Like others, I am attracted to this company based upon (apparent) value fundamentals and am in the early stages of ‘digging in’. But a macro view of the company is quite impressive.

I am a big believer in the answer to these two questions about any business, because they give you a good insight into the significant points of difference: “how are you different and better than your competition and why should I buy from you?”

 In this regard PPM stacks up very well:

Speed of Approval – aided by Advanced Technology

PPM are significantly faster than the major bankers in processing applications and issuing an acceptance. Try 72 hours versus the traditional banks at around 3 weeks for mortgage loans (approx. 70% of their biz). And auto loans as quick as 20 seconds!

Because of their size, I’d suggest they have the financial muscle to continue investing heavily into technology to keep (and extend) their leading edge here.

Speed of process Important to customers? Damn right it is! In some cases, speed of approval is more important than the rate and terms!

Size, accessibility & recognition

You might not have heard of PPM but the vast broker network which is responsible for the bulk of mortgage introductions have. Over 20 years some 20,000 brokers who are at the coal face making the recommendations to Mum & Dad are hooked into PPM with more joining each month. Yet PPM knows their marketplace and it is the borrower who will not be courted by the big 4 banks. They have carved out their niche.

So, great product offerings, great market reach and they have been so recognized by their peers over the last few years. The mantle place is full of #1 industry wide awards.

When the industry says you are the best, chances are strong that you are!   

But, having a good pipeline to the market with ‘in demand’ financial products is nothing unless they have access to cheap lines of credit where they have quality NIM (Net interest Margin or the difference between interest received per $1,000 face value of loan and the interest paid on that $1,000).

Again, this is a massive point of difference as PPM have the ability to syndicate loans and with access to over 100 institutional lenders. Indeed, PPM now have close on $16bn assets under management (loan book) on which they are making a margin.

So, yeah, the macro looks good. What I need to drill down on now are the risks involved because at face value the financial metrics are appealing. BUT,,,this is where I do believe I will fail because my circle of competence isn’t wide enough to cope with the vagaries of loans held outside the company (SPV’s), recourse and non-recourse loans, derivatives and hedging and currency translation movements.

 Final Comment (and decision): I will pass on this, but thought some of my observations might assist other Straw(wo)men!