JoeGambler I appreciate your thorough and thoughtful...

JoeGambler
I appreciate your thorough and thoughtful contributions.

I think that the issue of borrowings and the apparently high rates of interest is big stumbling psychological block that is holding the SP down, but materially its not all that important. So, let’s examine that. The £30m in bonds have an interest rate of 9.0% and there incur $2.7m interest expense annually. (These bonds both mature mid next year and can be converted to equity at any time at $1.30). As at 31 December 2016 the finance facility was also for $30m. It’s interest rate is 12% pa which means annualized interest another $3.6m. But, sometime during 1H CY 2017 MNY increased this facility to $50m. Assuming it has now fully drawn this down, I estimate that halfway through the Jan-June six months they will have incurred additional interest of $600k ($20m * 12% * 0.25). That gives MNY an estimated interest expense for the 2017 FY of $6.9m ($2.7m + $3.6m + $0.6m). This might seem like a lot, but in order to give it ‘understanding’, it needs compared to the interest that the company is earning.

My MNY model implies that the company is currently earning interest income, of on average, 23% on its gross loan book. As at December 2016 this value was $247m. I am assuming that it will be $281m by June 2017, and that makes the average gross loan book $264m for the six months. This means they will have earnt approximately $62m (interest revenue) during the six months to June and their total interest income/ revenue for the full 2017 FY will be approximately $113m.

Because the bulk of the money that MNY is lending to customers is coming from retained earnings and not from borrowings the difference between interest expense and interest income is quite marked. In numbers; $6.9m interest out v’s $113m interest in. From where I sit, this situation is sound, sustainable and fairly conservative.

Yeah, maybe I am being a bit optimistic about the dividend, still one can hope. Maybe, if they did pay a higher dividend the SP would be a lot higher and they could use this higher to ‘efficiently’ issue more shares and expand the business that way. Who knows, they might just do this?
As for the question of annual expansion. I think we need to ask what we mean by expansion? Do we mean revenues or do we mean profits? Because, in this context, largely because of the tight cost controls, profits should be rising a lot faster than revenues. I am projecting that in 2017 revenues will have grown by 17%, but profits will be up by circa 50%. Similarly, next year I am expecting revenues to grow by 20-22% and profits to rise by around 30%. I think that growth of 10% pa is way too low. This is a growth company, which means the risks are ‘elevated’ relative to larger more stable companies, but that means that growth of the top and especially the bottom line will also be elevated.

Cheers
K