The providers of the warehouse facilities I believe do not take any direct credit risk; that sits with MME and hence any cashflow that is coming in, is being used to ensure they have sufficient buffers to cover the bad loans on that 1.2bn loan book.
The providers of the warehouse facilities earn an interest because there is a chance that MME could default if they do not themselves have sufficient buffers......so the net margin they make is a combination of covering costs as well as covering defaults (this makes the warehouse facilities cheaper, but also puts all the rick on MME to get their credit checks correct).
Anyway, $6m in NPAT over 6 mths (if that translates to a similar amount of free cash flow) does not really make a dent in the loan balance of 1.2bn (maybe the loan facility of $50m which is diff to the warehouse loans, but again MME don't have sufficient cashflow/profits to pay this back hence its a juggling act).
They need interest rates to ease (to help improve their margins) as well as change sentiment in the market/sector so that more investors willing to put money in these warehouse facilities are available as they look for yield (currently if you can get ~4-5% risk free, why both with 7-8% on these facilities......you need the risk free rate to drop to 2% and then you might be able to convince someone if you double their yield).
MME Price at posting:
8.3¢ Sentiment: Hold Disclosure: Held
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