MCE - Matrix Composites & Engineering

[skc]

Could be a long time coming....noticed that the price dropped significantly during the week ahead of the latest announcement of revised downward forecast. Seems like there are always lots of people who are in the know before the forecasts are published on ASX. This is the third or fourth time the same has happened.

Yes I think your right but I think most or us have known for a while now its no shock horror just par for the coarse now. As for the smart money they seem to know everything before the retail investor, ASIC seems to be unable or unwilling to do anything about it.

There's a less sinister explanation of this imho.

There are many facts about MCE that the market and the public know about - the date of AGM (which most likely include an update), the lack of large contract announcements since the full year report, and the uncertainty in commodity markets and outlook amongst mining service companies.

Over the past week or two, I've seen a few analysts alerting investors of the above facts. The same analysts also arrived at the conclusion that there's a risk of revenue miss / profit downgrade at the AGM.

The "smart money" didn't know for sure that there would be a profit downgrade, but based on the facts and what's happening in the sector, the smart money would most likely conclude that the risk of a downgrade is pretty high. (Even an amateur like me saw the probability back in July).

Hence you see increased selling / shorting since early / mid Oct. The short side was the better probability play, and it makes the chart looks like the smart money knew it beforehand. The reason that the shorting didn't start earlier was because, the longer the exposure period, the higher the risks. If you short it for 4 months, the chance of them landing a large contract is much higher than from 3 weeks before the AGM.

Take a look at say BOQ before the profit update a few weeks ago, or TWE, WOR and SMX last week... you will see that there are also plenty of examples where the "smart money" appear to get it pretty wrong.

 

[Intrinsic Value]

There's a less sinister explanation of this imho.

There are many facts about MCE that the market and the public know about - the date of AGM (which most likely include an update), the lack of large contract announcements since the full year report, and the uncertainty in commodity markets and outlook amongst mining service companies.

Over the past week or two, I've seen a few analysts alerting investors of the above facts. The same analysts also arrived at the conclusion that there's a risk of revenue miss / profit downgrade at the AGM.

The "smart money" didn't know for sure that there would be a profit downgrade, but based on the facts and what's happening in the sector, the smart money would most likely conclude that the risk of a downgrade is pretty high. (Even an amateur like me saw the probability back in July).

Hence you see increased selling / shorting since early / mid Oct. The short side was the better probability play, and it makes the chart looks like the smart money knew it beforehand. The reason that the shorting didn't start earlier was because, the longer the exposure period, the higher the risks. If you short it for 4 months, the chance of them landing a large contract is much higher than from 3 weeks before the AGM.

Take a look at say BOQ before the profit update a few weeks ago, or TWE, WOR and SMX last week... you will see that there are also plenty of examples where the "smart money" appear to get it pretty wrong.

Yes that is a plausible explanation that you have given for this instance.

But it doesnt cover all the other times it has happened.

I believe the same thing happened when there was a trading halt back last year due to some financial irregularities.

 

[skc]

Well they won $50m in contracts. FY13 revenue forecast is still $225m (or is that revenue target => big difference) so they are no where near that at the moment.

The quote book up to FY14 = $490m. They said historical conversion from quote to order = 30%. So there's plenty of quoting before they can get anywhere near $225m in revenue.

The good thing is that it will surprise no one if they miss on the target.

Well... there it is profit downgrade #? (I've lost count).

Revenue guidance for FY13 is now $145m vs $225m back in July. NPAT now $1m having just reported $0.5m of profit for the HY...

$1.50 is the low back in Dec and if it doesn't hold then the chart has no real support to speak of.

 

[tinhat]

They get my sympathy because the $AUD must be killing them. They lose my sympathy because the only thing you ever hear from the management is either silence or bollocks arising from wishful thinking.

 

[fanger]

$1.50 is the low back in Dec and if it doesn't hold then the chart has no real support to speak of.

The way this thing has been trading we'll be at 20 cents in 6 months.

 

[zac]

The way this thing has been trading we'll be at 20 cents in 6 months.

Even though its under bool value now?

 

[robusta]

Even though its under bool value now?

I like to buy under book value but only with prospects of good sustainable profits.

 

[fanger]

Even though its under bool value now?

Why should that matter when is the market ever rational.

 

[zac]

It appears the forecasts for Matrix are on the mend and its getting contracts for expected production.

I notice it has no long term debt but short term debt has recently jumped to around $26M, anyone know why?
While its trading under Book Value with expected recovery im wondering if its a good Buy.

 

[Intrinsic Value]

It seems there is no floor to MCE. Down to 97c today.

How low can it go?

Maybe I should sent an email to RM and ask him his IV for MCE

 

[ROE]

Even though its under bool value now?

Book value are old school Ben Graham

it doesn't do any good for retail holder plus unless you know intimate details of the asset
you have bugger all chance of knowing exactly how much it is

A machine they bought for $50K and book that as asset under their book, how much do you think
they can sell them for if it comes to sell time under pressure? maybe 50% less or more...

I take the exception of real estate and discount a decent margin and that is a good book value play...

Buy only if you think the business can turn, don't buy for book value, you will go down with it...

PS: have no interest just observing before... after or now

 

[fanger]

It seems there is no floor to MCE. Down to 97c today.

How low can it go?

Maybe I should sent an email to RM and ask him his IV for MCE

Remember RM said it was worth $12 tells everyone its undervalued and buy it only to sell it and never talk about the stock again.

Earnings have fallen off a cliff, I think its only worth some where between 0 at 50 cents at the moment. Some more contract wins will change all that though.

 

[Intrinsic Value]

Book value are old school Ben Graham

it doesn't do any good for retail holder plus unless you know intimate details of the asset
you have bugger all chance of knowing exactly how much it is

A machine they bought for $50K and book that as asset under their book, how much do you think
they can sell them for if it comes to sell time under pressure? maybe 50% less or more...

I take the exception of real estate and discount a decent margin and that is a good book value play...

Buy only if you think the business can turn, don't buy for book value, you will go down with it...

PS: have no interest just observing before... after or now

Using book value is very dodgy indeed especially some of the things that I have seen over the last 15 years with the companies I have been working at and the games they play with their asset valuations.

 

[skc]

They did build a massive plant so there's plenty of value there if and when the order starts to flow again.

But there'd be plenty of time to buy after the signs of a recovery are confirmed imo.

 

[zac]

Using book value is very dodgy indeed especially some of the things that I have seen over the last 15 years with the companies I have been working at and the games they play with their asset valuations.

Wow im ive been made aware on the pitfalls of Book Value.
Where can I find more on this??

I was under the impression under Intrinsic Value is a good buy and under Book Value even better.
Clearly ive been misguided.

 

[VSntchr]

Wow im ive been made aware on the pitfalls of Book Value.
Where can I find more on this??

I was under the impression under Intrinsic Value is a good buy and under Book Value even better.
Clearly ive been misguided.

Book value is still a measure appropriate to some businesses. Just not all.

Are the assets worth value to other companies, are they actually realisable etc

 

[tinhat]

Wow im ive been made aware on the pitfalls of Book Value.
Where can I find more on this??

I was under the impression under Intrinsic Value is a good buy and under Book Value even better.
Clearly ive been misguided.

I did manage to learn a couple of useful things at uni. They were mainly to do with how to organise drinking games but in addition to that, one thing I remembered (from marketing of all things - truly the most feeble of academic disciplines) was competitive advantage. Just because you've gone and sunk a truck-load of cash into something doesn't mean you are going to be able to make money out of it. For whatever reason, Matrix has gone and geared up into a big fancy automated factory and now doesn't have the orders to justify the capital outlay.

As for book value - I buy stuff from liquidator auctions (grays online especially) all the time well below book value. How many people do you think are going to be in the market for a fully automated buoyancy riser production plant (in a market where you can't make any money making buoyancy risers under the AUD)?

When a company goes into liquidation (and I have been involved in one such case) the accountant's book value goes out the door. You call in the liquidator who send their valuer who puts a valuation based on an estimate of auction clearance price on everything that the company owns, from what is in the stationary cupboard onwards.

 

[zac]

Cheers Tinhat,
Thanks for clearing that up.

BTW im not a fan of drinking games. I dont like anything that may hinder me from getting drunk lol

 

[fanger]

So what changed MCE's sentiment on Friday? I skimmed thought the third quarter report and it seemed it was basically what they released in Feb.

 

[zac]

I was closing one trade and waiting for volume to hit my order so then I could buy MCE @ 80c and cant beleive it jumped up 20%.
The announcement that its looking more profitable than 1st anticipated I guess got some people on the band wagon.