MPM

[Captain Ramjet]

Hi everyone, Im a long time lurker first time poster. Just wondering if anyone has any thoughts on the Mike Pero listing coming up. I couldn't find any previous threads with this in.
Cheers

[Oracle]

Ramjet

I have prospectus coming, but otherwise know little. MP has obviously done well, & I think George Gould is a smart fellow. They should do well!

[PrinceofWhales]

You can download the prospectus at www.mikepero.co.nz/shares

[Captain Ramjet]

Thanks guys, Ill have a flick through the prospectus. Interesting article in the herald this morning...

Mike Pero deal reveals Gould's canny leverage

27.04.2004
By PAUL PANCKHURST
South Island investor George Gould's company, Gould Holdings, has secured a $13.5 million stake in the soon-to-be-floated Mike Pero Mortgages without shelling out a cent of its own money.

The small but high-profile mortgage broking business yesterday opened an initial public offering to raise $7 million to $10 million and float on the stock exchange.

The prospectus for the offer reveals founder Mike Pero sold the business to Gould Holdings for $15 million.

However, that does not mean that Gould's company shelled out that amount.

The purchaser was a Gould subsidiary called Mike Pero Mortgages, incorporated as a vehicle for the deal and the public share float.

Mike Pero Mortgages borrowed $9 million from Westpac and $4.5 million from a company associated with Mike Pero.

On top of the $13.5 million in debt, Pero bought back a 10 per cent stake in the company - 1.5 million shares - for $1.5 million.

Gould Holdings put up its balance sheet to guarantee the debt and pull off the deal that gave it a 90 per cent stake, or 13.5 million shares.

The money from the investors who buy into the float - and demand for the 7 million to 10 million $1 shares is high - will mainly be used to cut the bank debt.

After the debt is cut, Gould Holdings will stop guaranteeing the company's borrowings.

The bottom line: Gould's company will end up with up to 61 per cent of a company with an initial market capitalisation of at least $22 million.

It will hold a smaller stake of a bigger company if the offer raises more than $7 million.

The Gould camp says the outcome rewards the company's initiative and expertise and its role in guaranteeing the debt.

"What's that guarantee worth?" asked Gould.

"What is that worth, to put your balance sheet on the line?"

Gould also pointed out Gould Holdings and Mike Pero's vehicle, Mike Pero Securities, had agreed to restrictions on selling shares within a year of listing.

"It's not like we're just cutting and running - we've got to make sure the company then delivers."

The offer closes on May 19, with a listing expected five days later.

The company is projecting earnings before interest and tax of $2.7 million for the year to June 30, 2005, on revenue of $14 million.

The bottom-line profit is projected to be $1.5 million.

Based on a $7 million capital raising, the company projects earnings per share of 7.06c and a price to earnings ratio of 14.16.

With origins dating back to 1990, Mike Pero Mortgages is a mortgage broker which has helped to arrange an estimated 50,000 loans, totalling more than $5 billion.

The main lenders are the ASB, National Bank, ANZ and Westpac.

Quizzed on publicity about the BNZ cutting out mortgage brokers, Gould said the company was not affected because it had not dealt with the bank for a year.

Cheers

[Halebop]

These shares are just too expensive for something so small, especially when real estate seems to have peaked.

Mr Gould's so called mystique is not worth the premium he has placed on the company.

I won't touch this one.

[Captain Ramjet]

Halebop, can you explain why you think the shares are too expensive. Im new to this game and would like to understand how you decide if a share is expensive or not. Good point about real estate having peaked as well.
Thanks

[The Doctor]

George Gould is indeed a 'very smart fellow'and I am confident that George Gould will do very well indeed,in fact I am sure of it!

[clearasmud]

Most IPO's lately are unattractive and this one is no exception[^]
GG and MP will do very nicely:):D out of this.

[PrinceofWhales]

I quite enjoyed the other NZ Herald article today about Mike Pero, but then I know who gave the Herald the tip off about Pacific Express Airlines and why.
__________________________________________________ ___________________

Mortgage maestro ready to spread his wings

27.04.2004
By CHRIS DANIELS, aviation writer
Mike Pero, charismatic mortgage broker and successful businessman, has ambitions to be Mike Pero, airline owner.

He is sole director and shareholder of Pacific Express Airlines, registered with the Companies Office in February.

Pero said that despite registering the Pacific Express Airlines name, there were no immediate plans to start flying.

"I saw some opportunities in the Pacific, and I haven't taken it too much further at this stage," he said. "I just thought I'd grab a company name while one was available.

"We may do something down the line, but the focus now is the mortgage broking business."

Pero is no aviation neophyte. He once ran a one-plane Christchurch-based commuter airline, Airlink Services, which flew to Timaru and Alexandra feeding into the former Ansett New Zealand network.

"I have an interest in aviation and have considered something through to the Pacific Islands in more recent times, but that's as far as it's gone."

Pero, who is travelling the country promoting the public offer of shares in Mike Pero Mortgages, set up his broking firm in 1990. It now has 35 franchised brokers.

He sold 90 per cent of the company last month to Christchurch businessman George Gould for $13.5 million.

Pero has Cook Islands heritage and was last year's business person of the year at the Pacific Business Awards, something that should help attract loyalty from Pacific Island travellers.

Pero said it was coincidence that Air NZ's new Pacific service was also called Pacific Express, as he had chosen the name before Air NZ began its advertising.

This winter holiday season might prove to be a particularly risky time to be setting up a new airline in the Pacific as competition heats up.

Air NZ responded aggressively to a Fiji air-charter plan launched last year by the Flight Centre and local aviation company Airworks.

As soon as details of the charters were announced by the Flight Centre, Air NZ's discount wing, Freedom Air, began flights from the same provincial cities and dramatically dropped its prices.

The Flight Centre-Airworks scheme was eventually canned, but one industry player said the Pacific routes were increasingly competitive.


-

[Oracle]

George is certainly doing well.

I listened to him on Business TV yesterday, and noted comment, re BNZ not using Brokers. He did not seem concerned with a scenario, of other Banks going same way. Was that because he had nothing to lose, or there will be a finance arm, or what?

[Halebop]

quote:Originally posted by Captain Ramjet

Halebop, can you explain why you think the shares are too expensive. Im new to this game and would like to understand how you decide if a share is expensive or not. Good point about real estate having peaked as well.
Thanks


Hi Captain Ramjet.

Determining value for investing is greatly subjective and highly dependant upon the methodologies you use. To me this is expensive - to someone else it may be a cheap entry into a growth company. Regardless what I or the other guy thinks the "market" will decide in the end and probably change it's mind several times on the way!

However, for this one, my gut tells me to stay clear for now. I'll tell a little story...

I did most of my schooling in Australia. My mother owned a substantial sales and service business. Many of her suppliers confided she was their biggest customer in the country. She did very well and becuase of this we tended to mix with well to do people. One was a respected Sydney businessman. He was a director of several public and many private companies. Those steeped in 70's and 80's business lore would probably remember his name.

One day he asked me what I wanted to do when I grew up. Unhesitatingly, I offered "I want to be a businessman!". I can still remember the glint in his eye. His children were older than me and quite uninterested in the mechanics of business and investing and so I think he decided to take me under his wing.

My perception of business was that you come up with a great idea or invention (this was the time of the early Apple IIe's ), millions of people want it and you make a fortune. He offered an alternative path that had worked well for him...

1. Start with a company (any company, it could be yours to start with or someone elses).

2. Spin a story about it that sounds interesting (or better still exciting).

3. Extract dividends from it and leverage it to the hilt.

4. Take it public - they'll pay the same price you did AND you'll get to keep half of it.

5. Pay yourself directors fees and free options.

6. Don't worry if the share price goes low. It didn't cost you a cent.

7. Banks love to lend against shares (Yes kids, it's true...)

8. ...so start with another company, any company...

Now read the financials and fine print of the Mike Pero offering.

[clearasmud]

What a beautiful story Halebop!
Leverage is a beautiful thing provided you make sure you won't get burn't in the unlikely event things go wrong.
The person who sits and thinks can discover ways to fleece the gullible.

[fireflies]

Ordered my prospectus today

Cheers
Firefly

[Captain Ramjet]

Thanks Halebop, very enlightening. Something to aspire to I guess. Still, don't despise the day of humble beginnings. I've gotta start somewhere right.

[MeNoBatty]

Was he your 'Rich Dad', Halebop? [:o)]

[Halebop]

quote:Originally posted by MeNoBatty

Was he your 'Rich Dad', Halebop? [:o)]


:D

I wish! His kids got to follow meaningful careers like surfing and sailing. Maybe he helped develop my cynical side, not that it needed any further developing... [:p]

I actually caught up with him for the first time in almost 10 years just a couple of weeks ago. His mind is still sharp but his body is not being so obliging. He was wondering why I wasn't an infamous corporate raider yet. I said mostly it had something to do with my aversion to work and lack of money!

[tinking]

The prospectus for Mike Pero Mortgages forecasts that revenue growth will slow down in 2004. However, there does not appear to be any commentary explaining why the company thinks this will be the case.

Does anyone know of any reasons?

[Futurz]

quote:Originally posted by tinking

The prospectus for Mike Pero Mortgages forecasts that revenue growth will slow down in 2004. However, there does not appear to be any commentary explaining why the company thinks this will be the case.

Does anyone know of any reasons?


Costs associated with the company changing hands twice in the last year. Also factoring in the expected slow down in the property market, not that this has necessarily happened.

[mikescott]

I am be returning my allocation of 50,000 shares today back to broker who is very kindly giving me the shares a week ago after reading about this Mr Gould not paying any monies to get his 61% share of Mike Pero.

Mr Gould he is already very rich he no need for me to making him even richer.

[Lawso]

Anyone thinking of contributing to the George Gould Benevolent Fund MUST read the analysis of the MPM offer by Jenny Ruth in today's NZ Herald Business section. Caveat emptor!

[cruisader]

quote:Originally posted by minder

I am be returning my allocation of 50,000 shares today back to broker who is very kindly giving me the shares a week ago after reading about this Mr Gould not paying any monies to get his 61% share of Mike Pero.

Broker he is telling me that his firm is giving the shares back to the company!

Mr Gould he is already very rich he no need for me to making him even richer.

[cruisader]

how (and where) did you get 50k shares? If this is true it is a bad sign, i can only get 5k

[mikescott]

quote:Originally posted by cruisader

how (and where) did you get 50k shares? If this is true it is a bad sign, i can only get 5k


I be getting this from Macquarie last week. Broker he is very good person to me always.

[mikescott]

This be article it is in NZ Herald this morning. If Mike Pero is like this Homeloan company where its share price it is 35 cents when it was floated it be $1.00 then monies already made by Mr Gould.

He is already very rich man is my saying - he is not needing my monies to make him even richer. He is not good man to be trying to make so much monies in one month. Why this mr Pero he not selling company to market at $15m first? Why he gives Mr Gould $13.5m for Mr Gould he not even put in 1 cent?

Pero looks for rich pickings (NZH)

30.04.2004
COMMENT
On March 5, Mike Pero sold his mortgage broking and associated businesses for $15 million.
Now he and purchaser George Gould are trying to convince investors that the company, Mike Pero Mortgages, is worth between $22 million and $25 million.
That's depending on whether the current float raises only the $7 million target or whether it gets to the full over-subscription level of $10 million.
As far as I can see, nothing much about the underlying business has changed in the meantime.
Even by the standards of other recent floats, these are incredibly rich pickings within an even shorter period than most.
Take Vertex, where the venture capitalist vendors paid about $12.8 million for the stake they sold for $60 million in less than two years (Gould later bought a 19 per cent stake in Vertex and is now its chairman but had nothing to do with the float).
Or Freightways, where the venture capitalist vendor paid A$187 million for the company's Australian parent and a year later sold the New Zealand subsidiary, keeping a 20 per cent stake, to recoup most of its initial outlay.
The Mike Pero prospectus says the float proceeds will be used to pay the estimated $483,000 expenses of the offer (that's 6.26 per cent of the funds raised if $7 million and 4.4 per cent if $10 million), reducing debt and "to position the company for future growth by complementary acquisition. No particular acquisition is contemplated at the present time".
A glance at the March 5 balance sheet is enough to tell anyone that there won't be much, if any, money left for acquisitions.
Gould's purchase was entirely debt-funded, guaranteed by his investment company Gould Holdings, and the only equity left in Mike Pero Mortgages is the $1.5 million Pero paid to buy back a 10 per cent stake in the company; Gould currently owns 90 per cent.
That's supporting $16.8 million in total assets. In other words, current equity is just under 9 per cent of total assets, a very thin sliver indeed. If the float raises $7 million, that would bring equity up to 50.7 per cent of total assets and if it raises $10 million, equity would be just under 60 per cent.
But what are investors actually buying? Undoubtedly, the company's biggest single asset is its brand. Accountancy firm KPMG has valued that at $13.2 million. On top of that is the fee and other income already in the pipeline; the amount due in the next 12 months plus the cash is valued at just over $3 million in the balance sheet while future trailer commissions are valued at $71,526.
According to the prospectus, 60 per cent of the company's revenue in the year ending June will come from brokerage and a further 26 per cent from trailer commissions.
Every time the company or one of its franchisees signs a client up to a mortgage, they receive a percentage of that loan, usually between 0.5 per cent and 0.8 per cent of the loan amount as an upfront commission from the lender.
A number of lenders also pay continuing "trailer" commissions over the life of the loan, or for a set period, typically around 0.125 per cent of the loan amount. The company takes about 37.5 per cent of the brokerage earned by its franchisees. (The prospectus shows franchisees outside Auckland pay $50,000 each while those in Auckland pay $70,000.)
Then there are other fixed assets such as office furniture, computers and cars in the balance sheet at $383,275. All that adds up to just $16.75 million.
Current liabilities are put at $2.7 million while those due later than 1

[Morch]

Is this stock getting to a fair value???

Greenslades where gloating about the success of the float @ $1 and I guess all the money they made. The market now values the share at 87c!

Regards Morch :)

[Halebop]

I guess at 87 cents it's still a great result for the promoter. Mr Gould probably can't believe how dumb people are.

...2nd thoughts... Mr Gould knows exactly how dumb people are.