The picture below might be of some interest with reference to the chat on EPS expansion, share price etc.
The graph shows the much lower YoY shareprice growth compared to EPS growth over the same period. Between end of FY16 and FY17 price to book had come down a bit and return on enterprise value had increased with the current year bringing with it reductions in risk profile, increase in funding certainty and lower borrowing rates. This was despite indications that growth hadn't come out of the business so the PE etc. looked very attractive, even if the sector might have been perceptibly out of favour .
This situation was very encouraging with a buffer seemingly built into most rough metrics compared to share price, indicating good risk/reward and also taking into account potential for macro headwinds and reasonable, but not catastrophic, lending outcomes. Personally this was my acquisition trigger for MNY as I felt the company was undervalued back then. Share price pleasingly has increased quite substantially since then and has also offered up a couple of large gaps that provided a gift to the more actively inclined market operator. The question now is is the shareprice reflective of value or is there still a good value risk/reward opportunity? For disclosure I sold over half my holding when there was a large one day spike to $1.895 (it felt to me the gap had to fill from a technical perspective) and repurchased that within a couple of weeks when my thesis paid off and price closed the gap to around $1.60. I have recently sold 20% of my holding at $1.89 and 20% at $2. From this it's obvious I personally think a chunk of the value is off the table, but I also wanted to lock in some of those profits. I feel the business is more fairly valued, but still see some upside combined with growth and income (dividend) potential.
The wind back of some parts of the business and expansion into others and where the results end up on a risk adjusted basis is one of the key unknowns into the future given the changes that occurred during the current year. Although for the current year we obviously have present guidance. This leads to the question as to how much profitable growth is expected and how much should we pay now to be a part of that? At an estimated price to book of just below 1.6 times at the end of FY18 using a $2 share price and a FY18 PE of around 9.2 (my best guesses), this doesn't feel crazy given growth potential and that those metrics have been higher in the past with earnings growing into them and share price advancing handsomely. Consequently, there still seems to be value, but bad debts can change all that and thus.....
One of the other key unknowns I see is the through cycle bad debt profile when there isn't huge experience to reference with regards MNY through such a turn in macro conditions, as
@Klogg in my opinion correctly points out. Generally speaking over the longer time frames MNY provisions have increased as the book has grown. Although there are years where this provision has grown in advance of the book growth and vice versa and how much is attributable to actuarial make up and whether there is a little bit of smoothing of EPS growth around the edges is hard to work out (certainly not accusing any one of anything). The business lending profile has also changed and thus it's hard to normalise for this. Despite growth in provision correlating with growth in book, as one would expect, the real question is whether the base provision is sufficient. Even the introduction of AASB9 lifetime loss provision modelling won't necessarily pick up what happens in a period of stress given the company hasn't had experience of this when at scale, with the current business model (how easy is it to sell the collateral if noone's buying a second hand car?) and human predisposition to biases when making predictions using unknown factors. A risk for sure, but not one that has me running completely for the doors yet though given I still see some upside value, but much less than I personally felt there was before... I couldn't work out where my blind spot was and how I could be wrong in my investment decision before; if I was putting new money in now I wouldn't feel the same. As an aside, perhaps that means I should liquidate my holding now (as my holding is only worth to me what I'm prepared to pay for it now - perhaps another illustration of my own cognitive bias).
There hasn't been too much regulatory chatter recently other than some references not too long ago about some poor practices in the auto lending industry that didn't seem to go much further at the time, but could.... As the bankers know right now regulatory and/or public perception risks can play havoc whether one agrees with some of the moral hazard issues or not.
A few Mad thoughts...DYOR
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