MOC was hopelessly oversold earlier this year following the Hayne Royal Commission recommendations.
This added to the litany of problems last year, when the company revised its profit sharing arrangements with franchisees, on top of the implementation of updated software systems using Xplan as the core.
The market simply could not digest the closing of the windows from every direction.
Despite all this, the dividend was set at 3cps per half (well below NPAT) to ensure the new business model could weather a long long storm.
Many brave investors dug deep at 69c -75c for a debt free, NTA of 62c, cash flow positive business masked under the cloud of future uncertainty of revenue.
Darkness reigned.
The government then chipped in to announce they would leave grandfathered commissions untouched until 2021, to protect borrowers from facing banks alone.
Then who could could have guessed, the ALP lost the unloseable election, and negative gearing lives again.
Then the RBA drops interest rate by 50%, APRA throws away the responsible lending rule book, and Josh wants everyone to borrow like there is no tomorrow and brokers are frenetically putting together new deals and re-fi's.
A perfect storm morphed into an alignment of the moons. The price now sits 6 months later at $1.50+.
I expect dividends to increase from 6c pa to 7 then 8 as the business risks decline and gross lending increases in loan and in number. Brokers are fashionable again!
I will admit to being irresistably drawn into this stock once it fell below $1, like others here. It kept on falling and throwing caution to the wind, one must keep on buying. Well for my part, I am done buying and am now selling incrementally. I believe MOC is now overbought with a fair value of something around $1.20.
I will retain a reasonable holding as the stock owes me bugger all, and the ongoing income will be useful. To any would be buyers my thoughts are the horse has bolted. Wait for a quieter entry point, when property markets lose their renewed lustre, as they will in 2020.
I hate debt, and am ambivalent owning a stock that profits from it, especially from younger Australians who will be slaves for life. That said, the banks need intermediation to stop them from flaying people. The best interests duty now applied to the industry is a move in the right direction.
I believe MOC has a solid business model but will always be vulnerable to regulatory risk. Please keep that in mind.
