MPG - Metro Glass

[Leemsip]

Awesome post. Makes me want to get in there and make the changes myself.
Seriously, what are mgmt doing.

I would love to buy this company, but its just hopeless...

[mikeybycrikey]

I have two thoughts on Metro:
Never buy a private equity IPO until the rot is fully and totally exposed
Treat most intangible assets as being worth $0 (as a non-accountant)

I think there is some chance that MPG could be worth something one day. It's a gamble rather than an investment though.

Also, in my opinion the price drop after the announcement from APL wasn't necessarily fatal but did represent the faint light at the end of the tunnel suddenly getting dimmer and further away. One more headwind in an already stormy sea.

I'm very cautiously optimistic about MPG, but expect there is a high possibility of losing all my money if I invest. But price is so low that it could pay off handsomely if it does recover. Kind of like a lottery ticket then.

[Davexl]

I have two thoughts on Metro:
Never buy a private equity IPO until the rot is fully and totally exposed
Treat most intangible assets as being worth $0 (as a non-accountant)


I agree reluctantly quite strongly regarding Private Equity IPO, but admittently wasn't looking for this information specifically at the time.
I disagree with the second point because there are increasingly many companies, even in NZ who have large investments in Intellectual Property, patents, trademarks, specialized methods, designs, custom software etc, particularly high technology companies - but there is a dearth of companies who can value these assets correctly in NZ. Regular Auditors are simply NOT up to the task in evaluating Intangible assets (esp. Goodwill) with any degree of accuracy and the end result is far too subjective in my view and let's them off the hook...

[winner69]

I agree reluctantly quite strongly regarding Private Equity IPO, but admittently wasn't looking for this information specifically at the time.
I disagree with the second point because there are increasingly many companies, even in NZ who have large investments in Intellectual Property, patents, trademarks, specialized methods, designs, custom software etc, particularly high technology companies - but there is a dearth of companies who can value these assets correctly in NZ. Regular Auditors are simply NOT up to the task in evaluating Intangible assets with any degree of accuracy and the end result is far too subjective in my view and let's them off the hook...

The bulk of the intangibles shown in metro accounts (not counting the Oz acquisition) is a wash up of when Metro Performance Glass acquired Metro Glass Holdings as part of IPO. Paid $290m odd for $122m of assets.

Nothing really to do with valuing the sort of items you mentioned above.

If really keen try to make sense of that $170m Group Reorganisation Reserve that shows in Shareholder Equity.

[winner69]

A lot has happened since private equity forked out $350m in 2006 and bought Metro Glass from a few decent guys

Essentially been broke twice since then

Amazingly if you looked at their NZ operations without knowing its share price performance as a public company you’d say it’s a bloody good business - the ‘heart’ of the business remains and it ticks over well, Similar businesses around the world would love to achieve margins they do.

Pity money men got involved and more lately fund managers influenced company direction. Together they have destroyed it

Best if Leemslip bought it (after a lot of the debt has gone and Oz cast off) - he’d have a great company without the big end of town interfering

[Lease]

For holders(including myself), I wish we are good luck that their NZ business are intact. I have analysed their Aussie operation and I have no concern about it. As long as their NZ operation are OK, the SP should recover.

They used to have 50% market share in NZ. If they could achieve such high % of share, don't understand why they are afraid of competition.

[Davexl]

The bulk of the intangibles shown in metro accounts (not counting the Oz acquisition) is a wash up of when Metro Performance Glass acquired Metro Glass Holdings as part of IPO. Paid $290m odd for $122m of assets.

Nothing really to do with valuing the sort of items you mentioned above.

If really keen try to make sense of that $170m Group Reorganisation Reserve that shows in Shareholder Equity.


Both points thankfully taken winner69.

Sorry I meant to emphasize the Goodwill level of Intangible assets not the IP side of things per se. I have edited my earlier post to now include this aspect also.

The letter from the FMA's assessment on Goodwill impairment strongly implied a high level of subjectivity in valuing these Intangible assets, but that they were within acceptable range.

eg. "the assessment of the valuation and impairment of goodwill is necessarily based on certain judgements and estimates"
AND "we do not have reasons to believe that the judgements and estimates that have been made by the Metroglass Board are not supportable."

First I've heard about a $170m Group Reorganisation Reserve that shows in Shareholder Equity. Thanks for bringing it to my attention.:)

You can clearly see I am no accountant - plenty to learn...

[mikeybycrikey]

I disagree with the second point because there are increasingly many companies, even in NZ who have large investments in Intellectual Property, patents, trademarks, specialized methods, designs, custom software etc, particularly high technology companies.

I think Winner has mostly answered this for me but I'll add a little more.

In the case of Metro, the intangibles are a hangover from the past and I would say probably worthless. They should write them down but probably can't because there would then be no equity in the company.

If a company like Arborgen or PEB is telling you how valuable their patents are, they are worthless. If a company is just getting on and doing the job then there is value.

Xero has spent years building their software. They (probably) don't talk about their intellectual property being valuable. The value is in the customer experience etc, etc.

Although I'm not an accountant or a lawyer so might be talking rubbish. DYOR.

There is definitely value in IP. Crowing about the value of that IP is a big red flag to me though.

I take your point about the auditor although I have no idea how much they can do there. It's an interesting question. Let the buyer beware!

[Davexl]

In the case of Metro, the intangibles are a hangover from the past and I would say probably worthless. They should write them down but probably can't because there would then be no equity in the company.

If a company like Arborgen or PEB is telling you how valuable their patents are, they are worthless. If a company is just getting on and doing the job then there is value.

Xero has spent years building their software. They (probably) don't talk about their intellectual property being valuable. The value is in the customer experience etc, etc.

Although I'm not an accountant or a lawyer so might be talking rubbish. DYOR.

There is definitely value in IP. Crowing about the value of that IP is a big red flag to me though.

I take your point about the auditor although I have no idea how much they can do there. It's an interesting question. Let the buyer beware!


I absolutely agree that there is definitely value in IP - it is real and tangible on the accounts eg Coca-cola, but we in NZ are absolutely Rubbish in valuing Intangibles on the accounts. eg Goodwill and IP. I can think of having only heard of one company (myself recently) who I would trust in valuing IP for instance in a high technology co situation, plus perhaps some of the patent attorneys who are very few in number in NZ. It is a task for specialists only, otherwise only guesstimates are being made. Sorry can't remember the name offhand.

[Beagle]

Just a small point. Its not the auditors job to value IP. The responsibility for ensuring the statement of financial position shows a true and fair view lies with the directors.
Typically the partner in charge of the audit will review the reasonableness or otherwise of the IP and discuss the assumptions made by the directors in valuing same.

In MPG's case IP from the outset was based on growth rates that proved grossly unrealistic and it took the appointment of independent consultants for them to finally concede this was not a growth company at all. I haven't followed the valuation of IP since then or this company in detail because I have no respect for the ongoing B.S. that comes out of management and the directors mouth's.

The only realistic chance I see for shareholders to get a decent return is a takeover and a complete cleanout of management and the board. I think that's unlikely while the Australian operation is losing money as they may be parent company guarantees on leases meaning a surgical annexation of that operation is practically impossible.

[Beagle]

From metro ASM presentation

Looks different to recent maps I’ve seen on TV

Sorry - couldn’t resist

They're all good with Tasmania. I suspect real estate prices there are going to rocket after the smoke finally clears. Maybe a good place for a retirement village ?

[winner69]

They're all good with Tasmania. I suspect real estate prices there are going to rocket after the smoke finally clears. Maybe a good place for a retirement village ?

Only a matter of time before Tasmania burns ....again

[stoploss]

They're all good with Tasmania. I suspect real estate prices there are going to rocket after the smoke finally clears. Maybe a good place for a retirement village ?

Real estate in Tassie has been rocketing for a while ....

[winner69]

Over 37,000 consents for new homes last 12 months

Highest level since 1974

Metro must be creaming it and going to do even better next year

Anybody notice they no longer produce that chart showing NZ sales to consents for new homes (strong correlation once)

[Beagle]

You could buy the ones you sold at $2 back and have a free ride on previous profits. Some people reckon this free ride investment methodology means you can't lose :)

[Leemsip]

Hey Davexl & Winner69
The re-org reserve (as I understand it) is the difference between the cost of purchasing a subsidiary company and the net assets of the subsidiary.

So recognised to record the difference between the amount paid to acquire thePre-IPO Metroglass and the share capital of Metro Glass Limited.

Not sure if this actually helps understand the financial statements any better. I would have expected the reserve to roughly match the intangible assets...? Hmm

[Waikaka]

Currently happy to be buying into MPG at the moment.

At current prices a P/E of ~3.5. Profitable NZ operation (which is 80% of revenues). They have been reducing debt and have ~$60 Million in property, plant and equipment. All for a market cap of $49 million

On the downside they still have too much debt, possible incoming competition and hopeless Australian operation dragging them down.

Happy to hold my nose and buy up at these levels.

[Leemsip]

This stock is a screaming buy on most measures. $8m net profit in 2019 on a company valued at $50m.
Interest costs coming down by maybe a million in 2020.

Got some nasty Oz writedowns to come which will halve the net profit in 2020 ($4m estimated costs), but this looks more than fully imputed into the share price. The consolidation in new south wales complete by March 2020. They are taking action to stop the bleeding in Oz.

Down to $26c per share now! Pricing in armeggeddon and far more sellers than buyers. whos got the balls?

[Balance]

Long and wrong on this one.

Everyone holding off (including Bain & FBU) as APL is going to be providing serious competition from March this year when Stage 1 goes into operation.

Then there’s stages 2 & 3.

Try modelling a halving of margins if not more.

[Leemsip]

got a link to anything on APL?

[forest]

Long and wrong on this one.

Everyone holding off (including Bain & FBU) as APL is going to be providing serious competition from March this year when Stage 1 goes into operation.

Then there’s stages 2 & 3.

Try modelling a halving of margins if not more.

Yes that how I see it too, reduced margins and reduced revenue in NZ. And that for a company which has had margins reductions already sinds 2017.

[Leemsip]

Waikaka. You buying in big or just $5-10k kindof stuff?

[Waikaka]

Waikaka. You buying in big or just $5-10k kindof stuff?

Small scale stuff. Just happy to accumulate MPG at these prices. Cash is by far the most significant holding in the portfolio at the moment.

[Beagle]

got a link to anything on APL?

http://www.aplnz.co.nz/

https://www.waterfordpress.co.nz/business/apl-window-solutions/ Major expansion..more here https://www.eboss.co.nz/ebossnow/vantage-windows-and-doors-apl-glass-supplier-2020

No question in my mind MPG margins and market share will come under very serious pressure in N.Z. and turnaround in Australia, if possible at all, will prove to be extremely difficult and slow.

Pretty sure, going off memory, some of the old hands on here that know him are not impressed with MPG's CEO's track record.

[winner69]

http://www.aplnz.co.nz/

https://www.waterfordpress.co.nz/business/apl-window-solutions/ Major expansion..more here https://www.eboss.co.nz/ebossnow/vantage-windows-and-doors-apl-glass-supplier-2020

No question in my mind MPG margins and market share will come under very serious pressure in N.Z. and turnaround in Australia, if possible at all, will prove to be extremely difficult and slow.

Pretty sure, going off memory, some of the old hands on here that know him are not impressed with MPG's CEO's track record.


Yes Beagle — APL know their windows - impressively so

Until now most of their customers have had to source their glass from outfits like Metro. Now they can offer their fabricator customers the glass component as well. No doubt many will find dealing with one supplier

Metro have been rather coy in saying public how competition might impact them ...but my contacts tell me they are scared as hell.

They’ve mentioned something like APL fabricator customers in upper NI get about $25m of glass from Metro......but their service and delivery record will lessen chances of customers moving. Metro have never mentioned margin impacts from this competitive landscape.

A case of who has heaps to gain and who has heaps to lose - all I know Metro won’t be gaining.

[t.rexjr]

The glass division of APL still needs to be commercially viable. The extra competition will undoubtedly put pressure on Metro’s turnover, but glass is a low margin product. End users are unlikely to benefit from the increased competition as much as APL itself does. Although not insignificant, over time I’m predicting the industry to somewhat absorb the extra output and Metro to pretty much bumble along as they are...

[Balance]

The glass division of APL still needs to be commercially viable. The extra competition will undoubtedly put pressure on Metro’s turnover, but glass is a low margin product. End users are unlikely to benefit from the increased competition as much as APL itself does. Although not insignificant, over time I’m predicting the industry to somewhat absorb the extra output and Metro to pretty much bumble along as they are...

On the contrary, MPG's gross margins had been in the vicinity of 50% - mark up of 100% in other words.

Reason why competitors have entered the supply market.

APL is building and bringing on stream the most modern and integrated plant in the Southern Hemisphere - so costs will be lower and quality will be higher.

Outlook very grim for MPG - especially with the ill fated acquisition in Australia.

As I wrote before, long and wrong - big enough to admit it but not happy. ;)

[Beagle]

Been a great stock to avoid over the years, its performance even worse than other stocks in the building and construction sector, STU and FBU...beggars belief that its possible to perform worse than those two :eek2:

Balance, I am curious for any insights you may have on this. What on earth is going on in the construction sector such that these companies are all performing so consistently badly in the midst of a multi year building boom ?

Even looking forward, (hoping that at least one of them has learned some lessons from multiple past mistakes), dare I suggest that the prognosis for all three companies is still very grim !

[Davexl]

Been a great stock to avoid over the years, its performance even worse than other stocks in the building and construction sector, STU and FBU...beggars belief that its possible to perform worse than those two :eek2:

Balance, I am curious for any insights you may have on this. What on earth is going on in the construction sector such that these companies are all performing so consistently badly in the midst of a multi year building boom ?

Even looking forward, (hoping that at least one of them has learned some lessons from multiple past mistakes), dare I suggest that the prognosis for all three companies is still very grim !

Having bought into and exited all three companies also on the premise of this multi year building boom, am very interested in Balances opinion also. Surely it can't all be management incompetence? FBU at least should have improved quality & volume metrics based on it's new automated housing factory when ramped up for starters...

[Balance]

Been a great stock to avoid over the years, its performance even worse than other stocks in the building and construction sector, STU and FBU...beggars belief that its possible to perform worse than those two :eek2:

Balance, I am curious for any insights you may have on this. What on earth is going on in the construction sector such that these companies are all performing so consistently badly in the midst of a multi year building boom ?

Even looking forward, (hoping that at least one of them has learned some lessons from multiple past mistakes), dare I suggest that the prognosis for all three companies is still very grim !

My contacts in the development industry told me that the singular contributor to their dismal failure was their reward system.

In FBU, STU and a few other construction companies, senior management were rewarded on winning contracts & maintaining market share during the housing & construction boom.

It's all too easy to maintain market share by undercutting competitors by underpricing contracts and tenders.

In both cases, they were able to withstand the initial losses from the under-priced contracts due to the huge oligopolistic profits of their duopoly divisions - but as time went by, the rot surfaced and by then, it was all too late especially when costs went through the roof.

Both are lucky they have shareholders who see the underlying businesses as having value and are still very profitable, and so were prepared to pump in more capital to stabilize their financial positions.

Incidentally, FBU had been in this situation before (1990s and early 2000s) and those who were brave enough to invest then made a lot of money.

[Balance]

Having bought into and exited all three companies also on the premise of this multi year building boom, am very interested in Balances opinion also. Surely it can't all be management incompetence? FBU at least should have improved quality & volume metrics based on it's new automated housing factory when ramped up for starters...

In the case of MPG, the two contributors are the acquisition in Oz and the advent of APL as a major competitor (and loss of a strategic major customer) which resulted in the company being where it is today.

Alas, MPG has gotten very unlucky - the gains from industry consolidation have dissipated with the two contributors to its misfortunes.

Sometimes in life, you can get lucky as some developers I know were able to make money even while building costs went through the roof on their projects - only because land values were going up even faster!

[Davexl]

In the case of MPG, the two contributors are the acquisition in Oz and the advent of APL as a major competitor (and loss of a strategic major customer) which resulted in the company being where it is today.

Alas, MPG has gotten very unlucky - the gains from industry consolidation have dissipated with the two contributors to its misfortunes.

Sometimes in life, you can get lucky as some developers I know were able to make money even while building costs went through the roof on their projects - only because land values were going up even faster!


As somebody else who was especially long & wrong also on Metro, I STILL don't fully understand how their share price was so savaged when the APL competition was announced, it simply seemed totally over the top - companies compete all the time, even Metro operated in a competitive market, albeit with its economies of scale advantage over smaller players. I just don't want to get so totally blind-sided again by such an announcement without understanding the SP dynamics of such a circumstance. It seems that you can never know too much in this game and competitive position in a market is never straightforward to investigate...

[t.rexjr]

On the contrary, MPG's gross margins had been in the vicinity of 50% - mark up of 100% in other words.

Reason why competitors have entered the supply market.

APL is building and bringing on stream the most modern and integrated plant in the Southern Hemisphere - so costs will be lower and quality will be higher.

Outlook very grim for MPG - especially with the ill fated acquisition in Australia.

As I wrote before, long and wrong - big enough to admit it but not happy. ;)

I wonder if APL’s state of the art setup is going to trump Metro’s state of the art set up?
Was the glass supplied to APL at 100% margin?
Will APL be supplying consumers with a cheaper/better product?

Never bought into the growth lies.
Aussie was a mistake
Will they take a hit? Yes.
Will they still be a viable company? Yes.
Are they undervalued? Time will tell

Seems to me there’s a lot of wound licking rather than objective thinking in this thread. Polar opposite to the hype crazed blinkers of a few years ago. I doubt it fits many peoples ‘investment crteria’ in it’s current unknown state so I see no reason trading or investing in it currently. But it’s not off my radar.

[Lease]

Let's do some numbers work and see what will happen to MPG. We only focus on NZ segment.





2016
2017
2018
2019

2021














Sales

188037
213830
212901
217434

173947.2



EBIT

30124
33083
29240
31087

24352.608



EBIT Margin
16.02%
15.47%
13.73%
14.30%






Interst






3850



NPBT






20502.608



Income Tax(28%)





5741














NPAT






14762



No. of shares





185378



EPS






0.080



Implying PE at current SP




3.37




You can see MPG NZ business is reasonably stable from 2017 to 2019. It represented 50% market share MPG had. Let's assume APL take 10% off MPG since its operation is fully functional from March 2020.

So by the end of March 2021, MPG market share down to 40% thus its NZ revenue=217434 X 40%/50%=$173,947. You can see its EBIT margin dropped from 2016 to 2018 but had some recovery in 2019, so I assume EBIT margin at 14%. Thus 2021 EBIT=173947 X 14%=$24,352.

The Company have actively paid down debt so by March 2021, the loan should be below $70M and I take the figure to work out interest expenses=$70M X 5.5%=$3,850('000).

Net Profit before Tax=24352-3850=20502, take 28% tax rate so Net profit after tax=20502-20502 X 0.28=$14,762.

It has total outstanding shares of 185378('000), so EPS=14762/185378=0.08.

For Aussie operation, as its Victoria and Tasmania are profitable, NSW have been through restructure and write-off over the last two years so it can reasonably assume NSW will be break-even but in my analysis I simply assume the entire Aussie business is just break-even.

That leaves MPG EPS will be $0.08 by the year ended 31 March 2021, imply forward PE will be just over 3 at current SP.

What do you guys think?

[BlackPeter]

Let's do some numbers work and see what will happen to MPG. We only focus on NZ segment.





2016
2017
2018
2019

2021














Sales

188037
213830
212901
217434

173947.2



EBIT

30124
33083
29240
31087

24352.608



EBIT Margin
16.02%
15.47%
13.73%
14.30%






Interst






3850



NPBT






20502.608



Income Tax(28%)





5741














NPAT






14762



No. of shares





185378



EPS






0.080



Implying PE at current SP




3.37




You can see MPG NZ business is reasonably stable from 2017 to 2019. It represented 50% market share MPG had. Let's assume APL take 10% off MPG since its operation is fully functional from March 2020.

So by the end of March 2021, MPG market share down to 40% thus its NZ revenue=217434 X 40%/50%=$173,947. You can see its EBIT margin dropped from 2016 to 2018 but had some recovery in 2019, so I assume EBIT margin at 14%. Thus 2021 EBIT=173947 X 14%=$24,352.

The Company have actively paid down debt so by March 2021, the loan should be below $70M and I take the figure to work out interest expenses=$70M X 5.5%=$3,850('000).

Net Profit before Tax=24352-3850=20502, take 28% tax rate so Net profit after tax=20502-20502 X 0.28=$14,762.

It has total outstanding shares of 185378('000), so EPS=14762/185378=0.08.

For Aussie operation, as its Victoria and Tasmania are profitable, NSW have been through restructure and write-off over the last two years so it can reasonably assume NSW will be break-even but in my analysis I simply assume the entire Aussie business is just break-even.

That leaves MPG EPS will be $0.08 by the year ended 31 March 2021, imply forward PE will be just over 3 at current SP.

What do you guys think?

Couple of things which worry me:

1) competition typically takes not just market share, but they will as well push the margin lower for everybody. This might impact on your calculation.

2) MPG is geared up for the typical individual NZ house where for some stupid reason nearly every window will have a different size. MPG optimized their production for cutting lots of unique window sizes. I have seen their factory in Christchurch (and assume the others are similar) - i.e. I know what I am talking about. This means however that they can't really utilize the advantages of mass production.

If the market is moving to standardized window sizes (you will see this trend with larger developments like e.g. retirement villages), then competitors producing standard solutions will be able to produce much cheaper than MPG can. Given that APL is supplying not just the glass, but as well the frame with the glass this is what I'd expect will happen. MPG might find themselves quite soon in a situation where APL can sell frame plus glass for standard window sizes cheaper than what MPG would need to charge for the glass alone. If this happens, this would kill MPG. They don't have a frame factory and are not geared up to produce larger volumes of the same size.

Obviously they could program their machine to cut all the day the same size, but this would not reduce their production cost per window, which in a real mass production would happen.

While not certain, I think there is a real chance that MPG might bite the dust .. and in this case the share is obviously too dear as long as it costs more than nothing.

[Leemsip]

Really interesting thoughts from both sides. Thanks guys.
I'm siding with lease and going to snag a small parcel on Monday for a 2 year buy and hold.. ..

[Davexl]

Seems to me there is going to be a bidding war for engineering talent to optimize the computerised production plant. MPG ending up with the lower volume higher margin custom windows vs APL with the mass production. Both going after the double glazing retofit market. Or MPG as the established player undercutting APL as the new entrant and leveraging established frame makers as well on the understanding of a mea culpa of the historic margins.

[t.rexjr]

Couple of things which worry me:

1) competition typically takes not just market share, but they will as well push the margin lower for everybody. This might impact on your calculation.

2) MPG is geared up for the typical individual NZ house where for some stupid reason nearly every window will have a different size. MPG optimized their production for cutting lots of unique window sizes. I have seen their factory in Christchurch (and assume the others are similar) - i.e. I know what I am talking about. This means however that they can't really utilize the advantages of mass production.

If the market is moving to standardized window sizes (you will see this trend with larger developments like e.g. retirement villages), than competitors producing standard solutions will be able to produce much cheaper than MPG can. Given that APL is supplying not just the glass, but as well the frame with the glass this is what I'd expect will happen. MPG might find themselves quite soon in a situation where APL can sell frame plus glass for standard window sizes cheaper than what MPG would need to charge for the glass alone. If this happens, this would kill MPG. They don't have a frame factory and are not geared up to produce larger volumes of the same size.

Obviously they could program their machine to cut all the day the same size, but this would not reduce their production cost per window, which in a real mass production would happen.

While not certain, I think there is a real chance that MPG might bite the dust .. and in this case the share is obviously too dear as long as it costs more than nothing.

Standard window sizes = low margin product. The industry does already have fairly common window sizes. I doubt there is any benefit in offering a std window size at a largely reduced cost. For mass production of std windows to be viable you’d then need a) more stock on hand and b) more warehousing. Then you’d also have the issue that non standard windows would be comparatively cost prohibitive. Your clients would tend to go the company that offers flexibility at a reasonable cost as their client demand said flexibility. There is very little money to be made in the low cost end of town.

[BlackPeter]

Standard window sizes = low margin product. The industry does already have fairly common window sizes. I doubt there is any benefit in offering a std window size at a largely reduced cost. For mass production of std windows to be viable you’d then need a) more stock on hand and b) more warehousing. Then you’d also have the issue that non standard windows would be comparatively cost prohibitive. Your clients would tend to go the company that offers flexibility at a reasonable cost as their client demand said flexibility. There is very little money to be made in the low cost end of town.

That's what car makers used to say as well - before Henry Ford cut them with his model T out of the market ...

But sure - not everybody bought a Ford T, but for everybody the price of cars dropped (i.e. watch that margin ...).

[Beagle]

Very interesting debate. Got to say I am siding with Blackpeter on this one. Looking at the trend in EBIT margin from 2016 to 2019...the trend is not your friend if you're a shareholder and looking at the above posts nobody has commented on this clear and worrisome trend. Slice another 3-4% off that EBIT margin with decent competition and if losses continue in Australia as I believe they will, my instinct says this grinds its way onward with the downtrend continuing.

Looking at the chart gives not technical analysis encouragement whatsoever. Management have a long track record of talking a big game and failing and their credibility doesn't wash with me, frankly their credibility is in tatters. They talk that they can turn Australia around and I don't think they will.

PE's are meaningless if the E part is a complete unknown. If there was a very clear buy signal such as a break up through the 100 day MA support line, (if this ever happens), I'd think this might be a good de-risked time to take a punt.

[Lease]

Very interesting debate. Got to say I am siding with Blackpeter on this one. Looking at the trend in EBIT margin from 2016 to 2019...the trend is not your friend if you're a shareholder and looking at the above posts nobody has commented on this clear and worrisome trend. Slice another 3-4% off that EBIT margin with decent competition and if losses continue in Australia as I believe they will, my instinct says this grinds its way onward with the downtrend continuing.

Looking at the chart gives not technical analysis encouragement whatsoever. Management have a long track record of talking a big game and failing and their credibility doesn't wash with me, frankly their credibility is in tatters. They talk that they can turn Australia around and I don't think they will.

PE's are meaningless if the E part is a complete unknown. If there was a very clear buy signal such as a break up through the 100 day MA support line, (if this ever happens), I'd think this might be a good de-risked time to take a punt.

Beagle, you should see EBIT margin has recovered in 2019 from low in 2018. And just let you know MPG NZ EBIT margin has been further recovered to 15.73% at 1H 2020.

[Baa_Baa]

Looking at the chart gives not technical analysis encouragement whatsoever. ... If there was a very clear buy signal such as a break up through the 100 day MA support line, (if this ever happens), I'd think this might be a good de-risked time to take a punt.

Thats putting it politely, the chart is a disaster. For three years this keeps finding new lows. This is a monthly chart, the moving average lines are 4 month and 10 month (roughly same as 200 daily moving average). It will be intriguing to see whether the brave value investors are correct picking the low price for entry/top-up or whether the chart ends up showing a further decline into oblivion.

Have a look and see if you'd buy into this right now (https://invst.ly/pjki-) :scared:

[winner69]

Beagle, you should see EBIT margin has recovered in 2019 from low in 2018. And just let you know MPG NZ EBIT margin has been further recovered to 15.73% at 1H 2020.

...and 15% ebit Margin is world class. Many similar industries around the world would be over the moon if they achieved this margin

NZ operations are not as useless / hopeless / broken / munted as most make out

Pity the money men stuffed it and no wonder the market perception of metro is what is (as per baabaa’s chart)

Takes a lot to reverse that sentiment ...and not just good financials.

[Lease]

...and 15% ebit Margin is world class. Many similar industries around the world would be over the moon if they achieved this margin

NZ operations are not as useless / hopeless / broken / munted as most make out

Pity the money men stuffed it and no wonder the market perception of metro is what is (as per baabaa’s chart)

Takes a lot to reverse that sentiment ...and not just good financials.

Yes, Winner69, market sentiment is so negative but imo it is overreacted on MPG's Aussie operation and competition in NZ. I'm in and let's see how it will go.

[Waikaka]

Really enjoying the factual discussion guys.

Feel like everyone's points/concerns are valid to different degrees. But what it boiled down to for me is will MPG be around in 5 years? Will it be earning within spitting distance of what we see today?

It is currently priced like all the worst case scenarios are true. If they tighten up the Aus operation, minimise losses to the new competitor and keep paying down debt I am happy to hold a part of the business long term.

Feel sorry for people who bought in earlier and suffered some losses but I am more than happy to accumulate around the current prices and put them in the bottom draw.

[Beagle]

Thats putting it politely, the chart is a disaster. For three years this keeps finding new lows. This is a monthly chart, the moving average lines are 4 month and 10 month (roughly same as 200 daily moving average). It will be intriguing to see whether the brave value investors are correct picking the low price for entry/top-up or whether the chart ends up showing a further decline into oblivion.

Have a look and see if you'd buy into this right now (https://invst.ly/pjki-) :scared:

There's no two ways about it Baa Baa, that is an exceptionally ugly chart !
Long, hard earned experience has taught me never to buy stocks with charts like that. You almost always lose.

[Beagle]

Let's do some numbers work and see what will happen to MPG. We only focus on NZ segment.





2016
2017
2018
2019

2021














Sales

188037
213830
212901
217434

173947.2



EBIT

30124
33083
29240
31087

24352.608



EBIT Margin
16.02%
15.47%
13.73%
14.30%






Interst






3850



NPBT






20502.608



Income Tax(28%)





5741














NPAT






14762



No. of shares





185378



EPS






0.080



Implying PE at current SP




3.37




You can see MPG NZ business is reasonably stable from 2017 to 2019. It represented 50% market share MPG had. Let's assume APL take 10% off MPG since its operation is fully functional from March 2020.

So by the end of March 2021, MPG market share down to 40% thus its NZ revenue=217434 X 40%/50%=$173,947. You can see its EBIT margin dropped from 2016 to 2018 but had some recovery in 2019, so I assume EBIT margin at 14%. Thus 2021 EBIT=173947 X 14%=$24,352.

The Company have actively paid down debt so by March 2021, the loan should be below $70M and I take the figure to work out interest expenses=$70M X 5.5%=$3,850('000).

Net Profit before Tax=24352-3850=20502, take 28% tax rate so Net profit after tax=20502-20502 X 0.28=$14,762.

It has total outstanding shares of 185378('000), so EPS=14762/185378=0.08.

For Aussie operation, as its Victoria and Tasmania are profitable, NSW have been through restructure and write-off over the last two years so it can reasonably assume NSW will be break-even but in my analysis I simply assume the entire Aussie business is just break-even.

That leaves MPG EPS will be $0.08 by the year ended 31 March 2021, imply forward PE will be just over 3 at current SP.

What do you guys think?

I foresee a REALLY big problem with your analysis in that your assumption of 14% EBIT margin is fundamentally flawed.

There are two extremely important key flaws.

1. And this is by FAR the most important. For most manufacturing operations the cost of raw materials is actually quite low as a percentage of sales.
Most of the cost is in the operation is in the cost of the plant itself and human resources costs.
I don't know the industry well enough to know what this is but even if the cost of raw materials was as much as 50%, (and I would think it would be considerably lower than this) of sales and all other costs stayed the same, (and you be a brave man to back management to reduce human resources and other costs appropriately in line with sales reductions because I wouldn't), then if sales reduce by $44m as per your worked example the only cost to reduce are going to be the direct costs to manufacture that glass, (the raw materials and energy costs), so we would see if my guess at 50% is somewhere near the mark that costs would reduce by just $22m, so there would be $44m - $22m = $22m less EBIT and the company is running at a loss. To be crystal clear here, what I am saying is that the various plants and human resources required to run them will not run as efficiently and will sit idle at times and all other head office, plant and machinery, management, leases, motor vehicle and other administrative costs will stay the same plus an assumed inflation rate of about 1.5%, so they will go up in dollar terms !

2. Other companies do not simply take market share with no impact on pricing in the sector. (Witness how when JetStar started in the regions AIR's regional pricing had to come down to the point where although they never admitted it, they were probably struggling to make money out of the regions JetStar operated in).
If we assume just 5% price pressure overall that's another $8-9m in lost EBIT plus the $22m above, call it $30m less EBIT.

Its a REALLY tough industry. It doesn't take much for an operation that was profitable to start making losses. Someone on here needs to have a long hard look at this using the Australian operations as a valuable guide. They bought operations that were profitable and had considerable potential. It didn't take much in terms of pricing pressure and loss of business for that operation to be losing considerable money. That is your very best guide to what could happen to their N.Z. operations, someone needs to study what happened to the Australian operations very closely and learn some very valuable lessons.

I really do think this new competitor poses a very serious existential threat to MPG. MPG are very weak financially, still with far to much debt, limping badly carrying an Australian operation which itself is in a fight for its survival and are about to face a threat of serious margin pressure and loss of business.

The balance sheet is fundamentally flawed with vast amounts of fictitious intangible assets and net tangible assets are only 8 cents per share...and it wouldn't surprise me if that's where the share price is headed.

The analogy of the Titanic steaming at full speed through a field of icebergs is a very good one here. Really, with the way this company has been governed and managed in the past you'd be a very brave investor to back the captain to steer the ship around them.

Technical analysis, (the share price chart), is telling you the company is in a fight for its survival, because it is !

I think the bank knows this and although to the best of my knowledge the company hasn't admitted it, I think the company is "under instructions" from its bank to get the debt down because they want to lower their risk.

So with this grim view where do I think the share price is headed in the foreseeable future ?
Have a look at the share price chart that Baa Baa kindly posted yesterday. I would extrapolate from that and think over time the share price simply grinds lower and lower.

Be careful how much you punt on this one folks. The boat is already taking on water from the iceberg they hit in Australia, do you really want to back management to avoid hitting further iceberg's with their previous track record or is it more likely they hit a big iceberg while meddling around repositioning the deck chairs ?

Disc: I have no shares in MPG and do not hold a short position in them.

[Lease]

I foresee a REALLY big problem with your analysis in that your assumption of 14% EBIT margin is fundamentally flawed.

There are two extremely important key flaws.

1. And this is by FAR the most important. For most manufacturing operations the cost of raw materials is actually quite low as a percentage of sales.
Most of the cost is in the operation is in the cost of the plant itself and human resources costs.
I don't know the industry well enough to know what this is but even if the cost of raw materials was as much as 50%, (and I would think it would be considerably lower than this) of sales and all other costs stayed the same, (and you be a brave man to back management to reduce human resources and other costs appropriately in line with sales reductions because I wouldn't), then if sales reduce by $44m as per your worked example the only cost to reduce are going to be the direct costs to manufacture that glass, (the raw materials and energy costs), so we would see if my guess at 50% is somewhere near the mark that costs would reduce by just $22m, so there would be $44m - $22m = $22m less EBIT and the company is running at a loss.

2. Other companies do not simply take market share with no impact on pricing in the sector. (Witness how when JetStar started in the regions AIR's regional pricing had to come down to the point where, (although they never admitted it, they were probably struggling to make money out of the regions JetStar operated in).
If we assume just 5% price pressure overall that's another $8-9m in lost EBIT plus the $22m above, call it $30m less EBIT.

Its a tough industry. It doesn't take much for an operation that was profitable to start making losses. Someone on here needs to have a long hard look at this using the Australian operations as a valuable guide. They bough operations that were profitable and had considerable potential. It didn't take much in terms of pricing pressure and loss of business for that operation to be on life support.

I really do think this new competitor poses a very serious existential threat to MPG. They are a weak financially still with far to much debt, limping badly carrying an Australian operation which itself is in a fight for its survival and are about to face a threat of serious margin pressure and loss of business.

The analogy of the Titanic steaming at full speed through a field of icebergs is a very good one here. Really, with the way this company has been governed and managed in the past you'd be a very brave investor to back the captain to steer the ship around them.

Technical analysis, (the share price chart), is telling you the company is in a fight for its survival, because it is !

Your argument is valid but I can't agree. If sales were down, labour cost would be surely come down and other costs as well. This is the way of running business. I understand MPG will face big challenges but thanks to the recovering property market and now construction activities are much stronger, thus I don't think MPG won't survive.

TA means nothing to me. When I bought THL at 66C in 2009, the chart was very similar to the one MPG is now. And then you know what happened to THL in later years.

[Beagle]

Labour costs only come down if management are adept and quick enough to reduce them in a timely and appropriate manner. Other costs are likely to keep increasing.
THL a very different company and had the skills of a very sharp man with Rob Campbell at the peak of his career at the time. (I think he's gone beyond his level of technical competence now with the American operations). Surely you are not suggesting that the current management are remotely in the same league as Rob Campbell ?

Ignoring TA is a very risky business. I only do this when I have a compelling belief in the fundamental's of the company and at least a satisfactory level of confidence in management. Neither of these situations is present in MPG as far as I am concerned.

I'd be very interested to see someone post some detailed analysis of what went wrong with their Australian operations, how much sales and margins declined before they started losing money. Some VERY BIG clues to MPG's future lie in a detailed analysis of this. (I don't have the inclination to do this on the weekend but if I'm extremely bored next week and if nobody else does it, I might run the abacus over it in due course).

[Lease]

Labour costs only come down if management are adept and quick enough to reduce them in a timely and appropriate manner. Other costs are likely to keep increasing.
THL a very different company and had the skills of a very sharp man with Rob Campbell at the peak of his career at the time. (I think he's gone beyond his level of technical competence now with the American operations). Surely you are not suggesting that the current management are remotely in the same league as Rob Campbell ?

Ignoring TA is a very risky business. I only do this when I have a compelling belief in the fundamental's of the company and at least a satisfactory level of confidence in management. Neither of these situations is present in MPG as far as I am concerned.

I'd be very interested to see someone post some detailed analysis of what went wrong with their Australian operations, how much sales and margins declined before they started losing money. Some VERY BIG clues to MPG's future lie in a detailed analysis of this. (I don't have the inclination to do this on the weekend but if I'm extremely bored next week and if nobody else does it, I might run the abacus over it in due course).

"Other costs are likely to keep increasing."?????? If MPG used to run full capacity in plant, now as sales come down, they don't need to run full capacity, thus power, water, maintenance, etc will surely come down.

[Beagle]

"Other costs are likely to keep increasing."?????? If MPG used to run full capacity in plant, now as sales come down, they don't need to run full capacity, thus power, water, maintenance, etc will surely come down.

I assumed power and any other direct raw materials are included in the 50% cost of raw materials and I think 50% is an extremely generous guess. If its less, and I think it is, the effect on EBIT of sales reducing by $44m could be considerably more than $22m. e.g. if direct raw materials costs are 33%, a $44m loss of sales and other costs remaining the same would reduce EBIT by ~ $29.5m.

The cost of most commercial leases have ratchet clauses so they go up by a minimum of the inflation rate, usually more, most I have seen are a minimum of 2 or 2.5% per annum reviewed at least biannually.
Most staff want annual increases in their remuneration at least in line with the inflation rate. When was the last time management of any company didn't keep raising their salaries at least in line with the inflation rate ?

I suggest you have a very close look at how their Australian operations turned toxic. Key operational staff leaving, key customers lost and margin pressure were the 3 key reasons going purely off memory. What makes you think that won't happen here ?

[BlackPeter]

"Other costs are likely to keep increasing."?????? If MPG used to run full capacity in plant, now as sales come down, they don't need to run full capacity, thus power, water, maintenance, etc will surely come down.

Maybe some hints related to their cost structure and flexibility in adapting it:

1) They do run actually a very sophisticated factory. Lots of money is in the initial setup (all computer controlled machinery with lots of robots). If volumes go down, than this will do nothing to the initial setup cost and the write offs they will need to continue to earn.

2) They still do need staff with quite specific skills (handling glass and programming / maintaining these amazing machines). I remember they always found it difficult to hire and train this staff and I am pretty sure they don't want to let them go if they see a (what they might think) temporary slump. It would be very difficult and expensive for them to rehire suitable staff. I.e. very limited cost saving potential if times get tough unless they know that they want to wind down.

3) One of their competitive advantages is still that they are still able to supply custom cut glass basically overnight anywhere in NZ. This requires a large factory network and a large fleet with high base costs. Same cost whether you move that truck no matter whether it carries 50 or just 25 sheets of glass. Not sure it would do their business any good if they reduce the number of their tours when volume goes down, because this would mean that customers are supplied slower than before. Time is money in the building industry. Just one less competitive advantage they might not want to lose when times get tough.

To be honest - I do not see a lot of fat they could cut out of their operations without removing essential muscles ...

I think a better strategy for them could be to build on their strength (market share and large customer and supplier network) and take on the competition by providing as well complete window solutions instead of just glass. However - this would mean a significant investment and I am not quite sure either where the money would come from (big CR at rock bottom prices = terrible dilution?). I am as well not sure whether the current board and management would have the vision and skills to pull this through.

While I am as well sort of wondering whether there are currently some bargains available in the building industry - I am not sure, whether MPG might be currently the best bet for a dog of the NZX strategy ...

[mikeybycrikey]

Your argument is valid but I can't agree. If sales were down, labour cost would be surely come down and other costs as well. This is the way of running business. I understand MPG will face big challenges but thanks to the recovering property market and now construction activities are much stronger, thus I don't think MPG won't survive.

TA means nothing to me. When I bought THL at 66C in 2009, the chart was very similar to the one MPG is now. And then you know what happened to THL in later years.

I would have to agree with Beagle here.

Cutting staff and other expenses is always going to lag falling sales. Even if MPG are successful in keeping the business afloat and getting EBIT margin to 14%, there will a significant period where that margin will drop. Maybe a couple of years or so?

The other risk in cutting staff numbers is that, if you decide to cheerfully fire a quarter of your employees because sales are down by a quarter, you will then start losing all your best employees too because they will get out while they can.

I was working somewhere a few years back where morale was low. Every week there was someone with 20 years experience leaving. Cutting expenses is hard and very risky.

It's too soon to know the final outcome here but it's going to be a difficult few years for the company.

[Balance]

"Other costs are likely to keep increasing."?????? If MPG used to run full capacity in plant, now as sales come down, they don't need to run full capacity, thus power, water, maintenance, etc will surely come down.

Economics 101 - fixed vs variable & marginal costs of production.

Basically, past the inflection point, gross & net margins go through the roof.

Best example my university professor used - think of the airline or hotel business.

They work on a rather simple formula:

- at 60% to 65% load or occupancy factor, they break even

- at 65% to 80%, they start making increasing returns on their operations

- at 80% and above, they start making super profits.

Why? Fixed vs variable & marginal cost of providing the service on additional sales.

[Lease]

I assumed power and any other direct raw materials are included in the 50% cost of raw materials and I think 50% is an extremely generous guess. If its less, and I think it is, the effect on EBIT of sales reducing by $44m could be considerably more than $22m. e.g. if direct raw materials costs are 33%, a $44m loss of sales and other costs remaining the same would reduce EBIT by ~ $29.5m.

The cost of most commercial leases have ratchet clauses so they go up by a minimum of the inflation rate, usually more, most I have seen are a minimum of 2 or 2.5% per annum reviewed at least biannually.
Most staff want annual increases in their remuneration at least in line with the inflation rate. When was the last time management of any company didn't keep raising their salaries at least in line with the inflation rate ?

I suggest you have a very close look at how their Australian operations turned toxic. Key operational staff leaving, key customers lost and margin pressure were the 3 key reasons going purely off memory. What makes you think that won't happen here ?

Power , water, maintenance are overheads that are not cost of sales, which are not included in the 50% cost of raw materials.

Commercial leases no longer have impact on bottom line as IFRS 16 took effect on 1 Jan 2019, which rules all commercial leases need to be capitalised.

Salaries, as I said, labour costs will come down with reduced sales.

THL is a very different company? But you said "Long, hard earned experience has taught me never to buy stocks with charts like that. You almost always lose.":)

[Lease]

I would have to agree with Beagle here.

Cutting staff and other expenses is always going to lag falling sales. Even if MPG are successful in keeping the business afloat and getting EBIT margin to 14%, there will a significant period where that margin will drop. Maybe a couple of years or so?

The other risk in cutting staff numbers is that, if you decide to cheerfully fire a quarter of your employees because sales are down by a quarter, you will then start losing all your best employees too because they will get out while they can.

I was working somewhere a few years back where morale was low. Every week there was someone with 20 years experience leaving. Cutting expenses is hard and very risky.

It's too soon to know the final outcome here but it's going to be a difficult few years for the company.

Agree. There are timing differences. I don't deny MPG are facing difficulties. But unless it goes bust, MPG will eventually find its position.

It has 50% market share. How can they get this large scale of shares if they provide bad quality products and services? Therefore I really think people are overreacting the issues and totally ignore its competitive advantages.

Plus the construction activities have picked up since 2nd half last year. The marco environment is also favourable.

[Lease]

Economics 101 - fixed vs variable & marginal costs of production.

Basically, past the inflection point, gross & net margins go through the roof.

Best example my university professor used - think of the airline or hotel business.

They work on a rather simple formula:

- at 60% to 65% load or occupancy factor, they break even

- at 65% to 80%, they start making increasing returns on their operations

- at 80% and above, they start making super profits.

Why? Fixed vs variable & marginal cost of providing the service on additional sales.

The biggest fixed cost I can think is commercial leases. But as I mentioned above, commercial leases need to be capitalised so no longer affect bottom line.

[Balance]

The biggest fixed cost I can think is commercial leases. But as I mentioned above, commercial leases need to be capitalised so no longer affect bottom line.

Head office costs, depreciation & amortisation (plants & equipment actually do wear out & need to be replaced), sales & marketing costs, insurance, interest (especially when penalties are imposed for breach of covenants) - they all have to be covered first to stay in business.

[Beagle]

The biggest fixed cost I can think is commercial leases. But as I mentioned above, commercial leases need to be capitalised so no longer affect bottom line.

The reality of this new IFRS standard if you read through a few company reports is that commercial lease expenses are ostensibly simply reclassified and I can assure you the cost still exists and very much affects the bottom line. Have a look at HLG's 2019 annual report, (possibly one of the more straightforward annual reports out there that covers this subject well enough).

Balance's analogy with hotel and airline operations is bang on the money.. Once you lose a certain amount of business and / or margin (for whatever reason) you start losing money hand over fist, that much is abundantly clear from their Australian acquisition. Anyone who wants a case study in how things turn sour need look no further than that example for further detailed evaluation.

[Lease]

The reality of this new IFRS standard if you read through a few company reports is that commercial lease expenses are ostensibly simply reclassified and I can assure you the cost still exists and very much affects the bottom line. Have a look at HLG's 2019 annual report, (possibly one of the more straightforward annual reports out there that covers this subject well enough).

Balance's analogy with hotel and airline operations is bang on the money.. Once you lose a certain amount of business and / or margin (for whatever reason) you start losing money hand over fist, that much is abundantly clear from their Australian acquisition. Anyone who wants a case study in how things turn sour need look no further than that example for further detailed evaluation.

In HLG case, IFRS 16 make them worse off-$2m extra expenses on P & L. But for MPG, it will increase EBIT by $1.7m(see interim report page 6)

[Beagle]

Most professional investors and analysts will simply reverse any change from this new accounting standard when doing their analysis.

[King1212]

So.. beagle.. would u buy MPG? 10000 shares only $2700...black n white on roulette..

[Lease]

Most professional investors and analysts will simply reverse any change from this new accounting standard when doing their analysis.

Hahahaha, Beagle, when I say MPG is better off by adopting IFRS 16, you say most professional investors and analysts will simply reverse any change from this new accounting standard. I think if MPG is worse off(like HLG), then you will say the new accounting standard can't reverse.:)

[Beagle]

So.. beagle.. would u buy MPG? 10000 shares only $2700...black n white on roulette..

Other opportunities are preferred.


Hahahaha, Beagle, when I say MPG is better off by adopting IFRS 16, you say most professional investors and analysts will simply reverse any change from this new accounting standard. I think if MPG is worse off(like HLG), then you will say the new accounting standard can't reverse.:)

These changes are dreamed up by accountancy boffins with too much time on their hands who haven't leaned how to waste it on forums like this one :lol:

[Leemsip]

Change to ifrs doesn't have any p&l effect. Just puts the lease on the balance sheet and you then expense it off as you pay rent...

[Lease]

Change to ifrs doesn't have any p&l effect. Just puts the lease on the balance sheet and you then expense it off as you pay rent...

It does have P & L effect. In case of MPG, adopting IFRS 16 increase EBIT by $1.7m.

[Beagle]

It does have P & L effect. In case of MPG, adopting IFRS 16 increase EBIT by $1.7m.

Fresh all time low...life is tough. Maybe the real impact of the IFRS change is known by people in the know. Yes increase in EBIT of $1.7M but...extract from 2019 results presentation

* The estimated impacts of IFRS 16 accounting standard changes on FY20 results were communicated in the FY19 Annual Report. The changes are expected to reduce lease costs by $7.2m, increase depreciation by $5.3m, increase interest expense by $3.0m, and reduce net profit before tax by $1.1m.


You rather "conveniently" left out the interest cost impact. See page 16 from the results presentation here http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MPG/338180/304158.pdf

Just as well most professional investors and analysts will reverse this change out in their analysis isn't it :p

Half year results presentation makes it clear on page 11 http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MPG/344825/312604.pdf that net profit before tax for the current half was $0.6m lower which impacted Eps down from 4.5 cps to 4.2 cps.

[Lease]

Fresh all time low...life is tough. Maybe the real impact of the IFRS change is known by people in the know. Yes increase in EBIT of $1.7M but...extract from 2019 results presentation


You rather "conveniently" left out the interest cost impact. See page 16 from the results presentation here http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MPG/338180/304158.pdf

Just as well most professional investors and analysts will reverse this change out in their analysis isn't it :p

Half year results presentation makes it clear on page 11 http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MPG/344825/312604.pdf that net profit before tax for the current half was $0.6m lower which impacted Eps down from 4.5 cps to 4.2 cps.

OK, mate, you are right on that IFRS. But fresh low don’t concern me, rather I’m happy to accumulate more.

[BlackPeter]

OK, mate, you are right on that IFRS. But fresh low don’t concern me, rather I’m happy to accumulate more.

Take care mate - its a dangerous world out there :); For MPG in its current situation it might be worthwhile to remember the old adage "never invest money you can't afford to loose".

[Snoopy]

Fresh low don’t concern me, rather I’m happy to accumulate more.


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

[Balance]

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!

[Beagle]

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.

[Lease]

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.:)

[Snoopy]

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

[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 :-

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.

[Arbroath]

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.

[winner69]

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.

[Beagle]

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 ?

[winner69]

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’

[winner69]

Meant to also mention I wonder if both new Board and management appointments should highlight how great they were at Fonterra

[Beagle]

Hmmmm New CFO starting late January 2020 brings a "wealth" of 17 years experience from...you guessed it, the highly "successful" Fonterror, (deliberately misspelt) https://www.nzx.com/announcements/344311 He was obviously super successful at helping resolve the financial problems with Fonterror's overseas operations so why would we doubt his ability to help solve MPG's Australian financial problems or their possible pending N.Z. issues ?

But no worries because he has a "massive" vested interest in making this company and appointment work http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MPG/345914/313890.pdf This gives me "tons" of "confidence" going forward lol

[winner69]

Hmmmm New CFO starting late January 2020 brings a "wealth" of 17 years experience from...you guessed it, the highly "successful" Fonterror, (deliberately misspelt) https://www.nzx.com/announcements/344311 He was obviously super successful at helping resolve the financial problems with Fonterror's overseas operations so why would we doubt his ability to help solve MPG's Australian financial problems or their possible pending N.Z. issues ?

But no worries because he has a "massive" vested interest in making this company and appointment work http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MPG/345914/313890.pdf This gives me "tons" of "confidence" going forward lol

Looks like he already had 2000 when he signed up

Under water on the 10,000 he’s bought since

Even more incentive to do well

But he’ll be OK when the attractive LTIs kick in eh

[winner69]

When I read this Metro thread it reminds me so much of the Pumpkin Patch thread of a few years ago

Don’t think Metro train going to crash but we kept saying that about the Patch train.

[Balance]

When I read this Metro thread it reminds me so much of the Pumpkin Patch thread of a few years ago

Don’t think Metro train going to crash but we kept saying that about the Patch train.

They really need to do a rights issue, clean out the debt so that the company can surface from the suffocating embrace of the banks.

Given the track record however of the board and management, who is going to underwrite or pump in more money?

Fletcher Building - where are you!!???

[winner69]

Hey Beagle — being a CFO of Fonterra seems a pre-requisite to being involved with Metro

The new director was ‘CFO and Director of Strategy with the Fonterra Co-operative Group from 2001 to 2007.’

Getting a bit spooky

While on the subject of Metro Directors was Peter Griffiths any good at Z

[winner69]

Economist on radio this morning saying the current building boom is head to the BUST part of boom bust cycle

Something to do with migration numbers being a lot lower than what Stats NZ were guessing previously.

[Lease]

Economist on radio this morning saying the current building boom is head to the BUST part of boom bust cycle

Something to do with migration numbers being a lot lower than what Stats NZ were guessing previously.

Very strange FBU has performed strongly lately, don't understand MPG..................................

[Arbroath]

Even STU are holding in there despite a terrible announcement the other day....shows the benefit of de-risking the balance sheet.

NZ residential consents though still on fire in year to December at 37,538 a post 1970's record and Auckland at 15,154 an outright record. Surely MPG can keep paying off debt and get the balance sheet under control next 12-18 months....

[Beagle]

Markets doing incredibly well in the circumstances and close to all time high's but MPG just hit yet another fresh all time low at 24.5 cents.

I would have thought with supply chain issues developers importing cheap glass from China would be struggling and turning to good old made in New Zealand instead but apparently not.

[winner69]

Markets doing incredibly well in the circumstances and close to all time high's but MPG just hit yet another fresh all time low at 24.5 cents.

I would have thought with supply chain issues developers importing cheap glass from China would be struggling and turning to good old made in New Zealand instead but apparently not.

Float glass no longer made in New Zealand

There’s one plant in Australia and thats a dog ......CSR hocked Viridian off to Crescent Capital last year ...so in private equity hands

[steveb]

pity they can't use recycled glass

[Arbroath]

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!

Well 8.25% of the company changed hands today and I'd say Schroders is out entirely...question is who bought the large blocks that represent almost 8% of the stock....

[bottomfeeder]

And the sp firmed a little, so I feel its an upside. Surely they have got their **** together by now, for the Australian ops to become profitable.

[steveb]

Well 8.25% of the company changed hands today and I'd say Schroders is out entirely...question is who bought the large blocks that represent almost 8% of the stock....
Could it be the start of a takeover,Fletchers have plenty of cash in the warchest

[bottomfeeder]

It makes sense that its liable to takeover. Fits in with any construction industry participant.

[dubya]

Well 8.25% of the company changed hands today and I'd say Schroders is out entirely...question is who bought the large blocks that represent almost 8% of the stock....

https://www.nzx.com/announcements/348531

Entities associated with Sir Peter Masfen.

Article fron the NZ Herald:

Businessman and philanthropist a long-term investor who buys when things are tough

• Companion of the New Zealand Order of Merit for services to business and philanthropy.

One of New Zealand's most shrewd businessmen, Peter Masfen, reckons a trick is to always have reserves up your sleeve and invest when no one else wants to.

"I think my best investments have been at counter-cyclical times ... that's the benefit of always having capacity to pick up those opportunities," says Masfen, who today has been appointed a companion of the New Zealand Order of Merit for services to business and philanthropy.

"I'm a long-term investor, I don't trade things. I invest for the long term and I think it's fair to say that the best investments very often are made when things are tough and probably when no one else wants them, those tend to have the ability to show the best return if you stick with them long enough and are able to apply good business direction and principles to them," he says.

The former top-level rower, who represented New Zealand at the Tokyo Olympics in 1964 and the world championships in 1966, still has an active role in his family's business interests, which are estimated to be worth more than $400 million.

The family's Masfen Securities appears on many listed company registers and takes big stakes in NZX-listed businesses.

Their property investments include the 12,000ha Mt Linton Station in Southland as well as many commercial buildings spread throughout Auckland including in Newmarket, Parnell and Mission Bay.

The 74-year-old is perhaps best known for building up Montana Wines, which became New Zealand's largest wine producer, exporter and vineyard owner during his three decades on its board.

It also became a takeover target and in 2001 was bought by Allied Domecq, now part of French giant Pernod Ricard. The buyout was contested and Masfen says achieving an equal price for shareholders during it was one of the highlights of his career. The former Montana chairman wasn't interested in wine before he got involved with the business and says he isn't a "wine connoisseur".

Disc: Bought back in today @ 25c

[RupertBear]

https://www.nzx.com/announcements/348531

Entities associated with Sir Peter Masfen.

Article fron the NZ Herald:

Businessman and philanthropist a long-term investor who buys when things are tough

• Companion of the New Zealand Order of Merit for services to business and philanthropy.

One of New Zealand's most shrewd businessmen, Peter Masfen, reckons a trick is to always have reserves up your sleeve and invest when no one else wants to.

"I think my best investments have been at counter-cyclical times ... that's the benefit of always having capacity to pick up those opportunities," says Masfen, who today has been appointed a companion of the New Zealand Order of Merit for services to business and philanthropy.

"I'm a long-term investor, I don't trade things. I invest for the long term and I think it's fair to say that the best investments very often are made when things are tough and probably when no one else wants them, those tend to have the ability to show the best return if you stick with them long enough and are able to apply good business direction and principles to them," he says.

The former top-level rower, who represented New Zealand at the Tokyo Olympics in 1964 and the world championships in 1966, still has an active role in his family's business interests, which are estimated to be worth more than $400 million.

The family's Masfen Securities appears on many listed company registers and takes big stakes in NZX-listed businesses.

Their property investments include the 12,000ha Mt Linton Station in Southland as well as many commercial buildings spread throughout Auckland including in Newmarket, Parnell and Mission Bay.

The 74-year-old is perhaps best known for building up Montana Wines, which became New Zealand's largest wine producer, exporter and vineyard owner during his three decades on its board.

It also became a takeover target and in 2001 was bought by Allied Domecq, now part of French giant Pernod Ricard. The buyout was contested and Masfen says achieving an equal price for shareholders during it was one of the highlights of his career. The former Montana chairman wasn't interested in wine before he got involved with the business and says he isn't a "wine connoisseur".

Disc: Bought back in today @ 25c

thanks for posting :)

[Lease]

hope the billionaire can bring us some luck.

[mshierlaw]

Disc: Bought back in today @ 25c

MPG is my worst loss. Learnt heaps from this loss having previously ignored the ongoing advise from more experienced members here, "never buy a stock in a down trend".

I don't see any reversal of the current downtrend in the chart below. All the best & after all the downtrend has to reverse at some point.

11036

[bigbruce]

hope the billionaire can bring us some luck.

Not a billionaire, but struggles on $400 million

Adding to his holding of 8.8million, Have a feeling obtained with float.
Montana spun out of Corporate Investments, which booked the largest corporate loss at that time,around $800 million early 1990's, Shares tanked to around .22c. So a few parallels with MPG

[carrom74]

Not a billionaire, but struggles on $400 million

Adding to his holding of 8.8million, Have a feeling obtained with float.
Montana spun out of Corporate Investments, which booked the largest corporate loss at that time,around $800 million early 1990's, Shares tanked to around .22c. So a few parallels with MPG
https://www.scoop.co.nz/stories/BU1303/S00777/masfen-long-term-pacific-edge-backer-sells-10-mln-shares.htm?from-mobile=bottom-link-01

But ... he did make money in a company like pacific edge... also has few parallels with MPG...

[Leftfield]

Disc: Bought back in today @ 25c

Gutsy.... good luck with that..... on today's closing you are already in the green. Long may it last.

I'll be happy to watch from the sidelines.

[couta1]

MPG is my worst loss. Learnt heaps from this loss having previously ignored the ongoing advise from more experienced members here, "never buy a stock in a down trend".

I don't see any reversal of the current downtrend in the chart below. All the best & after all the downtrend has to reverse at some point.

11036 Buying a stock in a downtrend is not a problem if it's the right stock, but not this one.

[RupertBear]

MPG is my worst loss. Learnt heaps from this loss having previously ignored the ongoing advise from more experienced members here, "never buy a stock in a down trend".

I don't see any reversal of the current downtrend in the chart below. All the best & after all the downtrend has to reverse at some point.

11036

Currently my worst share as well. Bought on the downtrend and just watched it go down :rolleyes: silly Bear. Have learned from it as well and wont repeat that mistake ;) think our only hope is a TakeOver offer, but I hear hope isnt a good investment strategy so we might be stuffed for a while longer..:(

[dubya]

Gutsy.... good luck with that..... on today's closing you are already in the green. Long may it last.

I'll be happy to watch from the sidelines.


Buying a stock in a downtrend is not a problem if it's the right stock, but not this one.


Currently my worst share as well. Bought on the downtrend and just watched it go down :rolleyes: silly Bear. Have learned from it as well and wont repeat that mistake ;) think our only hope is a TakeOver offer, but I hear hope isnt a good investment strategy so we might be stuffed for a while longer..:(

MPG has been my absolute worst performer too :mad ;:. I wish I had sold out at about (from memory) $1.20 when a contributor to this forum who I respected (hardt) said he had sold, but I eventually got rid of them at a much much lower price than that!!

It was only a small purchase yesterday and a very small portfolio percentage, so I won't be losing any sleep if it doesn't do well. I hope not, and I could be repeating past mistakes, but time will tell I guess.

[moimoi]

Pile of debt that either needs to be refinanced or sheet-ed home to equity holders via cap raise

[Arbroath]

Pile of debt that either needs to be refinanced or sheet-ed home to equity holders via cap raise

Do you mean the debt pile that they've reduced by 30% in only 18 months from the businesses free cash flow? Agree they should've raised capital but that boat has sailed. I think they just need another 18 months of no dividends and the debt should be below $50m which is fine as long as the ebitda stays above $30m

[BlackPeter]

So - how good are analyst consensus predictions?

MPG had in January 2019 a (peak) share price of $0.56 and analysts (consensus) forecast for January 2020 was $0.47; The shareprice in January 2020 actually peaked at $0.28;

Analyst consensus predicted the SP to drop and this was correct, however they significantly underestimated the actual drop.

Looking into the consensus buy recommendation - it was in January 2019 a "Hold"(4.2/10) - i.e. analysts said that the share might slightly underperform the NZX (but no reason to Sell). This was not quite right, because MPG underperformed over the last 12 months the NZX50 by a woeful 70%.

Both analyst consensus prediction and recommendation have been ways too optimistic to be useful.

I am doing this exercise as well with other NZX listed stocks - the overview is here:
https://www.sharetrader.co.nz/showthread.php?11721-How-good-are-the-forecasts-of-stockmarket-analysts

9 stocks checked so far (checking for each consensus and buy recommendation);
Consensus shareprice forecasts correct: 1/9; analyst hitrate: 11%
Consensus recommendation vs NZX50 correct: 2/9; analyst hitrate: 22%

PS: current analyst consensus for MPG is a 41 cents share price in February 2021 combined with a recommendation of "HOLD" . Lets hope for holders sake that the analysts did learn from their mistakes :):

[bottomfeeder]

Analysts have no better crystal ball than the rest of us provided you are reasonably informed about the news and financial information of the stock you are following. They pretend to have some insider knowledge of sorts (which would be strictly illegal) because they keep in touch with company officers. Analysts are for the Mum and Dad type investors who don't have the time or wherewithal to carry out their own research. After all their catchphrase is not timing the market but time in the market. This cliche is only an excuse for getting it wrong in the short term. Investing is a bit more complex than that.

[dubya]

https://www.nzx.com/announcements/349072
On track to meet guidance and $15 mil paid off debt.
They seem to be getting themselves sorted out.
Surely....... finally on the right track.???!!!!
I certainly hope so. I guess time will tell.

[Lease]

https://www.nzx.com/announcements/349072
On track to meet guidance and $15 mil paid off debt.
They seem to be getting themselves sorted out.
Surely....... finally on the right track.???!!!!
I certainly hope so. I guess time will tell.

Well, it should be. 31 March is only one month away. They have pretty much known how they have performed in 2nd half year.

Good news.

[Lease]

1st half EBIT was $14.60M. Full year EBIT is expected between $21m and 24m. Take the lowest 21M, then 2nd half EBIT will be $6.4M. Its EPS is around 1.8C.

1st half EPS 4.2C, 2nd half EPS 1.8C, thus full year EPS 6C, indicate forward PE is 4.5.

[winner69]

1st half EBIT was $14.60M. Full year EBIT is expected between $21m and 24m. Take the lowest 21M, then 2nd half EBIT will be $6.4M. Its EPS is around 1.8C.

1st half EPS 4.2C, 2nd half EPS 1.8C, thus full year EPS 6C, indicate forward PE is 4.5.

But both H2 and FY still less than last year (normalised)

Suppose we still need to believe the story they're putting out.

Dirt cheap eh

Metro do seem one of those unlucky companies and has some unlucky Directors - hope the luck changes or else we might read that glass shipments have been seriously delayed.

[Beagle]

1st half EBIT was $14.60M. Full year EBIT is expected between $21m and 24m. Take the lowest 21M, then 2nd half EBIT will be $6.4M. Its EPS is around 1.8C.

1st half EPS 4.2C, 2nd half EPS 1.8C, thus full year EPS 6C, indicate forward PE is 4.5.

Market is always forward looking and in my opinion is right to be dead worried about what the earnings will be in FY21 and beyond for all the reasons previously stated on this thread by myself and others.

[Lease]

Market is always forward looking and in my opinion is right to be dead worried about what the earnings will be in FY21 and beyond for all the reasons previously stated on this thread by myself and others.

Yes, so MPG is up 10% today indicating its prospect.

[Lease]

But both H2 and FY still less than last year (normalised)

Suppose we still need to believe the story they're putting out.

Dirt cheap eh

Metro do seem one of those unlucky companies and has some unlucky Directors - hope the luck changes or else we might read that glass shipments have been seriously delayed.

Last full year EBIT was only $15.6M.

Normalised you mean before assets written-off and other one-off items? But this year there are still some written-off and one-off aussie restructure cost. So it's not necessary less than last year.

[winner69]

Last full year EBIT was only $15.6M.

Normalised you mean before assets written-off and other one-off items? But this year there are still some written-off and one-off aussie restructure cost. So it's not necessary less than last year.

F19 EBIT before significant items was $25.2m (down from $30m the year before that)

Now guidance is $21m and $24m. This excludes IFRS and Restructure so is the comparable EBIT before significant items ..comparing apples to apples.

I see that as EBIT before extraordinary items (Metros preferred profit measure) being down on last year (maybe by as much as 17% which is about what it was down in F19 v F18

The new man might be fixing things ....Masefield will be hoping so.

[dubya]

CEO, CFO and two directors accumulating. Share price seems to be holding too on an otherwise bleak day.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MPG/349269/317971.pdf

[winner69]

Last time I had some Metro shares were the ones i sold for $2 odd

Thought it a good time to have another go ...so got some at 26/27 the last few days. Not betting the farm but enough to be satisfied when the share price doubles or better

I reckon winner is onto a winner here

[Scrunch]

Last time I had some Metro shares were the ones i sold for $2 odd

Thought it a good time to have another go ...so got some at 26/27 the last few days. Not betting the farm but enough to be satisfied when the share price doubles or better

I reckon winner is onto a winner here

From the direct broking site the 30 day MA is just over 26c. The 100 day MA is just under 30c. If MPG happens to trade at 30c (which is only 1c away) its going to be over both the 30 and 100 day MA's.

Does anyone have a quick way of seeing what other NZ shares are still above both MA's? ATM still is but I'm wondering how many others there are.

[janner]

From the direct broking site the 30 day MA is just over 26c. The 100 day MA is just under 30c. If MPG happens to trade at 30c (which is only 1c away) its going to be over both the 30 and 100 day MA's.

Does anyone have a quick way of seeing what other NZ shares are still above both MA's? ATM still is but I'm wondering how many others there are.

There is no quick way... Apart from the information available to us peasants..
Just your Gutometer.. Then you can bathe or swim...
Hope this helps....

[BlackPeter]

From the direct broking site the 30 day MA is just over 26c. The 100 day MA is just under 30c. If MPG happens to trade at 30c (which is only 1c away) its going to be over both the 30 and 100 day MA's.

Does anyone have a quick way of seeing what other NZ shares are still above both MA's? ATM still is but I'm wondering how many others there are.

BBOZ.AX and BEAR.AX are both above all relevant MA's and in an uptrend - but I guess you didn't wanted to know that, did you ? :):

[Scrunch]

BBOZ.AX and BEAR.AX are both above all relevant MA's and in an uptrend - but I guess you didn't wanted to know that, did you ? :):

Not especially but it's a great reminder that these hedging alternatives exist on the asx. As Couta said on another thread there's opportunities in both a bull and bear market.

[Jaa]

Mark Eglinton, former CEO of Tenon between 2005-09 and an ex Fletchers executive sounds like a good addition to the board. Vote of confidence.

[carrom74]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12325217

Not sure whats the content is.
But looks promising for MPG.(from the headline)

[winner69]

Mark Eglinton, former CEO of Tenon between 2005-09 and an ex Fletchers executive sounds like a good addition to the board. Vote of confidence.

Yes - the success of those two businesses might have rubbed off on him.

Sorry - had to say that

[James108]

I would imagine most of the govt stimulus in the sector will be for transport infrastructure which metro glass have nothing to do with unfortunately.

[silverblizzard888]

I would imagine most of the govt stimulus in the sector will be for transport infrastructure which metro glass have nothing to do with unfortunately.

Lets just build everything out of glass to show how transparent they can make this sector!

[flyer]

Results to be released next Friday, looking forward to some sort of recovery.

[DazRaz]

Judging by the share price rise today and Friday, I'd say that people are expecting a positive result.

[mikeybycrikey]

Hmmm. I see a “please explain” notice in MPG’s future. Up 33% today on no news, unless I’ve missed something.

[Filthy]

low volume....

[sb9]

low volume....

Yeah, just over $100k in value, chump change....

[mikeybycrikey]

Yeah, just over $100k in value, chump change....

Today’s “low volume movement” seems to be the highest volume for almost 4 weeks. Since 13 May.

[winner69]

Announcement that announcement will be soon was good news ....this time didn't come with the rider that. '..we expect profit to be down'

[Leemsip]

Announcement that announcement will be soon was good news ....this time didn't come with the rider that. '..we expect profit to be down'

Back up to my buy in price! Who said value investing is dead (might have been balance)?

Should be a dead boring update which provides some certainty and we can get out of the 20 something cents per share territory.

Debt reduction hopefully on schedule ($15m was the target from memory) and moderately positive outlook with a huge list of caveats....

[winner69]

Pretty solid result in the circumstances

Outlook not that good in construction sector but they’ll keep busy

Metro never be this cheap to buy again if anybody wants to acquire them

Management might even get together and take them over?

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MPG/354919/324770.pdf

[BlackPeter]

Pretty solid result in the circumstances

Outlook not that good in construction sector but they’ll keep busy

Metro never be this cheap to buy again if anybody wants to acquire them

Management might even get together and take them over?

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MPG/354919/324770.pdf


While the implications of the COVID-19 pandemic on construction activity in New Zealand and Australia are uncertain,
Metroglass expects a significant decline in economic activity for at least the next 12 to 24 months. The base case
estimate for 9 month lagged NZ residential consents is for a marginal fall in FY21 and a c. 20% decline in FY22, before
a c. 5% recovery in FY23. A 20% decline in detached residential housing starts in our key Australian markets in FY21
(non-lagged) is also expected, followed by a 9% recovery in FY22.

Probably the most sobering sector assessment I have seen so far, but hey - they might well be right. What does surprise me is that they don't seem to expect any structural changes to the building sector. I am wondering what the increase of tiny houses, prefab houses and similar might do to their business? As well, what its the story with this new big competitor who must be coming online soon?

[mikeybycrikey]

I like how they say that dividends are cancelled but it's now because of the bank covenants, and therefore out of the company's control.

Otherwise nothing too unexpected but the future revenue projections are pretty startling.

[bottomfeeder]

Australia had to come right sooner or later. Dividends dont worry me, profits are what count.
Debt reduction equivalent to 8 cents per share. Under priced at 22 cents in my opinion.

[Lease]

MPG have performed marvelously well. Unfortunately the outlook of NZ construction is bad thus we can't expect SP will recover any time soon.

[steveb]

Av to good results just about confirms the recovery,especially with Aus becoming an asset instead of a liability,valued at only $40m I can't see management staking a takeover yet given the current level of debt,but a SPP could change everything,interesting year coming up possibly or just a steady as it goes year,time will tell.

[Leemsip]

Just listened to the earning call. Loved Trevor (who owns 1% of the company) talking about the bloated wage bill increasing as the company slides into the toilet.

Was a little disappointed with the insight of the preso. No forecasts and thoughts about the 20% reduction in construction on company revenues and margins.

Debt reduction is great, still a long way to go. Holding my small parcel of shares and will see what happens

[Davexl]

Finally wrote down their ridiculously high Goodwill by $86.5m, about a year too late IMO but signs of sanity emerging. Next to face the enormous market uncertainty, predictions are only guesses, same for every company right now...

[winner69]

Finally wrote down their ridiculously high Goodwill by $86.5m, about a year too late IMO but signs of sanity emerging. Next to face the enormous market uncertainty, predictions are only guesses, same for every company right now...

Even the three guys who gratefully took the $350m private equity offered them for Metro years ago thought it was ridiculous. That’s how far back the ‘goodwill’ goes.

[Louloubell]

Regular communication is something most companies can do better, certainly in uncertain times. So, I appreciate today's announcement.

[Leftfield]

MPG have performed marvelously well. Unfortunately the outlook of NZ construction is bad thus we can't expect SP will recover any time soon.


Av to good results just about confirms the recovery, especially with Aus becoming an asset instead of a liability, valued at only $40m ....


Just listened to the earning call. ... No forecasts and thoughts about the 20% reduction in construction on company revenues and margins.

Debt reduction is great, still a long way to go. Holding my small parcel of shares and will see what happens

This from NZSA for their members FYI.

Revenue was down 5% at $254.9 million, EBIT was ($69.5 million) including a $86.5 million impairment in
New Zealand goodwill and $4.6 million NSW Australia restructuring costs. This compares to an EBIT of $15.7 million in FY19. The Net Loss after Tax was $77.9 million compared to a NPAT of $5 million in FY19.

We note that Debt to Equity is 106% compared to 56% in FY19.


Lots of warnings here.... Take care holders. ( Disc - don't hold)

[Ferg]

Do we know if the fall in the NZ Commercial revenues from $52m to $40m per the 2020 AR was a planned event? i.e. are MPG wanting to get out of this sector? If so, are they switching off the tap (so to speak), or are they letting this decline gradually by not pursuing sales in this sector? Or is this decline a consequence of a supposedly soggy construction sector? I say supposedly because 3 of the 4 reported quarters saw an annual increase in GDP for Construction, for an overall positive value for the 12 months ended March.

[winner69]

Ferg, you answered correctly. They said this in half year profit announcement

CEO Simon Mander said: “The group’s FY20 results reflect a solid result in challenging market conditions. In New Zealand, we maintained consistent revenue in our key residential segment but had a decline in commercial glazing revenue as we reduced our risk exposure on large scale projects. In Australia, we have begun to make clear progress on our turnaround plan, growing revenues and delivering a positive EBITDA result for the second half.”

[Ferg]

Thanks for that. I should have read the interim report...!

One would hope this makes sense. I expect the margins on commercial jobs are lower than residential so we should see an improvement in GP% - and I would also expect a number of other costs to reduce (e.g. sales efforts and/or subbies etc). The question is have the fixed costs reduced by more than the lost gross margin? I would also expect to see an increase in the inventory turnover which would free more cash.

What is disappointing is the employees sent home get full pay during COVID (not 80% like others), the bankers get their cash back faster without covenant breaches but what do the shareholders get? Maybe a dividend in fiscal 2022, or calendar 2022. Disappointing IMO. And I struggle to understand the levels of salaries for a simple organisation.....

edit:typo


Ferg, you answered correctly. They said this in half year profit announcement

CEO Simon Mander said: “The group’s FY20 results reflect a solid result in challenging market conditions. In New Zealand, we maintained consistent revenue in our key residential segment but had a decline in commercial glazing revenue as we reduced our risk exposure on large scale projects. In Australia, we have begun to make clear progress on our turnaround plan, growing revenues and delivering a positive EBITDA result for the second half.”

[nztx]

Even the three guys who gratefully took the $350m private equity offered them for Metro years ago thought it was ridiculous. That’s how far back the ‘goodwill’ goes.

I always smile when I see the $170.665 Million odd Deficit (Negative Reserve) - Group Reorganisation Reserve sitting in the MPG Balance Sheet

It must have been some fairly good reorganisation ;)

[winner69]

What is disappointing is the employees sent home get full pay during COVID (not 80% like others), the bankers get their cash back faster without covenant breaches but what do the shareholders get? Maybe a dividend in fiscal 2022, or calendar 2022. Disappointing IMO. And I struggle to understand the levels of salaries for a simple organisation.....

edit:typo

Jeez, that’s a bit cruel

One could say that corporate welfare (eg subsidy) went indirectly to shareholders ....without that corporate welfare shareholders would have had to pay the wages ...or sack the staff

The corporate welfare might have saved the company from going bust and a complete wipe out for shareholders

Be grateful you’ve still got glaziers etc working for you.

[Ferg]

Not trying to be cruel at all. Allow me to explain.

What I have observed elsewhere is employees sent home who cannot work from home got 80% of their pay. The employees of businesses I deal with were a) happy to get 80% knowing their personal spend had reduced, b) happy to know the businesses were doing this to survive and c) happy to know they had jobs to come back to given the impending surge in unemployment stats. {I believe c was the primary factor whilst a was accepted through gritted teeth} So I was surprised to see MPG pay 100% thinking 80% was the norm everywhere (else) I looked. Good on them for being a good corporate citizen but my point was that it appears shareholders are their lowest priority. Given their historic issues with staff retention, maybe they were doing this to turn around the lack of loyalty and tenure from a good portion of their workforce....maybe such tactics will pay off in future in better employee/management relations.....but I'm speculating.

After realising I hadn't looked at the IR I also went back and read the posts for MPG for the past 2-3 years. What a train wreck....but it appears they are making the hard decisions that needed to be made (i.e. suspend dividends to reduce debt & write off goodwill) but they are yet to make a decision regarding Australia. If (and that's a big IF) they can turn it around then good on them. But it reminds me of the old joke that Australians have about Kiwis : "how do you get a Kiwi into a small business? Put them into a large business and leave them to it."

[Traderx]

Have just today bought into MPG (very small qty). Market cap c.$40m. NTA c.$20m. Seems to be reasonably cash generative (post covid). Could be sustainable NPAT of up to c.$20m pa with some disciplined cost out (unproven). Good products and I'm less bearish than some on outlook for construction and building sector. IMHO will be primary beneficiary of low interest rates.

I see this as a 100% in 12-24 months type opportunity, and hopefully a divi resumption at some point.

NB not a ramping post - as I say my exposure is very small.

Cheers

[Traderx]

https://www.nzx.com/announcements/358415

Update out
Debt down and "Trading results in June and July were pleasing"

But are going to continue to pay down debt rather than resume divis in short term (good move imo)

Disc - small pos

[Getty]

The downside is they are going to re brand the company.

The new name is Metro Underperformance Glass.
The new code is MUG.

Dr JPG.

I specify CERTIFIED concrete to make CRAZY paving.

[teabag]

Agree with you Traderx, a good long term hold. I bought into MPG some years ago in the 80's and sold out in the 60's, just before the big drop (no prescience on my part). But they seem to have stabilised their act and gone some way with their debt reduction. Most of their intangibles have now been written off, their aussie operation losses have been staunched, and looking ok (perhaps?) and their NZ ops producing a reliable earnings stream. Excluding the intangible writeoffs, which should be greatly reduced in future, an NPAT of around $20m pa is definitely on, and that's an EPS of 11 to 12 cents per share.

disc: have just bought a small holding

[Leemsip]

Ive bought another parcel on the latest debt reduction news. Tempted to go large....
Love the MUG reference :D

[Louloubell]

Am a long holder and long time sufferer. I will not post my entry price as I will lose the little self respect and credibility left.

I stayed in the free fall all the way down and averaged down when the sp was around 18c. How not to do things!!!

I like the approach atm: pay down debt, look after staff, don't over promise (and under deliver), reduce exposure to the bigger commercial sector, and eliminate all the book keeping fluffies and nonsense.

I will continue to hold. See light at the end of the tunnel for the sp when debt is low and divvies are being paid again.

[Davexl]

This from NZSA for their members FYI.

Revenue was down 5% at $254.9 million, EBIT was ($69.5 million) including a $86.5 million impairment in
New Zealand goodwill and $4.6 million NSW Australia restructuring costs. This compares to an EBIT of $15.7 million in FY19. The Net Loss after Tax was $77.9 million compared to a NPAT of $5 million in FY19.

We note that Debt to Equity is 106% compared to 56% in FY19.


Lots of warnings here.... Take care holders. ( Disc - don't hold)



Can someone explain to me how if they've been paying Debt down so successfully, how come Debt to Equity is UP vs 2019?
Is this something todo with Goodwill writedown? Thanks

[winner69]

Can someone explain to me how if they've been paying Debt down so successfully, how come Debt to Equity is UP vs 2019?
Is this something todo with Goodwill writedown? Thanks

You should do your own looking up mate

Yes Equity was down from $157m to $77m while debt was only down $8m in F20

Y

[traineeinvestor]

Can someone explain to me how if they've been paying Debt down so successfully, how come Debt to Equity is UP vs 2019?
Is this something todo with Goodwill writedown? Thanks

Correct. Net debt fell by about 16.5 million but debt/equity went up because the write down in intangibles was greater than the amount of debt repaid.

Given the role of intangibles in MPG's balance sheet, I'd be looking at cash flow, interest cover and EBITDA/debt ratios before I looked at debt/equity/

[Davexl]

Am a long holder and long time sufferer. I will not post my entry price as I will lose the little self respect and credibility left.

I stayed in the free fall all the way down and averaged down when the sp was around 18c. How not to do things!!!

I like the approach atm: pay down debt, look after staff, don't over promise (and under deliver), reduce exposure to the bigger commercial sector, and eliminate all the book keeping fluffies and nonsense.

I will continue to hold. See light at the end of the tunnel for the sp when debt is low and divvies are being paid again.


Got severely burned by this stock doing almost identical things as you have done Louloubell, instead of cutting my losses much earlier. Lesson Learned.
Even seriously thought about starting a class action lawsuit with the money involved and knowing all the shareholders likely to be affected.

Serious issues with Board & management until Simon Mander started 'very slowly' turning the ship around. Then finally the goodwill writedown.
My heart goes out to people like yourself who have suffered through this debacle - You are definately not alone. Good luck with being patient...

[Davexl]

Correct. Net debt fell by about 16.5 million but debt/equity went up because the write down in intangibles was greater than the amount of debt repaid.

Given the role of intangibles in MPG's balance sheet, I'd be looking at cash flow, interest cover and EBITDA/debt ratios before I looked at debt/equity/

Thanks for that. Wondering if 'looking thru' the Goodwill writedown, this stock may be a turnaround opportunity. Peter Masfen seems to think so...

Quote Originally Posted by *Arbroath* View Post <https://www.sharetrader.co.nz/showthread.php?p=791712#post791712>
(https://www.sharetrader.co.nz/showthread.php?p=791712#post791712)
Well 8.25% of the company changed hands today and I'd say Schroders is out entirely...question is who bought the large blocks that represent almost 8% of the stock....
https://www.nzx.com/announcements/348531

Entities associated with Sir Peter Masfen.

Article from the NZ Herald:

Businessman and philanthropist a long-term investor who buys when things are tough

• Companion of the New Zealand Order of Merit for services to business and philanthropy.
One of New Zealand's most shrewd businessmen, Peter Masfen, reckons a trick is to always have reserves up your sleeve and invest when no one else wants to.

"I think my best investments have been at counter-cyclical times ... that's the benefit of always having capacity to pick up those opportunities," says Masfen, who today has been appointed a companion of the New Zealand Order of Merit for services to business and philanthropy.

"I'm a long-term investor, I don't trade things. I invest for the long term and I think it's fair to say that the best investments very often are made when things are tough and probably when no one else wants them, those tend to have the ability to show the best return if you stick with them long enough and are able to apply good business direction and principles to them," he says.

The former top-level rower, who represented New Zealand at the Tokyo Olympics in 1964 and the world championships in 1966, still has an active role in his family's business interests, which are estimated to be worth more than $400 million.

The family's Masfen Securities appears on many listed company registers and takes big stakes in NZX-listed businesses.

Their property investments include the 12,000ha Mt Linton Station in Southland as well as many commercial buildings spread throughout Auckland including in Newmarket, Parnell and Mission Bay.

The 74-year-old is perhaps best known for building up Montana Wines, which became New Zealand's largest wine producer, exporter and vineyard owner during his three decades on its board.

It also became a takeover target and in 2001 was bought by Allied Domecq, now part of French giant Pernod Ricard. The buyout was contested and Masfen says achieving an equal price for shareholders during it was one of the highlights of his career. The former Montana chairman wasn't interested in wine before he got involved with the business and says he isn't a "wine connoisseur".

Disc: Bought back in today @ 25c

[bottomfeeder]

Larger volumes today, and price moving, perhaps FBU, is making a move.

[Louloubell]

Going up, but meaningless IMHO, as the volume is insignificant.

[Arbroath]

Really? The offer for 500k at 24 got taken out yesterday and the volume is only light today because there are no real sellers

[Scrunch]

Really? The offer for 500k at 24 got taken out yesterday and the volume is only light today because there are no real sellers

And not that many buyers either that have joined the queue rather than accepting the sell offer. 23.5c, 24.0c and 24.5c cumulatively had a buy depth of 182k (or $44k).

[Ferg]

And not that many buyers either that have joined the queue rather than accepting the sell offer. 23.5c, 24.0c and 24.5c cumulatively had a buy depth of 182k (or $44k).

This might give a bit more insight into buyers vs sellers:
https://imgur.com/y0T7rND

In summary there is support at 22.5c which is -10% of latest SP of 664k shares (cum.), being 65% of all bids. Conversely +10% of the SP sees offers of 84k shares (cum.) being 26% of all shares on offer. All buyers outweigh all sellers by almost 8:1.

[Louloubell]

I never thought that I would see the day that the trend is my friend and it would relate to Metro. 😜

[flyer]

I never thought that I would see the day that the trend is my friend and it would relate to Metro. 

Please dont jinx it, I need it to get over 30c - lol.

[Leemsip]

Please dont jinx it, I need it to get over 30c - lol.

Im investing in MPG the last few weeks with buy-ins from $23- $26.5c. Doesnt take much to move the share price, one of my purchases moved it up a cent yesterday. Incredibly thinly traded.
50c by Christmas lads, hold steady:)

Wrote to the company this week as per below and hopefully the exec will step up in the Nov report back.
------------------------------------------------------------
I am an investor with Metroglass and have been surprised and displeased at the current low share price despite what I consider to be:


Ongoing solid results
A really good plan to paydown debt as quickly as possible and following through with this plan
Write down of the crap on the balance sheet
A somewhat convincing story in your Oz business.
One of the lowest price/earnings or price/ cash earnings multiples on the NZX


To a great extent, in my humble opinion, the price/earnings multiple of a business reflects the narrative of the business. We only have to look at Tesla to know this is true, best propaganda, press relations etc in the world, price to earnings multiple of 1000. Taking this then as being at least somewhat true, the Metroglass narrative is one of the worst of any public listed business in NZ.

This would be easy for the company to change, starting with the Sept half year report.

MPG need to directly answer key concerns


Australian lockdown and a decent forecast for this side of the business
Potential for less residential construction in NZ
Talk directly to competition. There was some mention of a strong new competitor entering the scene a year or so back, whats happened here?
Debt reduction. Forecast debt a year from now and 2 years from now. Other releases have been pure backward looking.


MPG need to start getting a positive narrative out:


Start paying out 1c per share dividend right now. I think this only costs about $2m per year so no biggie for the company but will be a 4% cash return for shareholders. Signal future dividend increases and exactly what situation these will occur and when expected.
The level of ownership amongst the exec shows no faith in the company. The CFO owns $2k odd of shares, gotta be kidding me!! Management need to show some faith and get invested this month. If this doesn’t happen then why would anyone invest?
Narrative should talk more about the size and scale of the company. Market share and stability of this is important.
Start talking to Jarden and whoever else and get a better rating for the company.


Looking forward to you scraping this company off the floor and up to 50c per share. Put some effort in!

-------------------------------------------------------------------------------

[bullfrog]

Great summary, announcements regarding significant glazing contracts would also build confidence.

[Louloubell]

Beautiful Leemsip!!

[Arbroath]

Beautiful Leemsip!!

Another new recent high today at 28c. First half results due in 6-7 weeks time should be the catalyst to cement the turnaround

[Leemsip]

Another new recent high today at 28c. First half results due in 6-7 weeks time should be the catalyst to cement the turnaround

This share is my biggest holding now.

Im thinking this company is a prime candidate for a private equity takeover, then lever it up with debt and IPO it in a couple years. :mellow:

[Leemsip]

checking NZX everyday to see if the CFO has bought shares (as instructed_. Goddamn it, he is holding out. Probably in the period where this isnt possible now as Sept half year results are due soon.

[winner69]

checking NZX everyday to see if the CFO has bought shares (as instructed_. Goddamn it, he is holding out. Probably in the period where this isnt possible now as Sept half year results are due soon.

Was he meant to be buying or something

Has not too many shares but heaps of options.

[Louloubell]

Can't believe that we are talking about MPG, but it keeps tracking in the right direction.

But all on pretty low volumes.

[Louloubell]

Just talking to myself😜 Go Metro, keep up the good work.

[RupertBear]

Just talking to myself Go Metro, keep up the good work.

I hear ya Louloubell! Keep going up Metro and I will ALMOST get my money back :D

[winner69]

Just talking to myself�� Go Metro, keep up the good work.

No harm in talking to yourself ...especially as it’s happy talk. :t_up:

Probably Metro has beaten everybody else into submission and most will never be interested ever again.

Plenty of building going on ...metro just have to concentrate on the basics and do that well.

[DazRaz]

I hear ya Louloubell! Keep going up Metro and I will ALMOST get my money back :D

I'm up 63%. Took advantage of the low price when there was evidence of them getting their debt under control.

[RupertBear]

I'm up 63%. Took advantage of the low price when there was evidence of them getting their debt under control.

:eek2: OMG!! Well done DazRaz!! I have been a long suffering holder for longer than I wish to remember :( I have managed to get my average buy in down significantly by topping up when it was down around 0.20 but I am still drowning, gulp :crying: Have learned from my mistakes so thats the good news :)

[Panda-NZ-]

The numbers for this one were actually decent for a long time, it's easy to make a mistake.

Many companies overstate goodwill and it should really be changed in the nz accounting standards.

[janner]

I'm up 63%. Took advantage of the low price when there was evidence of them getting their debt under control.

Well done.

This is a company that I have followed for some time, and held.
Bought April 2017 @ 1.35 Sold June 2017 @ 1.38
Mainly because of gut feeling really. Also had second thoughts about the " Goodwill ".

However, kept my interest as it dropped and have repurchased a few weeks ago.
Not as good a % as yours DazRaz. Only 14% . I see higher.
Think it is worth riding for a couple of reports though.

[Lease]

I made mistake to cut loss on MPG as I thought Covid-19 would destroy property market and construction activity would shrink sharply, and the reality has gone to opposite:(

I took proceeds to buy SUM which now almost doubled my purchase price.

[bullfrog]

:eek2: OMG!! Well done DazRaz!! I have been a long suffering holder for longer than I wish to remember :( I have managed to get my average buy in down significantly by topping up when it was down around 0.20 but I am still drowning, gulp :crying: Have learned from my mistakes so thats the good news :)

in the same boat RB, didn’t want to lock in a loss when Milford sold out, so rode the train to pitsville. Averaged down when sub 20c, still below water, needs to get to 44c. I find it harder to sell than buy, so working on visualising selling each investment so when the time comes, I don’t wait n see for a couple of days, I sell, I’ve said my goodbyes months ago, ha.

[DazRaz]

The other thing that helped me decide to buy in was the investor fear over the competition from an overseas rival moving in on the NZ market. While that fear was keeping investors away, during COVID I couldn't see how an overseas rival could setup here and get established. How do you setup here if you can't even get into the country?

Hadn't put in as much as I would of liked but what I had at the time. The next financial results will show whether it is worth holding for longer.

[winner69]

The other thing that helped me decide to buy in was the investor fear over the competition from an overseas rival moving in on the NZ market. While that fear was keeping investors away, during COVID I couldn't see how an overseas rival could setup here and get established. How do you setup here if you can't even get into the country?

Hadn't put in as much as I would of liked but what I had at the time. The next financial results will show whether it is worth holding for longer.

It wasn’t an overseas rival setting up a new plant in NZ ....it was a local aluminium fabricator who was going to do their own glass.

Quite a chunk of Metros local customer base at risk.

It’s up and running but Metro say very little about it except that capacity outstrips demand and they will vigorously compete for work.

[DazRaz]

It wasn’t an overseas rival setting up a new plant in NZ ....it was a local aluminium fabricator who was going to do their own glass.

Quite a chunk of Metros local customer base at risk.

It’s up and running but Metro say very little about it except that capacity outstrips demand and they will vigorously compete for work.

Oh, ok. That's a bit different then. Let's hope they have stemmed the bleed in Australia then and keep their financials on track.

[Filthy]

tracking along well. up 20% for the week and 39% for the month.
Any TA experts want to guess where the next resistance is?

[Leemsip]

tracking along well. up 20% for the week and 39% for the month.
Any TA experts want to guess where the next resistance is?

Fair value IMHO is somewhere around 60-70c I reckon...... GO MPG!

[winner69]

tracking along well. up 20% for the week and 39% for the month.
Any TA experts want to guess where the next resistance is?

About 90 cents and then 230

[bottomfeeder]

Somebody realised TD interest rates are at 1%. Or FBU is spending their war chest.

[winner69]

Top of the leaderboard today ...incredible

That resistance at 90 cents getting closer

Go metro

[bottomfeeder]

I think 90 cents is over exuberant, but can see this settling at 45cents.

[RupertBear]

in the same boat RB, didn’t want to lock in a loss when Milford sold out, so rode the train to pitsville. Averaged down when sub 20c, still below water, needs to get to 44c. I find it harder to sell than buy, so working on visualising selling each investment so when the time comes, I don’t wait n see for a couple of days, I sell, I’ve said my goodbyes months ago, ha.

Same here bullfrog...we getting closer though...go Metro!! :)

[RupertBear]

I think 90 cents is over exuberant, but can see this settling at 45cents.

If it reaches 45 cents I will be a happy bear, if it reaches 90 cents I will be an ecstatic bear!! :D

[DazRaz]

I exited at 36c today. While I thought the market hadn't recognised the effect to the debt reduction, I think the road up from here will take a lot longer. A good gain but moving to a longer position.

[trader_jackson]

MPG has debt about the same as its market cap ($55m), being squeezed quite badly, yet has doubled in price in the past 6 months (since the covid low's)
STU has no debt, a much more commanding market position, better cash flows, and probably less chance of raising capital... and yet the share price is not even 20% higher than it was 6 months ago (in fact in mid August, STU's share price was virtually the same it was during the covid lows of early April)

I'm not saying STU is a 'great' business, nor am I saying MPG is a terrible business... in fact I'd say they're both dogs at this point in time.. but interesting that MPG has doubled in price (far outperforming the broader market) while STU has only gone up a mere 17% (underperforming the boarder market by a good chunk)

[t.rexjr]

It wasn’t an overseas rival setting up a new plant in NZ ....it was a local aluminium fabricator who was going to do their own glass.

Quite a chunk of Metros local customer base at risk.

It’s up and running but Metro say very little about it except that capacity outstrips demand and they will vigorously compete for work.

Vigorously compete for work? That rival, as far as I'm aware, are (or perhaps were) a rather large portion of Metro's business. The way that rival operates means there is little to no chance for Metro to compete within that supply chain. That rival is NZ biggest residential joinery supplier that captures over half of the market. That's over half the market that Metro will not be able to compete in once that rival is up to speed...

'Vigorously competing for work'. They're having to go into battle against another large NZ supplier (among others) and win over their competitors customers to replace lost contracts. Surely that translates to slashing margin. Something or someone will have to give...

[winner69]

If it reaches 45 cents I will be a happy bear, if it reaches 90 cents I will be an ecstatic bear!! :D

Hang in there rupert

I wouldn’t be surprised to see beagle on here soon

[RupertBear]

Hang in there rupert

I wouldn’t be surprised to see beagle on here soon

I think the last time the beagle was on here he called Metro a mange infected mutt :eek2: or some similarly affectionate name :D

[winner69]

I think the last time the beagle was on here he called Metro a mange infected mutt :eek2: or some similarly affectionate name :D

You know beagle can change his views ....the medicine worked and metro now a greyhound and beagle will fall in love again

[Leemsip]

This share is so thinly traded, No depth to buyers at all, so could see a 2-4c drop today (IMHO). Be good to consolidate somewhere in the low 30c area pre-announcement.

Nothing goes up in a straight line?

[Filthy]

STU has no debt, a much more commanding market position, better cash flows, and probably less chance of raising capital...

yes, STU is overdue a run back up as well eh TJ!
MPG now up ~54% since mid-Sept & still looking strong.
continuing to pay down debt reduces the chance of a dilutive cap raise.

[Filthy]

I wonder how much they could get if they flicked off AGG in ozzy now EBIT is positive

[Traderx]

MPG has debt about the same as its market cap ($55m), being squeezed quite badly, yet has doubled in price in the past 6 months (since the covid low's)
STU has no debt, a much more commanding market position, better cash flows, and probably less chance of raising capital... and yet the share price is not even 20% higher than it was 6 months ago (in fact in mid August, STU's share price was virtually the same it was during the covid lows of early April)

I'm not saying STU is a 'great' business, nor am I saying MPG is a terrible business... in fact I'd say they're both dogs at this point in time.. but interesting that MPG has doubled in price (far outperforming the broader market) while STU has only gone up a mere 17% (underperforming the boarder market by a good chunk)

MPG has largely maintained margins, STU has near zero normalised EBIT. STU is achieving cashflow by running down inventory. If STU has a "commanding market position" why cannot they get customer to pay sufficient margin so they can earn EBIT?

[RupertBear]

I exited at 36c today. While I thought the market hadn't recognised the effect to the debt reduction, I think the road up from here will take a lot longer. A good gain but moving to a longer position.

Excellent timing to exit at 36c DazRaz well done!! :t_up:

[DazRaz]

Excellent timing to exit at 36c DazRaz well done!! :t_up:
I'm very happy with that. I don't normally get the high for the day like that, never the top of a mini peak.

[DazRaz]

Further debt reductions announced today. More evidence of a turnaround.

[Filthy]

Further debt reductions announced today. More evidence of a turnaround.

great update. debt is now less than the market cap. that will hopefully impress the punters eh winner

[winner69]

Further debt reductions announced today. More evidence of a turnaround.

Yes indeed and better still no indication of poor trading (no downgrade coming)

Not really a turn around ....steady financial performance continues ...never really been bad (just that super duper profits that punters expected never came)

[Filthy]

we might even get to see an 'ecstatic bear' one day!

[Louloubell]

Does this eliminate the need to raise more cash?

[Leemsip]

I was happy with the early update. Made $14m ops cashflow on core operations during the 6 months of COVID. Still a PE of 5 on a very stable business with debt getting reduced pretty quickly...

If I wasn't already irresponsibly long I would buy more....

[RupertBear]

we might even get to see an 'ecstatic bear' one day!



:eek2: Be warned Filthy ecstatic bears have been known to sing and dance :D

[RupertBear]

Up to 37cents...ohhh goody, the Bear is getting excited! :D

[Louloubell]

The word PERFORMANCE is in its name, so it's living up to its name 😂

[Sideshow Bob]

The word PERFORMANCE is in its name, so it's living up to its name 

As history has shown, performance is not always good..... ;)

[Louloubell]

I'm happy and we are approaching my break even point as long as history doesn't repeat itself.

[winner69]

shareprice be 90 cents sometime next year

just getting back to where it should be

metro performance itself never really been a disaster ....just that the market thought it was a basket case - insto's / fund managers and the money men can only blame themselves if they lost money for playing with this.

[Leemsip]

Nice move higher today (when the overall market is down). Depth looking good to maintain this too.
Hoping for a re-rate after the Nov update...

[bullfrog]

Measure of a resilient business is not how they make profits in a boom, but how they weather the downturns. MPG received a lot of criticism for not making more money in the boom, but anyone who knows anything about civil contracting knows that chasing profits in a boom is a great way of over extending and going broke.

Very comfortable holder, happy with steady, predictable growth.

[Louloubell]

A move to this level will only happen when they start paying divvies again, which will happen when debt has been reduced to???

[Arbroath]

A move to this level will only happen when they start paying divvies again, which will happen when debt has been reduced to???

I think there is a good chance at the interim they say they intend to pay a final dividend in 2021 if the business keeps performing as expected

[Scrunch]

Up to 37cents...ohhh goody, the Bear is getting excited! :D

The bear should be gettting really happy. The last trade was up 5c for the day at 43c. Haven't seen it this high since the first half of 2019.

[Leemsip]

The bear should be gettting really happy. The last trade was up 5c for the day at 43c. Haven't seen it this high since the first half of 2019.

Hopefully this reflects insiders telling their mates to buy the shares ahead of the announcement later this month... Booming up 5c on the day.
50c by xmas I reckon.

[Filthy]

The last trade was up 5c for the day at 43c

its probably just our mate winner buying a few more... :t_up:
results out this time next week & its building pretty well.

[RupertBear]

The bear should be gettting really happy. The last trade was up 5c for the day at 43c. Haven't seen it this high since the first half of 2019.

Yes The Bear is brimming with excitement! :D BOOM I have almost got my money back! How exciting is that!! The Bear will be dancing on the streets soon :)

[RupertBear]

OMG 45cents :eek2: :D lets dance! :t_up:

https://youtu.be/-cLpZKVH07w

[RupertBear]

Now that The Bear has broken even do I take the money and run or do I hold :confused: hmmm ....

[Filthy]

its on its way back to winners 90 cents!

[RupertBear]

its on its way back to winners 90 cents!

ohh goody I hope so :D

[BlackPeter]

its on its way back to winners 90 cents!

Which may or may not be true. Just remember that Share price is underlying value plus hype. Hype can be pretty volatile.

But sure - FBU is well known for buying into companies when they are well overvalued. It is a gamble for MPG holders, but it might work out ...

[winner69]

Which may or may not be true. Just remember that Share price is underlying value plus hype. Hype can be pretty volatile.

But sure - FBU is well known for buying into companies when they are well overvalued. It is a gamble for MPG holders, but it might work out ...

Underlying value 80 cents plus hype 10 cents equals 90 cents

On its way for a pretty well run company

All those guru fund managers and finance guys who hyped Metro up post IPO and those who got sucked in deserve what they got ....it turned out $1.20 plus of hype was a pipe dream all along.

[mikeybycrikey]

Which may or may not be true. Just remember that Share price is underlying value plus hype. Hype can be pretty volatile.

I'm pretty sure that MPG has been valued with negative hype for the last few months. Might be in the ball park of underlying value now.

[flyer]

Monday morning for the results, hoping they are good, a few more cents to the share price would be nice.

[Scrunch]

Monday morning for the results, hoping they are good, a few more cents to the share price would be nice.

Managements current trading / outlook statements are going to be the key bit. The financials cover a period with very different conditions and could be all over the place. The half year period is April 2020 to Sept 2020. We know from the August announcement below that the L4 lockdown had basically taken out a months revenue and after four months there was still a $18.6m year on year decline.

On the 21st Aug MPG provided a 4-month trading update. If not separately advised, it should be possible to tell what sales looked like in Aug/Sep from this announcement.


Unaudited results for the four months ended 31 July 2020 (FY21 YTD)

New Zealand (NZ$) Revenue
FY21 YTD 53.8
FY20 YTD 72.6

Australia (A$) Revenue
FY21 YTD 17.1
FY20 YTD 17.1

Group (NZ$) Revenue
FY21 YTD 72.0
FY20 YTD 90.6

Net debt (NZ$)
31 July 20 54.7
31 July 19 78.7

o NZ activity has recovered well following the alert level 4 shutdown. June
and July revenues were broadly in line with last year. For the months of May,
June and July, the NZ business has achieved a similar Gross profit margin %
versus the same period last year

[Arbroath]

Managements current trading / outlook statements are going to be the key bit. The financials cover a period with very different conditions and could be all over the place. The half year period is April 2020 to Sept 2020. We know from the August announcement below that the L4 lockdown had basically taken out a months revenue and after four months there was still a $18.6m year on year decline.

On the 21st Aug MPG provided a 4-month trading update. If not separately advised, it should be possible to tell what sales looked like in Aug/Sep from this announcement.

One key question will be whether the refinanced and reduced debt facilities allow the payment of a dividend at the full year. They had agreed no dividends for FY21 during Covid but since then they’ve repaid $19m of debt and appear to have turned the corner. Debt/ebitda will be under the previous dividend reinstatement target of 1.5x at this half year result.

[Filthy]

https://www.nzx.com/announcements/363657

[winner69]

https://www.nzx.com/announcements/363657

What you reckon then filthy?

Exceptional or just good or disappointing?


This a bit of a worry .... 'New Zealand operations progressively and safely ramped up through May,
with revenue and gross profit percentage from June to September remaining broadly in line with last year'

No catch up

[Filthy]

What you reckon then filthy?

I think they get a pass.... no major surprises; which is good for MPG. a few more boring results like this would be great.
ozzy business looks like its in much better shape and getting a bit of traction.
A bit disappointed no forward guidance was given.... but reading the narrative, they seem to be cautiously optimistic don't they...

[winner69]

I think they get a pass.... no major surprises; which is good for MPG. a few more boring results like this would be great.
ozzy business looks like its in much better shape and getting a bit of traction.
A bit disappointed no forward guidance was given.... but reading the narrative, they seem to be cautiously optimistic don't they...

Might see 90 cents next year then

[Arbroath]

I think they get a pass.... no major surprises; which is good for MPG. a few more boring results like this would be great.
ozzy business looks like its in much better shape and getting a bit of traction.
A bit disappointed no forward guidance was given.... but reading the narrative, they seem to be cautiously optimistic don't they...

fair summary I reckon....if they can make a FY21 npat of $11-12m then a dividend is a prospect. Debt to ebitda (pre-IFRS16) down to 1.53x today and should be around 1.3x at FY21.

good to see Aussie is at least breakeven now after a couple of years of bleeding...imagine if it started to contribute $1-2m npat

[mikeybycrikey]

I was interested to read about the sale and leaseback agreement for the vehicles. I had wondered how they had paid back a larger amount of debt than I had expected. Maybe they had announced that earlier but I might've missed it.

Other than that nothing particularly interesting that I can see. Australia looking maybe better than I expected. NZ probably slightly worse but time will tell.

[Filthy]

I was interested to read about the sale and leaseback agreement for the vehicles. I had wondered how they had paid back a larger amount of debt than I had expected. Maybe they had announced that earlier but I might've missed it

yeah they mentioned it in the ann on the 14/10 - leasing a no brainer eh!
reckon it would be nice to get debt down to about 20M

[BlackPeter]

I was interested to read about the sale and leaseback agreement for the vehicles. I had wondered how they had paid back a larger amount of debt than I had expected. Maybe they had announced that earlier but I might've missed it.

Other than that nothing particularly interesting that I can see. Australia looking maybe better than I expected. NZ probably slightly worse but time will tell.

Agree. Sort of good they stopped the bleeding in Australia, but not bleeding anymore still does not make it a winner, at best a survivor.

NZ sort of a worry - given that home improvement industry is currently totally flat out in NZ (even trying to get just a quote these days from many home improvement businesses is hopeless ... and I am speaking from experience), why does MPG not benefit from the money all these non travelling Kiwis are now spending for their homes? Home insulation business is booming, home renovations business is flat out. What exactly is wrong with MPG that they don't see this boom?

I hope for them that they pull through, but if I just look at the analyst predictions, then MPG looks currently ways overvalued ... and hey, they are neither a FPH nor a MFT ...

Obviously - analyst EPS predictions are pretty low (avg 2.3 cts over the next 3 years) ... if they just manage to double this number, then their current SP looks fair. Question is just - do they?

Looking at their long term EPS (negative 9 cents per share over the last 10 years) am I not that optimistic. In the past they tended to generate in good years something like 5 to 11 cents per share - but every 8 to 10 years they seem to have these huge write offs basically extinguishing any profits they made in between.

Sort of like AIR, just lower highs and more messy crashes.

On the other hand - this time is different, isn't it?

[RupertBear]

Hmmm well I sold a few last week @ $0.44 and ditched the rest this morning. Have held this thing for way too long and pleased to get out with most of my fur intact. Better places for The Bears money to sit making honey. Someone will probably turn up and buy them out now that I have sold :rolleyes: GLTH :)