MET - Metlifecare - one for the fundies?

[Germaine]

Poor management and governance is not something that will be changed unless the scheme of implementation happens.
MET recorded a development margin of just 11% for the year. OCA had a development margin of three times that in the same real estate market.
For me to hold at $5.93 I'd have to be holding based on 13.6 times underlying profit when I have very little respect for management's abilities or the board. There is no reason for me to do this when OCA is trading on about 10.5 times my estimate of FY21 underlying profit and I have full confidence in the board and management.

Maybe you are the one that needs to do some deep introspective thinking ?
Here's some questions to start you off :-
1. Why is it that all the directors apart from the chairman are recommending this deal at $6 given NTA is north of $7 ?
2. Do the directors think the current development model of the company is fundamentally flawed or what other aspect of the current business model is performing so poorly that they think its worth well below NTA ?
3. Is the declining occupancy now down to 96% part of the reason ?
4. What do the directors know about the company that they think its only worth $6 that you don't know ?
5. Before we even heard of Covid and before this proposed scheme of implementation was ever known this was trading at around $4.25 in late 2019 with an asset backing of $7. What does that suggest to you the market thinks of the abilities of management and the directors ?
6. Given 5 above, what might the share price fall too if the scheme implementation agreement is voted down ?
7. Given 5 and 6 above are shareholders on a hiding to nothing voting this down ?

Shooting myself in the foot just so I can make a moral or ethical statement about what's right or wrong does nothing to help me achieve my objective of a long and very comfortable retirement. There's shares on the NZX with much better upside than this from $5.93.

There are two separate issues here: management ability, and the terrible deal at $6 struck by the Board. I view holding a few shares (say 100) and violently objecting to the Scheme is a very worthwhile message to send to other Boards not to sell their shareholders short. It costs you nothing because the Scheme will probably go through anyway, and even if it doesn't you won't lose much. Its a personal philosophy I guess, but I am not one to cut and run, when i can instead stand and fight against the inequity of it all. I don't see that by voting against the Scheme, you are in any way vindicating management's performance.

Not only that, but the Scheme meeting will be fun. So buy 100 shares for the princely sum of $593, and bring your popcorn. It will be the best shareholder meeting in 2020 I reckon.

[Germaine]

Germaine, Beagle certainly has a few clues , but will occasionally change his mind , if that is what you mean by short term.

No by short term I mean cutting and running, rather than sticking around and objecting to something that stinks.

[Germaine]

Because the Superannuation Fund has decided to support the sale and li'l bit shareholders ain't gonna make much difference to that vote.

Making a fuss, and making directors uncomfortable, is always worthwhile. Otherwise what changes? Will you vote in the General Election? If yes, why bother, given your vote "ain't gonna make much difference to that vote..."

See my point? It's the principle that matters, and in my view it matters a huge amount.

[Germaine]

Germaine, Beagle certainly has a few clues , but will occasionally change his mind , if that is what you mean by short term.

I hope so, it would be good to have someone with Beagle's quality of thinking on the objectors side...

[JeremyALD]

Making a fuss, and making directors uncomfortable, is always worthwhile. Otherwise what changes? Will you vote in the General Election? If yes, why bother, given your vote "ain't gonna make much difference to that vote..."

See my point? It's the principle that matters, and in my view it matters a huge amount.

So what exactly are you planning to do / say at the meeting that will impact the future and how these deals are struct?

It certainly won't be your vote, a few percent of retail shareholders voting against the scheme is not going to make much difference.

I think the other point is Beagle and I bought when the initial deal was declined and we saw value in the share price point for a long term hold (until an even worse deal was struck). Had I been a shareholder for years I may have seen it worth putting up a fight.

[Beagle]

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[BlackPeter]

For what it is worth .. just updated Metlifecare (probably for the last time ever) in my spreadsheet.

Average long term PE (at $5.93 SP) was 16.7, which (in combination with a negative earnings CAGR of -6) does not look that flash.

Forward PE (based on analysts consensus guesses) is 24.7 - hmm

Yes, NTA (as discussed to death) looks good - $7.18, but somehow the board does not seem to be very good at utilizing the equity shareholders trusted them to look after.

BTW - DCF value (courtesy to shareclarity) used to be for some time $4.49 but just (in the last two weeks or so) moved magically to $6,00 - interesting coincidence, isn't it?

Now - this might be a controversial statement and against the spirit of this thread, but based on above numbers and past company performance would I not pay $6 per share (unless speculating for a greater fool, but this is not investment). I think the shares are under the current conditions worth something like $4.50 to $5 ... i.e. the Swedes pay a roughly 20 to 25% bonus to fair value to get hold of this company. Fair enough?

No doubt they do see higher value in it, and I believe if they replace the current inept board with somebody who knows what they are doing, they well might realise this higher value. But isn't this what any good investor would do?

I think the current offer is fair ... and anybody who thinks MET is more worth should just make a better offer and buy it.

Just my 2 cents ...

Discl: not holding, but must admit that MET was good to me in the past (not once, not twice but three times ; Clear evidence that it is possible to make money with dogs run by at best mediocre directors if you get the timing right ...

[Beagle]

SUM's the situation up very well. If the deal is voted down I expect the shares to gradually retrace back to the range you've suggested of $4.50 - $5.00. Sometimes making a stand on principle is simply not in one's interests and is too expensive. I suspect most shareholders know they're caught are between a rock and a hard place and will vote to approve the scheme.

[teabag]

Well said BP, I think $6 is fair enough. You will have to switch out the board and management and spend a few years hard work to get the stock to what its NTA is supposedly worth - so, a 19% gain over 2-3 years. I wish the Swedes luck.

[Germaine]

SUM's the situation up very well. If the deal is voted down I expect the shares to gradually retrace back to the range you've suggested of $4.50 - $5.00. Sometimes making a stand on principle is simply not in one's interests and is too expensive. I suspect most shareholders know they're caught are between a rock and a hard place and will vote to approve the scheme.

That's where you and I differ then. I am a person of principle, you one of expedience. Shame.