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21-01-2020, 10:17 AM
#2071
Originally Posted by Lease
OK, mate, you are right on that IFRS. But fresh low don’t concern me, rather I’m happy to accumulate more.
Many of the big shareholders all trying to get out through the small exit door.
Watching for some big crossings and then, may consider a double up.
He who dares, wins sometimes!
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21-01-2020, 10:29 AM
#2072
My prognosis is this company grinds on and on. Their bankers will be happy to see debt coming down gradually. Only after at least two, probably three more years will we know if they have a viable business model in this new highly competitive environment or not.
Risk averse people will sit on the sidelines and wait and see evidence that this ship is capable of weathering the forthcoming severe storm and wait to see TA evidence of same, such as a clear break up through the 100 day MA. This one has the potential to be really corrosive to one's patience for many years...all the time shareholders will be getting no dividends.
Shareholders will need very significant endurance to see any possible potential realised here, that's my prediction. I know my limitations and cannot be that patient, certainly with management and the directors track record, they haven't earned my trust so even if I could be that patient I wouldn't be with these guys.
Last edited by Beagle; 21-01-2020 at 10:31 AM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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21-01-2020, 10:37 AM
#2073
Member
Originally Posted by Snoopy
Lease, I am impressed with your thorough investment approach and the fact that you are prepared to look through the headline gloom and crunch some numbers. Your position taking in MPG may turn out to be very savvy indeed and I say good luck to you.
I get the idea of having all your eggs in one basket and watching that basket very closely as an investment strategy. I am not saying this is what you are doing, but sometimes it is best to watch a couple of baskets closely at once to make sure you don't lose your perspective. So I am going to suggest you take another look at STU. Yes I checked your posting history and found you did give it the brief once over in September 2019. But the price has come back since then, which changes the risk equation going forwards. The reason I am suggesting STU to you is that like MPG it has received a hammering in the current building boom. But it doesn't have the debt issues that MPG has. All I am saying is don't put all your energy into one prospect when there are other similar prospects out there.
I learnt this hard lesson myself when investing in Arrium on the ASX in recent years. A steel producer, the key was the trade off between market price for product and extraction costs. It was always going to be a tight run balance and if management had stuck to their guns I believe Arrium would still be trading today. However, the board lost confidence and thought they might go bankrupt if certain price trends continued. Those price trends did not continue with hindsight, but management tipped the whole thing into receivership anyway. And that shows you as a shareholder can understand a business very well and be right, but still lose. Best of luck with MPG.
SNOOPY
Thanks Snoopy, very sound advice. Actually MPG is the smallest holding in my portfolio. My biggest one is SUM.
My investment thought is: pick a black horse and wait it to turn around. Surely I can't be always right thus there are always a few shares in my portfolio, currently there are six.
In regards to MPG, I think there are three case scenarios: 1. Turn around 2. Being taken over 3. Go bust.
I feel it's very unlikely it goes bust. As per my analysis its NZ business may be worth EPS 8C by the end of March 2021. Members here have very different opinions on my analysis. Well, if I halve my estimation, MPG still have EPS 4C and still a profitable company. It currently owns over 50% market share. If MPG couldn't provide good products and services, how would it achieve such large scale of market share? It must have good reputation and people won't largely dump MPG when APL get in.
Surely MPG have issues ie Aussie, debt, etc. But in terms of picking a black horse, MPG is an ideal one.
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21-01-2020, 12:25 PM
#2074
Originally Posted by Lease
In regards to MPG, I think there are three
case scenarios:
1. Turn around
2. Being taken over
3. Go bust.
I feel it's very unlikely it goes bust. As per my analysis its NZ business may be worth EPS 8C by the end of March 2021. Members here have very different opinions on my analysis. Well, if I halve my estimation, MPG still have EPS 4C and still a profitable company. It currently owns over 50% market share. If MPG couldn't provide good products and services, how would it achieve such large scale of market share? It must have good reputation and people won't largely dump MPG when APL get in.
Surely MPG have issues ie Aussie, debt, etc. But in terms of picking a black horse, MPG is an ideal one.
Be very careful to differentiate in your mind the high tech factories of MPG that will no doubt keep providing glass to NZ's building industry, whatever the result, and the financial entity that owns those factories.
I agree that it is very unlikely all of the equipment will be mothballed and the staff sacked. Shutting down modern facilities that supply 50% of the market does not make sense. However whether the ownership will continue under current shareholders or be handed to a receiver is another question. It really depends how happy the banks are with the current management and if they can see a reasonable prospect of MPG trading out of their hole. And that includes those bankers that look at your analysis of the situation on this thread. How a company will do in the future is at its core a judgement call and not everyone is an optimist. If the banks get nervous and decide they want their loan money back, then they will have absolutely no consideration for current shareholders. I can assure you of that!
SNOOPY
Last edited by Snoopy; 21-01-2020 at 12:30 PM.
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
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21-01-2020, 12:58 PM
#2075
https://www.nzx.com/announcements/287113 Bought in 2016 for $A43.1m when making sales of $A45m and making EBITDA of $A8m per annum.
In the 25/11/19 announcement sales for 1H FY20 were $27.1m (annualised $54.2m) yet the loss at EBIT level, (note this is EBIT level not EBITDA level above) was $2.3m. What a stunningly bad turnaround given the increased current sales !!
Included in this half year announcement was this statement about the outlook in Australia :-
In Australia, leading indicators point to a further softening of residential construction activity in the near term, impacting multiresidential approvals in particular. AGG is primarily involved in the new detached housing and alterations and additions segments which have been less volatile but are also expected to decline
So what can we deduce from this ?
Despite sales increasing significantly since the Australian acquisition, the turnaround from a highly profitable operation at EBITDA level has been quite staggering to say the very least to where the business is now.
Okay so there has been some management and director changes but...many remain and their legacy that they have presided over such an incredible deterioration in operational performance in a growing market where sales have increased, how will they perform in N.Z. in a market about to get a major new highly efficient competitor that's going to potentially seriously erode margins and sales ?
How will they perform in Australia going forward given their own prognosis of the outlook ? What gives the directors confidence they can turn this Australian operation around at all given the outlook over there ? Focusing on double glazing for the parts of Australia that have a cooler climate ?, I am totally perplexed ? What area's in Australia have a cooler climate ? Haven't the directors even heard of climate change ?
The more I look at how badly this has been managed the worse it looks and the market and MPG's bankers are dead right to be seriously concerned about this company's future.
Last edited by Beagle; 21-01-2020 at 01:08 PM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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21-01-2020, 01:10 PM
#2076
I agree with you 100% Snoopy regarding the attitude of banks to shareholders. However by March 31 the company will have repaid c. $26m of debt in only 18 months. That's a very good effort and although the future market is being disrupted by APL if MPG can repay $10m+ a year from cashflow then I'd say the bankers will be comfortable with that. Don't forget they have a $125m facility although I think will all know the answer they'd get if they rang to drawdown $50m for an acquisition.
The mistake the MPG Board has made was not raising some capital. When they were c $1.00 they should have raised $30-40m to knock off debt. STU did the right thing balance sheet wise. They are also in a bit of a tough spot but their balance sheet is very strong.
Right now MPGs enterprise value is only $120m. I don't think APL want to make no $$ on their window operation so should behave rationally but we'll have to wait and see.
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21-01-2020, 01:10 PM
#2077
Originally Posted by Beagle
https://www.nzx.com/announcements/287113 Bought in 2016 for $A43.1m when making sales of $A45m and making EBITDA of $A8m per annum.
In the 25/11/19 announcement sales for 1H FY20 were $27.1m (annualised $54.2m) yet the loss at EBIT level, (note this is EBIT level not EBITDA level above) was $2.3m. What a stunningly bad turnaround given the increased current sales !!
Included in this half year announcement was this statement about the outlook in Australia :-
So what can we deduce from this ?
Despite sales increasing significantly since the Australian acquisition, the turnaround from a highly profitable operation at EBITDA level has been quite staggering to say the very least to where the business is now.
Okay so there has been some management and director changes but...many remain and their legacy that they have presided over such an incredible deterioration in operational performance in a growing market where sales have increased, how will they perform in N.Z. in a market about to get a major new highly efficient competitor that's going to potentially materially going to erode margins and sales ?
How will they perform in Australia going forward given their own prognosis on the outlook ? What gives the directors confidence they can turn this Australian operation around at all given the outlook ? Focusing on double glazing for the parts of Australia that have a cooler climate ?, I am perplexed ? What area's in Australia have a cooler climate ? Haven't the directors even heard of climate change ?
The more I look at how badly this has been managed the worse it looks and the market and MPG's bankers are dead right to be seriously concerned about this company's future.
This is what happens when Fund managers demand GROWTH .....guys, growth by acquisition is the way ....so go and buy something and don’t dilly dally around too much.
Share price was $2 when that was announced ....but thevFund managers met their comeuppance ......and took a lot of small investors down with them.
Last edited by winner69; 21-01-2020 at 01:16 PM.
”When investors are euphoric, they are incapable of recognising euphoria itself “
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21-01-2020, 01:22 PM
#2078
Originally Posted by winner69
This is what happens when Fund managers demand GROWTH .....guys, growth by acquisition is the way ....so go and buy something and don’t dilly dally around too much.
Share price was $2 when that was announced ....but thevFund managers met their comeuppance ......and took a lot of small investors down with them.
That $2 was when you sold out wasn't it. Well done to you !!
So with your track record I am more than a little interested in whether you see this as a viable punt at present ?
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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21-01-2020, 02:59 PM
#2079
Originally Posted by Beagle
That $2 was when you sold out wasn't it. Well done to you !!
So with your track record I am more than a little interested in whether you see this as a viable punt at present ?
I’m like Lease - Metro is still essentially still a pretty good company of a day to day basis
It’s a pity the money men hijacked Metro before and since the IPO made all these ‘promises’ of results which were never going to be able to be achieved.....impossible and that’s why I thought 2 bucks was a good time to get out.
We know the consequence of that (share price $2 plus to 25 cents) and most of the comments deriding metro are made looking through this lens.
Piss investors off enough you become a market pariah and that’s a very bad place to recover from.
Beagles question - a viable punt? Yes if you really want to punt today ......but I’d wait as my old mate Balance put it so beautifully until ‘the big shareholders have managed to get out that small exit door’ before getting back in.
A change of Chairman and a few directors wouldn’t do any harm. Goulter as Chairman was the private equity sellers puppet and Griffiths has done a shocking job ....and you’d have to wonder if the two who have ‘extensive backgrounds in the building and construction industry’ added any real value before they ‘retired’
Last edited by winner69; 21-01-2020 at 03:02 PM.
”When investors are euphoric, they are incapable of recognising euphoria itself “
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21-01-2020, 03:07 PM
#2080
Meant to also mention I wonder if both new Board and management appointments should highlight how great they were at Fonterra
”When investors are euphoric, they are incapable of recognising euphoria itself “
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