MMS - McMillan Shakespeare

[skc]

MMS went under $10 this morning, intra day low ~$9.50.

There is a couple of downside risks floating around at the moment and the ever-present political risk is (deservingly) heightened at the current time. With that said, the price is getting back to pretty compelling levels if you assume MMS can maintain the model.

It went ex-div by 21c this morning. Often on ex-div days the market depth becomes really thin (as many brokers automatically delete standing orders). The seller just managed to find a hole in the thin depth and flash crashed it down to $9.50 on only 10,000 shares. Probably some charting coming into play as well as $10 was a nice round number for automated stop losses (to those silly people who use them). So nothing to see really... Unless whatever Craft said is real and having some influence...

The full draft of the not for profit working group was released via freedom of Information, last week - suspect that is influencing the price at the moment.

Please explain?

 

[craft]

It went ex-div by 21c this morning. Often on ex-div days the market depth becomes really thin (as many brokers automatically delete standing orders). The seller just managed to find a hole in the thin depth and flash crashed it down to $9.50 on only 10,000 shares. Probably some charting coming into play as well as $10 was a nice round number for automated stop losses (to those silly people who use them). So nothing to see really... Unless whatever Craft said is real and having some influence...



Please explain?

The spike today is probably more to do with the ex date - stuff all volume down there.

More weighing on the market would be this.

http://www.treasury.gov.au/Access-to-Information/DisclosureLog/2014/1447

 

[burrow]

MMS went under $10 this morning, intra day low ~$9.50.

There is a couple of downside risks floating around at the moment and the ever-present political risk is (deservingly) heightened at the current time. With that said, the price is getting back to pretty compelling levels if you assume MMS can maintain the model.

Ex-dividend $0.21 today.

 

[skc]

The spike today is probably more to do with the ex date - stuff all volume down there.

More weighing on the market would be this.

http://www.treasury.gov.au/Access-to-Information/DisclosureLog/2014/1447

Thanks. This is definitely important. I wonder if MMS will bother making a statement about it (which will probably just draw people's attention to it and put pressure on the share price anyway).

 

[craft]

Thanks. This is definitely important. I wonder if MMS will bother making a statement about it (which will probably just draw people's attention to it and put pressure on the share price anyway).

Probably should have done it by now if they were going to.

Its all been basically in the media and public domain and commented on prior by the company as the working group handed the report to the government quite a while ago - this is just the first time the actual report has been seen in full thanks to somebody doing a FOI.

 

[galumay]

The market reacted very favourably to the news of the strength of MMS recovery from the Rudd debacle, up nearly 6% today to close at $11 exactly.

I wonder if the institutional buyers are moving back in again?

Anyway, happy to continue holding, I bought as a spec punt under $9, but re-rated them into my investment portfolio after the election. I will reassess mid year and see where its going.

 

[Faramir]

It fell under $10 because of rumours of changes to FBT. There will be no changes this Budget. I am predicting (ok -guessing) that everyone will realise this either Tuesday or Wednesday after Budget Night.

I hold some shares. Got them last month at $9.62. I wish brought MMS last year at $7 but I wasn't monitoring stocks last year. I am hoping hold MMS for the long term.

 

[qldfrog]

other way of seeing that jump yesterday:
enough people have had access to the budget this week end before release and confirmation MMS was safe for another year=>
insider trading but on a wider spread, so wide the share price significantly rises...
my guess only but sometimes, the most obvious answer is the right one!

 

[galumay]

other way of seeing that jump yesterday:
enough people have had access to the budget this week end before release and confirmation MMS was safe for another year=>
insider trading but on a wider spread, so wide the share price significantly rises...
my guess only but sometimes, the most obvious answer is the right one!

Yes, that is another possibility, although I really doubt that could move the price 6% in a days trading - after all there was never the slightest suggestion that there would be any changes to the process in this budget.

One thing it highlights is how difficult it can be to explain price movements even after the event and with the aid of 20-20 hindsight, yet people stake their savings on believing they can predict price movements with foresight!

I do agree with your 'Occam's razor' point, the most obvious/simplest explanation is very often correct, and thats not unsupportive of buying action by Institutionals.

I also had a bit more of a detailed read of their recent announcements and the expanding business in the UK looks to have a lot of potential and may help to broaden and strengthen the underlying business model for MMS.

 

[burrow]

Wouldn't be surprised to see MMS back up around the $15 mark by this time next year. EPS forecast about $0.97 and PE of 16 would do it. The long--term is more clouded as analysts will always have potential FBT changes in mind. That being said, MMS are diversifying away from this risk.

Tim.

 

[ROE]

I Actually prefer smart group over this it listed today and dropped 9% so I pick up some...seem reasonable price with risk and reward after the price drop.

Their earning is fairly diversified and not all ties to car leasing, their revenue only drop 4% with the FBT
debacle ... 4 times smaller and has room to grow

but both are good business with regulation uncertainty.

 

[Ves]

The temporary suspension of Remserv (MMS subsidiary) from writing new contracts for novated leases for QLD Government employees is an interesting development. Whilst it is reportedly immaterial in terms of earnings according to the company, it potentially raises questions between MMS and their on-going relationship with the QLD Government (which by all reports is a very lucrative contract - especially the exclusive agreement with QLD Health).

I've had the feeling in the past that Fairfax love to jump all over this company - so it may turn out to be another storm in a teacup.

 

[VSntchr]

Looks like the storm in a tea-cup analogy has proven to be the correct option VES, announcement out this morning stating ban lifted and no material impact.

 

[Faramir]

Please help a beginner like me understand this:
http://www.asx.com.au/asxpdf/20150205/pdf/42wfq08sv1w66s.pdf
Announcement made 8pm.
Aquisition Of Presidian for $115 million.

I don't know if that's too much, just right or a bargain?

I have no idea of how the market will react later today. I know won't react. I purchased MMS last April 2014, sat through July dips and now sitting on about 18-19% profit. It was the second stock I purchased. I completed missed out on the July 2013 drop because I had no involvement in the stock market.

First half FY 15 NPAT for McMillian Shakespeare is expected to be $31.1 million

Presidian revenue is $64.8 million and EBITDA $12.2 million for FY 2014
For Dec-14 YTD Normalised Revenue $37.7 mil and normalised EBITDA $7.2 mil

I am sorry if I cannot add any valuable input to MMS (I am still a beginner). I do not understand the cons of this deal. The pros are all spelt out in the report (see above link)

The main question: did they pay a fair price for it? Will adding a new Retail Financial Services arm to MMS, decrease or increase MMS performance as a business.

(My gut beginner naive feeling is it will increase it.) no more from me. Time for more experienced posters to add more valuable input/contributions to this thread

Thank you in advance.

 

[peter2]

Short term break-out momentum trade setting up suggested by forum regular*.

Price consolidating above recent highs. I would like to see a close >12.10 with above average volume.

Note: goes XD 0.25ff 30/3. We might see some demand for the stock (with div) this week if the market remains bullish.

Note: I'll even consider a failed bear trap (<11.50) if that happens as a buy signal.

Definitely one for the daily watch list.

 

[galumay]

Yep, the market has reacted well to MMS's continued recovery from the effect of the threat of legislative change prior to the last election. All the fundamentals were positive in the H1 report, strong growth in the FCF so I would expect it will continue to perform well.

Happy to hold and collect the divvys.

 

[Faramir]

This article in thebull.com.au answered my question in post #354.
http://www.thebull.com.au/premium/a/52994-mid-cap-stock-pick-for-long-term-investors.html

I like Tony Featherstone's articles. I think the last 5-7 paragraphs are important reading for me. MMS is one of my best performing stocks so far.

I like these two paragraphs in the article:

Clearly, the company is not waiting for any change. Its $115 million acquisition in February of Presidian is a smart move. Presidian is an independent provider of finance, warranty and insurance products and a specialist in used cars. The acquisition bolsters McMillan’s presence in consumer finance in new and used cars and makes it less reliant on FBT exemptions.

McMillan’s United Kingdom operations, expected to turn profitable in 2014-15, are another long-term growth engine. A bigger offshore presence reduces the company’s exposure to Australian regulatory risk and the UK market in new-car salary sacrificing has excellent prospects.

Any more input from anyone?

 

[galumay]

Any more input from anyone?

I find the thing with acquisitions is that there is not much substitute for waiting and looking at what it does to the balance sheet. Its hard enough to have any level of certainty about what will happen in the future with a stable company's financials, let alone one that has added an acquisition.

The company's always bang on about synergies - but all too often the net result is negative rather than positive!

The MMS deal all sounds good, at least its largely withing their realm of competence, its proportionally small and the numbers look OK. I think the main positive is how well MMS are doing as a whole business, my analysis shows very strong FCFE growth and I am happy to continue to hold.

 

[craft]

Short term break-out momentum trade setting up suggested by forum regular*.

Price consolidating above recent highs. I would like to see a close >12.10 with above average volume.

Note: goes XD 0.25ff 30/3. We might see some demand for the stock (with div) this week if the market remains bullish.

I'm not sure that Peter still has this on his radar for Pav's portfolio So I will just make a quick mention why I suggested it to him.

I eyeball charts of my holdings regularly. Not so much to trade them technically but to just absorb a source of visual information.

This jumped out at me so I mentioned it to Peter.




Price compressing above a resistance/support level with an internal 5 wave pattern. Most importantly a marginal break of the resistance on the 5th wave that didn't follow through - making the marginal break of the compression look promising. When I was trading I would have taken the entry at next open with my initial exit the low of the trigger day.

Depending how you treat the dividend in relation to trading (which is the really interesting question) The trade is still open and MMS has today made a new high (again depending on how you treat dividends) on the time frame relevant to the trade.

Question - how do you treat dividends in relation to your entry patterns / trade management exit points?

 

[peter2]

I liked the location of the consolidation (above old highs) as well (noted in post #355). The choice of the BO level was tricky with a few of us having differing opinions so I selected 12.30. I had fully intended to include this trade if it triggered into the Momentum thread.

It did trigger (traded >12.30) the day before it was due to go XD. I did not post the trade as we know that most prices fall by the amount of the div (MMS 0.25ff). craft is quite right, trading around XD dates is tricky when the amount of the div is a significant part of the initial risk. In this case I decided to avoid it (in the Pav Mom thread) and keep an eye on it.

If price trades >12.30 soon then it would be a better trigger (IMO). I love seeing stocks swallow their div and trade higher.