Ann: Money3 Secures $150m Debt Facility, page-34

I was lucky enough to sell a bunch of my holding at $1.895 on the spike - as it jumped so hard it felt like it had to fill the gap back down. However, at current prices I see the value equation to be very attractive and have reacquired a good chunk of the parcel I sold. I hold this view regardless as to whether BP are correct on assuming a net earnings loss from exiting SACC lending and thus a drop in target price (still note their target is $2.10 and from current prices would be a very pleasant gain in 12 months from where we are now).

It would take very few years (say 2.5) of adjusted profits before the net assets equalled the market cap. As an aside the price to book ratio has roughly been in the 1.3 range over the past 3 years. You'd get the dividend on top of that to boot and could even reinvest using the DRP and get a decent discount too.

At a high level if we were to remove the segmental profit from last year's result (and attribute a proportionate drop in funding costs from removing the receivables) the net reduction in post-tax profit might be say $13m. Total profit was $29.1m, which would leave $16.1m. The remaining business holds higher security and will achieve cheaper funding costs and so from this perspective is also de-risked, but let's leave this aside for simplicity. If we assume that the capital released was fully reinvested in secured auto lending (what's proposed) then there would be replacement earnings, not perhaps quite as much, but certainly a replacement with a lower risk profile. For argument's sake I'll say $6.5m post tax (circa half what would be achieved from SACC lending, again for simplicity) and then add another $1m for interest savings, giving $23.6m. This takes now account of the increased funding lines that allows for growth and even if the business doesn't grow at all going forward, $23.5m is nothing to sneeze at. With net assets of $182m + say $14m for the 5 months to end of November it would only take about 2.5 years of earnings to at least achieve net assets at the current market cap and that's without growth. Remember the stock has historically traded at about 1.3-1.4 times book. When using very conservative assumptions such as this the company fees very cheap given there's plenty of growth opportunity and a history of solid earnings. It also gives lots of wiggle room to absorb any shocks like a significant spike in bad debts,....I'm happy to be patient and let time be my friend with MNY and collect the dividend via DRP in the meantime.

A separate thing that I note is the intangibles on the balance sheet. These will have to be removed from the balance sheet for the portion of the business that disappears and depending on how that exit will occur will have an impact on how those are treated from an accounting sense. The recent announcement talks about a "sale, collection or a management buyout of our Branch and Online divisions". The goodwill associated with those two divisions is circa $7.8m. If they were just to collect the outstanding amount from the book and not sell (to management or otherwise) then the future value of those segments will reduce into run off and fail to support that value leading to write-downs there. I hope any such items are considered well in advance to manage circumstances in the best way possible. Whereas if there was a sale then these values would be taken into account on the sale of those segments of the business as part of any gain or loss. I think I would like to see that part of the business sold as it would seem to me that it would realise better value than a simple run off. If it was an MBO how do the shareholders ensure we get an appropriate price rather than a bargain basement exit? That's something that was going through my mind and I haven't much experience with MBOs myself.