins included on top of the cost of funds - mortgages don't as they are viewed as virtual retail loss leaders. Yes, deposit holding organisations use these deposits to lend, however a surprising level (even of our "4 pillars") actively seek to securitise as much of their loan books as possible.

As far as RHG bouncing, there may well be some bounces along the way, however as we progress into the AIMS reset season funding a securitised lender 100% via CDOs & SD is going to get more difficult, not easier. Industry buzz paints a grim picture for lenders who are not tightening their belts now - and most mortgage industry investers avoided RAMs simply because they had spent 12-18 months, in an obvious fasion, writing unprofitable business to boost their loan book for the IPO.

Re: RHG - Rams Home Loans

Mofra said:

No lender in the country is making 0.5% return of its resi mortgage loan book (excluding reverse mortgages in isolation).
Most major banks write loans at a loss....

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I find that really hard to believe. Would you pls be able to provide some fact/resources supporting this claim?

From my ingenius consideration I go by the fact that simple re-lending of the credited term deposits and/or (into certain degree) everyday account balances on which the banks pay max. about 7%pa interest these days should produce a gross margin of about 1%+ (counting the current mortgage rates being about 8%+pa).

Of course you may argue that bank does not have sufficient own "cheap funds" (ie. own term and other deposits) hence may need to fund the mortgages from "outside sources". But even than I see that the interbanking LIBOR rates stand at around 5-5.5% this year. So underwriting a loan for retail rate of 8%+ still leaves some handsome profits on the table doesn't it?

I understand RAMS used shorter term or less than standard processes to finance their loans which is where the troubles start.

Re: RHG - Rams Home Loans

To my last entry (cant edit it now ):

Perhaps more accurately reflect the potential profit margin the 90days bill swap rate should have been used; it is still around 6.90% vs. 8%+ variable interest on retail mortgages.

Keep in mind though that a large financial institution should have enough of its own "cheaper" deposits to rarely use this more expensive inter-banking market.

Re: RHG - Rams Home Loans

jkool said:

I find that really hard to believe. Would you pls be able to provide some fact/resources supporting this claim?

From my ingenius consideration I go by the fact that simple re-lending of the credited term deposits and/or (into certain degree) everyday account balances on which the banks pay max. about 7%pa interest these days should produce a gross margin of about 1%+ (counting the current mortgage rates being about 8%+pa).

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jkool,

I work in the industry (and have done so for a number of years) and it is common knowledge amongst pricing people that major banks write unprofitable business to leverage into other products (which is why discounts are offered with package incentives).
Most profitable securitised lenders (which don't have the luxury of writing non-profitable business) are looking at a 0.3-0.35% margins across their loan books.

Going by your figures, out of the 1% (although source funds are often cheaper) are loan management fees, compliance, default management, loan maintenance (including statements) and often an upfront & trailing commisions to the originators. Profits are wafer thin on massive volume industry wide.

Re: RHG - Rams Home Loans

Mofra said:

jkool,

I work in the industry (and have done so for a number of years) and it is common knowledge amongst pricing people that major banks write unprofitable business to leverage into other products (which is why discounts are offered with package incentives).
Most profitable securitised lenders (which don't have the luxury of writing non-profitable business) are looking at a 0.3-0.35% margins across their loan books.

Going by your figures, out of the 1% (although source funds are often cheaper) are loan management fees, compliance, default management, loan maintenance (including statements) and often an upfront & trailing commisions to the originators. Profits are wafer thin on massive volume industry wide.

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It's better if you can provide some hard facts that most bank write home loan at a lost as oppose to I work in the Industry...

I cant seem to find this information any where in any annual reports that said most banks write home loans at a loss ... hmm...
and I cant recall any recent banks announcement/speech that they are writing loans as a loss but make up the profit from elsewhere....if this information is true, it sure need to be disclosed to the market.

Consider Warren Buffett wants to buy into Country Wide which is an American largest residential mortgage company during this crisis time.. I find it hard Warren see these guys writing loan at a lost..