Well spotted. It’s odd that they would disclose net assets when...

Well spotted. It’s odd that they would disclose net assets when they have not disclosed 2H 24 profit. That disclosure is probably an accident, because if the figure is right one can work backwards to derive profit, as you have done. If that $190m is to be believed it would, as you say, suggest that 2H24 profit was $17m, yet that seems highly unlikely given the net profits of the past three half year periods.

The update shows that gross revenue and NIM of 2H 24 were flat v 1H, and operating cost level near to flat on 1H. Net credit loss charges for the 2H period are only slightly better than 1H. Given all that, the 2H profit after tax should be very close to that of 1H i.e. $6m, not $17m.

HOWEVER I wonder if something has been revalued, out of the normal course of trading- for example balance sheet provisions for credit losses. The balance sheet provisions as % of gross receivables have been 5.8% at Dec 23, 6.6% at June 23, and 6.1% at June 22. The update says the balance sheet provision at June 24 was 4.7% on $1.22B which = about $57m provision. That compares with $66m at 31/12/23 shown in note 3.1 of 1H accounts. This represents a net improvement of $9m* pre tax release of provision in 2H24. Thus my best guess is that the underlying profit in 2H was very similar to 1H (ie about $6.2m) to which can be added $$9 for release of provision made in previous periods, hence about $15m total for 2H. That doesn’t get us as high as the implied $17m that you draw attention to, but it’s pretty close (especially as my figures are very broad crush) and there may be a few more small tweaks.

This explanation does make sense, but- if it is true- I would caution investors against thinkingthat this level of profit is sustainable. Unless MME makes further releases of provisions in future periods, the $9m “bonus” won’t be repeated. It may be possible to do that gradually over 2 or 3 years if MME deliberately keep increasing the credit quality of their assets, and if the existing loans are gradually repaid with a better loss experience than MME has allowed for. However, I wouldn’t want to rely on that. Also, if MME keep going for higher quality loans, it’s likely that they will not be able to charge the same interest rates as before.

*NB the 2023 AR shows that MME has large tax benefits that are not recognised on the balance sheet, both for timing differences and tax losses. Hence there was no tax expense in the last two and half years, as those profits were sheltered from tax by these losses etc for which no asset has been created on the balance sheet. These benefits should mean that profits are likely to be tax free for several more periods. Of course it also means that any divs will be unfranked. DYOR not advice