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Mortgage Choice share price soars 12%

Credit: Steve Jurvetson

The Mortgage Choice Limited (ASX: MOC) share price has jumped 12% to $1.85, after the mortgage broker reported an 8% gain in net profit for the interim 2016 financial year period.

It seem investors were much pleased with the results – perhaps expecting net profit to fall as Australian property prices come off the boil, and investors desert the market.

According to Mortgage Choice, it was the best six monthly result the company has ever produced. Must’ve been good then.

Here’s a summary of the key points…

  • Revenues up 5.4% to $97.0 million compared to the previous year (1H FY2015)
  • Cash profit up 12.4% to $10.1 million over 1H FY2015
  • $6.2 billion in home loans settled in the first half – up 8.5% over 1H FY2015
  • Loan book surpasses $50 billion for the first time
  • Earnings per share of 8.6 cents
  • Fully franked interim dividend of 8 cents per share, up slightly over the 7.5 cents paid in 1H FY2015.

The good news for Mortgage Choice is that borrowers continue to use mortgage brokers more than they visit lenders directly. The company also says that the home loan market ‘remains robust’.

What next for Mortgage Choice?

It appears that Mortgage Choice has a good six months ahead of it if current conditions remain stable. The company is increasing its financial planning revenue, head office leads and home loan settlements, and there is plenty of room for the company to grow given its 3.6% market share, either by acquisition or organically.

Foolish takeaway

Despite the share price jump, Mortgage Choice is trading on a trailing dividend yield (fully franked) of above 8%, and shares still look fairly cheap. A year ago, shares touched a 52-week high of $3.00, and the share price could be headed back there.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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