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Strategies & Market Trends : Value Investing
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To: Brendan W who wrote (21871)8/11/2005 6:35:45 PM
From: Brendan W  Read Replies (1) of 78525
 
FMD update.

FMD released earnings this afternoon. I bought some more in the afterhours, because of what I perceive to be a lack of negative surprises in the report. In the conference call, they said the client concentration risk did decrease in fiscal 2005 (ending 6/30/2005): JPMorgan/Bankone dropped to 30% from 59% in FY 2003. Earnings came in 5c ahead of the company's projections for the year and fourth quarter. They mentioned a backlog that will get securitized in the fall but I don't remember the exact number, nor do I know how to judge it. They confirmed growth expectations of 30 plus percent for fiscal 2006.

The one potential negative I heard was that client spend on advertising student loans (though growing rapidly) was being deferred to later in the fiscal year. They cast this in terms of the clients trying to match ad spending with when the loan activity was actually occurring.

It was somewhat comforting that FMD views federal authorization of student loan funds as a positive. The rationale was (a) it would grow the overall market for secondary eduction and (b) greater private student loans would be required to supplement the always inadequate federal loans.

Also, interesting was the CEO poopooing the idea of selling their servicing assets at par because they would then not be able to recapture the value of their truly "conservative" assumptions on the servicing assets.

We'll see.
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