Your figures may be a little bit wrong
Quote:
Originally Posted by
noodles
I agree Percy. It is a continuing pattern of upgrades at DPC. Some more colour is given in the RNZ interview.
http://www.radionz.co.nz/national/pr...nings-guidance
But of more interest to me was the details about how the acquisition will be funded. From this I can calculate a normalised pe for FY16 (year ending 31 march 2016)
First some assumptions:
1. DPC get 100% ownership
2. All Convertable notes are converted
Additional Capital raised based on 100% ownership $48mill @25c per share. I included the convertible notes in my eps calculcation. I know this is not technically correct, but they will probably convert at a later date. In any, case, the number of shares on issue should reflect this.
The number of new shares issued = 48Mill/.25c= 192mill shares. Add this to the existing shares and we get 685mill shares
Now the profit. DPC stated here that NPBT for FY16 with 100% ownership is $25mil
https://www.nzx.com/companies/DPC/announcements/253161
While they won't pay full tax that year, I'm going to assume they do to get a true reflection of underlying profit.
So NPAT = 25*(1-.28)= $18mill
This gives me an eps of 2.62c
And a pe of 9.53 (at current share price of .25c)
For me a pe< 10 in a growth company is rare.
DISC: Holding
On the assumption that $25M PBT represents 100% ownership of TUA for the 2015-6 FY then:
there will be 615M shares and $18M of bonds which paid out $1M62 of interest.
That would equate to a tax normalised NPAT of 2.929cps. ($18M/615M)
Convert the $18M of bonds to 72M more shares (is that right?) and you save the $1M62 interest.
That would equate to a tax normalised NPAT of 2.791cps. ($19M17/687M)
Remember that this is based on estimates of future profits and actually results will be different.
Best Wishes
Paper Tiger
The thin capitalisation of Reverse Equity Mortgages
Quote:
Originally Posted by
Snoopy
What does surprise me is the very low shareholders equity needed to support the assets on the books:
FY2013: $0.059m/$6.628m = 0.89%
FY2014: $0.234m/$5.430m= 4.3%
Anyone offer an explanation as to how they can get away with such thin capitalisation?
OK, I will attempt to answer my own question.
The reverse equity loan (REL) business is very different from other kinds of lending businesses. When people take out a reverse equity loan, they do so retaining ownership of their property. But this isn't how the bank lending them the money sees it. The bank takes the money that they leant on the REL, then turns that 'financial receivable' into an asset on the bank's balance sheet. Our 'owners' loan agreement with the bank means that the bank has effectively taken over the ownership of a substantial part of the property, despite the 'owner' still being listed as 'the person who took out the loan' on the property title.
Even better than this (from the bank's perspective) is that the value of their asset (finance receivable) keeps going up as the interest bill keeps rising. Short of being unable to recover the value of the property when it is finally sold, the bank simply cannot lose on this deal. The bank's asset (finance receivable) can only increase in value over time. So you can run an REL business on hardly any capital because that capital will never be called upon to bail out the loan.
Capital 'never be called upon to bail out the loan'? That sounds too good to be true, and it is. But by limiting the amount of capital loaned on a property to say 50% of its market value (I made that figure up) and using the expected life of the people who took out the loan as a calculation input figure the bank can virtually eliminate the possibility of the loan going bad. Any property slump can be ridden out by just making the residual balance required to be retained by the property owner high enough. You would have to be a very incompetant banker to lose on such a deal.
SNOOPY