Hello, Mr. Pink
I would like to thank you for opening this board up to everyone for discussion. I am finding it very useful. I have not participated substantially yet, so this will be my first real post.
I had a response to your comment that you would like to see if a Big 5 accounting firm would "bless" REXI's accounting. I have been studying REXI (and the other lenders) for the last few weeks since its dramatic fall begin. It seems to me that even if a Big 5 accounting firm "blessed" REXI's accounting that would be completely irrelevant. Why should we let a bunch of accountants tell us how to value a company? It would not change that only a fraction of REXI's earnings are cash, and the bulk are non-cash items. Wouldn't you say that the careful individual analyst, rather than being swayed by the decrees of a bunch of accountants about GAAP, should value a company based on how much he/she thinks the earning stream, its growth prospects, and the underlying assets are worth?
For example, from my calculations, last quarter REXI had about 8 cents of cash earnings, and about 37 cents of non-cash earnings. The 8 cents of cash earnings are in the bank. The 37 cents of non-cash earnings are based on the appraisals of the properties which secure the loan. Obviously, if the properties are worth exactly what REXI paid for the loans, and there is no added value, then the 37 cents of earnings are worthless. If they are worth the full appraised value, and REXI can foreclose and sell them, then the 37 cents would actually understate the earnings. The trick is to decide how much "added value" REXI contributes to a property based on its seizure of the cash flow, restructuring of the underlying business, and sending in its own property managers. One useful thing would be to try to compare the appraised value of some of the properties REXI controls to comparables in the Philadelphia (or other) market. I am starting to look into this.
So I guess, in summary, wouldn't you say that to properly value REXI, rather than listening to a bunch of accountants, isn't it more appropriate to do the "accounting" yourself, so that you can decide for yourself what the company is worth?
Thanks again!
- The Boom Dog |
