I read the NZF Money prospectus and trust deed and started buying! (It was me who took the 100k in late March).
NZF Money is the unit with exposure to retail debenture funding. This unit has been downsized aggressively ... (from $84m March 2009 to $34m March 2011).
As of mid-March NZF Money had $21m of secured retail debenture funding and $13m of equity funding!
I estimate that the Finance Direct sale puts them at about $15m of retail debenture funding and maybe at $15m of equity (in the NZF Money unit)!!
The bulk of their assets are elsewhere. The reason you buy this company is because the Home Loans division has $208m of assets funded by bank debt at $205m, insured and AAA rated. This generates about $4m in operating revenue year in, year out.
The Financial Service division with about $10m in assets and $2m in liabilities contains the Mike Pero activities. This unit can be depended on to generate about $2m in operating revenue.
If we acknowledge the pain (already booked in the accounts) of the impairments in the Property Finance division (NZF Money) and the Consumer Finance division (Finance Direct) ... I think we can look forward to at least a neutral contribution to next years accounts from the unit that remains (NZF Money).
I can see NZF Group generating at least $6m in annual operating surplus in 2012 and beyond.
Not bad for a company with a market capitalisation of $3m. This is the reason I am buying.
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