Prudent Yield Hog Focus: Two Harbors Investment, Young REIT With a 14.2% Yield [View article]
I disagree. The vast majority of reverse mergers, especially the Chinese ones that you were using in your comparison, are when existing companies, looking to become public, buy a shell and reverse into that shell (as compared to going through the IPO process). In TWO case, there was no preexisting company. There was a pool of capital that was then deployed to buy mREIT assets. The machinations were just legal incorporation moves. The Chinese reverse are suspicious because they are already operating companies listing and representing past numbers as real when it turns out sometime that is not the case. With TWO, a pool of capital was deployed to buy assets. Its a fresh start
Prudent Yield Hog Focus: Two Harbors Investment, Young REIT With a 14.2% Yield [View article]
the company's book value was $9.44 at year end, therefore $9.04 ex divy assuming no growth YTD (prob a bad assumption but for simplicity sake). By raising money at 10.25 the money is accretive. Book value, just by the nature of the raise, moves to $9.37. Lets assume they can put that money to work, and apply the 1.15-1.2 multiple range and you have a price target of 10.78 - 11.25, as well as a 15% dividend. Not bad.
Debunking Citron's Hit Job on World Acceptance Part 3 [View instapost]
1) I’m claiming they are likely incapable because their poor credit history points to a likelihood of failing to repay. Again, I think the default rate is bogus because instead of recognizing a customer’s failure to make a payment, the company (from your article) “admits that it – GASP – ‘actively encourages customers to refinance existing loans, increasing the amounts borrowed and fees paid’".
2) I will refine my claim and get rid of the assumption. They can’t “just move on” because they don’t have access to many if any other institutions thanks to their poor credit history. As an aside, aren’t you just presuming they are not in debt over their heads. Or can you point to your source of information on WRLD customers’ personal financial situation.
3) Whether or not the rates are in violations (as well as WRLD collection practices, etc) is a matter for the judge to decide. That is the risk. Unfortunately, your certainty doesn’t affect the likelihood of a judge ruling in WRLD’s favor. Furthermore, there is always the possibility of federal law changing (specifically when Consumer Protection revs up later this year).
4)I reread your piece and the only words I saw addressing this issue were as follow: What Citron implies is that World engages in “loan pyramiding”, in which another $1000 is added to the principal already due. Only an ignorant businessman would operate that way. What idiot would add principal to a loan that the borrower is telling you he already will be unable to pay off? To answer your question, the executives at WRLD. By doing so they can recognize revs, increase loan book, and make those numbers continue to look sweeter.
5) Sounds like an accounting misunderstanding here. By cash, I mean greenbacks, Benjamins, dollars, etc. Income is an accounting measure. Hypothetically if a consumer came in and refinanced his original loan of $500 for $600 (with $25 in fees), the company recognized $25 in revenue (the fees) on the income statement, an increase of $100 in receivables on the balance sheet (from $500 to $600), and the customer walks out the door with $75 in cash (the extra $100 minus $25 in fees).
6) I’ve read both and see only a growing average consumer loan. If nearly 75% of the loans are refinances and the average loan is growing steadily, how can the loans be getting smaller? Please tell me where you are deriving this information.
7) In your article you wrote, “World’s charge-off rate is 14-16%, which is LOWER than that of most payday lenders, which average in the low twenties!” Please reconcile the two numbers you provided (“low twenties” and “6%”).
8) Frankly, I’ll give you this one. They (WRLD execs) have been executing this scheme flawlessly for years. Why not have the company borrow money, use it to buy stock, then sell your personal stock? It’s brilliant.
Debunking Citron's Hit Job on World Acceptance Part 3 [View instapost]
Larry, Read your three pieces on WRLD. Some comments... 1) You note more than 73% of customers refi loans.. why would they do this other than being incapable of paying? 2) You say if the customers found terms unattractive they would just move on -- they can't -- they dont have access to credible institutions and are in debt over their heads 3) The New Mexico case and similar ones are material because if a ruling says the rates violate state law, WRLD would potentially be out of yet another state (now only in 11) to do business 4) You claim they dont loan pyramid but it certainly looks that way... they have an ever growing loan book with 3/4 of the customers being the same 5) You say the revenue is real because its cold hard cash that goes into the bank.. not true... customer leaves with some cash and a higher IOU ... WRLD recognized fees in higher IOU as income... they actually dont take in cash, rather give more of it out and grow the loan book 6) You continually refer to 14-16% default numbers -- those are just the number of loans that have not been flipped... other near delinquent borrowers are rolled into a new bigger debt piece and dont show up in default numbers 7) The default rates should be much higher, evidenced by the numbers you provided ... if payday lenders, who have more security and collateral have low 20% default rates, it logically follows that unsecured WRLD loans should have higher default rates, not significantly lower ones 8) Doesnt it seem weird to you that the company continues to buy stock, not from free cash flow, but rather by tapping ever increasing revolvers?
China Precision Steel: Ready for a Major Run [View article]
um, are we talking about CPSL? Like China Precision Steel? Look at the last 4 quarters... gross profit margin from oldest to most recent is 13, 11, 7.2, 7% ... how does that indicate a company transitioning to higher margin products
How is -.01 to .12 a 1400% gain?
PS the last 4 q EPS numbers are (from oldest to most recent) .06, .04, .03, .01
Prudent Yield Hog Focus: Two Harbors Investment, Young REIT With a 14.2% Yield [View article]
The Chinese reverse are suspicious because they are already operating companies listing and representing past numbers as real when it turns out sometime that is not the case.
With TWO, a pool of capital was deployed to buy assets. Its a fresh start
Prudent Yield Hog Focus: Two Harbors Investment, Young REIT With a 14.2% Yield [View article]
Prudent Yield Hog Focus: Two Harbors Investment, Young REIT With a 14.2% Yield [View article]
Debunking Citron's Hit Job on World Acceptance Part 3 [View instapost]
2) I will refine my claim and get rid of the assumption. They can’t “just move on” because they don’t have access to many if any other institutions thanks to their poor credit history.
As an aside, aren’t you just presuming they are not in debt over their heads. Or can you point to your source of information on WRLD customers’ personal financial situation.
3) Whether or not the rates are in violations (as well as WRLD collection practices, etc) is a matter for the judge to decide. That is the risk. Unfortunately, your certainty doesn’t affect the likelihood of a judge ruling in WRLD’s favor. Furthermore, there is always the possibility of federal law changing (specifically when Consumer Protection revs up later this year).
4)I reread your piece and the only words I saw addressing this issue were as follow:
What Citron implies is that World engages in “loan pyramiding”, in which another $1000 is added to the principal already due. Only an ignorant businessman would operate that way. What idiot would add principal to a loan that the borrower is telling you he already will be unable to pay off?
To answer your question, the executives at WRLD. By doing so they can recognize revs, increase loan book, and make those numbers continue to look sweeter.
5) Sounds like an accounting misunderstanding here. By cash, I mean greenbacks, Benjamins, dollars, etc. Income is an accounting measure. Hypothetically if a consumer came in and refinanced his original loan of $500 for $600 (with $25 in fees), the company recognized $25 in revenue (the fees) on the income statement, an increase of $100 in receivables on the balance sheet (from $500 to $600), and the customer walks out the door with $75 in cash (the extra $100 minus $25 in fees).
6) I’ve read both and see only a growing average consumer loan. If nearly 75% of the loans are refinances and the average loan is growing steadily, how can the loans be getting smaller? Please tell me where you are deriving this information.
7) In your article you wrote, “World’s charge-off rate is 14-16%, which is LOWER than that of most payday lenders, which average in the low twenties!” Please reconcile the two numbers you provided (“low twenties” and “6%”).
8) Frankly, I’ll give you this one. They (WRLD execs) have been executing this scheme flawlessly for years. Why not have the company borrow money, use it to buy stock, then sell your personal stock? It’s brilliant.
Thanks for the interaction.
Debunking Citron's Hit Job on World Acceptance Part 3 [View instapost]
Read your three pieces on WRLD. Some comments...
1) You note more than 73% of customers refi loans.. why would they do this other than being incapable of paying?
2) You say if the customers found terms unattractive they would just move on -- they can't -- they dont have access to credible institutions and are in debt over their heads
3) The New Mexico case and similar ones are material because if a ruling says the rates violate state law, WRLD would potentially be out of yet another state (now only in 11) to do business
4) You claim they dont loan pyramid but it certainly looks that way... they have an ever growing loan book with 3/4 of the customers being the same
5) You say the revenue is real because its cold hard cash that goes into the bank.. not true... customer leaves with some cash and a higher IOU ... WRLD recognized fees in higher IOU as income... they actually dont take in cash, rather give more of it out and grow the loan book
6) You continually refer to 14-16% default numbers -- those are just the number of loans that have not been flipped... other near delinquent borrowers are rolled into a new bigger debt piece and dont show up in default numbers
7) The default rates should be much higher, evidenced by the numbers you provided ... if payday lenders, who have more security and collateral have low 20% default rates, it logically follows that unsecured WRLD loans should have higher default rates, not significantly lower ones
8) Doesnt it seem weird to you that the company continues to buy stock, not from free cash flow, but rather by tapping ever increasing revolvers?
China Precision Steel: Ready for a Major Run [View article]
How is -.01 to .12 a 1400% gain?
PS the last 4 q EPS numbers are (from oldest to most recent) .06, .04, .03, .01