MOC Details
Delivered profit in the first half of 2017: Mortgage Choice Limited (ASX: MOC) reported that their NPAT on a cash basis rose 16.2% year on year (yoy) to $11.7 million in the first half of 2017 as compared to $10.1 million in 1H16. The group reported that they settled $6.4 billion in home loans during the period which is an increase of 2.4% against the prior corresponding period (pcp). The group’s overall loan book rose 3.3% yoy to $52.4 billion as compared to $50.7 billion in 1H16. Mortgage Choice Financial Planning (MCFP) Funds under Advice enhanced 35.8% yoy to $423.1 million in 1H17. MCFP insurance Premiums Inforce crossed $20 million milestone, and rose 27.8% yoy to $22.0 million during the period. The group’s cash earnings per share reached 9.4 cents during the period from 8.1 cents in the prior corresponding period. Accordingly, MOC declared an interim dividend of 8.5 cents per share against 8.0 cents in 1H16.
 
Net profit before tax (Source: Company Reports)
 
Loss making segments offloading led to further focus on their growth segments: The group offloaded their Help Me Choose business in the first half of 2016 to focus more on their core segments. Accordingly, their funds Under Advice and Premiums Inforce rose by 35.8% and 27.8%, respectively, during the period against the pcp. The group enhanced their network both in terms of franchisees and brokers during the period and intends to continue to enhance their network and accelerate broker productivity during the second half by leveraging their Business Growth team’s capabilities.Moreover, management reported that they started the year at a positive note as they got good response with home loan applications, referrals and Mortgage Choice Asset Finance. 

Growing network (Source: Company Reports)
 
Recommendation:MOC stock surged over 36.6% in the last one year (as of March 29, 2017). On the other hand, Australian Securities and Investments Commission recently reported that they undertook a wide-ranging study into mortgage brokers to evaluate whether lending patterns have been distorted owing to incentives for mortgage brokers. Although ASIC has been positive about brokers like MOC, some headwinds seem to be swirling around the mortgage rates. The stock has corrected over 4.8% in the last four weeks (as of March 29, 2017) and slipped 4% on March 30, 2017; and this pressure is expected to continue going forward. We believe that investors can book profits in the stock as we give a “Sell” recommendation on the stock at the current price of - $ 2.25


MOC Daily Chart (Source: Thomson Reuters)

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