service fees worth nearly 500 m

Post from another board:

Share price has fallen from $2.50 to 27 cents in 3 months.

Could not resist the temptation to enter the share register with this stock......as always based on hard fundamental analysis.

Market cap of $100 million (27 cents)......value lies in future distrubtion ie capital returns the company may make, prior to wind down of their business.. Some 70 cents in return per share, to the market (unfranked-which we will discuss later)........I have calculated as some possibility/likelihood..

RAMS has a substancial asset in the form of future servicing rights (FSR) for loans on its book, which under financial rules do not allow it to be recognised in the RAMS consolidated balance sheet. This value of $493 million (item 7.11 in their prospectus) reflects the PRESENT DAY servicing rights of this asset. A 100 basis point change in discount rate impacts the FSR valuation by $14 million. No typing mistake-thats some $1.35 per share.

To further explain.........their costs are heavily front end loaded. The company on their $14.5 billion loan book, will only this year start to pay tax. Early termination of RAMS loans incurr a 1.5% to 2% fee.....or about some $240 million for the company. RAMS incurs an upfont cash cost when writing new business......and they have done alot of that in the last two years.

RAMS will receive a cash payment of $140 million....that amount will reduce by $15 million for ongoing fee payment to franchisees. RAMS would have to pay that money anyway.....so really the Westpac deal is net $140 million. RAMS will also see inflow of capital laons made to franchisees in 2005 and 2006 and return of sub-debt in 2008.

RAMS is now all about, the amount of return to their shareholders....Just with regard to tax........most investors are happy to see share price appreciation and subsequently pay tax on that capital gain. Exactly the same will apply to any RAMS distribution, should they come unfranked. (net same deal if franked). This is very important..........means in your calculations as to possible return to you......tax payable - or however its handled.....tax should be discounted in looking at risk/reward scenarios here.

This one is complicated and possibily still risky. I have assumed with Westpac, and an improving commercial bills market.....that they will refiance.

Simple thing to do is to read the post......but still don't buy. Make up your own mindpost from another board: