# MCP - McPherson's Limited



## robusta (20 November 2011)

MCP Operates in two distinct market sectors, namely, in the distribution of household consumer products (kitchen utensils, glassware, plastic bags, food wraps and aluminium foil, and beauty, personal and hair care products), and in the book and commercial printing industry.

Have had MCP on my watchlist for a while now, they operate in a highly competitive enviroment with a ordinary outlook but somehow manage to produce decent returns.

Anyhow they have recently proposed a demerger and reverse takeover of the printing business.

http://www.asx.com.au/asxpdf/20111118/pdf/422mg1vmw1xr53.pdf

Starting to put this one in the too hard basket, is the sum of the parts worth more than the whole business??

Someone may be able to find opportunity here and if so good luck to them.


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## Huskar (29 November 2011)

Hi Robusta I was having a look at MCP and wonder on the timing of the demerger: the market is probably not in the mood to be marking up a book printing business or a consumer discretionary business at the moment... 

But I like demerger situations - because as you say often 1+1>2, though more details about the proposal are probably required before there is clear evidence of value here in my opinion. And perhaps more worrying is the warning that HY12 profit will be 30% down on PCP due to "ranging decisions" of retail customers, whatever that means (I presume loss of orders for consumer products).


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## robusta (29 November 2011)

Huskar said:


> Hi Robusta I was having a look at MCP and wonder on the timing of the demerger: the market is probably not in the mood to be marking up a book printing business or a consumer discretionary business at the moment...
> 
> But I like demerger situations - because as you say often 1+1>2, though more details about the proposal are probably required before there is clear evidence of value here in my opinion. And perhaps more worrying is the warning that HY12 profit will be 30% down on PCP due to "ranging decisions" of retail customers, whatever that means (I presume loss of orders for consumer products).




The "ranging decisions" are probably due to WOW & WES strategy of pushing "own brand" products at the expense of importers and wholesalers like MCP.

MCP is trading at a good price if past performance can be maintained however the outlook is not so positive. I would be interested in more details on the printing business.


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## Huskar (1 December 2011)

For a good (though sardonic) explanation of "ranging decisions" see the recent Insider article on Funtastic...

http://www.smh.com.au/business/cold-hard-cash-continues-to-hold-its-appeal-20111128-1o37r.html

ps my favourite column


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## skc (1 December 2011)

Huskar said:


> For a good (though sardonic) explanation of "ranging decisions" see the recent Insider article on Funtastic...
> 
> http://www.smh.com.au/business/cold-hard-cash-continues-to-hold-its-appeal-20111128-1o37r.html
> 
> ps my favourite column




The ranging issues are everywhere. GFF and SYM are two others that come to mind.
It would be interesting to see if Metcash's new slogan "Champion of brands" is going to work. TBH, can anyone tell the difference between Heinz bake beams vs Coles home brand? 

I read the FUN announcements - it is absolutely crazy how many pillow pets got sold in the US... aren't they in a recession?!

This was pretty funny though...



> It is enough to make you bite the head off your pillow pet.
> 
> Read more: http://www.smh.com.au/business/cold...-its-appeal-20111128-1o37r.html#ixzz1fFFJ2KUO


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## Huskar (1 December 2011)

skc said:


> The ranging issues are everywhere. GFF and SYM are two others that come to mind.
> It would be interesting to see if Metcash's new slogan "Champion of brands" is going to work. TBH, can anyone tell the difference between Heinz bake beams vs Coles home brand?
> 
> I read the FUN announcements - it is absolutely crazy how many pillow pets got sold in the US... aren't they in a recession?!
> ...




Haha yes. A very wry sense of humour which I like. Pillow pets are clearly not a discretionary item btw?..


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## seanious (8 November 2012)

Huskar said:


> Haha yes. A very wry sense of humour which I like. Pillow pets are clearly not a discretionary item btw?..




So I'm holding this company at the moment, the demerger seemed to do them well but they definitely don't look to be world beaters. 

Decent dividend yield ($0.17 per share, BellDirect has this at 7.4% div yield after tax) on a company that won't go broke anytime soon - based on my current understanding - is pretty much the only good story I can think of for MCP. Maybe a consumer confidence play could be had here? 

Like previous comments have said issues with Coles and WOW really pumping their in house brands has hurt the bottom line a bit along with everything else in the market, however it looks like the company is reacting to this by investing more in care products which the big 2 don't sell as far as I know.

They are improving efficiency of their stock system and logistics. They also closed their Melbourne office last year as a cost cutting measure and merged it into the Sydney office. Doesn't sound like they are messing around.

Their NZ business also made money last year.

Another fun fact a big chunk of their Non-Current Assets (around 90%) is Intangibles like Good Will, which I guess is standard for a consumer goods company with so many brands? If you take the intangibles out their balance sheet becomes very lopsided to the liability side.

They also took on bit more debt (additional $20M) to fund the demerger and acquisition of new brands last fin year. 

Last open was $1.850

Anyone else have some thoughts?


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## pixel (22 February 2017)

Awfully quiet on the MCP front. Do holders want to keep the 14%+ (annualised, grossed-up) yield a personal secret? Or is it too boring?
Technically, I also see the chance of a Cup & Handle pattern developing.
Seems worth a punt IMHO, and I'm on.


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## tinhat (22 February 2017)

I wish I held onto mine now. I bought just before that stock price crash having been suckered into the dividend trap. Not having looked into the company for a while I assume their whitegoods business has done well, because selling cling-wrap and freezer bags didn't seem like much of a defendable and profitable industry to me.


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## pixel (23 February 2017)

MCP - revised target $1.45, long-term possibly $1.69
I added on the break @1.26


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## The Triangle (1 March 2019)

Silly prices this morning, down 9% on divi date.  I added to holdings in early trading.   

Earnings were ok, should have a reasonable FY result.   I think the stink of BWX is keeping MCP at these mid 120 low 130 levels.


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## The Triangle (16 April 2019)

Astonishing.  Where will this end up?  90 cents is my guess.


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## The Triangle (23 July 2019)

Fantastic preliminary result.   Dividend much higher - company will start providing forward guidance.  Proven earnings growth and old legacy issues long gone.   Virtually no debt.  No excuse for this to trade below $2.  I expect a 13 cent dividend next year.


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## tinhat (24 July 2019)

I haven't been following this company for a few years but what a dog it has been. The CEO is doing well earning $800k base salary plus $600k incentives in 2018FY for running a company with a market cap of $150m (a cap that is less than revenue). I hope he is worth it and can turn this company into something worth investing in. I still can't get excited over kitchen consumables and low end cosmetics.

I see they have divested from their kitchen appliance business and are focusing more on health and wellness and cosmetics (beauty) into the chemist and grocery channels.

I also see they have bought a 51% stake in a health and wellness snack and milk powder drink (gut health, blah blah) maker with hopes of cracking into China. From yesterday's announcement:

"Through the new venture, McPherson’s will leverage its existing sales and marketing expertise to drive domestic distribution and export growth, particularly within China, whilst working with its venture partner to develop further Health & Wellness products to extend the brand portfolioThrough the new venture, McPherson’s will leverage its existing sales and marketing expertise to drive domestic distribution and export growth, particularly within China, whilst working with its venture partner to develop further Health & Wellness products to extend the brand portfolio."

Really? What existing sales and marketing expertise of selling FMCG into China do MCP possess? It will be interesting to watch if the business can turn around but its not a very exciting business IMHO.


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## The Triangle (24 July 2019)

Exactly- it was a dog. Key word - was.  They have turned around.  Proof is the last few results, balance sheet, and cashflows, dividends. 

That’s why the share price is up 20% and approaching 5 year highs.   

I’m glass half full - but that’s probably because I’m far in the green.  Doesn’t need to be exciting to make money.


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## The Triangle (11 February 2020)

This was my largest single holding and as such I decided to de-risk myself. Sold 50% today - MCP is sitting very near 15 year highs.  I expect a reasonably good 1/2 - but they derive significant growth and product sales from China - and I'll wait until this uncertainty has passed with coronavirus.  Might add more later.


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## The Triangle (19 February 2020)

Poor result.  Lower dividend.  Borrowed to pay divi.   Poor casflow.   Asset reduction...  Nothing good here.  Just average.  

Sold out.


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## Dona Ferentes (19 February 2020)

.... a "_leading supplier of Health, Wellness and Beauty products in Australasia *and increasingly China, *with operations in Australia, New Zealand and Asia. McPherson's markets and distributes beauty care, hair care, skin care and personal care items such as facial wipes, cotton pads and foot comfort products, as well as a range of kitchen essentials such as baking paper, cling wrap and aluminium foil._"

Probably no real unique proposition. China is a 'double edged sword" these days. Well timed


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## The Triangle (21 February 2020)

Hate to be one of those people...  But seriously - there are that many people specifically buying and selling 9,022 shares?


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## The Triangle (2 December 2020)

Overreaction.  MCP has done this before warn on profits only to come in not as bad.

They have minimal debt and good casflows so although i expect a writedown from the blackmores acquisition (mcp have a horrible track record)  think 1.20 is a reasonable reentry point.  They just did a raising at 2.20+ lots of flexibility here.

However MCP credibility has been shot and anyone who bought in the past 12 months will be very upset.    Should be interesting to see what they do with the dividend.


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## Dona Ferentes (3 December 2020)

The Triangle said:


> Poor result. ....
> 
> Sold out.



its all about timing?






*McPherson’s Trading Update *
➢ Settlement of Global Therapeutics acquisition, marking the establishment of the McPherson’s Health and Wellness Division 
➢ Australian core owned brands performing well, with 5 out of 6 brands delivering year to date sales and contribution margin growth in comparison with last year 
➢ _*Weaker than expected 11/11 trading event*_ leads to excess Dr. LeWinn’s stock  
➢ *Reduced 1H21 forecast sales *to ABM results in revision of underlying PBT in the range of $6.5 million to $7.5 million and *withdrawal of FY21 underlying PBT guidance *
➢ ABM is forecasting very strong growth of 40% to 50% in Dr. LeWinns sales to its reseller community in calendar year 2021 
➢ Strong balance sheet with net bank debt of ~$10 million post acquisition of Global Therapeutics 

_--- underdelivering . OK once, but a serial event. China risk. New division. Mmmm._


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## The Triangle (3 December 2020)

Dona Ferentes said:


> its all about timing?
> View attachment 115733
> 
> 
> ...



Buy low sell high... Every once in a while it works


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## The Triangle (10 December 2020)

Very swift!  CEO/MD has resigned.    I'm sure the SP will be down early, but once the dust settles the market should be happy with this result.  Someone had to be held to account over how things have gone lately.    Clicking your heels 3 times and saying china is not a strategy.

Wonder if BWX will be looking at this space and thinking about an MCP tie-up.


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## The Triangle (17 February 2021)

*Sigh*  Terrible result again.   Barely 1 million of actual profit.  Negative operating cash-flow, dividend being funded by shareholders who went in for the capital raising.   

Got out _again _this morning.  I made a few dollars but ultimately got this wrong.  One of the shorter holding periods.  Was a good buy at 1.20 - but there are clearly structural issues in the company and the acquisition of black-mores vitamins is going to have to shoulder the burden of getting the ship turned around.   

Also - anyone else see the line blaming lack of Chinese students and Chinese tourists for dr lewin sales drops?  Considering the vitamins are partially traditional Chinese - it suggests to me the same mechanisms that have led to this current downgrade will also flow on to their new acquisition.     They have also flagged a material downgrade to this year vs last year.  

At least debts are still very low and manageable.


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## Dona Ferentes (29 March 2021)

McPherson’s shares have risen almost 20 per cent since last Thursday, when Kin Group subsidiary Gallin launched a surprise on-market takeover offer after building a 4.9 per cent stake over the last two months.

McPherson’s shares reached $1.46 on Friday before retreating to $1.42 today, exceeding Gallin’s $1.34 a share offer, which was pitched at a 9.8 per cent premium to the market price and was less than half the stock’s value in October 2020.



> McPherson’s denounced the offer as “*utterly opportunistic” *and said the bid profoundly undervalued the company, which owns beauty brands including Dr LeWinn’s, Manicare, A’kin and Lady Jayne, and kitchenware brand Multix.




McPherson’s institutional shareholders seem to agree, raising the likelihood Kin Group will have to raise its offer price to secure seats on the board and launch a strategic review.

_- pretty cheap premium for what could be a controlling stake. Still trading above offer..




_


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## frugal.rock (17 August 2021)

Had noticed recently that AEF have become a substantial holder on MCP.

With yearly results out tomorrow, I wonder what AEF is anticipating?
Any ideas @Dona Ferentes ?

Either way, the long term chart looks like it's got some decent overhead space, if indeed things have picked up?
Will be watching out of interest only. Always interested where the bigger fish are putting their dosh.


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## frugal.rock (10 February 2022)

Have been keeping my eye on this one the last few days. 🧐
Might have a nibble if it goes on with it from here, with an uplift in volume.


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## Dona Ferentes (25 March 2022)

frugal.rock said:


> Have been keeping my eye on this one the last few days.



what a tale of woe. Still stuck on sub $1 trading. Since the October 2020 plunge on volume (fundies bailing?) , there has been no recovery. 

The latest Ann, yesterday, hasn't brought back the magic. MCP went from 88c to $1.02 when announced yesterday, and a day and a half later , back to 90c.


> _A series of formal agreements with relevant members of Chemist Warehouse Group to establish a unique strategic alliance with CWG, structured to deliver material commercial and operational benefits to McPherson's_.



_1. McPherson’s will be appointed as Chemist Warehouse’s exclusive long-term distributor of a select portfolio of Chemist Warehouse-owned or controlled health and beauty brands .... The range, which includes  Wagner Vitamins, Wagner Body Science, Bondi Protein, Foster Grant, INC and Microgenics, and will be made available to all customers within the McPherson’s distribution network. _
_2. Chemist Warehouse will increase the portfolio of McPherson's brands which CWG currently ranges in Australia and New Zealand, to include Moosehead, Maseur, Fusion Health, Stratton, Sugar Baby and Happy Flora._
_3. As part of the Strategic Alliance Chemist Warehouse will be issued approximately 14.1 million McPherson's shares on 1 July 2022, thereby becoming a substantial shareholder, with a holding of 9.9% of McPherson’s shares on a fully diluted basis. The shares will be issued at a value of $0.88 each._

..........................
and a week ago, some comment on the company:

*Ally Selby: *.... _welcome to Livewire's *Buy Hold Sell*. I'm Ally Selby, and today we're talking about two of investors' favourite things, dividends and small caps. While small caps are hardly known for their dividends, these gems are really not as rare as you may think. So to analyse [some] of them, we are joined by Martin Hickson from 1851 Capital, and Ben Rundle from Hayborough Investment Partners.

Next up, we have McPherson's, which has an annual yield of around 5.8% and announced a dividend of three cents per share in February. Is it a buy, hold, or sell?_

*Ben Rundle (SELL): *I think McPherson's is a sell. This is a business with an abysmal track record. Over the last 10 years, they've doubled the capital contribution to the business and significantly diluted the equity for no earnings growth at all. I think they come up with a new product every few years. It never endures. It's a sell.

*Ally Selby: *_Well, they actually recently appointed a new chair. His name is Ari Mervis. He used to be a beer and dairy executive. Do you think he could turn the business around? Is it a buy, hold, or sell?_

*Martin Hickson (SELL): *Unfortunately, I agree with Ben. I think it's a sell. It screams cheap. It's got a yield, but I think it's a value trap. They've had a lot of problems with a lot of their new products, Multix, doesn't have a lot of pricing power. We think it's a sell, as well.


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## The Triangle (9 December 2022)

Dona Ferentes said:


> what a tale of woe. Still stuck on sub $1 trading. Since the October 2020 plunge on volume (fundies bailing?) , there has been no recovery.
> 
> The latest Ann, yesterday, hasn't brought back the magic. MCP went from 88c to $1.02 when announced yesterday, and a day and a half later , back to 90c.
> 
> ...



Analysts got it right for once!

You have to ask some questions when a company goes from $3 to $0.70 in 2 years, and has 2 failed takeover attempts, and continually makes acquisitions which don't ever seem to pay off.   Of all the heinous things which happen on the ASX I'm rather surprised to see ASIC taking action here, but still happy nonetheless to see some degree of justice brought to these elites.  This did have me thinking - what is it that triggers ASIC? I've never once received a reply to any of the online complaint forms that I've filled out - so I'm thinking it's either a high-ranking politician who has been stitched up and makes it known that 'XYZ' needs to be investigated, or its the company itself which rats out its own people and thus makes prosecution much easier???  Who knows...

Thought about taking a 3rd dip into MCP as debt level is still very low and cash generation is still ok, adjusting for change in receivables I get about 9 million in operating cashflow for FY22, assuming 4 million in leases, and 2 million in capital a year that's about 3 million left for 'free' cashflow which I don't think justifies a market cap of $100m at 70cps or 6 million in dividends.  I get a rudimentary EBITDA of about 7.5 million (not using MCP's EBITDA) which is close to my adjusted operating cashflow, so no warning bells there. 

I put it back on my watch list, the half year results should be interesting and if they scrap/cut the dividend and this thing sinks to the 40-50 cent range I may revisit things.


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