Ann: Franchisee Remuneration Structure Review, page-12

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tim8wilson

642 Posts.

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05/06/18

12:03

Post #: 33499567
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Originally posted by CaptainBarnacles ↑

I'm biased as I shorted them (again) Monday, and have been thinking about the downside asymmetry quite a bit. But I don't think the market is overreacting. It isn't about today's earnings and dividends, but about their future earnings and share of the pie, and the size of the future pie itself IMO, and size of future dividends.

You have franchisee stress IMO, with RFG as a nasty case study.
You have Mortgage Choice saying brokers will be getting a larger share of the pie.
You have banks wanting to cut Mortgage Broker influence and commissions, even if they say they do not. They can probably get away with differential pricing (branch versus broker pricing) if their negotiating power is very strong, which it currently would seem to be.
You have the royal commission (RC) coming up with "interesting" views about Mortgage Broker remuneration.
Now you might have customers questioning whether they want to deal with mortgage brokers, in light of the media and RC perhaps.
You have potential mortgage brokers, some of who will be talented in the future, deciding whether to sign up or not.
You have much tighter serviceability criteria for lending - so less loans are actually approved - both branch and broker.

As always - the banking industry regulator's employees are likely to be highly rewarded future employees of the big banks IMO (I call it future bribed) - they will probably be biased against Mortgage Brokers.

Perfect storm for Mortgage Broking IMO. I would be happy to long MOC under Book Value, maybe when there are signs that the Mortgage Broker negotiating power is growing, and banks are competing for broker business again.

Just my opinion - some of my perceptions may be wrong - we will find out eventually.

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Even if hypothetically the allegations regarding exploitation of franchisees eventually turn out to be unfair (and i'm not saying that they are) the reputational damage has been done, and MOC will have trouble attracting new franchisees for the foreseeable future. The question from the perspective of an investor is that when the smoke clears and the knife finishes falling - will the eventual market price under value the business? We shall see.

MOC Price at posting: $1.50 Sentiment: None Disclosure: Not Held
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0 Great analysis

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