I wrote back in October that Mortgage Choice Limited (ASX: MOC) was likely to continue its strong run of growth, thanks to three key factors; Brand development, 'Project One' (major investment in Customer Relations Management program for franchisees), and a broader spectrum of products (including improved cross-selling potential thanks to CRM program, above).
The idea is a sound one, and shareholders can see some early results of these three foci in today's interim 2015 results, which were decent, if uninspiring:
- Total revenue up 8.5% on prior corresponding period (pcp) to $97m
- Net Profit After Tax down 9.4% on the pcp to $9.9m (asset sales in prior period inflated those earnings)
- Underlying profit up 2.3% after tax to $9.9m
- Loan book continues to grow, up 4.4% to $48 billion
- $6.2m cash at bank
As readers can see the business continues to grow in a low-interest rate environment, although revenue and profit growth were slower than in the previous year which may turn away some investors.
Collection House Limited (ASX: CLH), this ain't.
Nevertheless as fellow contributor Ry Padarath noted in his article here, the nature of Mortgage Choice's business makes its dividend virtually bulletproof, and readers should expect continuing investment in the franchise to deliver strong returns.
Competition in the sector is building however, with non-bank lender Yellow Brick Road Holdings Ltd (ASX: YBR) growing rapidly and offering a similar diversified financial management offering to Mortgage Choice.
However, Yellow Brick differs in some ways as it is not simply a mortgage broker, but offers money management, loans and financial services through its network of branches as well.
Given the huge percentage of all loans and financial services still controlled by the big four banks, I'd say there's plenty to go around for everyone.
With low interest rates expected to continue for the foreseeable future and the inevitable interest in housing that follows, Mortgage Choice is in a very comfortable position for continued rollout of its business model and associated cross-selling opportunities.
The Financial Planning business was one of the biggest stars, more than doubling its revenue, while the online HelpMeChoose comparison website also saw its revenue climb 30%.
For these reasons and others the party isn't necessarily over when interest rates rise, either.
While customer growth and opportunity for new franchises will slow, lower houses prices should see a wave of excluded buyers – the young and less well-off – seeking to buy homes, while commissions might also rise as the value of repayments (through higher rates) increases.
All things considered, Mortgage Choice continues to look like a sound long-term investment and an excellent dividend stock.
