MTQ Corporation

[Musicwhiz]

Some positive news from Neptune Marine Services, in which MTQ owns close to 10% of. They have delivered on their key milestones in the ongoing restructuring, and saved A$9.5 million. For quarter ended March 31, 2011, they achieved breakeven. See announcement below:-

http://www.asx.com.au/asxpdf/20110517/pd...bkcsrq.pdf

The announcement also contains details of their plan for ongoing restructuring in order to cut costs and revamp their organization structure. I see this as a very positive sign and look forward to NMS posting a decent set of results for FY 2011 ended June 30, 2011.

[Nick]

http://www.neptunems.com/sites/neptunems...-03-11.pdf - a recent analyst report covering its restructuring efforts.

[Musicwhiz]

http://www.neptunems.com/sites/neptunems...-03-11.pdf - a recent analyst report covering its restructuring efforts.

Thanks Nick,

The research report was done in March 2011 and does highlight a lot of risks moving forward for the business. It also gives a summary of the measures taken to cut costs and streamline operations. Too bad though, that a report was not written more recently upon the sale of Neptune Trident vessel and also for today's restructuring announcement. Perhaps soon?

As of this writing, as a result of the positive announcement, NMS' share price has moved up 0.5 Aussie cents to A$0.038 pre share.

[Musicwhiz]

Dear all, Part 2 of my analysis of MTQ's FY 2011 Financials is now up on my blog. Please feel free to visit and leave comments, thanks!

A snippet as follows:-

"In terms of segment net profit, Management’s ongoing focus in streamlining operations in Engine Systems has yielded positive results, with revenues in this division not only showing a steady increase, but also yielding growth in operating profits and net profit margin. Segment net profit for Engine Systems has hit a 7-year high of $2.7 million and segment margin is now 5.4%, up from 3.2% a year ago. It would appear that the synergistic collaboration with Bosch has enabled margins and revenue to grow, while keeping costs low."

[Nick]

I must say that I am very impressed in the Management execution in successfully turning around MTQES. The Borsch deal has made the difference. Australia is a pretty big market and the positive gains in translating AUD to SGD should outweigh the translation of USD to SGD in the oilfield business !

[Musicwhiz]

Dear all, Part 3 of my analysis of MTQ's FY 2011 Financials is now up on my blog. Please feel free to visit and leave comments, thanks!

A snippet as follows:-

"From the announcement proper, MTQ mentions that it seeks to participate in Neptune’s business as a significant investor and views Neptune’s capabilities as a “strategic extension of its predominantly workshop based operations in Singapore and Bahrain”. Kuah Boon Wee, CEO of MTQ, will also take a seat on the Board of Directors of Neptune. I will be breaking down this transaction into parts by analyzing and reviewing Neptune as a company, its proposed strategic changes made, and providing a summary of the actions taken to date to signify its commitment towards corporate overhaul and re-structuring."

[Musicwhiz]

MTQ has a partnership with Bosch in Australia under their Engine Systems Division.

Business Times - 09 Jun 2011

Bosch 2010 sales revenue for Asia-Pacific gains 43%

At 11b euros, it accounts for 23% of group's global sales

THE Bosch Group yesterday announced a surge in annual sales revenue for the Asia-Pacific region for 2010. This marks the highest contribution from the region to date.

Accounting for 23 per cent of the Bosch Group's global sales in 2010, sales revenue for Asia-Pacific increased from 7.7 billion euros (S$15.7 billion) in 2009 to 11 billion euros in 2010 - a 43 per cent growth.

Revenue for South-east Asia grew as well - from 363 million euros to 486 million euros.

Martin Hayes, South- east Asia president and managing director of Robert Bosch, said: 'The strong performance of all our business divisions (in South-east Asia) verifies the success of our strategy to further expand our footprint in the Asian markets.'

With the growing demand in the region, Bosch is planning to grow its presence in the Asian market. 'We will continue to establish our footprint in the region,' added Mr Hayes, elaborating that the company is looking at countries such as Indonesia, Thailand and Vietnam.

Bosch will continue to invest in research and development, 'to remain ahead of competition and align our strategic goal by providing innovative solutions to problems', Mr Hayes said.

Specifically, in Singapore, a new corporate research group that focuses on energy management is in setup phase.

It will look at issues such as solar energy infrastructure and green building technology for mega cities. The setup phase will be completed by the end of this year.

[Musicwhiz]

Over the last few days, from June 8, 2011 to June 17, 2011, Blossomvale (100% owned Subsidiary of MTQ) has acquired 43.455 million additional shares in Neptune Marine Services (NMS) at prices between A$3.5 cents to A$3.71 cents.

MTQ's stake in NMS now stands at 243,455,000 shares (13.89%) at a new (lower) average cost of about A$4.76 cents per share, down from their original cost of A$5 cents per share acquired during the rights issue. Will MTQ be purchasing more shares of NMS in the coming days/weeks? I believe Kuah Boon Wee sees value in NMS which is why he is increasing MTQ's stake from 11.41% to the current level.

As at this typing, NMS's share price is trading at A$3.7 cents/share.

[Nick]

Hi MW,

I was reviewing NMS website and to my pleasant surprise, I came across a very recent article dating on 18 May 2011 -

Neptune establishes NEPSYS® MoU with Singapore's Unidive

http://www.neptunems.com/news/article/18...idive.aspx

On another note, considering MTQ continued investment in NMS, I think it would mean that the Company have sufficient cash-flow to manage their cash-flow and start up cost in Bahrain and hence should be viewed as a positive sign. Ultimately, we have to wait for their next financial result to see how the Bahrain venture is faring in light of the geo-political situation there.

[Musicwhiz]

Hi MW,

I was reviewing NMS website and to my pleasant surprise, I came across a very recent article dating on 18 May 2011 -

Neptune establishes NEPSYS® MoU with Singapore's Unidive

http://www.neptunems.com/news/article/18...idive.aspx

On another note, considering MTQ continued investment in NMS, I think it would mean that the Company have sufficient cash-flow to manage their cash-flow and start up cost in Bahrain and hence should be viewed as a positive sign. Ultimately, we have to wait for their next financial result to see how the Bahrain venture is faring in light of the geo-political situation there.

Hi Nick,

Thanks very much for the link! I didn't know Unidive (acquired by Mencast) and NMS (with MTQ as SSH) now has a business partnership, haha. Small world indeed. But I must caution that it is just an MOU announced in mid-May 2011 and no definitive contract has been signed yet, therefore no revenue will be recognized for both parties. Still, it is a positive sign that NEPSYS system is in demand and that NMS can penetrate the Singapore and SEA market through Unidive.

To be frank, it also came as a surprise to me that MTQ decided to pump even more cash to purchase NMS at current prices. In total over 7 days, MTQ pumped in A$1.588 million to purchase 43,455,000 shares of NMS, at a blended average price of A$3.65 cents per share. After conversion, the company had spent about S$2.07 million (1 AUD = 1.306 SGD) just on this investment. Interestingly, cash balances stood at S$23.8 million as at March 31, 2011 (almost close to 3 months ago), and this constitutes about 8.7% of the cash. I think you may be right to say that MTQ's business is generating healthy cash flows from both Bahrain and Singapore for their Oilfield Engineering, and that Engine Systems is also chugging along fine; in order for them to be able to dish out this amount just on an AFS investment. Of course, since MTQ does NOT publish quarterly results, we shall only be able to know the financial situation of the Company in Nov 2011 when they release their 1H FY 2012 results.

Personally, I don't think NMS will become another RCR Tomlinson. There are still too many uncertainties in NMS for me to see a gem in it, and though father and son have proven savvy in terms of investing in down-trodden companies and then selling at a peak, I am not sure if history can indeed repeat itself. It will be sufficient for me if NMS manages to report a profit and +ve cash flows, and eventually pay a dividend to MTQ.