MPG - Metro Glass

[percy]

Ohhh $1 is back on the cards, truck positioned ready and waiting.

Unloading or loading.?

[Fatboyj]

Against your sound advice, I will be loading .

[percy]

Against your sound advice, I will be loading .

My sound advice is not that soundly based.! I do not like the sector, and did not like MPG's result,or their record of underperforming.
I therefore have not done "full" research on MPG,and do not know whether the share price reflects the company is over priced or under priced.
Please take my comments as just a warning.There are a great number of companies I follow,and I think a lot would be safer investments.
I always think ,if in doubt stay away.
If I were to give advice it would be, that I often buy a small parcel of shares in a company,and when that company achieves what they say they will do, I buy more,and keep buying as they continue to do, as they say they will do.
If they don't I sell straight away.

[horus1]

What a good philosophy. It works . I bought these at 1.05 and am sitting

[Beagle]

The article behind the paywall on NBR was titled "Glass half empty". Is the glass half full or is it half empty or it is simply half a glass of water ?
It all depends on your perspective. Stick half a glass or water right on the edge of the table and get down to floor level and look up and it looks half full. On the other hand looking directly down from above it looks half empty. Okay enough of the metaphors this is what I am getting at.
EBITDA margin fell to 18% in 2017...they can and have done better in the past, 20 and 22% in recent years and they have acknowledged they have made mistakes and are learning.
Their Annual meeting statements have been treated extremely cautiously by the market and most people expecting a flat result although the company itself officially at this stage is still cautiously optimistic of some profit growth. If one takes a glass half full approach then one could hope they can slowly grow earnings and the stock on a PE of 10 on 11.5 cps this year is currently worth $1.15 with potential for a recovery as they can prove earnings growth.
I guess those with only a small sized glass of this could simply leave the thing out in the rain and hope favorable economic conditions fill the glass a bit more and that management having received a rocket are working hard to restore higher EDITDA margins...(the possum approach).
All things considered including the pending election uncertainty I think the shares are currently about fair value.

[winner69]

Metro have heaps of goodwill on their books

It is supported by assuming volume growth of 7.9% pa over the next 5 years and then 2.8% pa growth forever. Management budgets that auditors are happy with.

We should believe them - thus $1.10 current share price is so cheap it's not funny (esp if factor in margin expansion as well)

All honky dory on the Metro front.

[bullfrog]

It seems to me that certain fund managers got their knickers in a twist about under-performance in a boom. If you can't make money in a boom, when can you make it? Just a few thoughts about booms...

In a boom, companies are tempted to ramp up, expand, recruit, borrow. It's a boom, there's a shortage of skilled staff, so unskilled staff come on the books, quality suffers, product is returned, deadlines missed, penalties ensue, profits disappear, then the bust happens and that company swiftly exits stage left (history of being unreliable, poor quality). Add into the mix that many construction companies are run by can do managers who hate to turn away work, not strategists, planners, and you have a sector that will always stuggle to make a profit regardless of boom or bust. Simplistic way of looking at, but I like simple.

MPG, I hope, are looking at the long term, not compromising quality, delivering on time, not expanding simply to meet demand, and therefore, not making big profits in a boom, but making sure they will still be around in the bust.

You want a tortoise in this sector, not a hare.

[winner69]

It seems to me that certain fund managers got their knickers in a twist about under-performance in a boom. If you can't make money in a boom, when can you make it? Just a few thoughts about booms...

In a boom, companies are tempted to ramp up, expand, recruit, borrow. It's a boom, there's a shortage of skilled staff, so unskilled staff come on the books, quality suffers, product is returned, deadlines missed, penalties ensue, profits disappear, then the bust happens and that company swiftly exits stage left (history of being unreliable, poor quality). Add into the mix that many construction companies are run by can do managers who hate to turn away work, not strategists, planners, and you have a sector that will always stuggle to make a profit regardless of boom or bust. Simplistic way of looking at, but I like simple.

MPG, I hope, are looking at the long term, not compromising quality, delivering on time, not expanding simply to meet demand, and therefore, not making big profits in a boom, but making sure they will still be around in the bust.

You want a tortoise in this sector, not a hare.

Good summary

Metro have essentially been around for decades and been through a few boom and bust cycles so know what they're all about .....and one of their strategic intents is to have a sustainable business.

They do tout themselves as a hare don't they?




Mind you mainly because private equity loaded them up with debt they did end up in liquidation in 2012 post the bust of 2009/2010. Take out the huge interest expense they were still quite profitable

[Hoop]

What a good philosophy. It works . I bought these at 1.05 and am sitting

Not always....but yeah often but in ways one does think of...Often a layman's paradox occurs..

Investors put their rosy glasses on and act on "logic" when they see a sector booming and dive into companies related to that sector...as the boom keeps rolling on shareprices should keep going up --right?....No, wrong!!....

If Mr Market is "irrational" and a booming sector company's shareprice loses it's up trend "logic" says the market will come its senses and eventually the "cheap" share price will rise to reflect the sector's/company's fundamentals (Benjamin Graham's short term voting machine long term weighing machine argument)--right?...No wrong!!!!!!!

The "logic" paradox commences when... company's shareprices after a while begin to slow down/maybe reverse thus underperforming their NZX indexes while their sector market keeps on booming...Disbelieve me.. then look at AIA ARG AVR FBU KPG MET(only just qualifies) MVN RYM STU SUM...

It's never a perfect world and some could argue with me using OCA PCT, maybe MET, PFI (maybe peaked recently?)...but the number of companies mentioned above is enough NZ examples to reinforce the worldwide correlation argument that there is no significant correlation between Equity shares and economy.

This argument seems illogical and a paradox to ones thinking but its a laymans paradox, fueled on by media hype and "media logic", which clouds the thinking of the best of us....

So why is this happening??...Thinking back to Market Cycle Theories provides an answer to a few questions..such as near the top of an economic cycle negative forces come into play..increased competition, lower profit margins, scarcity of supply slowing down production and raises risk of mis-quoting jobs due to time lags, new competition brings new systems of doing things upsetting the bemoths companies which are slow to adapt, the perceived overbundance of wealth within a booming sector upsets the public which forces the Government to act and install more regulations and controls thereby creating more costs...
The market top endgame is always oversupply...many cyclic sectors e.g property are very large ships at sea..satisfying sudden market demand shifts takes years to gear up and when by that time the market is eventually satisfied there are still many projects in long term production and when the satisfied market demand tapers off the market the industry motion carries on and oversupply results...Government is always slow to react too so expensive regulations stay in place....Think Titanic..

Equities are known as a leading indicator..the equity market is forward looking..yes a reborn market can happen but Benjamin Graham's famous quote is not always a given..

Using Charts with the companies above..most (RYM excluded) peaked around Sept to November 2016...What happened at this period?..How far forward is the NZ market looking?..Is the property market/economic cycle reaching it's end -game and the Equity market is a forecast warning?...or is it all Bullsh1t and the sector carries for much longer forcing the companies shareprices to correct upwards again?

Disc: recently bought..holding

[BlackPeter]

So what are you saying? NZ will not increase but reduce the number of houses we are building? New houses will be built with less windows? Or are you saying that the builders who require at the moment a one to two week turnaround for getting new windows will be happy in future to order their new windows in China and wait for 8 weeks until they arrive?

I think it is easy to look at the SP trend and fall into a depression ... and everything looks bleak. And sure - everything can go wrong. Maybe the dear leader tests his first live missile close to NZ (lucky that Christchurch is out of range ) ... though this might even boost the windows market - who knows?

MPG are an established company with a huge market share - and there is no sign for demand dropping soon - and so far they kept their market share. There are many indicators for increasing demand, though. Their EPS over the recent couple of years was between 10 and 11 cents - and there is no indication that this will drop. Their share price at the moment is 110 (i.e. PE around 10).

They invested heavy into new equipment and have end of this year another manufacturing upgrade. Typically new equipment helps you to produce (after a learning curve) more efficiently.

Why would anybody buy 4.5% bonds if you can buy instead shares offering (without growth) a 7% dividend (plus imputation credits)? Even if the dividend yield would half (what nobody expects) they would still look good compared to bonds (due to the imputation credits).

Sure - if NZ Inc is closing down with the last person at the departure gate switching off the lights, they would have problems, but so would any other investment in NZ. Do we expect this?

Let the speculators do their job ... at some stage they run out of shares to sell - and then MPG will find again an appropriate price level reflecting its earnings and (if we so believe) growth potential). Some people though might buy very cheap shares ... and others will be sorry they sold them.