MTQ Corporation

[Musicwhiz]

I don't know the company well. I know it because of MW blog.

MW, do you still holding the stock? The company balance sheet remain healthy.

Yes, I still hold this Company. It has been in my portfolio since 2009 and I am pleased with its growth thus far.

As the Company's MD&A has mentioned, things are obviously slowing down due to the depressed oil price, thus creating a subdued environment for the Singapore operations. Bahrain is profitable and is contributing but Singapore is the main drag now, as well as Binder in Indonesia (which is loss-making). Neptune also had higher expenses which pulled down margins.

Well, I won't exactly say the Balance Sheet is "healthy". Cash stands at around $44m as at Dec 31, 2014 while total debt is around $61m, giving the Company a net debt of $17m. Note that finance costs have actually fallen yoy in 3Q 2015 as well as 9M 2015, which is a good sign. Therefore, most of the margin erosion came from an increase in staff costs (+5% yoy for 3Q 2015), as well as higher COGS (+6% yoy in 3Q 2015) despite revenue being flat.

I think the key here is that the Company is still generating healthy FCF, though probably not at the levels hoped for 2 years ago when they kick-started Bahrain. The capex has not increased significantly for 3Q 2015 compared to 3Q 2014 even though Bahrain is fully up and running; so the FCF generated was around $11m for 9M 2015.

This weakness in oil prices has caused oil majors to defer and delay capex, which obviously has a knock-on effect on the Company. As to when the recovery would take place, there's no definite timeline but the Company is in good shape to weather the storm.

The important point here is that when oil was last at USD 40, it was still business as usual for the Company. They are not capex-intensive even though their business does rely on the E&P side; so this, I feel, will help them to buffer a substantial portion of the downturn.

Other views are welcome as well. Thanks.

[sykn]

Thanks for the positive note of your assessment. I've eyed this company since 6 months ago but didn't dare to get in when prices were hitting the peak of around $1.83. But I finally got in at $1.04, which would not happen if not for the drop in oil prices. So I guess we've just got to stick around and let this oily ill-wind blow over, which according to a DBS research piece, may well happen in a matter of months rather than years. They are predicting a V-shape recovery to USD100 this year and stabilising there for the next 3 years, but we'll see who's right.

[corydorus]

I think V-Shaped like will happen if the Saudi is aggressive enough to push below current $40-$50. which mean they need to over-supply and not just maintaining current market share. Even then, i am not fully convince we will see $100 again.

[brattzz]

predications... well... no one can say for sure,

most important is what can the Co. do when their revenue is down 50% for a considerable amount of time, and how the management reacts to this..

[Belg]

Today MTQ dropped to a 52 weeks low of 0.95. Probably being sold off as the current oil situation doesn't seem to improve in the short term.

Would there be more downsides?

[Tiggerbee]

MTQ Corp cut to "hold", targeted slashed to 95 cents by CIMB

http://sgx.i3investor.com/servlets/fdnews/49189.jsp

SINGAPORE (Feb 3): CIMB has downgraded MTQ Corp to "hold" from "add" and slashed its price target from $1.55 to 95 cents, which imply 5.7 times projected FY2016 earnings and 1.1 times FY2015 book value.

It has also lowered its FY2015 to FY2017 earnings per share estimates by 24% to 32% to factor in expected weaker profit margins.

The changes came after MTQ, which makes and repairs oilfield equipment, said its December-quarter (FY3Q2015) earnings tumbled 78% y-o-y and 72% q-o-q to $1.4 million on weaker performances at its Singapore and Australia operations.

[Tiggerbee]

http://sgx.i3investor.com/blogs/cimbrese.../23406.jsp

Target S$0.95 (Stock Rating: HOLD)

At 6% of our full-year forecast, 3QFY3/15 core net profit of S$1.4m (-78% yoy) was 78% below our expectation and 76% below consensus. 9M formed 49% of our FY15 estimate. All business units, aside from the Bahrain facility, fared poorly. We slash our FY15-17 EPS by 24-32% as we reduce our margin expectations. With near-term weakness set to persist, we lower our blended P/E and P/BV-based target price (implied 5.7x CY16 P/E; 1.1x CY15 P/BV) and downgrade the stock to Hold from Add. We would revisit the stock upon faster-than-expected earnings recovery and accretive acquisitions.

3QFY15 results: Bahrain the only bright spot
3Q15 core net profit tumbled 78% yoy and 72% qoq to S$1.4m. The main culprits were 1) lower-than-expected profitability at its Singapore Oilfield Engineering operations (affected by operating leverage), 2) higher-than-expected losses from Binder and 3) higher opex incurred by Neptune. As a result, the group's EBITDA margins dropped to 8.5% (3Q14: 14.7%; 2Q15: 12.2%). Yoy, MTQ's revenues were flat at S$74.9m. The inclusion of Binder's sales (the business unit was acquired in Jan 2014 and did not contribute to the prior period's revenue) as well as higher contributions from Bahrain were offset by lower sales by the Singapore operations. The only bright spot for the group was Bahrain, which has started to report profits after its 3-years start-up period. Management is markedly more positive on the drilling market in the Middle East vs. ASEAN. Last, MTQ remains in a solid financial position to tide through choppy conditions. Its net gearing stands at 0.1x and the group generated S$20.7m operating cashflow in 9MFY15.

No upswing in 4Q; downgrade to Hold
The negative read through from MTQ's results is that Southeast Asian drillers - which form the demand driver for MTQ's Singapore operations - are facing lower utilisation and day rates. This has led to lower activities for MTQ's Singapore operations as discretionary maintenance activities required by the drillers are pushed back. Management guided for near-term weakness to persist and we do not expect an earnings upswing in 4Q. Hence, we downgrade the stock to Hold from Add. We would revisit the stock upon faster-than-expected earnings recovery and accretive acquisitions.

[brattzz]

89cts! waos!

looks ripe for delisting at low price!
Chairman Quah, keen bo?

[brattzz]

86 cts liao, on Friday the 13th!

Chairman Quah Sir! any actions bo?

[shn]

This one still keeps falling. I still have some odd lots. When is a good time or price to accumulate? I am monitoring.