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TOP TRADING TIPS from Alessio Rastani, CEO and Founder of Leadingtrader.com


Manx Financial Share Chat (MFX)



Share Price: 8.25Bid: 8.00Ask: 8.50Change: 0.00 (0.00%)No Movement on Manx Financial
Spread: 0.50Spread as %: 6.25%Open: 8.25High: 8.25Low: 8.25Yesterday’s Close: 8.25


Share Discussion for Manx Financial


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Korg
Posts: 3,623
Off Topic
Opinion:No Opinion
Price:8.125
MFX
9 Aug '17
Regardless of the "mellon effect", seems to me the recent dealings are proportionate pointers to future earnings for the business. Been following the progress here and can see decent upside.
 
M1keG
Posts: 9
Off Topic
Opinion:No Opinion
Price:8.125
RE: Warrants and the Future
2 Aug '17
We will have to agree to disagree there then. Eventually the past warrants will get converted, possible loans converted etc, though the latter are getting less onerous and in the gift of the business not loan holder for some.

There has always been a declared ,Future Vision, of getting to a position of paying out excess capital and I can wait for that time. All these items we are now complaining about were gifted 5 years ago and the recent gifts are far more reasonable, loans without warrants, existing warrents increased in conversion price, loans convertable at banks behest etc.

Like I say I can wait for this to play out even if I don't agree with how the rich and senior management look after themselves first.
h4mmered
Posts: 9
Off Topic
Opinion:No Opinion
Price:8.125
RE: Warrants and the Future
2 Aug '17
Yes, Greg Bailey was gifted some free money by Jim Mellon, and this demonstrates the real challenge for investors - there's no way that any upside is truly going to accrue to external shareholders, just to Jim and his gang.
M1keG
Posts: 9
Off Topic
Opinion:No Opinion
Price:8.125
RE: Warrants and the Future
2 Aug '17
Savvy?, Spent a million, has a book value today of 1.3 million. Thats not savvy thats the who you know network at play.
Troysius
Posts: 17
Off Topic
Opinion:No Opinion
Price:8.125
Warrants and the Future
2 Aug '17
I am confused by M1keG, the Chairman of the Board is Mr Mellon, who has no son, are you confusing him with Mr Banks (of UKIP fame) whose son is on the Board?

Dr Greg Bailey who purchased the warrants and then exercised them is a close colleague of Mr Mellon in the biotechnology field and they sit on various Boards together.

He seems however to be a savvy investor and one would expect that he has not invested just over a £1 million for it not to produce some capital return as there is no income return at present.

Sadly I had the same logic when i bought my 500,000 shares and rather than make any capital gain, I have merely generated a substantial loss!
M1keG
Posts: 9
Off Topic
Opinion:No Opinion
Price:8.125
RE: warrants
1 Aug '17
You do realise that the warrants were in the hands of the chairman of the board and the largest shareholder (who's son is an IND?), you know, the guys who gives everybody else on the board their jobs?

Accounts are history and historically, since the turnaround this bank has achieved a ROE of over 10 percent, Guessing what its going to be this year is just that a guess. My money, literally, is on them eventually getting the cash cow going even if I don't have to like how its done. The growth is there just need a bit more help from the sideline businesses.
h4mmered
Posts: 9
Off Topic
Opinion:No Opinion
Price:8.125
RE: warrants
1 Aug '17
The warrants were not exercised, and had the Board allowed them to expire, refusing to allow them to be assigned then other shareholders would be materially better off.

On ROE, the figures in the accounts take no account of the dilutive impact of the warrants and the loan stock conversion. That takes the ROE comfortably down to single digits.

Note that the company will require significantly more than the minimum under Basel III in view of its small size and so above average risk of failure, according to regulatory norms. It won't be a huge multiple but it will be higher than statutory minimum. This exacerbates the issues around capital - being sub scale increases the capital that you need to write a certain level of business, which reduces the ROE....
M1keG
Posts: 9
Off Topic
Opinion:No Opinion
Price:8.125
RE: warrants
1 Aug '17
It would appear this one does?

Page 28 and 29 of annual report indicates Liquidity risk and how receivables are matched against customer accounts. Quote Maturity mismatches between lending and funding are managed within internal risk policy
limits Unquote

Allowing the warrants to expire? Since when do the rich ever give up another opportunity to make more money. They were always going to be exercised, the power was with the owner of the warrant.

I agree about the NAV but the share price is the practical measure. We are so far below NAV due to the uncertaintity of dilution, in this crazy world getting rid of the latter is just as likely to raise the share price!!

ROE figures, not sure where you are looking?

From the last accounts

As stated, profit before income tax for the year was £1.5 million (2015: £2.3 million) on a net interest income of £16.0 million (2015: £13.5 million). Our key metrics remain positive: our return on equity was 10%
(2015: 17%), which remains within the range of that of our peer group. Our lending grew by 15% (2015: 13%)
over the year. The level of performing loans remains impressive at 94%, a testament to our prudent lending policy.

Turning to the balance sheet, our loan book grew by £14.7 million to £116.1 million (2015: £101.4 million) and our deposit base increased to £126.0 million (2015: £106.3 million), a growth of 15% and 18% respectively. In turn, our equity increased by 8% to £13.2 million (2015: £12.1 million).

There's the capital problem. When your loan book grows by 14.7 million you need 10.5 pct more tier 1 capital under Basel III and the reduced profit did not provide sufficient for further growth. In some respects its a good problem to have as its at least caused by growth?
Troysius
Posts: 17
Off Topic
Opinion:No Opinion
Price:8.125
Financing
1 Aug '17
How right are you on the financing.

It seems to me that Mellon has yet again got a very good deal, which was not offered to the shareholders in general.

Either the company is in such bad shape that it can not raise funds from elsewhere, but why would then a new investor take up a 13% stake in the company, or alternatively it was another 'sweet heart' deal.

Just think of the money Mellon has made out of this company through his loans and warrants!

The company should either have had a rights issue of sought external loan finance at a more commercial rate.
h4mmered
Posts: 9
Off Topic
Opinion:No Opinion
Price:8.125
RE: warrants
1 Aug '17
No bank would operate with assets and liabilities matched unless it was a regulatory requirement, because it significantly increases a whole range of risks. Firstly, as there is no certainty as to future profitability because of the short duration of the portfolio, long term budgeting becomes more of a finger in the air job. Secondly, the portfolio is, naturally, concentrated around a narrow range of maturities, making the loan portfolio inherently more risky due to the lack of diversity. Thirdly there is no opportunity to add optimise shareholder value by providing liquidity at a more optimum point in the yield curve, since the maturity profile is fixed. Fourthly, a short duration loan book will not be able to benefit from the same range of security that a longer term book could. In particular, property lending at the short end is more limited, specialist and often more risky. I could go on.

I agree that the remaining loan stock and warrants are not significantly dilutive to the share price but they are to the NAV. Had the loan stock been refinanced as straight debt and the warrants allowed to expire the NAV would have remained at the just shy of 13p level it was at the year end. Instead investors get their NAV diluted down to the share price.

If there really was no alternative available to Jim Mellon refinancing the company and diluting shareholders' NAV by over 30%, that would suggest that the company is hardly in fine shape, in a market awash with liquidity. The debt should have been able to be refinanced at less than 5% and with straight debt.

Given the type of lending being undertaken (consumer, receivables finance, equipment leasing) the rates are high and yet the business makes a marginal profit. If all goes really well and nothing blows up, the company could potentially creep into double digits ROE (with the loan stock converted). That is not an acceptable ROE for the risk shareholders are taking in investing in a very small, niche lending business, and suggests that the peak ROE is less than the WACC. If that is the case then the shares should trade at a significant discount to tangible NAV.

A small, specialty finance business in the current relatively benign default conditions should be producing a 15-20% ROE but it is not and without a significant increase in the capital base it never will.




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