Agree with comments on business model hence why they are buying online businesses but with the great respect I do not think most understand the economics of this business and therefore vastly undervaluing. I think Bouris is intentionally smashing the profitability and driving out private investors. There have been no sales by him, Macquarie or Nine - all holding onto their stake.
Lots to this but the key is the loan book asset book and difference in Year 1 v Year 2+ commissions. In short YBR pay brokers around 70bps of Yr1 margin as commission. Yr2 on, this drops, historically 15-18bps. Therefore - while the business is growing and writing lots of new loans - margin is small as most of the NIM is paid away to brokers. Years 2 onwards margin increases by circa 55bps (70 bps - 55 bps) therefore based on $27bn book that is equivalent to around $14M pa additional margin. Even at 3 times - (the price books trade for) this is more than the entire market cap of YBR! That;s before we even value the franchise, the acquired online business, wealth etc, etc.
Hes running this into the ground and then will get into bed withMacquarie maybe with Nine and change the model to online and take it out for a a song
YBR Price at posting:
14.0¢ Sentiment: Buy Disclosure: Held
