MMS - McMillan Shakespeare

[craft]

In relation to the MMS off-market share buyback.

I hold in a superannuation accumulation account, so a tax rate of 15%. and have run the numbers to see if it is worthwhile participating.

Here is the calcs in case it helps somebody else model their own numbers.

 

[craft]

I’m going to tender some of my MMS shares into the buyback. Here is a trade analysis of one of the parcels.

The $15.95 after tax sale price is based on todays close and the calculations in the above post. Buy back is not concluded until 22/10 so final proceeds received will vary a bit.

 

[bigdog]

One of the biggest falls today after asx announcement
9/12/2019 9:07:15 AM FY20 Trading Update

McMillan Shakespeare revealed that it expects its underlying net profit after tax for FY 2020 to be in the range of $83 million to $87 million.

This compares to underlying net profit after tax of $88.7 million in FY 2019. Which represents a year on year decline of 2% to 6.5%.

MS is experiencing more challenging market conditions in Australia, New Zealand and the United Kingdom than expected and these challenging trading conditions aren’t expected to improve any time soon.

Regulatory changes impacting credit and insurance products have resulted in a reduction in its margins this year.

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[peter2]

MMS recovered from the Covid selloff slowly, then rallied strongly from $10 to $12.

MMS is due to report 1HFY21 in two days (24/2/21). I'm expecting a good report since their last business update was well received (price spiked higher). I've bought an initial position and will wait to see what happens to price after the news.

 

[finicky]

Not Held

 

[qldfrog]

Not Held

View attachment 183266

Reading the announcement lingua is enough to scare me as an investor, but maybe for trading...
Plenty of volatility/range

 

[peter2]

Noticing the increased demand (uptick in prices) for car leasing companies I started a position in MMS last week. Just a half position in case my timing was incorrect. Will add, after higher low forms.

 

[mullokintyre]

Noticing the increased demand (uptick in prices) for car leasing companies I started a position in MMS last week. Just a half position in case my timing was incorrect. Will add, after higher low forms.

View attachment 185890

I have also entered a small stake in MMS.
Its down to 14.70, but has a good dividend , and I cannot see there being a slowdown in vehicle leasing and employee management.
Plan to increase my stake over time (hopefully averaging up rather than down).
Mick

 

[peter2]

I've sold my initial position as my timing has been shown to be wrong. Will monitor for another reversal trading opportunity.

With the WFH crowd being forced back to the office I thought car leasing as an employee incentive would pick up. We'll see.

 

[mullokintyre]

I've sold my initial position as my timing has been shown to be wrong. Will monitor for another reversal trading opportunity.

With the WFH crowd being forced back to the office I thought car leasing as an employee incentive would pick up. We'll see.

I reckon a good percentage of car leasing is for tax purposes, so I expect it to continue, especially when the governments made novated leases on EV's a little more desirable by eliminating them from FBT calcs.
Mick

 

[finicky]

What 'Market Matters' was saying in answer to a reader question back on 31 August 2024.

"Hi Tony,

As we can see from the chart the market indeed initially liked what it saw in MMS’s result, the numbers were solid and broadly in line with expectations, however in the earnings call post the result, the CEO was questioned on the first 8 weeks of trading, saying….Yeah, look, I think the start of the new financial year has been pretty consistent with what we saw in June. So, as alluded to, obviously, we think the economic conditions, macro conditions, remain similar.

The latter part of FY24 was tougher for these companies, and those comments imply FY25 has started in the same way, i.e. they are not experiencing any real recovery. That forced analysts to rejig their numbers, with consensus earnings per share (EPS) downgrades the result. On that same day, Smart Group (SIQ) and SG Fleet (SGF) were also sold off, but in the case of SIQ, they reported the following day ahead of expectations + they’ve started FY25 better than peers. We own SIQ and think their result and trading update was superior to both MMS & SGF, and they should outperform from here."

Not Held

 

[mullokintyre]

MMS continues to fall further.
Seems like a solid company, pays dividends etc.
Thought I would have it for defensive purposes, and initially looked like I had bought it around the low.
Should have stuck to trading goldies.

Mick

 

[galumay]

Seems like a solid company, pays dividends etc.

Problem is the balance sheet, debt is over 4x equity. Divvy is more than earnings, basically paying divvy with debt.

 

[finicky]

SIQ might be the better bet? Although not very cheap its debt is moderate.

I hold neither

Note: Numbers in final column are for Cal 2023, SIQ H2 is December

 

[galumay]

SIQ might be the better bet?

I think you are right, its a better quality business, payout ratio is less than 100%, its got pretty good FCF, as you say debt is much lower, (still more than I like.). ROIC is stronger.

Neither interest me, but on a superficial glance i would pick SIQ if forced to own one of them!

 

[finicky]

Again our great minds concur

 

[mullokintyre]

Problem is the balance sheet, debt is over 4x equity. Divvy is more than earnings, basically paying divvy with debt.

Yes, it does carry a lot of debt, but I reckon its mainly to the fact that its a lease provider.
These liabilities are large, but spread over many clients.
Ten clients going bust over such a large volume does not affect the bottom lie as much as say ten clients going bust for a subcontractor will wipe them out.
Still not a great investment, especially the fact that they are paying out more than 100% in divs.
Mick

 

[galumay]

Yes, it does carry a lot of debt, but I reckon its mainly to the fact that its a lease provider.
These liabilities are large, but spread over many clients.

Its complex, $230m of the long term debt is just Bank loans, the rest, $311m is notes payable, secured against the fixed & floating charges over the leased vehicles. So in respect of the notes payable the liability is to the warehousing trust, I guess you could argue that they are unlikely not to be able to keep within covenants because the notes are secured against multiple small assets (leased vehicles.)

I am only guessing though, as its not a business nor business model I have spent much time on.

 

[Faramir]

I am out of touch with MMS. I sold it roughly 3 years ago and brought VGS.
Thank you everyone for highlighting what I have been overlooking. I feel relieved that I got out of MMS but the reason why I got out is quite dumb.
I didn’t have an proper understanding of MMS but VGS, an international Index fund seems like simpler and a better option for me.

 

[divs4ever]

MMS continues to fall further.
Seems like a solid company, pays dividends etc.
Thought I would have it for defensive purposes, and initially looked like I had bought it around the low.
Should have stuck to trading goldies.
View attachment 192760
Mick

if it is any consolation , i tore up some cash on this as well

and while SOME goldies turned into nice winners i ripped up some cash on some goldies as well

i doubt i will come back to this stock ( or it's rivals )

i see a widespread reduction in headcounts ( except , disappointingly in government )

therefore less scoring fringe benefits , with digitization and automation replacing some on the payroll

one trend to watch is if the 'work from home' trend is reversed or just used as a ploy to reduce staffing levels