MPG - Metro Glass

[winner69]

Tempted to sell out too but to me the market cap of this company seems ridiculous if they get similar results to H1 2016 which is our last indication from them.

How flat is flat Jeremy?

Is flat the same as similar?

Whatever appears as if NZ is going backwards

[James108]

Bought some more at $0.99, as winner alluded to I am encouraged by some of the holders on here capitulating.

[Beagle]

I decided I'm holding on for the ride. Realistically how much lower can they go? 90 cents? I feel like there's not much more for me to lose given this is a dividend paying stock with a strong market position. They still have 51% market share in NZ and it's not like consents are going to continue their decline given the housing shortage. Bar a disaster in Australia it might just be a poor performing stock trying to find a bottom before settling around $1.

Still big learning lesson for me not to buy a stock in a downtrend that his historically underperformed. I still have hope this recovers quite significantly if the H1 results are decent (clearly the market is expecting a worse result than signalled).

Milford is a short term worry but maybe the sooner they're out the better.

That's not going to happen overnight though is it mate ! Talk about unloved...
Go back a few weeks. Everyone was shocked when they capitulated down to ~ $1.18 overnight from ~ $1.36 myself included. Nobody imagined they would breech $1.00 at that point. Who's to say there isn't another 18 cent fall in this through simply grossly excessive supply from Milford and others and its horribly unloved status leading to insufficient demand ? That's why I sold yesterday and also while its quite true that this company could bounce back so could SUM other companies which are also dreadfully underpriced on a fundamental basis. Very difficult for new projects to be signed off at present as we wait and see if a left leaning Government coalition will send us into some other unknown direction. You think that might impact MPG in the foreseeable future ?, I do ! I know of one $20m development block of apartments that got canned last week., sure there's dozens of other developments under review.

[JeremyALD]

That's not going to happen overnight though is it mate ! Talk about unloved...

Interested to hear your thoughts Beagle, take out the terrible chart and tell me what this company is worth if it delivers similar results to last year and NPAT of around 20m?

[James108]

That's not going to happen overnight though is it mate ! Talk about unloved...
Go back a few weeks. Everyone was shocked when they capitulated down to ~ $1.18 overnight from ~ $1.36 myself included. Nobody imagined they would breech $1.00 at that point. Who's to say there isn't another 18 cent fall in this through simply grossly excessive supply from Milford and others and its horribly unloved status leading to insufficient demand ? That's why I sold yesterday and also while its quite true that this company could bounce back so could SUM other companies which are also dreadfully underpriced on a fundamental basis. Very difficult for new projects to be signed off at present as we wait and see if a left leaning Government coalition will send us into some other unknown direction. You think that might impact MPG in the foreseeable future ?, I do !

One years bad result (not that I think the coming year will be terrible) is worth a few cents off the share price at most (as long as it is not a structural problem).

I also do not make investment decisions about what the SP may do in the future, I simply compare what I think the value is to the current SP. If the SP keeps dropping I will keep buying unless I think the value of the company has changed or allocation of MPG within my portfolio exceeds a level I am comfortable with.

As it happens I agree with you about SUM, but that is already my biggest holding and I am uncomfortable adding more!

[couta1]

Have already sold it once and bought back cheaper, might have to do it again if it drops lower, happy to ride it out and claw back losses in due course whether that be from divvies, and or capital gain. PS-Only makes up 1.2% of portfolio currently.

[BlackPeter]

Interested to hear your thoughts Beagle, take out the terrible chart and tell me what this company is worth if it delivers similar results to last year and NPAT of around 20m?

For what it is worth ... they are currently trading (@$1.00) on a forward PE of 9 - i.e. you clearly can consider them as "fair value" - even if their earnings drop somewhat this FY (which might be possible - they plan a lot of investment ...). However - if we consider $1 as fair value - they sold a year ago for more than $2 ... i.e. SP by 100% overpriced.

Looking at that - they might as well have a corresponding under-swinger of 50% - 50 cents anybody for the share?

So - how is their business likely to develop?

• Political situation: I agree with beagle - every day of political games of our very own buffoon will kill more building projects in their tracks - and a rail link to Northland won't need lots of additional windows. Maybe we can give him some baubles with windows, but whether this would be enough to keep MPG's business up - who knows?
  
• Do they make as well windows for retirement villages? Of course they do. However - one thing I did learn on my visit is that standardisation of buildings (and windows) might be bad for MPG. Their production is optimised for lots of variety - i.e. design a house with every window of a different size - and they will be very competitive. Retirement units however sort of all look the same and I would guess that they use only a very small number of different window sizes (standardisation). In this case it might pay for whoever builds these units to order 10.000 windows for the next 1000 units in China (or in some other mass market) or at least threaten to do that to depress MPG's margin. Saves money for the builder and if you intend to build 1000 units using the same plan, it is easy to plan some months ahead.
  
• One other thing which started to concern me somewhat is that they carry a lot of goodwill on their balance sheet. Actually - if you remove the intangibles, than their equity is negative. I know that they are not the only company doing that - and as long as things tick along this is normally justified and not a problem. However - if things turn pear shaped at some stage, than goodwill is often not standing the test ...
  

Discl: Still holding some ... but with a twitchy sell-finger.

[JeremyALD]

For what it is worth ... they are currently trading (@$1.00) on a forward PE of 9 - i.e. you clearly can consider them as "fair value" - even if their earnings drop somewhat this FY (which might be possible - they plan a lot of investment ...). However - if we consider $1 as fair value - they sold a year ago for more than $2 ... i.e. SP by 100% overpriced.

Looking at that - they might as well have a corresponding under-swinger of 50% - 50 cents anybody for the share?

So - how is their business likely to develop?

• Political situation: I agree with beagle - every day of political games of our very own buffoon will kill more building projects in their tracks - and a rail link to Northland won't need lots of additional windows. Maybe we can give him some baubles with windows, but whether this would be enough to keep MPG's business up - who knows?
• Do they make as well windows for retirement villages? Of course they do. However - one thing I did learn on my visit is that standardisation of buildings (and windows) might be bad for MPG. Their production is optimised for lots of variety - i.e. design a house with every window of a different size - and they will be very competitive. Retirement units however sort of all look the same and I would guess that they use only a very small number of different window sizes (standardisation). In this case it might pay for whoever builds these units to order 10.000 windows for the next 1000 units in China (or in some other mass market) or at least threaten to do that to depress MPG's margin. Saves money for the builder and if you intend to build 1000 units using the same plan, it is easy to plan some months ahead.
• One other thing which started to concern me somewhat is that they carry a lot of goodwill on their balance sheet. Actually - if you remove the intangibles, than their equity is negative. I know that they are not the only company doing that - and as long as things tick along this is normally justified and not a problem. However - if things turn pear shaped at some stage, than goodwill is often not standing the test ...

Discl: Still holding some ... but with a twitchy sell-finger.

Considering not a lot has really changed since ASH meeting you have certainly changed your tune? It's been known for months Mr Peters was going to be the kingmaker so I'm not sure why everyone finds that so surprising now it's come to pass.

We have a housing shortage. All parties want to build MORE houses than present.

You were the biggest supporter of this stock for a long time so I am a bit puzzled as to why you are throwing in the towel.

[percy]

[QUOTE=BlackPeter;686625]
[*]One other thing which started to concern me somewhat is that they carry a lot of goodwill on their balance sheet. Actually - if you remove the intangibles, than their equity is negative. I know that they are not the only company doing that - and as long as things tick along this is normally justified and not a problem. However - if things turn pear shaped at some stage, than goodwill is often not standing the test ...
[/LIST]

One of the things I do when analysing a company, is take off goodwill and intangibles.Always surprises me.just how many companies then have negative equity.
Has saved me making a lot of mistakes.

[Beagle]

We are in the midst of a building boom. Cyclical companies should average a PE of 10 across the cycle. When things are bad in the industry and low volumes but a recovery is anticipated the PE might be 13-14. When things are booming you have to ask if a PE of 10 for a cyclical is still appropriate ?
At 9, (busy as a beaver plugging holes in a dam today so will accept BP's assertion of 9) one wonders if it should be 8 given all the political uncertainty. This is so much like FBU without quite their theatrics and level of fiasco but you have to ask if they can't make good money in the boom when will they ?
The whole we're investing in more capex to build efficiency so reminds me of airlines buying expensive more fuel efficient planes and then promptly passing on the savings its not funny. I don't "buy it "
Simple laws of supply and demand apply here. With Milford with lots of shares left to sell and with quite some weeks until there's an update from the company in November its not immediately obvious to me how the shares gain upward momentum in the short term. Yes BP SUM companies are very good at buying in vast bulk the more standardized the better. Agree with Percy. Huge intangible assets levels in balance sheets is something I am not keen on. Intangibles are so easy to erode and so difficult to build upon...natural swings in business cycles almost inevitably catches up at some stage with high intangible valuations.