MCE - Matrix Composites & Engineering

[skc]

So as a tech analyst where do you think it is going short term and medium term?

I don't qualify myself as a tech analyst (not a good one anyway), but supports/resistances are conveniently located at $3, $4, $5 and $6.

I'd say without substantial news it should meander between $3 to $4.

I think Skaffold has it valued now at $1.70

I read somewhere that Skaffold has CMI valued as having the best Margin of Safety on the market - when it neglected the large amount of preference share on issue

 

[odds-on]

Yours is probably a more sensible way of trying to estimate a value than RM's. At least you recognise that IV in a company like MCE is ephemeral. As notting said, it's a difficult company to value because earnings can jump around. If you believe that oil prices will continue to climb then it's probably got a higher value. There does seem to be a lot of bad news in the price. Personally, I think the company is in the right place at the right time and seems to be pretty well run, even with its current growing pains.

The biggest issue I have with RM is that he preaches long term investing, but then can slash the company's IV by 80-90% (How can you be so wrong in such a short period of time?). To me, that would indicate he got something wrong with the original analysis. We all make mistakes and I've had some shockers but then again I'm not on TV trying to sell my system. He should at least say he got it wrong.

I use a DCF and PE ratio to value companies but in the case of MCE I tend to see it as more at the speculative end and any DCF is going to be extremely difficult.

I was reading Bulls, Bears and a Croupier by Matthew Kidman (ex WAM) and he said in his experience that most companies are rubbish but they have good spells. Wise words IMO and not to be forgotten when looking at companies like MCE. As for RM, my only gripe is the "extraordinary business" guff, like reading one book will help you spot one, me thinks once you have bought and sold a couple of dozen over twenty years then you might have an idea what to look for.

Personally i only use PE ratio for predictable companies otherwise i prefer use price to sales or dividend yield with strong economic tailwinds (decent revenue growth over many years)

Serious question. when calculating IV how much range do you apply for it to be within a fair range? Personally i use +/- 20%.

Cheers

Oddson

 

[Ves]

I read somewhere that Skaffold has CMI valued as having the best Margin of Safety on the market - when it neglected the large amount of preference share on issue

I don't know a thing about this company but that is a decent run up. 11.5% today alone! Did the program neglect the pref shares and over-state the ROE or something?

 

[McLovin]

I was reading Bulls, Bears and a Croupier by Matthew Kidman (ex WAM) and he said in his experience that most companies are rubbish but they have good spells. Wise words IMO and not to be forgotten when looking at companies like MCE.

I agree with that 100%. I think someone else on here once pointed out that RM is really just following earnings momentum. Australia doesn't have a domestic marketplace big enough to support more than a handful of truly wonderful companies. COH is probably the real standout, IMO, of an Australian business with a fantastic product (despite recent hiccups) that has been able to dominate it's market worldwide.

Personally i only use PE ratio for predictable companies otherwise i prefer use price to sales or dividend yield with strong economic tailwinds (decent revenue growth over many years)

I use DCF and PE. The PE model I use is actually designed for sideways markets, where PE is compressing.

Serious question. when calculating IV how much range do you apply for it to be within a fair range? Personally i use +/- 20%.

How long's a piece of string? It really depends on the company. The more predictable earnings are, the less fuzzy the IV. I try not to get too hung up on coming with a value because they're never that accurate anyway. I get in the ballpark and then apply an MoS. Sometimes doing a sensitivity analysis can really help, you can calculate the IV under different scenarios and then take the worst case and apply MoS to that.

 

[notting]

COH is probably the real standout, IMO,

Absolutely, and if it hangs around where it is for much longer I'm soon going to be irresponsibly dependant on it, and sleeping like a baby!

 

[odds-on]

I agree with that 100%. I think someone else on here once pointed out that RM is really just following earnings momentum. Australia doesn't have a domestic marketplace big enough to support more than a handful of truly wonderful companies. COH is probably the real standout, IMO, of an Australian business with a fantastic product (despite recent hiccups) that has been able to dominate it's market worldwide.




I use DCF and PE. The PE model I use is actually designed for sideways markets, where PE is compressing.



How long's a piece of string? It really depends on the company. The more predictable earnings are, the less fuzzy the IV. I try not to get too hung up on coming with a value because they're never that accurate anyway. I get in the ballpark and then apply an MoS. Sometimes doing a sensitivity analysis can really help, you can calculate the IV under different scenarios and then take the worst case and apply MoS to that.

McLovin, thanks for the feedback. It helps me refine my own valuation techniques and stock selection criteria. You have pointed out that COH is one of the only "extraordinary businesses" listed on the asx - what approach should an investor take to make some money? Valuing companies like MCE has considerable risk. Hunting for liquidation value type investments has liquidity and diversification risks.
One approach i am considering is running a screen using Martin Zweig criteria based on earnings and revenue growth over many years and then perform balance sheet checks, those that pass this i buy with a greater % percentage of funds allocated to the cheaper stock. I ran screen on FT.com and it came up with CCV, CUE, JBH and MND.

Cheers

Oddson

 

[McLovin]

It might be better to start a new thread or maybe ask Joe to move the last couple of posts into a new thread, instead of discussing broad things in the MCE thread.

 

[skc]

Director just sold 1m shares on market. May be that will dampen the enthusiasm a bit?

Here's my hypothetical short trade trade @ $3.75 with stop at $3.85.

Target $3.40.

Lol. Target hit to the dot. 3.5R in 3 sessions.

Somehow hypothetical trades always work better than real ones

 

[notting]

Bit of buying came it at 3.40!
Or maybe maybe it was all those paper traders taking profits on their shorts!
Dropped it at 3.50 I mean really if you can't stand up today I don't like your chances for the near term Mr MCE!

 

[StumpyPhantom]

Wow! What a saga lies in this MCE thread I've been reading over the last 12-16 months. I too am (was) a RM follower who went into MCE on faith, and I'm a little over RM 'holier than thou' now. I've now relegated RM to just one of the views that I take into account. So MCE now waits in my SMSF fund for the magic to come back - I've got maybe a decade before retirement so it should make it up by then (and then hopefully with some added gusto). I really do believe all the views that say it's got long-term potential but I'll hang around the explorers and the biotechs in the meantiime to get the "rush" once in awhile.

 

[zac]

Wow! What a saga lies in this MCE thread I've been reading over the last 12-16 months. I too am (was) a RM follower who went into MCE on faith, and I'm a little over RM 'holier than thou' now. I've now relegated RM to just one of the views that I take into account. So MCE now waits in my SMSF fund for the magic to come back - I've got maybe a decade before retirement so it should make it up by then (and then hopefully with some added gusto). I really do believe all the views that say it's got long-term potential but I'll hang around the explorers and the biotechs in the meantiime to get the "rush" once in awhile.

With the high AUD value a lot of companies that rely on the export market as such arent doing so well. This is evident with the poor performance of the All Ordinaries where as the US markets have rallied nicely.
China now has caused further set backs but I truly see Matrix as being able to become a much more profitable company when the AUD devalues itself.
With the way the US is heading Im tipping to see better performance in the next few years.
There are obviously more factors than just that plaguing MCE but I think a more competitive market will help them spring back.

 

[clinta44]

With the high AUD value a lot of companies that rely on the export market as such arent doing so well. This is evident with the poor performance of the All Ordinaries where as the US markets have rallied nicely.
China now has caused further set backs but I truly see Matrix as being able to become a much more profitable company when the AUD devalues itself.
With the way the US is heading Im tipping to see better performance in the next few years.
There are obviously more factors than just that plaguing MCE but I think a more competitive market will help them spring back.

How much do you think the natural hedge helps MCE? I haven't looked into it a great deal but they bang on about it a fair bit.

 

[VSntchr]

Still no major orders announced for MCE...ive got a feeling that the 2nd half may be just as bad as the 1st..

Now to add to the worries of shareholders the original founder Max Begley has retired (although he is 70).

Gladly not currently holding.

 

[fanger]

Its becoming one of the most boring stocks on the market. You would think that with MCE quoting on $700mil odd they would have one something by now.

 

[skc]

Its becoming one of the most boring stocks on the market. You would think that with MCE quoting on $700mil odd they would have one something by now.

They don't need to report on every contract win. Some companies do it but it is not a regulatory requirement or anything. The Board only needs to disclose if the company's performance is expected to be materially different to what the market is told/believes.

But on the history of MCE and for the sake of investor's tickers, you think that management should disclose meaningful contract wins on a more regular basis.

It is an interesting example of how "no news" is interpreted based on investor confidence of the board.

 

[Intrinsic Value]

They don't need to report on every contract win. Some companies do it but it is not a regulatory requirement or anything. The Board only needs to disclose if the company's performance is expected to be materially different to what the market is told/believes.

But on the history of MCE and for the sake of investor's tickers, you think that management should disclose meaningful contract wins on a more regular basis.

It is an interesting example of how "no news" is interpreted based on investor confidence of the board.

I think there are quite a few holders of MCE whose patience is sorely tested having bought high and hoping that things will turn around. But how long can they wait? MCE could really nosedive if they dont get some good positive news this year.

 

[StumpyPhantom]

I think there are quite a few holders of MCE whose patience is sorely tested having bought high and hoping that things will turn around. But how long can they wait? MCE could really nosedive if they dont get some good positive news this year.

+1 Dividend statement of 2 cents per share in the mail today!

 

[Sutekh]

Starting to become interested in MCE as it moves into the 2.80-2.90 region where it has bounced off 3 times before in the last year.



Today it closed off the bottom of $2.82, and I will definitely be keeping an eye on it in the next few days, but the volume was very light; not nearly as convincing as the previous visit to $2.80, which was followed by a great run up to $3.80.

 

[skc]

Starting to become interested in MCE as it moves into the 2.80-2.90 region where it has bounced off 3 times before in the last year.

View attachment 47023

Today it closed off the bottom of $2.82, and I will definitely be keeping an eye on it in the next few days, but the volume was very light; not nearly as convincing as the previous visit to $2.80, which was followed by a great run up to $3.80.

Does bouncing on the same region 3 times make the support stronger or weaker?

I know the conventional answer is "the more touches, the stronger it is"... but I can't help but thing it is often the opposite.

 

[odds-on]

Does bouncing on the same region 3 times make the support stronger or weaker?

I know the conventional answer is "the more touches, the stronger it is"... but I can't help but thing it is often the opposite.

I want to buy MCE as it is a perfect candidate for some speculation. It is on my "fallen angels" stock screener. Speculation requires discipline and I will not purchase until the Price to Sales is less than 1 and I see some positive company announcements plus media reviews.