Top five Mortgage originator Finbond to list on AltX

Finbond Property Finance, the country's fifth largest mortgage originator, is planning to list on the JSE's Alternative Exchange next week.

This is the first opportunity for investors to gain access to the new and dynamic mortgage origination industry which is now responsible for generating between 60% and 70% of all mortgage advances in SA.

Last year the total amount of mortgage advances by lending institutions in South Africa came to nearly R700bn the majority of which was generated by mortgage originators and mortgage advances are still growing at a rate of nearly 30% year-on-year.

Finbond, the biggest, independent, mortgage originator in the country, is currently placing between R800m and R1 000m a month in private client mortgage finance.

The banks pay Finbond a commission on the mortgage applications it generates and Finbond, in turn, pays a commission to the introducers of the business worked out on a sliding scale based on business volumes. The company has a network of 25 branches and some 500 agents, brokers and consultants out in the field countrywide.

The business has four principal activities: mortgage origination; debt consolidation and equity release; bridging finance; and term loans. All are essentially linked to the core business of mortgage origination which is currently responsible for 29% of the company's gross profit.

Finbond Property Finance was started by Dr Willie van Aardt in 2003 and has since become a major player in the mortgage origination industry.

Recently Finbond made four strategic acquisitions, acquiring 100% of Independent Bond Originations, Dimension Financial Services, Bondmaster and Blue Dot in order to bulk up its business ahead of the proposed listing. All four will become shareholders in Finbond after the listing.

Van Aardt says the current buoyancy in the property and mortgage origination market and the fact additional economies of scale and synergies will flow from the recent acquisitions, make Finbond an exciting investment proposition.

"This will be the first opportunity for investors to gain access to the growing new mortgage origination industry. The fact that we will be the first mortgage origination company to list on the JSE creates some exciting opportunities for further consolidation in an industry where increased business volumes are a key determinant for success." 

Finbond is looking to raise a total of around R185m through the private placement of 65 million shares through subscription with institutional investors at 225 cents a share and the private sale of 17.5 million shares at 225 cents a share ahead of its listing on June 15. The offer closes on Friday. The money will be used to settle the purchase price of the acquisitions and to recapitalise the companys bridging and term loan books.

The company turned in an after tax profit of R22,6m for the year ended February 2007 and is projecting that to rise to R58,8m in 2008 and R84,8m in 2009 mainly as a consequence of its recent acquisitions and the increased opportunities for inward business referral.

Van Aardt remains bullish on the outlook for the mortgage origination market where the latest figures released by the South African Reserve Bank (to end March 2007) show that it continues to grow at a rate of 27,9% year-on-year. He says the recent interest rate increases seem to have done little to dampen consumers' enthusiasm for acquiring property. In addition, he says, experts forecast that residential property prices themselves will grow at about 13,1% in nominal terms this year.