MTQ Corporation

[pianist]

today market is a huat huat market in a sea of green..

[Temperament]

Or you can apply for excess rights to make up 1 lot for your odd lot. i think most company issuing rights "favour" odd lot applicants to make up 1 lot. i have been successful most of the time, when i try. (i think company wants their shares to be actively traded also.) But you are responsible for your own action.
Not Vested!

Temperament,

It is a bonus issue.

Thanks.

Opps! Sorry! Didn't pay full attention or misread. But what i say about excess rights application to make up for the odd lot, whole, is true for me.

[dydx]

This evening's announcement provides full details of MTQ's proposed 1-for-4 bonus issue, including the plan that the Bonus Shares will be entitled to the proposed final cash/scrip dividend of $0.02/share in respect of the financial year ended 31Mar13.....
http://info.sgx.com/webcoranncatth.nsf/V...5000F917A/$file/Proposed_Bonus_Issue.pdf?openelement

I thought the following para extracted from the announcement does provide a clear explanation on the proposed bonus issue.....
"The rationale for the Proposed Bonus Issue is to increase the accessibility of investing in the Company to more investors, thereby encouraging trading liquidity and greater participation by investors and broadening the shareholder base of the Company."

I think it is quite fair to say that the illiquidity of MTQ as a share counter - chiefly due to the fact that the company's existing 100,167,851 issued shares have been tightly held by mostly long-term investors, partly driven by MTQ's attractive twice-yearly dividends totalling $0.04/share - has prevented Mr Market to do his normal trick to give it a market value closer to its justified fair intrinsic value. Clearly, the better-than-expected FY13 (ended 31Mar13) full-year results, coupled with the proposed bonus issue, have together brought about enthusiastic buying after the result announcement on 6May13, by new investors and existing shareholders increasing their stakes, and their willingness to pay a higher price - so Mr Market is finally working! In fact, today (8May13) MTQ advanced another $0.08, or 5.3%, to close at $1.60 - a new record high - with 572 lots transacted.

I believe a lot of credit must go to CEO Mr Kuah Boon Wee, under the guidance of Non-Executive Chairman (and his father) Mr Kuah Kok Kim. The father-and-son team has proven to be both competent/experienced managers and skilled investors, including in M&A. As CEO Kuah is only 46, he will have many years to lead and contribute to MTQ's further growth. More background info on the Senior and Junior Kuahs......
http://www.nextinsight.net/index.php/sto...irmans-son

[Nick]

DMG has released a report on MTQ FY 2013 result - http://mail.dmg.com.sg/dmgnew/dmgrshnew....6000a3ddc/$FILE/SG-MTQ%20Corp_Raising%20Too-Conservative%20Estimates%20Post%20Roadshow_20130509.pdf

(Not Vested)

[safetyfirst]

Hi,

would just like to ask, if i am holding 6 lots for MTQ, would i be disadvantaged as I will only get 1 bonus share, or would i get 1.5 bonus share instead? thanks

haha you may also sell 1 lot or buy 2 lots before it goes xd then you will still have a whole number after the bonus issue

[Musicwhiz]

DMG has released a report on MTQ FY 2013 result - http://mail.dmg.com.sg/dmgnew/dmgrshnew....6000a3ddc/$FILE/SG-MTQ%20Corp_Raising%20Too-Conservative%20Estimates%20Post%20Roadshow_20130509.pdf

(Not Vested)

This is an updated report released after a roadshow they organized for the Company. I can't imagine them being even more bullish to raise their TP to $2.20!

If you look at their 2-stage DCF (in the first report May 7), they are assuming high FCF generation every year and also a higher than flat growth rate for Engine Systems. That is how they ended up with an initial DCF value of nearly $2.90, which they subsequently trimmed down.

What they can do is stress-test their scenarios to come up with a range of potential fair values, and use more conservative assumptions for FCF.

[dydx]

I actually find the first 2 key points - on the Bahrain facility fast achieving operational cash break-even, and Neptune Marine Services (NMS)'s improving profit margins - in OSK/DMG's 8May13 report very good and useful.....
http://mail.dmg.com.sg/dmgnew/dmgrshnew....130509.pdf
, and I feel their FY14 Revenue and NP forecasts - $280.0m and $27.5m, respectively - are rather conservative. I think we have to bear in mind that: (1) there is a lot of business opportunities for MTQ's types of oilfield engineering services in the Middle-East, and sooner or later, business volume and profits of the Bahrain facility will take off; and (2) NMS has gone through a lot of revamp and down-sizing in the last 2 years, and is now lean and mean and well placed to grow business volume of its diversified specialised sub-sea services on a profitable basis.

Is OSK/DMG's revised TP of $2.20 too aggressive therefore unrealistic? Well, I believe given enough time, this is entirely possible, as we have to bear in mind that MTQ is a very well managed business group, and its relatively small size makes it a potential acquisition target for other bigger players in the same or related trades. If we assume a slightly higher NP forecast of $30.0m for FY14, and a very reasonable PER of 8.0x would give a fair value estimate of $240.0m, or $2.40 a share (based on the latest 100.168m issued shares).

Today (9May13), continuous buying raised MTQ by another $0.08, or 5%, to close at another record high of $1.68, with 753 lots transacted. Mr Market has again proven wrong those shareholders who chose to sell out in the last 2 days, as MTQ has risen continuously by a total of 23% in the last 3 market-days.

[pianist]

168...an auspicious number finally reached. hit target price.

[LLI]

168...an auspicious number finally reached. hit target price.

NMS acquisition really changed the whole valuation of the company.

[Musicwhiz]

NMS acquisition really changed the whole valuation of the company.

It also makes the Company that much harder to analyse.

NMS is an order-book based business, hence projecting revenues/cash flows would be much more difficult. I suspect NMS' capex requirements may be higher than MTQ's core Oilfield Engineering business, which is why the analyst from DMG OSK used $13m as his capex assumption.

As to the $40m OCF generated every year, this seems rather optimistic as MTQ has traditionally generated just $20m of OCF and about $16m of FCF.

Note that the Balance Sheet of the Group has also been altered; gearing is now a prominent feature and we need more details on the cost of debt and debt maturity profiles to get a better sense of when they need to refinance, and how much finance costs will rise by. Trade Receivables is also very high, thus bringing up the question of collectability; though this may be a timing difference, I prefer to err on the side of caution.

Finally, Bahrain is still a question-mark. The analyst seems quite positive on Bahrain based on what Management has said but I prefer to be prudent and assume no breakeven until at least FY 2015.

This may cause the valuation of the company to be more muted, but I want to factor in scenarios which are pessimistic so as to understand what the downside risks are.