The mortgage broking service provider Mortgage Choice Limited’s (ASX: MOC) shares went down by 6.4 percent on 13 December 2018 after the company released its FY 2019 earning guidance.
Earlier at the time of announcing the FY 2018 results, Mortgage Choice expected that its FY19 Cash NPAT would be around $16.5 million. However, in the recently held Annual General Meeting (AGM), the company highlighted that the brokers were experiencing a longer time for procession loan application because of the tightening lending policies.
Now with the slowing property market, the company has gained more clarity on the impact of these conditions on its FY 2019 settlements as the Company moved through the first six months of FY 2019.
The company is expecting that in FY 2018 its home lone settlement will be 10 percent lower than the FY 2018 settlements. The fall in the settlement will result in reducing the commission revenue, and it will also affect the corresponding flow of other revenue lines. As a result of these falls, the company has adjusted its guidance for FY 2019 Cash NPAT to be in between $14 and $15 million.
Further, the company also reported that it has made significant progress on its companywide change program for building the platform for growth and long-term sustainability of the company’s business. Mortgage Choice is on track to achieve a 10 percent reduction in its operating cash expense base for FY 2019 as compared to FY 2018. The company also informed that it has successfully implemented the new broker remuneration model and all the franchisees have moved onto the new broker software platform from the November month of 2018.
The new broker remuneration model was launched on 12 July 2018, and it was focused to ensure that the company is having a sustainable and strong platform for growth over the long term. The new broker remuneration model was implemented to increase the settlement volumes and market share over the medium to long-term.
In FY 2018, the company reported a cash net profit after tax result of $23.4 million, which was 3.3% higher than FY 2017. The funds Under Advice was $733 million, and premiums in force were $28 million. The gross revenue of the company increased by 10 percent and the net profit increased by 116 percent in FY 2018 as compared to FY 2017. In October, the company appointed highly experienced Mr. Ian Parkes as the new Chief Financial Officer (CFO) to strengthen the company’s executive team.
Meanwhile, the share price of the company fell by 21.26 percent in the last six months as on 12 December 2018 and traded at a PE ratio of 34.850x. MOC’s shares traded at $1.110 with a market capitalization of circa $148.12 million as on 13 December 2018.
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