CER's income is likely to fall over the next 24 monthsbut to a limited degree only.
CERS loans are made in a variety of ways but the majority are made to preserve a fixed % margin to the banks over the rate the banks are charged themselves. This rate has fallen dramatically and of course this has been their major expense. Accordingly CER's costs will fall by a far greater margin than their income while the banks keep their fat margins meanwhile.
I would have thought the above was fairly obvous but a little complicated by hedges in place which have to expire for the full affects of this to come into play.
Meanwhile CER's trust structure has tax implications that inhibit paying off debt. Property devaluations which reduce the distributable income are actually a short term help in this respect as the debt is paid off that much quicker. Coppertop the interest rate falls mean that CER's income will go through the roof....
In my view the tax situation should be made a non event by simply having a matching rights issue for any distributions made - in this way no tax penalties, and no dilution for those that particpate.
Blastoff
CER Price at posting:
6.1¢ Sentiment: LT Buy Disclosure: Held
