GFL - Good news for Geneva Finance

[whatsup]

I guess with the turn around of Geneva its time to start a new post thread, imo all of the legacy issues that dogged the old Geneva have been addressed and with Fridays 4 year high there is obviously some who know what is going on behind the scenes and are dipping their toes into GFL now.
Good luck to the brave and with the forth coming half yearlies there could be better results out there than there has been for many a year.

[Major von Tempsky]

Nice to see a title more appropriate to the changed circumstances and outlook. I hope to buy a few more before report date so I won't go discussing it for fear I pee on my own nest ;-)

[Major von Tempsky]

Hope u r still watching whatsup. They have the sell price at 6cps now although if u look at the Depth table it says 5.4. But moving, moving, in the right direction :-) I've given up on buying a few more by report date, I'd like to have a little bit of cash besides shares, just for a change.

[whatsup]

Hope u r still watching whatsup. They have the sell price at 6cps now although if u look at the Depth table it says 5.4. But moving, moving, in the right direction :-) I've given up on buying a few more by report date, I'd like to have a little bit of cash besides shares, just for a change.

MvT, Am watching, I think that the 1/2 yearlys are due in late Nov or early Dec, to me someone has a inkling of something and I suspect that it could be a good result, this share could be the sleeper of 2016, hmmmmmmm !

[Major von Tempsky]

I think the result will be around Dec 13 going by last year.

Should be a good one for the 2016 Stock Picking Competition, it should be big enough to be allowed in by then.

[Joshuatree]

For anyone else like me wondering what ,where Geneva is,its GFL on NZX AM market and its ,:)wow 46.87 % up for the year.Congrats MVP and whatsup if you've ridden this.

[whatsup]

For anyone else like me wondering what ,where Geneva is,its GFL on NZX AM market and its ,:)wow 46.87 % up for the year.Congrats MVP and whatsup if you've ridden this.

From my research the biggest shareholder is the same family that owns a big slice of the recently floated insurance company CBL , they underwrote last years rights issue and took up all of the short fall so if they have confidence in Geneva its good enough for me .

[whatsup]

Up another 6.4% today , someone likes what they see or hears , hmmmmmm !

[Major von Tempsky]

Thanks JoshuaTree, up $22,500 or 35.2% for me :-)

[whatsup]

Upward movement again and with the half yearlys due out in a couple of weeks time , do the look O K or what ? !!

[Major von Tempsky]

Hope you all realize that Geneva posted its 6 months results to 30 Sept 2015 at 10.46 this morning?

Revenue up 31% to $5.756 million, profit up 423% to $1.507 million. All sectors profitable :-)

[Major von Tempsky]

A second release, a bit later this morning, includes the info "The company's shares are traded on the NZAX, and the
latest results have produced a basic profit of 0.639 cents per share for the
12 months to 30 September 2015."

That implies, even with a very conservative Price/gross earnings per share, a fair bit of capital appreciation to come, especially with further increasing profits!

[whatsup]

A second release, a bit later this morning, includes the info "The company's shares are traded on the NZAX, and the
latest results have produced a basic profit of 0.639 cents per share for the
12 months to 30 September 2015."

That implies, even with a very conservative Price/gross earnings per share, a fair bit of capital appreciation to come, especially with further increasing profits!

WOW, fantastic result, well done to management, we could now see more of the same but imo not to the same magnitude , looks like to me that they have settled on a very good business plan which should generate profits and dividends for a while to come.
Whats alluded to in the way of acquitions interests me greartly. hmmmmm !

[whatsup]

Solidly into .06 now, good buying imho for a second/third tier growth stock, breaking new ground but with this weeks profit ann all of the legacy issues are well and truly behind it, I guess GFL now joins the other second tier finance stocks , HNZ & TNR

[Major von Tempsky]

Who are TNR again?

Think I'll put Geneva into my stockpicks for next year - they're big enough now!

They're a secret share, no discussion in the media yet on their stellar rise this year. Time for Rob Stock to write another article about them methinks.

[whatsup]

Now Turners previous Dorchester Finance.

[Major von Tempsky]

Thanks Whatsup - Dorchester, hmmm, interesting memories, luckily not for me!

I see Reuters is quoting Geneva's P/E at 12.58, not a bad score!
And on the Depth table there is now one seller at 10 - nice.

[Major von Tempsky]

Wow! Never before in my 4 decades of investing has the market so perfectly picked a result that trading continues after the announcement at exactly the same price as before it - despite a 23% rise in turnover and a 61% rise in Net Profit! Weel done Mr Market!

[whatsup]

Wow! Never before in my 4 decades of investing has the market so perfectly picked a result that trading continues after the announcement at exactly the same price as before it - despite a 23% rise in turnover and a 61% rise in Net Profit! Weel done Mr Market!

Mr Market is asleep, once this result is digested there could be a rerating, Im told that with the nightmare now behind GFL it has several growth plans ready to implement, but in my view if they had ann even a small divi it could have appeared on investors radar, wait and see imo.

[Major von Tempsky]

Agreed, but I have a feeling there won't be any dividends until they have exhausted using previous tax losses to maximise the rate of growth. Maybe 3 years...

[percy]

I have just read the result announcement.It reads very well.
Looks as though you are "well positioned."

[whatsup]

Agreed, but I have a feeling there won't be any dividends until they have exhausted using previous tax losses to maximise the rate of growth. Maybe 3 years...

I think they have $8 mil in tax losses, quite a handy sum now that they are in profit !

[Major von Tempsky]

You know when you go into Direct Broking, click on your watch list, then click on GFL (in blue) it then takes you into Quotes. If you then click on the little triangular thing ito gives you options of Quotes, blah blah, Depth, blah blah and lastly Reuters. The question is, the Reuters reports on GFL are 6 months plus out of date, when are they going to update them?

[Major von Tempsky]

https://www.nzx.com/markets/NZAX/securities/GFL/analysis

Not looking too bad :-)

[whatsup]

7/1 cons ann today and poised for sustainable growth in my book.
Only finance company from the GFC to survive and "do the right thing by all stake holders".

[Beagle]

7/1 cons ann today and poised for sustainable growth in my book.
Only finance company from the GFC to survive and "do the right thing by all stake holders".

Be VERY careful folks, this statement is very disingenuous. Some facts to consider
1. Many finance companies survived the GFC.
2.. First ranking debenture holders had to take 15% of their debenture value as shares at circa 35 cents per share, now worth a mere fraction of that.
3. Millions of dollars was invested in unsecured subordinated notes and these investors were forced to take close to half of the value of their investment in shares at circa 35 cps, now only worth a fraction of that so have taken a very serious haircut.
4. The company has an extremely chequered history and has made some very interesting calls on what loans are bad, doubtful and restructured in the past.
5. I know for a fact that they used to use the old cleanse the balance sheet just before balance date by selling a lot of horribly overdue loans into their side company Stellar Collection at full face value rather than taking an appropriate write-off on those loans as a means of artificially propping up the profitability / minimising losses to paint a far more rosy picture of their financial performance than what would otherwise have been the case.

I can't help wondering if they use the same old tricks to inappropriately avoid losses on bad / doubtful debts these days ? Does a leopard change its spots or a Tiger change its stripes ?.
I see David OConnell was in charge back then and still is. Hmmm

I put a LOT of stock on a companies track record in terms of assessing the credibility of management and the credibility of their "reported results". When looking at a companies track record I assess their entire track record not just the last year or two. Easy to manipulate one or two years financial results...anyone remember how Fay Richwhite manipulated the profit of Tranz Rail by doing grossly insufficient maintenance on the railway lines ?

Reported results for bank and finance companies involved a whole lot of subjective assessment of loans in terms of what's overdue, past due, doubtful and truly bad debt and Geveva finance's track record in this subjective process is something investors might like to consider.
Disc: Don't own, not to be considered professional advice or a recommendation, DYOR)

[Major von Tempsky]

A statement by Roger that is somewhat disingenuous in itself.
David O'Connell was called in to turnaround the Farmers Finance Co before the GFC (Global Financial Crisis) which he succeeded in doing brilliantly which is why he was head-hunted to do the same for Geneva. Despite the impression given by Roger, David O'C is a relative newcomer to Geneva, basically post GFC. Before GFC there were 53 Finance Companies in NZ, now there are a handful who have survived 6? 7? And a few more who made compacts with their investors involving severe haircuts.

Why did nearly 50 NZ Finance companies go down? Fairly simple, not malevolent black magic. Finance Companies borrowed from investors and the public and had very high gearings by the nature of the industry. They depended on being able to refinance their borrowings from investors and the public when they became due and for decades they did this. Come GFC and investors and the public took fright and refused to refinance NZ's Finance Co's and Boom, down they went like a set of dominoes except for the odd one owned/partly owned by supportive banks while Geneva made a compromise with it's investors which necessarily involved a heavy haircut for all. That is all now history except for Roger who is still trying to fight the Norman Conquest. A very few investors like myself (45 years experience with a double degree in Economics) spotted the turnaround situation, realised the GFC is now history and took a stake. My stake was bought at an average 4 cents a share, now worth about 6cps. So to Roger, WOLF! Update yourself.

Maybe it is true some investors fear another GFC. I prefer to postulate that Central Banks and Governments and International Insitutions have learnt from the GFC. Some people are still dead scared of another Great Depression because they haven't studied Economics or Economic History. They are the basis for aspiring dramatic authors to come out with at least one new book each year with titles like "The Coming Great Crash" and make a killing from eager suckers.

[Beagle]

Geneva Finance likes to portray itself as a great corporate citizen for eking its way through years of the moratorium they creatively constructed.

In 2008 investors were compelled to accept shares for a portion of their debenture stock. This portion was 15% for secured debenture holders and 45% for unsecured subordinated stockholders and shares were issued at 36.492 cents per share. An investor with $100,000 of unsecured subordinated notes received back $55,000 plus interest and 123,314 shares now worth the "penny dreadful" sum of only 5.6 cps each $6,905, thus a capital loss has been suffered of nearly $40,000 ! An investor with $100,000 of first ranking secured debentures received back shares and capital repaid of $87,301 if they were still holding the shares today.

Its a very sad indictment on the company that they now have to do a 7:1 share consolidation so that the SP might theoretically exceed the price the shares were issued at eight years ago ! It almost goes without saying that no dividends have been paid on those shares in all that time.

Let the record correctly reflect the fact that investors did take a serious haircut on this company.

The shares, (in any meaningful volume) never traded above 10 cps despite being issued at 36.492 cps based on management's assertions to a so called independent report on the moratorium.
Managements assertions which this report were based upon, (but never adequately tested or audited) appear to have been grossly inaccurate in that the market immediately perceived the shares as being almost worthless.

The company modelled itself on Instant Finance, in fact Glenn Walker the former CEO, (now an undischarged bankrupt) was the former CEO of Instant Finance and had ready access to all the intellectual property on how that highly successful company ran, (a company I might add that has run successfully right through the GFC without losing a cent of investors money) and yet managed to run this company in such an inept way as to destroy a significant portion of debenture holders and especially unsecured subordinated note holders investment.

Mr Oconnell was on board and in charge of this company both before and during the moratorium when they were making extremely dubious transfers of millions of dollars of badly overdue debtors into their side company Stellar Collections at full face value. Through this process they disingenuously hid millions of dollars of bad loans, (write-downs) that should have been recognised in Geneva Finance itself.

Just as well they didn't include a confidentiality clause in my settlement with them because that means someone can tell the awful truth about this companies grim history.

I'm just putting their history out there so people can decide for themselves if they think the company has sufficient credibility for their own investment risk profile.
(Disc: Don't own. Everything said is to the writers best recollection of events that occurred many years ago but should not be relied upon as investment advice or a recommendation. No responsibility whatsoever is accepted. DYOR). Absolutely not looking to buy if the SP goes down so my comments are based on a detailed involvement with the company and are not biased by having any current investment position with them but as always its up to people to decide for themselves who's posts have more credibility.

[whatsup]

Geneva Finance likes to portray itself as a great corporate citizen for eking its way through years of the moratorium they creatively constructed.

In 2008 investors were compelled to accept shares for a portion of their debenture stock. This portion was 15% for secured debenture holders and 45% for unsecured subordinated stockholders and shares were issued at 36.492 cents per share. An investor with $100,000 of unsecured subordinated notes received back $55,000 plus interest and 123,314 shares now worth the "penny dreadful" sum of only 5.6 cps each $6,905, thus a capital loss has been suffered of nearly $40,000 ! An investor with $100,000 of first ranking secured debentures received back shares and capital repaid of $87,301 if they were still holding the shares today.

Its a very sad indictment on the company that they now have to do a 7:1 share consolidation so that the SP might theoretically exceed the price the shares were issued at eight years ago ! It almost goes without saying that no dividends have been paid on those shares in all that time.

Let the record correctly reflect the fact that investors did take a serious haircut on this company.

The shares, (in any meaningful volume) never traded above 10 cps despite being issued at 36.492 cps based on management's assertions to a so called independent report on the moratorium.
Managements assertions which this report were based upon, (but never adequately tested or audited) appear to have been grossly inaccurate in that the market immediately perceived the shares as being almost worthless.

The company modelled itself on Instant Finance, in fact Glenn Walker the former CEO, (now an undischarged bankrupt) was the former CEO of Instant Finance and had ready access to all the intellectual property on how that highly successful company ran, (a company I might add that has run successfully right through the GFC without losing a cent of investors money) and yet managed to run this company in such an inept way as to destroy a significant portion of debenture holders and especially unsecured subordinated note holders investment.

Mr Oconnell was on board and in charge of this company both before and during the moratorium when they were making extremely dubious transfers of millions of dollars of badly overdue debtors into their side company Stellar Collections at full face value. Through this process they disingenuously hid millions of dollars of bad loans, (write-downs) that should have been recognised in Geneva Finance itself.

Just as well they didn't include a confidentiality clause in my settlement with them because that means someone can tell the awful truth about this companies grim history.

I'm just putting their history out there so people can decide for themselves if they think the company has sufficient credibility for their own investment risk profile.
(Disc: Don't own. Everything said is to the writers best recollection of events that occurred many years ago but should not be relied upon as investment advice or a recommendation. No responsibility whatsoever is accepted. DYOR). Absolutely not looking to buy if the SP goes down so my comments are based on a detailed involvement with the company and are not biased by having any current investment position with them but as always its up to people to decide for themselves who's posts have more credibility.


Rog, I really feel sorry for you , yes you lost a heap of money along with plenty of others BUT there are thousands of "investors " who "invested " in a myrid of finance companies who lost everything, at least those previous Geneva investors have something not a lot but something , now for the rebuild just how the directors go about it will be the question mark.

[Beagle]

Thanks and agree. The apparently SIX BILLION dollars lost during the GFC by N.Z. investors has left many deep scars, some like my Uncle who lost almost everything he had in money managers, ($600K), (not advised by me to go into that). I would concede that at least David OConnel and some of the management team there tried their best in extremely difficult conditions, made all the more difficult by some very dubious lending decisions made by the former CEO Glenn Walker. They did better than most but its a sad indictment on the governance, Trustee's exercise of their ability to provide effective oversight, regulatory system and on auditing standards generally in N.Z. that things worked out as badly as they did for so many investors. I've spent enough time now and posted enough detail for people to now be aware of the background of Geneva so over and out on this one and good luck to investors.

I learned a lot from this. Never ever put too much into any one thing. These days I reckon its best to have ten good investment idea's you really like and spread it around pretty evenly.
If you can't find 10 good high conviction idea's just leave the rest in cash. (I haven't got time to follow more than 10 companies really closely)

[Biscuit]

It's well worth a visit to their website if you want an insight into how some people must manage their financial affairs. 12% to nearly 30% interest plus a list of fees as long as your arm if you want to use their money. Hard to see why everyone on the website (even the cartoon people) are smiling so much. A more honest expression might be a combination of gormless anxiety. Not moralizing, just saying, but not a business model that appeals to me.

[GTM 3442]

Let's face it. Geneva is nothing more than a punt at this stage. One step up from being one of the "penny dreadfuls" of which I am so fond, but a punt nonetheless.

And that's the basis upon which I shall buy some once the price returns to the equivalent of 5cps. And write the money off as "lost" as soon as I buy. But I am open to happy surprises!

My guess at the timeframe for my turning sufficient bucks to exit is about 2020-2025.

[whatsup]

Relisted at the 7/1 takes effect, whatnow ?

[Beagle]

It's well worth a visit to their website if you want an insight into how some people must manage their financial affairs. 12% to nearly 30% interest plus a list of fees as long as your arm if you want to use their money. Hard to see why everyone on the website (even the cartoon people) are smiling so much. A more honest expression might be a combination of gormless anxiety. Not moralizing, just saying, but not a business model that appeals to me.

Sums it up very nicely. Fact is anyone with a decent credit rating will get cheaper money from their bank or one of the mainstream finance companies which leaves this company as nothing more than bottom feeders.


Let's face it. Geneva is nothing more than a punt at this stage. One step up from being one of the "penny dreadfuls" of which I am so fond, but a punt nonetheless.

And that's the basis upon which I shall buy some once the price returns to the equivalent of 5cps. And write the money off as "lost" as soon as I buy. But I am open to happy surprises!

My guess at the timeframe for my turning sufficient bucks to exit is about 2020-2025.

Make no mistake, they are a penny dreadful...
The use of a Swiss city as the name for a finance company is meant to infer strength and stability in much the same way as the choice of "Stellar" in stellar collections Ltd is meant to infer they have a stellar ability to collect overdue debtors. Investors would do well to consider whether these name choices are deliberate attempts to present an image and whether that attempt to portray same has anything behind it or whether this is simply a cunning marketing ploy, much like a cynic might claim that the 7:1 share consolidation is simply another creative way to try and create a more substantive feel to the company in terms of its share price being somewhat more normalised.

[Major von Tempsky]

Very strange stuff from Roger. David O'Connell was brought into Geneva after successfully sorting Farmers Finance. Faced with the situation he was faced with I don't see he needs to apologise to anyone! He's succeeding and I have bought into that success.
My mother had all her money in different finance companies and after she died I cashed the lot in to invest in shares that were solid and paid dividends so that one got both dividends and a chance of capital appreciation. Now that the GFC (Global Financial Crisis) is over I have taken the opportunity to invest some in Geneva in the recovery situation there. But I am well diversified into property, shares and bank deposits. Today I celebrate the fact that for the first time my Spark/Telecom holdings now exceed what they were before the GFC hit.
This thread is part of an NZX share investment thread. It has nothing to do with very unwise behaviour by people who lent lots of money to finance companies without diversifying in historical times. I would like the Moderator to exercise some censorship to steer this thread along the right path otherwise I and and others will go elsewhere where we can sensibly discuss CURRENT SHARE INVESTMENT!

[GTM 3442]

Very strange stuff from Roger. . . . . . I would like the Moderator to exercise some censorship to steer this thread along the right path otherwise I and and others will go elsewhere where we can sensibly discuss CURRENT SHARE INVESTMENT!

I would not like the moderator to exercise some censorship to steer this thread.

[Major von Tempsky]

Well here we are, all you dogs in a manger, you've been pre-empted by CURRENT events. Have a look at today's announcement, Geneva has declared a special 1.5 cps dividend to be paid in August this year!
Amongst other things it means I could now, if I wished, quite safely sell off my Geneva without tax saying I bought for dividends and now I have a dividend. But I think I'm in for rather longer than that.

[whatsup]

Well here we are, all you dogs in a manger, you've been pre-empted by CURRENT events. Have a look at today's announcement, Geneva has declared a special 1.5 cps dividend to be paid in August this year!
Amongst other things it means I could now, if I wished, quite safely sell off my Geneva without tax saying I bought for dividends and now I have a dividend. But I think I'm in for rather longer than that.

I was picking for a divi eventually but not for this year, may be 2017 but this makes life very interesting , whats next can they grow their loan book markedly that is my question, it will make this years AGM very interesting imo.

[Major von Tempsky]

Yes, it's rather sooner than I was expecting too, I thought next year at the earliest. When and where is the AGM Whatsup?

[GTM 3442]

I had a 2020 timeframe for Geneva becoming an investment rather than a speculation. Things might be happening sooner than I had anticipated.

However it's a special dividend, so we'll see what happens in the dividend space next year. If there's nothing, I reckon I'll be able to pick 'em up at 35c with no problem.

[whatsup]

Yes, it's rather sooner than I was expecting too, I thought next year at the earliest. When and where is the AGM Whatsup?

Last year 1st Sept should be the same as that but you never know it could coincide with the divi payment just to bring smiles all round, hmmmmmm !

[Major von Tempsky]

Worth having another look at in the light of today's announcement and trading :-)

[Snoopy]

Worth having another look at in the light of today's announcement and trading :-)



Shareholder Equity$20.256m


less Intangibles$0.180m


less Deferred tax$1.796m


Total Available Asset Base$18.280m





Financial Assets at fair value thru P&L$0.630m


plus Financial Receivables$54.575m


plus Other Receivables & Deferred Expenses$0.15m + $1.082m


Total Receivables$56.437m



So check :

Total Available Asset Base > 0.2x (Total Receivables)

=> $18.280m > 0.2 x $56.437m = $11.287m (true)

=> Geneva passes the Available Equity to Receivable Loan book test.

SNOOPY

[Snoopy]

Worth having another look at in the light of today's announcement and trading :-)

Geneva does not quote EBIT figures directly. So I have calculated it by taking 'Net Profit Before taxation' (EBT) and adding back into that the interest expense.

(EBT + I)/ I

= ($2.739m + $3.372m)/ $3.372m = 1.81 > 1.2 (test standard)

=> Geneva passes the EBIT to interest expense test.

SNOOPY

[Snoopy]

Worth having another look at in the light of today's announcement and trading :-)



Current Financial AssetsReference


Cash & Cash Equivalents$8.025mBalance Sheet FY2016


Financial Assets at fair value thru P&L$0.630mBalance Sheet FY2016


Financial Receivables 0-12 months (contractual)$19.934mNote 16


Total Current (contractual)$28.529m(addition)





Current Financial LiabilitiesReference


Total Current (contractual)$20.023mNote 30





Other Cash SourceReference


Borrowing Headroom$2.946mNote 19



Now we can use the above information for the liquidity buffer test:

($28.589m + $2.946m) = $31.535m > 1.1 x $20.023m = $22.025m (true)

=> Geneva passes the liquidity buffer ratio test

SNOOPY

[Snoopy]

Worth having another look at in the light of today's announcement and trading :-)



Underlying DebtReference


Debt$49.372mBalance Sheet FY2016


less Outstanding Claims Liability$0.252mBalance Sheet FY2016


less Unearned Premium Liability$2.272mBalance Sheet FY2016


Total Underlying Debt$46.848m(addition)





Underlying AssetsReference


Total Assets$69.628mBalance Sheet FY2016


less Finance Receivables$54.576mBalance Sheet FY2016


Total Underlying Assets$15.052m(addition)



We use the above data to work out the ratio:

(Underlying Debt)/(Underlying Assets) = $46.848m/$15.052m = 311% > 90% (test standard)

Result Geneva emphatically fails the underlying gearing ratio test! (or is there something wrong with the way I have applied this test? - see thread in 'Investment Strategies': 'Gearing ratio: Trading Company vs Bank'

SNOOPY

[Major von Tempsky]

Not quite sure where you are coming from Snoopy. Finance Receivables are still an asset not a liablility and for a Finance Company are always going to be its biggest asset. Perhaps if you quoted the results for the same calculation for half a dozen other NZ Finance Companies we could see whether it is an outlier and whether it matters.
cheers,
The Major

[whatsup]

I note that Geneva goes ex div on 11 Aug 2016 , Im thinking that this would be Geneva's first ever dividend small as it is , are there better things to come, AGM should reveal a master plan ! ?

[Snoopy]

Not quite sure where you are coming from Snoopy. Finance Receivables are still an asset not a liablility and for a Finance Company are always going to be its biggest asset.

Major (and others), I think I should explain why I think looking at the 'Underlying Gearing Ratio' is important.

Suppose you found out that all of the management of Geneva Finance were holograms, and the business was actually run by 'yours truly' out of a doghouse with a silver supper dish as collateral. Now if I was stumping up funds to loan out for fellow mutts to buy dog biscuits, my silver supper dish might be sufficient collateral to inspire confidence: Should I start dishing out 'beyond best by date' bags of dog biscuits (for example). However, if I was stumping up capital to buy cars (as Geneva does), and a couple of my 'finance receivables' (cars) turn out to be dud, then my silver supper dish is not going to go far funding (if only temporarily) replacements. What I am saying is that Geneva needs a certain 'critical mass' in its own right to be seen as a credible lender, if all the loans were called in and repaid. Measuring the 'Underlying Gearing Ratio' is one way to assess if Geneva has a sufficiently funded core.

To measure the 'Underlying Gearing Ratio' I need to take out the finance receivables and, if Geneva was a bank, also take out the underlying bank depositors funds that are propping up these finance receivables. IOW I am trying to get a picture of the 'Geneva Skeleton' should all loans be called in and repaid. But of course Geneva no longer takes depositors funds. Instead they have turned to Westpac and Kiwibank as their source of funds. The question then is, how much of Genva's bank funding is there to support the loan book only? And how much of the funding is there to support the 'Geneva Skeleton'? These are two questions I don't know how to answer right now.

So lets assume all of the bank loans are there to support the 'Geneva Skeleton' (a pessimistic conservative assumption). This means that when I take out the 'finance receivables' to get the 'Total Underlying Geneva Assets', then I do not take out an equivalent supporting amount of capital that has been borrowed from the banks to support these financial receivables, when I calculate 'Total Underlying Geneva Debt'. I am almost certainly incorrect doing my 'Underlying Gearing Ratio' calculation:


'Underlying Gearing Ratio' = 'Total Underlying Geneva Debt'/ 'Total Underlying Geneva Assets'


in this way. Because some of those bank borrowings will have been taken up with the express intention of supporting the 'finance receivables' book. But,

"How to measure it?",

is my question!



Perhaps if you quoted the results for the same calculation for half a dozen other NZ Finance Companies we could see whether it is an outlier and whether it matters.


Good idea. There aren't many finance companies that are listed (release detailed results) and are comparable. But I am looking at the finance side of Turners TNR (was Dorchester) as we speak.

SNOOPY

[Snoopy]

I think looking at the 'Underlying Gearing Ratio' is important.

Geneva needs a certain 'critical mass' in its own right to be seen as a credible lender, if all the loans were called in and repaid. Measuring the 'Underlying Gearing Ratio' is one way to assess if Geneva has a sufficiently funded core.

To measure the 'Underlying Gearing Ratio' I need to take out the finance receivables and, if Geneva was a bank, also take out the underlying bank depositors funds that are propping up these finance receivables. IOW I am trying to get a picture of the 'Geneva Skeleton' should all loans be called in and repaid. But of course Geneva no longer takes depositors funds. Instead they have turned to Westpac and Kiwibank as their source of funds. The question then is, how much of Genva's bank funding is there to support the loan book only? And how much of the funding is there to support the 'Geneva Skeleton'? These are two questions I don't know how to answer right now.


'Underlying Gearing Ratio' = 'Total Underlying Geneva Debt'/ 'Total Underlying Geneva Assets'


Some of those bank borrowings will have been taken up with the express intention of supporting the 'finance receivables' book. But,

"How to measure it?",

is my question!


After some thought, I think I have been looking at this issue of gearing from the wrong angle.

Geneva is free to negotiate with its parent bankers on what is a suitable level of funding for the company. It seems inconceivable that they would negotiate their own loan package in a way that would put their own 'funding core' at risk. So we can use the information we have combined with a 'rule of thumb' to calculate an appropriate sized funding core.

The table below has taken items from the balance sheet (marked (1)), and used those numbers to generate other numbers in the prescribed order ( (2),(3),(4),(5) )



[AssetsLiabilitiesShareholder Equity


[Not Underlying Finance$15.052m (2)-$13.547m (3)=$1.505m (5)


[Underlying Finance$54.576m (1)-$35.825m (4)=$18.751m (5)


[Balance Sheet Total Finance$69.628m (1)-$49.372m (1)=$20.256m (1)



Calculation (2) allows us to work out the core assets not related the underlying finance contracts of the business (everything else apart from the receivables book) by simple subtraction. The finance company 'rule of thumb' for their core is to ensure that:

(Non-Risk Liabilities)/(Non-Risk Assets) < 0.9

From this, we can work out that the Non-Risk Liabilities must be no more than:

(Non-Risk Assets) x 0.9 = $15.052m x 0.9 = $13.547m (which is answer 3 above).

Simple subtraction and addition is then used to work out the rest of the numbers in the table.

So what's the point of this so far?

By working out the minimum size of the business core (as measured by assets and liabilities), that means we can measure how well the rest of the business is set up to do the customer lending, the bit that actually generates the profits for Geneva. This is done by looking at the assets and liabilities left outside the core.

Implied Available Financing Gearing ratio
= (At Risk Liabilities)/(At Risk Assets)
= $35.825m/$54.576m
= 65.6%

Generally you would want to match your 'At Risk Liabilities' with your 'At Risk Assets'. This particular match looks acceptably conservative. But how does it compare with other listed finance entities?

SNOOPY

[Major von Tempsky]

Don't forget that Geneva is also increasingly in other businesses, mainly buying distressed loan books and realising them at a profit and also insurance.

cheers,

le Commandant

[Snoopy]

Worth having another look at in the light of today's announcement and trading :-)



EOFY2016EOFY2015Average


Cash/Cash Equivalents$8.025m$4.094m$6.060m


Investment Property Income$3.031m$2.718m$2.875m


Finance Receivables$54.576mm$41.833m$48.205m


Total$57.139m



Interest Margin = [(Interest Received) - (Interest Expenses)] / [Average Cash Earning assets for Year]
= [$9.312m -$3.372m] / $57.139m
= 10.9%

It is interesting to compare that figure with that of Heartland that increased to 4.4% for FY2015 and is forecast to increase again. Heartlanders seem very happy with that '4.4% and rising' beating all the other banks. But start stacking 4.4% up against other finance companies and it doesn't look so clever.

SNOOPY

[Snoopy]

Don't forget that Geneva is also increasingly in other businesses, mainly buying distressed loan books and realising them at a profit and also insurance.

cheers,

le Commandant




Impaired Asset Expense (A)Provision for Impairment (B)Net Receivables (Including impairment) (C)(B/C)Normalised EBIT (excluding Impaired asset expense) (D) (A/D)


FY2015-$0.897m$29.631m$71.461m41%$3.768m-24%


FY2016-$0.234m$29.448m$84.024m35%$5.517m-4.2%



Something strange is going on here. Impaired asets are being written up in value, not down, each year (hence negative impared asset expense). Is there an explanation?

SNOOPY

[Sgt Pepper]

Any news from the Geneva Finance AGM held this afternoon? My dividend payment went though to my account a few days ago

[GTM 3442]

Let's face it. Geneva is nothing more than a punt at this stage. One step up from being one of the "penny dreadfuls" of which I am so fond, but a punt nonetheless.

And that's the basis upon which I shall buy some once the price returns to the equivalent of 5cps. And write the money off as "lost" as soon as I buy. But I am open to happy surprises!

My guess at the timeframe for my turning sufficient bucks to exit is about 2020-2025.

Well, I see that over the past couple of months, the price has trended down quite nicely toward my 5c equivalent. With a little luck it will soon be time to open the bottom drawer ready to receive a bundle of these

[Major von Tempsky]

Anyone know when Geneva is going to announce in December?

[whatsup]

I see last years half yearly ann was released on 14/12/15 , tomorrow, what can we expect , surely there is good news with good growth prospects , a $3 mil + circa profit would be nice !

[Major von Tempsky]

I'll look for it :-)

Staying absolutely mum until it happens seems to be the GFL policy. We could be fretting for another week or two yet.

[Sgt Pepper]

I'll look for it :-)

Staying absolutely mum until it happens seems to be the GFL policy. We could be fretting for another week or two yet.

I have emailed them yesterday, no response yet.

[Major von Tempsky]

Depth table is developing nicely. GTM 3442 needs to have a look at it ;-) Long term value investors can see some nice strong compund interest trends developing....

[GTM 3442]

Depth table is developing nicely. GTM 3442 needs to have a look at it ;-) Long term value investors can see some nice strong compund interest trends developing....

Mornin' fungus.

Two bids of 36c, total 40k shares, one offer of 10k at 48c, one offer 20k at 55c? I'd hardly call that developing nicely.

Still a punt. Just as they were at 20-odd cents in late 2014.

[Sgt Pepper]

Mornin' fungus.

Two bids of 36c, total 40k shares, one offer of 10k at 48c, one offer 20k at 55c? I'd hardly call that developing nicely.

Still a punt. Just as they were at 20-odd cents in late 2014.

Given the latest profit results I am surprised no ramp up in the share price yet

[ziggy415]

Given the latest profit results I am surprised no ramp up in the share price yet
not too much...great fit for heartland bank

[whatsup]

Sarg, It will happen especially after the full years results are known, buy now for a reassessment .70+ imho.

[Sgt Pepper]

Who are TNR again?

Think I'll put Geneva into my stockpicks for next year - they're big enough now!

They're a secret share, no discussion in the media yet on their stellar rise this year. Time for Rob Stock to write another article about them methinks.

Just received in the mail an unsolicited offer from Zero Commission Ltd to acquire my shares in Geneva Finance. They appear to be offering the market price. I have no interest in selling however is this interest a positive sign for GFL share price this year?

[whatsup]

Just received in the mail an unsolicited offer from Zero Commission Ltd to acquire my shares in Geneva Finance. They appear to be offering the market price. I have no interest in selling however is this interest a positive sign for GFL share price this year?

Sarg, I too am a s her but no offer to me I note that one of the directors is the founding entity of CBL who floated last year or so and that flew from its listing price of $1.35 to over $4.00 before settling, they are major shareholders and would be here if there was no game plan, 2017 could be a big year for Geneva imo.

[Major von Tempsky]

These outfits, forget the term for them, offer significantly lower than the going price to their old lady shareholders, so if Zero Commission are offering the going price hmmm hmmmm....

[Sgt Pepper]

Indeed Major. I wonder when the half year reports are due? I was too late to enter the 2017 share picking contest but GFL would have been one of my picks for significant gains in 2017 in my opinion.

[whatsup]

Up 8% already @ .52, 7 year high, hmmmmmm !

[Major von Tempsky]

Yep, I noted that Whatsup :-)

Sgt Pepper, next report not due to about halfway through June. Perhaps they might do an acquisition like Spark this morning....

Sgt Pepper I managed to get GFL into my Shertrader competition picks, so here's hoping!

[Major von Tempsky]

Anyone like today's news from Geneva? :-)

[whatsup]

With .50 almost hit highest price (.52 ) for the year, must be some good news ann due out shortly, whatsup ?

[whatsup]

With .50 almost hit highest price (.52 ) for the year, must be some good news ann due out shortly, whatsup ?

All time high today @ .56

Fantastic result profit up 45% @ $5.1 mil.
Dividend .02 / share up 33%

and all set for further acquisitions and growth after its near death experience share to watch ( as I have for 3 years now )

[Major von Tempsky]

Yep, it's great stuff! I wonder what their yearly dividends pattern will now settle into....

I got into them after an article on them by Rob Stock in the Sunday Star Times Business section on July 28 2013 - is that what prompted you Whatsup or did you have a different trigger?

[Twinklefingers]

I tried to buy some at .44c after their last announcement but it's so illiquid I missed out and my offer expired. Kicking myself now. Almost the same thing happened when I bought TIL at .84 and I ended up buying far less than I should've. Good luck to holders I hope it does the same thing TIL did :)

[Major von Tempsky]

I never haggle when I buy, it strings the process out too long and God knows what will happen then.

I check out the prospective share, gross dividend %. P/E, last couple of reports and look at the Depth table. If I am satisfied, including is the share big enough to give ease of buying and selling then I put in a computer order through Direct Broking at the current selling price provided the seller has at least the volume I want, then Bang! I pull the trigger. Result I have what I want within 10 minutes, no worrying or stuffing around.

I bought my latest tranche 10,000 of Geneva yesterday thinking otherwise it will take a significant rise by report date at 49cps expecting them to report about mid June with no dividend. Bingo I was the first in at 49cps and it caught fire!

If I had put in a order at last sale price or just above the other buyers I would be sitting by the kerb, sobbing!

[whatsup]

I never haggle when I buy, it strings the process out too long and God knows what will happen then.

I check out the prospective share, gross dividend %. P/E, last couple of reports and look at the Depth table. If I am satisfied, including is the share big enough to give ease of buying and selling then I put in a computer order through Direct Broking at the current selling price provided the seller has at least the volume I want, then Bang! I pull the trigger. Result I have what I want within 10 minutes, no worrying or stuffing around.

I bought my latest tranche 10,000 of Geneva yesterday thinking otherwise it will take a significant rise by report date at 49cps expecting them to report about mid June with no dividend. Bingo I was the first in at 49cps and it caught fire!

If I had put in a order at last sale price or just above the other buyers I would be sitting by the kerb, sobbing!

MvT, I personally would like no divi, put the money into growth and acquitions if they are around/available, this years AGM will be very interesting in that the "top table " should give S Hers an insight at to what their business plan is from here on out, could be an interesting future if they get things right,

[Sgt Pepper]

I never haggle when I buy, it strings the process out too long and God knows what will happen then.

I check out the prospective share, gross dividend %. P/E, last couple of reports and look at the Depth table. If I am satisfied, including is the share big enough to give ease of buying and selling then I put in a computer order through Direct Broking at the current selling price provided the seller has at least the volume I want, then Bang! I pull the trigger. Result I have what I want within 10 minutes, no worrying or stuffing around.

I bought my latest tranche 10,000 of Geneva yesterday thinking otherwise it will take a significant rise by report date at 49cps expecting them to report about mid June with no dividend. Bingo I was the first in at 49cps and it caught fire!

If I had put iMjoa order at last sale price or just above the other buyers I would be sitting by the kerb, sobbing!

Major

I am very glad I was not tempted to sell to the offer I had received two months ago for 40cps

[Snoopy]

WOW, fantastic result, well done to management, we could now see more of the same but imo not to the same magnitude , looks like to me that they have settled on a very good business plan which should generate profits and dividends for a while to come.


Note: The financial year for Geneva ends on 31st March



YearDividends Paid 'per share'Significant Event During Year'


FY2013 NILExited moritaurium, Established $30m Securitization facility

[/TR]

FY2014 NIL


FY2015 NILRights Issue raises $6.1m, fully subscribed (April 2014)



FY2016 NILSecuritization facility increased to $35m (June 2015)


FY20171.5cpsSecuritization facility increased to $45m (June 2016)


7:1 Share consolidation 493,040,761 -> 70,435,275 (16 July 2016)


Raised $3.1m additional professional Investor funding to build cash reserves (January 2017)


FY2018 (f)2.0cps


Average FY2014 to FY2018 inclusive0.7cps



(f) indicates forecast payment

SNOOPY

[Snoopy]

Note: The financial year for Geneva ends on 31st March



YearDividends Paid 'per share'Significant Event During Year'


Average FY2014 to FY2018 inclusive0.7cps




Note that due to past losses, dividends will be unimputed (so the quoted dividend figures paid are gross) for the forseeable future.

Plugging in a representative yield, one that represents the ups and downs of the financing cycle of Geneva Finance, we can now arrive at our 'Capitalised Dividend Model' valuation

(Representative Dividend per Share) / (Acceptable Yield) = Share Price (an algebraeic manipulation of: Dividend per Share / Share Price = Yield )

0.7c / 0.085 = 8.2c

A reminder here that NTA was:

$24.9m/ 70.4m = 35cps at balance date (31-03-2017).

This means my fair valuation is at a good discount to asset value. Capitalising the dividend will punish a company when the period examined includes years where no dividend was paid. That was the case here. But it would be wrong to think that under different (less favourable) market conditions, the company couldn't return to a situation where no dividend was paid. It is also true that if the allowance for bad loans was increased to the same percentage that applied in FY2015, a substantial amount of capital would disappear from the balance sheet. So I believe that my 8.2c valuation is fair.

This $0.082 valuation is measured at the average point in the business cycle. One might argue that we are now riding high in the business cycle and that this $0.082 valuation is consequently too low given today's circumstances. I wouldn't argue with that. But would the real valuation at the top of the business cycle increase share value by a factor of 7? Ever the bargain hound, I wouldn't look at buying any shares myself until that share price drifts down to that 8.2c level. Consequently I won't be buying at market levels of over 50c, a price that can only be justified but ignoring all history up to the present (although I accept that some will do this).

SNOOPY

[Beagle]

Note that due to past losses, dividends will be unimputed (so the quoted dividend figures paid are gross) for the forseeable future.

Plugging in a representative yield, one that represents the ups and downs of the financing cycle of Geneva Finance, we can now arrive at our 'Capitalised Dividend Model' valuation

(Representative Dividend per Share) / (Acceptable Yield) = Share Price (an algebraeic manipulation of: Dividend per Share / Share Price = Yield )

0.7c / 0.085 = 8.2c

A reminder here that NTA was:

$24.7m/ 70.4m = 35cps at balance date (31-03-2017).

This means my fair valuation is at a good discount to asset value. Capitalising the dividend will punish a company when the period examined includes years where no dividend was paid. That was the case here. But it would be wrong to think that under different (less favourable) market conditions, the company couldn't return to a situation where no dividend was paid. It is also true that if the allowance for bad loans was increased to the same percentage that applied in FY2015, a substantial amount of capital would disappear from the balance sheet. So I believe that my 8.2c valuation is fair.

This $0.082 valuation is measured at the average point in the business cycle. One might argue that we are now riding high in the business cycle and that this $0.082 valuation is consequently too low given today's circumstances. I wouldn't argue with that. But would the real valuation at the top of the business cycle increase share value by a factor of 7? Ever the bargain hound, I wouldn't look at buying any shares myself until that share price drifts down to that 8.2c level. Consequently I won't be buying at market levels of over 50c, a price that can only be justified but ignoring all history up to the present (although I accept that some will do this).

SNOOPY

Eureka, you've finally got it. The shares are basically worthless as their business model simply doesn't work across the business cycle.

[Major von Tempsky]

Any "worthless" Geneva shares you can offer me Roger, I'd be very happy to buy off you for next to nothing :-)

Both you and Snoopy, well Snoopy anyway, should read the latest news release from Geneva and you will pick all sorts of interesting hints and vibes that Geneva will be continuing stratospheric progress of the last 3 years.
I'll be buying more as money comes to hand :-)

As for Snoopy's rethink about tax on Geneva....it seems to have escaped his attention the wink in the said news release that so heavy were Geneva's losses that they don't forsee paying tax for the forseeable future rendering his rethink rather specious.....

Roger is in the same position as King Canute....no matter what he says and does Geneva will be floating higher. He is congenitally unable to get his head around the fact that since 3 or 4 years ago Geneva is a different animal with a low cost computer based structure of just 2 branches and much fewer employees, new activities,a new strong cornerstone shareholder, new management and new sources of finance. He is like the generals who are now ready to refight the last war....but history has run over him and everything is different....Passchendaele is over, the Maginot line has gone and the World has changed unrecognisably - well to Roger anyway!

[Snoopy]

Snoopy should read the latest news release from Geneva and you will pick all sorts of interesting hints and vibes that Geneva will be continuing stratospheric progress of the last 3 years.
I'll be buying more as money comes to hand :-)

Since 3 or 4 years ago Geneva is a different animal with a low cost computer based structure of just 2 branches and much fewer employees, new activities,a new strong cornerstone shareholder, new management and new sources of finance.

As for Snoopy's rethink about tax on Geneva....it seems to have escaped his attention the wink in the said news release that so heavy were Geneva's losses that they don't forsee paying tax for the forseeable future rendering his rethink rather specious.....


As I said in my capitalised valuation post.
"Capitalising the dividend will punish a company when the period examined includes years where no dividend was paid."

If you believe that the dividend pattern will continue along the lines of the last two announcements over the next five years, then obviously the capitalised value of GFL shares will come out rather higher than 8.2c. But based on past behaviour, that assumption would be a matter of faith in the 'new' Geneva. And whether that faith is justifiable, or not, is up to each individual investor to decide.

The tax position at Geneva is a bit of a mystery to me. It is clear that over FY2016, the $1.150m tax benefit greatly increased GFL's NPAT. Yet if I go the cashflow statement, I can't find anything there that suggests any money has come in or out of the IRD. So I guess that $1.150m is all related to GFL's inglorious past, and is some kind of 'paper adjustment'. But even if that item isn't cash, the fact that a tax benefit is able to be incorporated into the books means that other 'real cash' can be freed up for dividend purposes.

Whether you should include the tax benefit in the Geneva results depends on what you are looking at and for what purpose. If it changes the books to the extent that higher (any) dividends are possible going forwards, then you should. If you are looking to compare Geneva with other finance companies, from an operational perspective, then you shouldn't (IMO).

SNOOPY

[Major von Tempsky]

Placeholder: Don't want the Geneva thread vanishing off the Board as the old Fletcher thread did.

[whatsup]

.60 all time high well done.

[percy]

.60 all time high well done.

Yes well done holders.
Whatsup as you started this thread, would you please put the GFL code in the thread title.
thank you.

[silverblizzard888]

This stock officially has jack all liquidity

[Beagle]

60 cents...well well. Considering the 7:1 share consolidation that's a whopping 8.57 cents of shareholder value for shares issued at the time of the moratorium 9 years ago at what Directors assured shareholders was fair value then 36.49 cps. What a "fantastic" long term investment this company has been. Nine years on with very little in the way of a dividend for nearly a decade original beleaguered investors given a "hobson's choice" of shares or liquidation could now cash in if there was sufficient liquidity and get a "whopping" 23.5 cents in the dollar back on shares they were assured by some of the former directors still in office were issued at fair value in 2008.
What a truly "stellar" investment opportunity this company has proved to be. The "integrity" of the original valuation of those shares in 2008 and the veracity of their business model should be crystal clear for all to see but if you need any help consider this, how much has the NZX50 increased in value since 2008 ?

[silverblizzard888]

60 cents...well well. Considering the 7:1 share consolidation that's a whopping 8.57 cents of shareholder value for shares issued at the time of the moratorium 9 years ago at what Directors assured shareholders was fair value then (35 cps if my memory has served me well. What a "fantastic" long term investment this company has been.

For a finance company that survived the financial crisis, it actually ranks among better returns than a lot of financial companies in NZ during that period as a lot didn't even make, though sadly it wasn't a positive return.

[Beagle]

For a finance company that survived the financial crisis, it actually ranks among better returns than a lot of financial companies in NZ during that period as a lot didn't even make, though sadly it wasn't a positive return.
To be clear, I am referring too two things. 1. The "integrity" of the original valuation used to cajole investors into accepting shares in lieu of part of their debentures.
2. The performance of the company for shareholders since 1 June 2008 relative to other financial institutions which provides clarity regarding the "veracity" of their business model. That there were many more pitiful finance companies which inflicted an more painful outcome to investors is a very sad state of affairs, no question about that. The penalties handed out in regard to offences for those few directors that were prosecuted was without question the most pathetic slap on the hand with a wet bus ticket stuff compared to the six billion dollars of investors money that went south.

All I am saying here is keep in mind the long term of where this company has come from, the damage they have inflicted and see for yourself by their long term performance the veracity of their business model. People with a good credit record borrow from the cheapest source and don't go to third or fourth tier lenders, why do you think their balance sheet has such a phenomenal amount of provisioning, all of which is just best guess and when their guesses vary from one year to another that's when reductions in provisioning can give the "illusion" of a profit....all to be written back if hard times come along.

[whatsup]

This stock officially has jack all liquidity

Very tightly held for a reason, its a 3 year plan imo.

[whatsup]

60 cents...well well. Considering the 7:1 share consolidation that's a whopping 8.57 cents of shareholder value for shares issued at the time of the moratorium 9 years ago at what Directors assured shareholders was fair value then 36.49 cps. What a "fantastic" long term investment this company has been. Nine years on with very little in the way of a dividend for nearly a decade original beleaguered investors given a "hobson's choice" of shares or liquidation could now cash in if there was sufficient liquidity and get a "whopping" 23.5 cents in the dollar back on shares they were assured by some of the former directors still in office were issued at fair value in 2008.
What a truly "stellar" investment opportunity this company has proved to be. The "integrity" of the original valuation of those shares in 2008 and the veracity of their business model should be crystal clear for all to see but if you need any help consider this, how much has the NZX50 increased in value since 2008 ?
Beag, I couldn't disagree with you but all shareholders had a chance to load up with the cash issue of a couple of years ago and then apply for more, I did and so far haven't regretted it , Im now a top 10 s her.

[whatsup]

all time high today and with the upcoming AGM there could be more " good news " .

[Major von Tempsky]

Yeehar! I'm holding tightly. Glad I don't have any Fletcher :-)

[Sgt Pepper]

Yeehar! I'm holding tightly. Glad I don't have any Fletcher :-)

Glad I didn't accept the unsolicited offer received through the mail 3 months ago to take my GFL shares off my hands for 40cps!

[Snoopy]

Shareholder Equity$20.256m


less Intangibles$0.180m


less Deferred tax$1.796m


Total Available Asset Base$18.280m





Financial Assets at fair value thru P&L$0.630m


plus Financial Receivables$54.575m


plus Other Receivables & Deferred Expenses$0.15m + $1.082m


Total Receivables$56.437m



So check :

Total Available Asset Base > 0.2x (Total Receivables)

=> $18.280m > 0.2 x $56.437m = $11.287m (true)

=> Geneva passes the Available Equity to Receivable Loan book test.



For the risk averse, time to review some Geneva Finance covenants for FY2017



Shareholder Equity$24.862m


less Intangibles$0.471m


less Deferred tax$3.114m


Total Available Asset Base$21.277m





Financial Assets at fair value thru P&L$0.475m


plus Financial Receivables$64.077m


plus Other Receivables & Deferred Expenses$0.011m + $$1.400m


Total Receivables$65.963m



So check :

Total Available Asset Base > 0.2x (Total Receivables)

=> $21.277m > 0.2 x $65.963m = $13.193m (true)

=> Geneva passes the Available Equity to Receivable Loan book test.

I have tried to be consistent in my finance company tests. The idea that a company should possess ready access to cash that covers twenty percent of the loan book originates from a banker's view of what the restructured 'PGG Wrightson Finance' (since taken over by Heartland) balance sheet should look like. Over the years, I was absolutely rubbished for this view when I applied it to Heartland itself, on the Heartland thread. Yet almost all the other finance companies I looked at seemed to have little trouble complying with this standard. In the end, because of the improving quality of the Heartland loan book, I relented on my requirement and set a new standard of 17% of the receivables book as easily accessible cash.

Back to Geneva, note 16 detailing the finance receivables shows a 'provision for credit impairment' of $29.889m on total gross financial receivables of $94.645m. This represents an impairment rate of:

$29.889m / $94.645m = 32%

The question then has to be asked. Is my 'stress test scenario' looking for 20% of the value of the 'loan book capital' to be available to be drawn down at short notice a big enough buffer considering that in 'normal operations' 32% of the loan book is already impaired? In this instance my capital requirement is based on the net loan book. The net loan book is only 68% of the gross loan book. So my requirement is for the company to have:

0.68 x (1-0.2) = 0.544 so 1-0.544 = 45.6% of the loan book value 'covered' for possible evaporation.

That is quite a high standard IMV, which must give some confidence to shareholders.

SNOOPY

[Snoopy]

Current Financial AssetsReference


Cash & Cash Equivalents$8.025mBalance Sheet FY2016


Financial Assets at fair value thru P&L$0.630mBalance Sheet FY2016


Financial Receivables 0-12 months (contractual)$19.934mNote 16


Total Current (contractual)$28.529m(addition)





Current Financial LiabilitiesReference


Total Current (contractual)$20.023mNote 30





Other Cash SourceReference


Borrowing Headroom$2.946mNote 19



Now we can use the above information for the liquidity buffer test:

($28.589m + $2.946m) = $31.535m > 1.1 x $20.023m = $22.025m (true)

=> Geneva passes the liquidity buffer ratio test





Current Financial AssetsReference


Cash & Cash Equivalents$11.072mBalance Sheet FY2017


Financial Assets at fair value thru P&L$0.475mBalance Sheet FY2017


Financial Receivables 0-12 months (contractual)$24.023mNote 16


Total Current (contractual)$35.570m(addition)





Current Financial LiabilitiesReference


Total Current (contractual)$20.491mNote 30





Other Cash SourceReference


Borrowing Headroom$2.246mNote 19 ($45m) & Note 30 ($42.754m)



Now we can use the above information for the liquidity buffer test:

($35.570m + $2.246m) = $37.816m > 1.1 x $20.491m = $22.540m (true)

=> Geneva passes the liquidity buffer ratio test

This is an easy pass. But investors also need to remember that Geneva carries a very high proportion of impaired loans on their books. So a lot more liquidity than 'normal' is probably a necessity.

SNOOPY

[Snoopy]

Geneva does not quote EBIT figures directly. So I have calculated it by taking 'Net Profit Before taxation' (EBT) and adding back into that the interest expense.

(EBT + I)/ I

= ($2.739m + $3.372m)/ $3.372m = 1.81 > 1.2 (test standard)

=> Geneva passes the EBIT to interest expense test.



Updating the above FY2016 test for FY2017:

Geneva does not quote EBIT figures directly. So I have calculated it by taking 'Net Profit Before taxation' (EBT) and adding back into that the interest expense.

(EBT + I)/ I

= ($3.815m + $3.458m)/ $3.458m = 2.10 > 1.2 (test standard)

=> Geneva passes the EBIT to interest expense test.

I have wondered about the reasoning for constructing this test in this way. I think it is obvious that if you were a major lender to a finance company, then you would be very interested in that finance company's ability to pay interest on your loan. 'Earnings before Interest and Tax' is exactly what it says. The are two conceptual problems I have with this statistic.

1/ Most companies do have to pay tax, and a tax debt to IRD takes precedence over bank creditor interest (IIRC). So as a lender, I would be interested in a company's ability to pay after they had paid their tax, not before.
2/ A company's must pay interest out of its underlying earnings. The more you earn the more you can borrow is the equation. Adding borrowing costs to underlying earnings will reduce those earnings. Generally most listed companies do have bank loans. So isn't a cleaner measure of the ability to make repayments NPAT with those interest costs already removed?

To me it looks like 'NPAT / I ' is a better measure of the ability to repay than 'EBIT / I'.

SNOOPY

[Snoopy]

After some thought, I think I have been looking at this issue of gearing from the wrong angle.

Geneva is free to negotiate with its parent bankers on what is a suitable level of funding for the company. It seems inconceivable that they would negotiate their own loan package in a way that would put their own 'funding core' at risk. So we can use the information we have combined with a 'rule of thumb' to calculate an appropriate sized funding core.

The table below has taken items from the balance sheet (marked (1)), and used those numbers to generate other numbers in the prescribed order ( (2),(3),(4),(5) )



[AssetsLiabilitiesShareholder Equity


[Not Underlying Finance$15.052m (2)-$13.547m (3)=$1.505m (5)


[Underlying Finance$54.576m (1)-$35.825m (4)=$18.751m (5)


[Balance Sheet Total$69.628m (1)-$49.372m (1)=$20.256m (1)



Calculation (2) allows us to work out the core assets not related the underlying finance contracts of the business (everything else apart from the receivables book) by simple subtraction. The finance company 'rule of thumb' for their core is to ensure that:

(Non-Risk Liabilities)/(Non-Risk Assets) < 0.9

From this, we can work out that the Non-Risk Liabilities must be no more than:

(Non-Risk Assets) x 0.9 = $15.052m x 0.9 = $13.547m (which is answer 3 above).

Simple subtraction and addition is then used to work out the rest of the numbers in the table.

So what's the point of this so far?

By working out the minimum size of the business core (as measured by assets and liabilities), that means we can measure how well the rest of the business is set up to do the customer lending, the bit that actually generates the profits for Geneva. This is done by looking at the assets and liabilities left outside the core.

Implied Available Financing Gearing ratio
= (At Risk Liabilities)/(At Risk Assets)
= $35.825m/$54.576m
= 65.6%

Generally you would want to match your 'At Risk Liabilities' with your 'At Risk Assets'. This particular match looks acceptably conservative. But how does it compare with other listed finance entities?


Geneva is free to negotiate with its parent bankers on what is a suitable level of funding for the company. It seems inconceivable that they would negotiate their own loan package in a way that would put their own 'funding core' at risk. So we can use the information we have combined with a 'rule of thumb' to calculate an appropriate sized funding core.

The table below has taken items from the balance sheet (marked (1)), and used those numbers to generate other numbers in the prescribed order ( (2),(3),(4),(5) )



[AssetsLiabilitiesShareholder Equity


[Not Underlying Finance$20.100m (2)-$18.090m (3)=$2.010m (5)


[Underlying Finance$64.077m (1)-$41.225m (4)=$22.852m (5)


[Balance Sheet Total$84.177m (1)-$59.315m (1)=$24.862m (1)



Calculation (2) allows us to work out the core assets not related the underlying finance contracts of the business (everything else apart from the receivables book) by simple subtraction. The finance company 'rule of thumb' for their core is to ensure that:

(Non-Risk Liabilities)/(Non-Risk Assets) < 0.9

From this, we can work out that the Non-Risk Liabilities must be no more than:

(Non-Risk Assets) x 0.9 = $20.100m x 0.9 = $18.090m (which is answer 3 above).

Simple subtraction and addition is then used to work out the rest of the numbers in the table.

So what's the point of this so far?

By working out the minimum size of the business core (as measured by assets and liabilities), that means we can measure how well the rest of the business is set up to do the customer lending, the bit that actually generates the profits for Geneva. This is done by looking at the assets and liabilities left outside the core.

Implied Available Financing Gearing ratio
= (Finance Division Liabilities)/(Finance Division Assets) (*)
= $41.225m/$64.077m
= 64.3%

(*) Finance Division also incorporates insurance assets

Generally you would want to compare your 'Finance Division Liabilities' with your 'Finance Division Assets'. This particular match looks acceptably conservative. But how does it compare with other listed finance entities? Geneva have slightly reduced their risk profile from FY2016. But the 'Turners Finance' division of 'Turners Automotive' in FY2016 (my post 1272 on the Turners thread) had a much lower financing gearing ratio at 48.6%.

SNOOPY

[Snoopy]

EOFY2016EOFY2015Average


Cash/Cash Equivalents$8.025m$4.094m$6.060m


Investment Property Income$3.031m$2.718m$2.875m


Finance Receivables$54.576mm$41.833m$48.205m


Total$57.139m



Interest Margin = [(Interest Received) - (Interest Expenses)] / [Average Cash Earning assets for Year]
= [$9.312m -$3.372m] / $57.139m
= 10.9%

It is interesting to compare that figure with that of Heartland that increased to 4.4% for FY2015 and is forecast to increase again. Heartlanders seem very happy with that '4.4% and rising' beating all the other banks. But start stacking 4.4% up against other finance companies and it doesn't look so clever.





EOFY2017EOFY2016Average


Cash/Cash Equivalents$11.072m$8.025m$9.549m


Investment Assets Saleable$3.190m$3.031m$3.111m


Finance Receivables$64.077m$54.576m$59.327m


Total$71.986m



Interest Margin = [(Interest Received) - (Interest Expenses)] / [Average Cash Earning assets plus Actual cash for Year]
= [$11.357m -$3.456m] / $71.986m
= 11.0%

It is interesting to compare that figure with that of Heartland that increased to 4.4% for FY2016 and is forecast to increase again. Heartlanders seem very happy with that '4.4% and rising' beating all the other banks. But start stacking 4.4% up against other finance companies and it doesn't look so clever.

SNOOPY

[Major von Tempsky]

Hmmm, hum Snoopy, I wonder if you are up to date.

I seem to remember reading a relatively recent statement that the "heritage loans" have largely been repaid or written off so that division of GFL is now looking for new loan books to bid for and realise.

[Snoopy]

Hmmm, hum Snoopy, I wonder if you are up to date.

I seem to remember reading a relatively recent statement that the "heritage loans" have largely been repaid or written off so that division of GFL is now looking for new loan books to bid for and realise.


You are the one with 'skin in the game' Major. I just look at the accounts occasionally. So I am happy to be corrected if you have greater insight.

No quite sure what you mean by "Heritage loans". I see in the 'segmented results' under note 39 in the annual report there is a section titled "Old Business." The assets of this segment over the last three years, and the accompanying 'impaired asset expense for the equivalent year go like this:



YearSegment AssetsImpaired Asset Expense


2015$6.670m$1.474m


2016$8.968m$1.463m


2017$9.966m$1.046m



This shows that:
1/ the actual 'old loan' asset balance is increasing, not decreasing from FY2015 to FY2017.
2/ Yet the loan balance is increasing even as the impaired loan expense on old loans continues to occur each year!

At first glance the juxtaposition between 1/ and 2/ doesn't make sense. Perhaps you can explain Major?

SNOOPY

[Snoopy]

Impaired Asset Expense (A)Provision for Impairment (B)Net Receivables (Including impairment) (C)(B/C)Normalised EBIT (excluding Impaired asset expense) (D) (A/D)


FY2015-$0.897m$29.631m$71.461m41%$3.768m-24%


FY2016-$0.234m$29.448m$84.024m35%$5.517m-4.2%



Something strange is going on here. Impaired assets are being written up in value, not down, each year (hence negative impared asset expense). Is there an explanation?




Impaired Asset Expense (A)Provision for Impairment (B)Net Receivables (Including impairment) (C)(B/C)Normalised EBIT (excluding Impaired asset expense) (D) (A/D)


FY2015-$0.897m$29.631m$71.461m41%$3.768m-24%


FY2016-$0.234m$29.448m$84.024m35%$5.517m-4.2%


FY2017$0.315m$29.889m$93.966m32%$7.622m+4.6%



We have returned to the more normal situation of impaired assets are being written down in value. The provision for bad debts to gross receivables (net receivables including impairment) remains at eye wateringly high levels, albeit slightly down on the previous year. But that seems to be the way that the Geneva business model works. Yet the impaired asset expense as a percentage of earnings remains modest.

SNOOPY

[whatsup]

Snoopy and Major why don't you ask that question at tomorrows AGM ?

[Snoopy]

Snoopy and Major why don't you ask that question at tomorrows AGM ?


I live in the wrong island for the AGM Whatsup. Although probably the fact that I am not a Geneva shareholder means that I wouldn't be invited anyway ;-p

Will happily hear your summary of the AGM tomorrow though!

SNOOPY

[Snoopy]

Hmmm, hum Snoopy, I wonder if you are up to date.

I seem to remember reading a relatively recent statement that the "heritage loans" have largely been repaid or written off so that division of GFL is now looking for new loan books to bid for and realise.


I woke up this morning Major, and the 'night gnome' had whispered into my unconsciousness that I hadn't answered your question properly! Some companies who have gone through a troublesome period 'ring fence' their bad history, and redirect their efforts to their current and future business strategy. I see that under Note 39a:

1/ 'New Business' is defined as the lending of money to individuals , companies and other entities under a securitized receivables arrangement with Westpac.
2/ 'Old Business' is defined as the management of money to individuals , companies and other entities on loans issued (by inference prior to the securitization arrangement with Westpac), plus the wrap up from any of those loans due from the debt collection agency.

Apart from the fact that the 'New Business' is actively chasing 'new business' while the 'Old business' is not, I can't see any difference between the fundamental basis of the 'Old business' and the 'New business'. Furthermore both the 'New business' and 'Old business' both rank in the segmented analysis as 'Current Business Units'.

The 'Old business' description refers to 'external debt collection'. But I don't know if that means:

1/ Geneva has outsourced the collection of unpaid debts from recalcitrant customers OR
2/ Geneva has bought overdue loans from third party lenders that it is now attempting to recover.

If it is the latter,there is no mention of such activity continuing in the future under 'New Business'. Consequently I don't know where your suggestion that Geneva is "looking for new loan books to bid for and realise" comes from.

SNOOPY

[Snoopy]

The return on Equity figures for Geneva Finance, as published for the last few years are tabulated below:



EOFY2012EOFY2013EOFY2014EOFY2015EOFY2016EOFY2017


Geneva Finance NPAT (A)($1.577m)$0.091m($4.201m)$2.194m$3.529m$5.133m


Geneva Finance S/H Equity EOFY (B)$10.532m$12.368m$8.314m$16.064m$20.256m$24.862m


Geneva Finance ROE (A)/(B)-15%+0.74%-51%+14%+17%+21%





Noodles has suggested on the Geneva/Turners/Heartland story thread. that the published performance of Geneva is being 'massaged upwards' by the historical tax refunds being claimed. To get a better perspective on the current operational performance he suggested that I remove these 'tax refund injections', and impose income tax at the 28% rate that most companies pay. This I have done in the table below.



EOFY2012EOFY2013EOFY2014EOFY2015EOFY2016EOFY2017


Geneva Finance NPAT {tax refunds removed and income tax imposed} (A)($1.577m)$0.091m($4.197m)$1.548m*0.72$2.379m*0. 72$3.815m*0.72


Geneva Finance S/H Equity EOFY (B)$10.532m$12.368m$8.314m$16.064m$20.256m$24.862m


Geneva Finance ROE (A)/(B)-15%+0.74%-50%+6.9%+8.6%+11.0%



The ROE record looks much less impressive presented like this. Yet presumably it is the income tax credits that have helped provide the cashflow that has allowed directors to declare a dividend from FY2015 and FY2016 and FY2017 results?

SNOOPY

[Snoopy]

Here is what I said about the drivers of last years (FY2016) profits on the Geneva/Turners/Heartland 'story' thread:

-----

Prudence could be used to manipulate profit. All Geneva need to do is to reclassify some of their 'provisions' as 'good loans', and this number immediately flows through to the bottom line. Geneva posted that the unaudited profit for FY2016 is up 61% on FY2015. But there is not enough detail on where this profit increase has come from to judge the result in my opinion.

"The profit growth was primarily attributable to the growth in interest income from the receivables ledger (which increased +17% on last year), the maintenance of interest yields, control of asset quality and the growth in revenues of our insurance operations where net premium income was 60% up on March 2016.”

'Control of Asset Quality' could simply mean writing back the value of previously impaired assets, that flows straight to the bottom line. Doing that might grossly distort the assumed operational performance if you just read the headline profit figure. But until the detail comes out, no-one knows what the real operational improvement performance for Geneva has been.

------

The finance division was still far and away the greatest contributor to profits over FY2017. And the CEO, in AR2017, had this to say about it.

------

"The main driver of the profit increase was the growth in the receivables ledger, up 21% on last year. This driven by increasing lending volumes and in conjunction with the increase in contractual yields , control of asset quality and operating costs gave this trading entity a good result this year.

-------

There is that phrase again: 'control of asset quality'.

The provisioning rate has gone down from 41% (FY2015) to 35% (FY2016) and now to 32% (FY2017) of the total loan portfolio (before provisioning is deducted). That 3% improvement over FY2017 represents $2.839m in loan portfolio value. Given Geneva currently pay no tax, that 'change in provisioning' could flow straight through to the bottom line. Take that change in provisioning off the declared profit for FY2017:

$5.133m - $2.839m = $2.294m

That is less profit than last year. Shareholders must place a lot of faith in the fair valuation of loan book to believe the profit growth story.

SNOOPY

[whatsup]

Here is what I said about the drivers of last years (FY2016) profits on the Geneva/Turners/Heartland 'story' thread:

-----

Prudence could be used to manipulate profit. All Geneva need to do is to reclassify some of their 'provisions' as 'good loans', and this number immediately flows through to the bottom line. Geneva posted that the unaudited profit for FY2016 is up 61% on FY2015. But there is not enough detail on where this profit increase has come from to judge the result in my opinion.

"The profit growth was primarily attributable to the growth in interest income from the receivables ledger (which increased +17% on last year), the maintenance of interest yields, control of asset quality and the growth in revenues of our insurance operations where net premium income was 60% up on March 2016.”

'Control of Asset Quality' could simply mean writing back the value of previously impaired assets, that flows straight to the bottom line. Doing that might grossly distort the assumed operational performance if you just read the headline profit figure. But until the detail comes out, no-one knows what the real operational improvement performance for Geneva has been.

------

The finance division was still far and away the greatest contributor to profits over FY2017. And the CEO had this to say about it.

------

"The main driver of the profit increase was the growth in the receivables ledger, up 21% on last year. This driven by increasing lending volumes and in conjunction with the increase in contractual yields , control of asset quality and operating costs gave this trading entity a good result this year.

-------
Snoops, If you were able to have gone to the meeting today you could have asked searching questions and discovered that you have been barking up the wrong tree, their business is 80% into the car market plus car service and insurance and that 18% of that market is to "gold" status borrowers , 70+% to "silver and only approx 8% to "bronze" status. Their margin is up to 18% gross on the bronze and smaller on the gold customers.
While not give anything away they are expecting another very good year and so far everything is on track to deliver that.

[Snoopy]

Snoops, If you were able to have gone to the meeting today you could have asked searching questions and discovered that you have been barking up the wrong tree, their business is 80% into the car market plus car service and insurance and that 18% of that market is to "gold" status borrowers , 70+% to "silver and only approx 8% to "bronze" status. Their margin is up to 18% gross on the bronze and smaller on the gold customers.
While not give anything away they are expecting another very good year and so far everything is on track to deliver that.


Appreciate the extra insight 'Whatsup'. I just brought up the Annual Report for 2017, and couldn't see the car market even mentioned in it! But obviously this makes Geneva a better measuring stick to compare against the finance arm of 'Turners Automotive', who like Geneva do insurance.

I am curious about these 'gold', 'silver' and 'bronze' customers. Just what do these terms really mean? Does Valerie Adams qualify as a 'silver customer' for her 2016 Olympic effort for example?

SNOOPY

[Snoopy]

Current Financial AssetsReference


Cash & Cash Equivalents$11.072mBalance Sheet FY2017


Financial Assets at fair value thru P&L$0.475mBalance Sheet FY2017


Financial Receivables 0-12 months (contractual)$24.023mNote 16


Total Current (contractual)$35.570m(addition)





Current Financial LiabilitiesReference


Total Current (contractual)$20.491mNote 30





Other Cash SourceReference


Borrowing Headroom$2.246mNote 19 ($45m) & Note 30 ($42.754m)



Now we can use the above information for the liquidity buffer test:

($35.570m + $2.246m) = $37.816m > 1.1 x $20.491m = $22.540m (true)

=> Geneva passes the liquidity buffer ratio test

This is an easy pass. But investors also need to remember that Geneva carries a very high proportion of impaired loans on their books. So a lot more liquidity than 'normal' is probably a necessity.



This is what the other Beagle said on the Geneva/Turners/Heartland story thread about the provisioning level that Geneva should have.

"50% Snoopy. Its a 50/50 chance when you make unsecured loans as a fifth tier lender to people who are seeking loans as a lender of almost last resort."

In 'dollar terms', the amount of the buffer is: $37.816m - $22.540m = $15.276m

This is 'additional capital' that could theoretically be drawn upon quickly to supplement the $29.889m already provisioned in the Finance Receivables section of the report. This means the 'current' total bad loan buffer is:

( $15.276m + $29.889m ) / $94.645m = 47.7%

That is pretty much 'spot on' with our learned Beagle friend's estimate of what is required. So could it be that for all of these doubtful loans being written (as evidenced by the huge provisioning) management really are cogniscant of all the risks and have provisioned appropriately? Being a 'fifth tier lender' may not sound good. But if Geneva have learned from their near death experience, can you say with all sincerity going forwards that, with the appropriately increased provisioning, this business model won't work?

SNOOPY

[whatsup]

Appreciate the extra insight 'Whatsup'. I just brought up the Annual Report for 2017, and couldn't see the car market even mentioned in it! But obviously this makes Geneva a better measuring stick to compare against the finance arm of 'Turners Automotive', who like Geneva do insurance.

I am curious about these 'gold', 'silver' and 'bronze' customers. Just what do these terms really mean? Does Valerie Adams qualify as a 'silver customer' for her 2016 Olympic effort for example?

SNOOPY
Na its base on their credit rating, job , employment potential, loan loadings etc, all very well researched and transparent.

[whatsup]

Na its base on their credit rating, job , employment potential, loan loadings etc, all very well researched and transparent.

Very low level of unsecured/ bottom level loans and only approx. 20-25% of applicants are successful, all loans are monitored monthly and if they fall behind the loan is called up or put into the debt collectors hands

[Snoopy]

Due to past losses, dividends will be unimputed (so the quoted dividend figures paid are gross) for the forseeable future.

Plugging in a representative yield, one that represents the ups and downs of the financing cycle of Geneva Finance, we can now arrive at our 'Capitalised Dividend Model' valuation

(Representative Dividend per Share) / (Acceptable Yield) = Share Price (an algebraeic manipulation of: Dividend per Share / Share Price = Yield )

0.7c / 0.085 = 8.2c

A reminder here that NTA was:

$24.9m/ 70.4m = 35cps at balance date (31-03-2017).

This means my fair valuation is at a good discount to asset value. Capitalising the dividend will punish a company when the period examined includes years where no dividend was paid. That was the case here. But it would be wrong to think that under different (less favourable) market conditions, the company couldn't return to a situation where no dividend was paid. It is also true that if the allowance for bad loans was increased to the same percentage that applied in FY2015, a substantial amount of capital would disappear from the balance sheet. So I believe that my 8.2c valuation is fair.

This $0.082 valuation is measured at the average point in the business cycle. One might argue that we are now riding high in the business cycle and that this $0.082 valuation is consequently too low given today's circumstances. I wouldn't argue with that. But would the real valuation at the top of the business cycle increase share value by a factor of 7? Ever the bargain hound, I wouldn't look at buying any shares myself until that share price drifts down to that 8.2c level. Consequently I won't be buying at market levels of over 50c, a price that can only be justified but ignoring all history up to the present (although I accept that some will do this).


It is always good to be able to cross check these valuations with another method.

The price paid for UDC last year was a 60% premium to net asset backing. The GFL asset backing was 35c at balance date

1.6 x $0.35 = 56c

However, takeover offers usually include a premium for control of 10-20%. This suggests a normal market price range of 45c to 50c

The bid offer currently in the market (09-08-2017) is 57c. This looks to be above fair value on a 'net asset' basis and way above fair value on a 'capitalised dividend' basis. Another year paying a good dividend will greatly increase the 'capitalised dividend' fair value of GFL. But not to the extent of GFL being worth 45c, the bottom of the 'net asset value' based company valuation range.

My take on this company is that it is riding the wave of a strong economy and has a real chance to become a respected market player. However, respect has to be earned, and GFL does not have the across the business cycle trading record to earn my respect. The question that is on the cusp of my lips is this:

"If Geneva is still doing the same kind of lending as before (the 'New Business' business segment seems to have the same business description as the 'Old Business' business segment), then how will the result going forwards be any different to the last GFC inspired consumer slowdown that almost claimed the company?"

The fact that the small changes in the judgement of the loan book health can quickly wipe out all profits is also unnerving.

Without a better track record,, I could see myself paying up to 15c for GFL shares. But 57c (the 09-08-2017 offer price ) is too rich for me.

SNOOPY

[Investor]

Very low level of unsecured/ bottom level loans and only approx. 20-25% of applicants are successful, all loans are monitored monthly and if they fall behind the loan is called up or put into the debt collectors hands

You won't find many finance companies sending debts to collection agencies at 30 days.

[Snoopy]

You won't find many finance companies sending debts to collection agencies at 30 days.


You might if that company owned the debt collection agency. One of the Geneva subsidiaries is 'Stellar Collections'. One former shareholder has suggested that Geneva sell their problem loans at full value to 'Stellar Collections'. That makes the operating performance of the pure finance division look better.

SNOOPY

[Investor]

You might if that company owned the debt collection agency. One of the Geneva subsidiaries is 'Stellar Collections'. One former shareholder has suggested that Geneva sell their problem loans at full value to 'Stellar Collections'. That makes the operating performance of the pure finance division look better.

SNOOPY

Ah I see..

[whatsup]

.63 today all time high, since the last one !

[Major von Tempsky]

Keep up, keep up Whatsup, you're falling behind already!

[whatsup]

Yeh MvT , the S P seems to me to be slowly manipulated upwards , how can this be achieved as there now is a new high s p .

[whatsup]

.65 Another all time high ! slowly and steadily does it .

[Snoopy]

I am completing the third leg of the NZ finance trifecta, by looking at the historic performance of Geneva as an investment over a two year period.
I have just done an exercise checking out returns over the '30th September to 30th September' year. Why those dates? Because it gives time for the March 31st end of year result to be declared and digested by the market.



Share PriceSept 30th 2015Sept 30th 2016Sept 30th 2017


Geneva Finance Limited$0.31$0.41$0.58
[/TR]
[/TR]




Income ReceivedSale of RightsCY Q2 Dividend (earned previous year)
CY Q3 Dividend (earned previous year)CY Q4 Interim Dividend


2015


20161.5cps


20172.0cps1.0cps

2018? cps



Notes:

1/ Financial Year Ends 31st March.
2/ Income received in italics not earned in period following 30th September under consideration.

Overall Share Growth 30/09/2015 to 30/09/2016

$0.31 (1+g) = ($0.41 + 0.72x$0.015) => g = 36%

Overall Share Growth 30/09/2016 to 30/09/2017

$0.41 (1+g) = ($0.58 + 0.72x$0.02) => g = 45%

Those are pretty impressive growth figures. No wonder you shareholders are smiling!

SNOOPY

[whatsup]

Another good half years result and its divi up 25% .

[CROESUS U.T.]

More good news for 2020

Geneva Finance Half year pretax results up 44%

[nztx]

Goodness - Yet another Unimputed Dividend

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/GFL/393362/372361.pdf


Source: Accrued Income

You'd think that sooner or later the Income would unaccrue itself, resulting some tax being paid
so Dividends could start accumulating some fragments of Imputation Credits, or is it too early ?

[Scrunch]

Goodness - Yet another Unimputed Dividend

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/GFL/393362/372361.pdf



You'd think that sooner or later the Income would unaccrue itself, resulting some tax being paid
so Dividends could start accumulating some fragments of Imputation Credits, or is it too early ?

The deferred taxation asset has been reduced to $3.0m at 31 March 2021. That's going to require slightly over $10m of pre-tax profits to fully utilise. With a Pretax profit of $8.2m in the year to March 2022 so its likely to be more than a year to go of no imputation credits. It could be longer if there are still some additional off-balance sheet tax losses.

However, with your skills I'm pretty sure you already knew that as there were taxation assets on the balance sheet.

[Ferg]

I haven't seen the latest AR but the 2021 AR had tax losses carried forward of $9.9m and zero imputation credits (per note 22 on page 37). I doubt they used all the tax losses in the latest financial year so we might see some taxes being paid and partial imputation credits on dividends in the year ended March 2023 at the earliest and possibly full IC's on dividends in the year ended March 2024.

Edit: Sorry for the duplicated answer - I saw Scrunch's reply after I posted.

[nztx]

The deferred taxation asset has been reduced to $3.0m at 31 March 2021. That's going to require slightly over $10m of pre-tax profits to fully utilise. With a Pretax profit of $8.2m in the year to March 2022 so its likely to be more than a year to go of no imputation credits. It could be longer if there are still some additional off-balance sheet tax losses.

However, with your skills I'm pretty sure you already knew that as there were taxation assets on the balance sheet.


Thanks Scrunch .. these things may be worth a look in if economic factors in the goldfish bowl
dont turn things really sour ahead..

Thanks also - Ferg

[winner69]

Times seem tough in Geneva land

Half year profit down 17%/20% on last year

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/GFL/420808/406172.pdf

The old release bad news at 5pm and hope nobody notices trick

[nztx]

Times seem tough in Geneva land

Half year profit down 17%/20% on last year

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/GFL/420808/406172.pdf

The old release bad news at 5pm and hope nobody notices trick


A mysterious revelation from GFL .. most finance companies *would* absolutely more than recover increases in cost
of funds from their captive targets at earliest .. Perhaps impairments are instead an issue ? :)

[Rawz]

A mysterious revelation from GFL .. most finance companies *would* absolutely more than recover increases in cost
of funds from their captive targets at earliest .. Perhaps impairments are instead an issue ? :)

thats what i was thinking too

[Fortunecookie]

They currently don't have an a managing director and moved to a new premise. The main shareholding is in the of estate of Hutchinson (forgot his first name). Unfortunately he passed away, he was subject to a court case linked to the insurance company that went belly up. The case is still against his estate. I believe the other directors have been acquitted but don't fully know the ins and outs.

[Fortunecookie]

thats what i was thinking too

Not necessarily funding cost is typically floating and the loan rate offered is fixed for the duration of the loan period. So if rates continued to go up you get margin compression. This is generally speaking.

[whatsup]

Not necessarily funding cost is typically floating and the loan rate offered is fixed for the duration of the loan period. So if rates continued to go up you get margin compression. This is generally speaking.

Yeh, Classic mistake, borrowing long , lending short !!

[Fortunecookie]

Yeh, Classic mistake, borrowing long , lending short !!

True. Or borrowing short, lending long.
They got the insurance bus as well, I am wondering if something has happened to that?.