SSC Security Services Corp Ordinary Shares V.INP

RE:RE:RE:RE:Yikes

[AntoninScalia]

tkirk62 wrote:

The problem with your analysis is that it is entirely based on past performance. The economics of the new mortgage business are highly attractive. If Input can deploy for example $500 million into mortgage streams, that can result in more than $20 million of annual cash flow. That’s significant for a company with a current market cap of $130 million. I do however appreciate your thoughts on the share issuance which I also don’t like.

Okay, fair enough, my model is based on the old streaming business. But lenders are very much valued based on book, and is Input not trying to pivot to resemble a more traditional lender? I think my method still fits, it's simply the growth premium you want to put on the business. I can't see a way that the value of Input's reserves aren't the most meaningful pice of their valuation.

I don't want to sound snippy, but what if Input deploys $5 billion of capital? $50 billion? It's arbitrary and ridiculous to say "what if Input deploys $500 million, then this market cap is far too low". I can just as easily ask "what if Input only deploys $40 million?", and my question would be far closer to reality. We are different kinds of investors, because if I have to do mental gymnastics (like predicting 15x growth in capital deployment) I get uncomfortable on pass on that investment.

Fair enough. I would say in response that deploying $23 million into mortgage streams in a couple of months indicates that there is a strong demand for such a product and it would not be inconceivable that Input will be able to deploy hundred of millions of dollars into this stream.

I think valuing Input based on book value makes sense but if the company starts generating consistent cash flows from mortgages streams the company will command a healthy multiple on cash flows. Book value can stay the same if the cash generated is returned to shareholders as dividends/buybacks.