a new start , page-6

Not sure you can get a handle on the underlying metrics at the moment. In reality the profit recorded is also influenced by the value of the DMF units. The discount rate applied to future income the expected growth rate per pricing and the average age seems to be a big issue.

As this company is in transition I would expect that once the USA is completed - I see no reason why the returns cannot go up to 4c per unit. The DMF model allows you to free up capital so you can run your capital out to far more opportunities. Its an extremely complex valuation model but the great part of it is that as opposed to the rental process which is a capital intensive process and has got more so as bankers look for more equity the DMF model seems to allow you to free up the capital and only carry the portion to fund the period until resale. So suggest that that approach is in the range 30 % equity to the value of the property.

The problem with the DMF model is that you can change your assumptions and thereby change your valuation of future money. That as I understand has caused this huge problem in retirement solutions as many of these have now become bad as bankers demanded more equity the whole valuation process fell apart as the discount rate had to be increased because of risk and as such the future income valuation changed negatively.

If you are interested in understanding more of it I suggest you take out a trial at the intelligent investor website and look at the recent article they produced.

For my money my view was this:

Management were very competent at this market and as such know it inside out.

Management have incentive to align with shareholder objectives.

Management seem to be using a hurdle of 18% IRR as base hurdle. Thats good enough for me.

I think that over the next few years you will see a growing list of opportunities and that this group will deliver a growing stream of good cash flows but that that will build over time.