MPG - Metro Glass

[Baa_Baa]

The industry demand profile is massive for the next 10+ years, way larger than being able to be serviced by solely local companies. Central government, local government and private enterprise have a demand profile in the out years far exceeding ability to supply locallly, the construction/build industry is cyclicling upwards in a truely massive way. Currently some companies are hurting or breaking as they transition from owning all risk to a new paradigm of shared risk. Listed companies in this sector are being punished for past and present circumstances. It is not reflective of the industry demand profile. Second tier suppliers will know this, listed or not. A bright future is ahead for reliable suppliers to construction/build. While SP may appear to be be cyclic, it is not a reliable reflection of future demand for products and services. The industry is facing the largest demand side that it has ever seen historically.

[bullfrog]

Casting my eye back, into what seems like ancient history, I’ve copied a couple of quotes from balance (hope you don’t mind), in May. MPG is in the glass business, it’s a simple business, I just don’t see another competitor coming in with a huge technological advantage. I’m quite happy with a building company that is good at what it does, doesn’t frantically grow until it’s systems break, a job falls over and then collapses.

Goodwill is a tangible asset in construction, especially in the supply chain, probably more so than in any other sector for obvious reasons. Over to you balance as you summed it up better than I could...

“What is different about MPG is that the company is inherently profitable and despite the downgrades, is still profitable and does not need a capital raise to repair its balance sheet (unlike FBU and now, STU).”

“My glazier contact (who has done some big projects like Britomart Auckland and Auckland Airport) said his firm preferred to obtain supply from a player like Metro Glass - the logistics of importing directly from China and Korea to save a few %tage is simply not worth the aggravation. There seems to be problems with shipments.”

And as for a slow down in building, I’ve seen the proposed plans for green field urbanisation, and it’s significant, plenty of work in the pipeline for MPG and it’s competitor.

[Snow Leopard]

A few thoughts:

All goodwill is intangible assets but not all intangible assets are goodwill.

Whilst I believe I know that goodwill acquired/created/destroyed on the purchase of a business is essentially price paid less fair value of tangible assets, I have little idea of what inputs are used to determine the carrying value of that goodwill.

I do know that, like fundamentally valuing a company, it requires assumptions about the future over many years.

Naively, if your value for the company is less than the equity then you have grounds to consider writing down the goodwill?

The great irony of course is that goodwill is a sunk cost, the benefit or damage was done at purchase time, and profit and cashflow do not care what value goodwill appears at on the books.

Monday we get the half year results and comment so you get to see how they are doing against the earlier guidance and hopefully their thoughts about the future.

As a side note I notice that TME had negative equity on the last financials if you strip out the goodwill.

Disc: I still own a few shares in MPG.

Rant: Let's go back to amortising the damn stuff!

[Leftfield]

While I respect the FA skills of many posters here, those that get caught up in the lure of dividend yield assuming that a declining share must at some stage bounce, are ignoring the fundamental TA analysis that says 'never buy in a down trend'.

From a TA perspective MPG has NOT been a 'buy' since about 2 yrs ago when the 90/180 MA day 'death cross' was passed at about $1.50 to $1.40.

Since then the downward trend has been unrelenting. I can recall many here saying that there was value at about 90c and MPG was going to 'turn around' because of the building boom...... well it hasn't.

Never buy into a down trend.

[percy]

A few thoughts:

All goodwill is intangible assets but not all intangible assets are goodwill.

Whilst I believe I know that goodwill acquired/created/destroyed on the purchase of a business is essentially price paid less fair value of tangible assets, I have little idea of what inputs are used to determine the carrying value of that goodwill.

I do know that, like fundamentally valuing a company, it requires assumptions about the future over many years.

Naively, if your value for the company is less than the equity then you have grounds to consider writing down the goodwill?

The great irony of course is that goodwill is a sunk cost, the benefit or damage was done at purchase time, and profit and cashflow do not care what value goodwill appears at on the books.

Monday we get the half year results and comment so you get to see how they are doing against the earlier guidance and hopefully their thoughts about the future.

As a side note I notice that TME had negative equity on the last financials if you strip out the goodwill.

Disc: I still own a few shares in MPG.

Rant: Let's go back to amortising the damn stuff!

Intangibles are just like the battery in your car.Good when it starts the engine.Unless when it does not.

[winner69]

The industry demand profile is massive for the next 10+ years, way larger than being able to be serviced by solely local companies. Central government, local government and private enterprise have a demand profile in the out years far exceeding ability to supply locallly, the construction/build industry is cyclicling upwards in a truely massive way. Currently some companies are hurting or breaking as they transition from owning all risk to a new paradigm of shared risk. Listed companies in this sector are being punished for past and present circumstances. It is not reflective of the industry demand profile. Second tier suppliers will know this, listed or not. A bright future is ahead for reliable suppliers to construction/build. While SP may appear to be be cyclic, it is not a reliable reflection of future demand for products and services. The industry is facing the largest demand side that it has ever seen historically.

The industry demand profile is massive for the next 10+ years, way larger than being able to be serviced by solely local companies .......so true baa_baa, let us not forget

[Brain]

Optimists have more fun and are often are correct and even if we are not right then something good will come out of it.

[Beagle]

While I respect the FA skills of many posters here, those that get caught up in the lure of dividend yield assuming that a declining share must at some stage bounce, are ignoring the fundamental TA analysis that says 'never buy in a down trend'.

From a TA perspective MPG has NOT been a 'buy' since about 2 yrs ago when the 90/180 MA day 'death cross' was passed at about $1.50 to $1.40.

Since then the downward trend has been unrelenting. I can recall many here saying that there was value at about 90c and MPG was going to 'turn around' because of the building boom...... well it hasn't.

Never buy into a down trend.

Yes a salient reminder. Bad management will wreck a good company. I frankly couldn't care less what the theoretical future demand side of the equation is, these guys won't make a big quid out of it that much is completely obvious. The fact that the main two people spinning the corporate B.S, (the chairman and Rigby) are gone speaks for itself. Whether the new crew are any better remains to be seen but the downtrend speaks for itself and I for one won't be risking slicing open my paw pads again catching this falling knife.

Good companies spend their time making good results, poor companies spend their time dreaming up excuses. If shareholders had a CEO that actually knew how to run the company as opposed to having to hire outside consultants to tell him how shareholders might have some sort of chance....but they're in a steep learning curve remember, (after being in business for 40 years+) so we should forgive them and allow them even more latitude lol

[percy]

The industry demand profile is massive for the next 10+ years, way larger than being able to be serviced by solely local companies .......so true baa_baa, let us not forget

Been that way since the 1950s.
Different this time.?

[winner69]

Metro NZ sales F18 were $213m with EBIT of $29m. Their EBIT margin of 14% would be rarely bettered by any industry participants globally.

Biggest competitor Viridian sales in same period $96m with EBIT of $0.9m. Such performance (here and in Australia)/has seen CSR undertake a strategic review of the Viridian business ....code for its for sale to anybody who may want it (and Metro confirmed this the other day)

Viridian with the support of CSR couldn’t hack it in NZ — Metro’s market position and operations just too much for them

Metro as a business not the dog some think — they have the resilience to do continue to do well into the future even as a new entrant comes into the market (maybe replacing that other one which might not survive in the future)

But as Metro is listed I reckon that fund managers and instos being the impatient and greedy lot they are will see Metro going private again.