Research, page-12

You asked what could go wrong with this company......surely the biggest risk is that the modelling that mgmt have subjectively applied does not reflect the true credit risk associated with the loans.

We will only find out 2-3-4 years down the track that collections are not in line with how much they are provisioning each year (i.e. the provision is underdone).

I invested in Collection House (CLH) and this issue was hidden as mgmt had all the information and auditors either did not review their process or found it too hard to challenge mgmts assumptions . Having said that I invested in Credit Corp (CCP) and they tend to do the reverse; their profits are generally understated and if growth slows for any period (usually because they don't want to overpay for PDLs), they can release a bit of provision to reflect growth. In the former, mgmt were trying to get paid hoping it would not catch up, while in the latter, mgmt seem to care about maintaining long term steady growth in the accounts in a very disciplined way and shareholders have developed a level of trust they are not gaming the accounts to get paid more.

BTW I'm not claiming that MME mgmt are doing anything untoward, just saying that there seems a lot of subjective judgement applied to the ECL calculation as the Auditors have indicated in their key audit matters. The 'comforting' factor is that mgmt own ~60% of shares, so you would hope their interest are not short term and are aligned with us regular shareholders.

Like many I'm struggling to understand the true 'profit' of the business - if as they claim it is 12m (Cash NPAT), I'm not I've seen a reconciliation anywhere (slide 8 on the results presentation indicates a actual loss adjustment of 18m, but I'm not sure where that number came from - did they provide for 28m, but only actually write off 10m?!?).

If that 12m NPAT is correct, then that equates to an EPS of ~7c so a PE of ~30 on last years earnings.....not bad for a company that seems to be growing it's receivables as it has.