MTU - M2 Group

[robusta]

Re: MTU - M2 Telecommunications Group

New all time high and close for MTU. Interesting in light of the carnage, plunge and whipsawing posts of the last page or so.

Obviously there’s now anticipation of a good result – which if it occurs would be quite impressive considering the integration tasks they have on their plate.

This business is giving me a lot to think about, I took some profits at $6.12 a while ago now the price has zoomed to over $7.00 it should ve very interesting reading the results next week. I probably should think about selling but where else to allocate the capital into something that is growing earnings?

Let your profits run.

You can't make a loss taking profits.

Anyway not a bad problem to have.

 

[Ves]

Re: MTU - M2 Telecommunications Group

Why take profits if you are a long-term fundamental investor and the business has not give you an exit criteria? You are just handing the interest-free loan back to the government earlier than you otherwise would have. As much as 23% of your profits could be handed back (assuming holding period over one year).

Different story if you are forced to sell, then you just pay the tax.

 

[Muschu]

Re: MTU - M2 Telecommunications Group

Really interesting and I must be missing something. Maybe the record results announced today were already factored in... MTU hits $7.27 and then slides to around $6.81 at the moment.
Beyond my comprehension like most of the market.....

 

[clinta44]

Re: MTU - M2 Telecommunications Group

Speaking on long term fundamentals for MTU... the biggest concern I have with this company is its acquisitions. While most of the acquisitions make sense, the way they purchase these companies doesn't make too much sense (IMO).

They have almost added 100 million new shares since FY2008.

If they limited the issuing of shares EPS could be north of 50c now...

I have a funny feeling the board feels that the share price is overvalued and are issuing shares because its cheaper than using existing cash flow and/or existing debt facilities. But in saying that, if my opinion is correct, at the end of the day the board is still stiffing the MTU shareholders by issuing shares at over inflated prices.

anyone else have opinions on the acquisition strategies?

 

[Boggo]

Re: MTU - M2 Telecommunications Group

Really interesting and I must be missing something. Maybe the record results announced today were already factored in... MTU hits $7.27 and then slides to around $6.81 at the moment.
Beyond my comprehension like most of the market.....

In the majority of cases the upcoming results are evident in the price action way before the masses are informed.

 

[Ves]

Re: MTU - M2 Telecommunications Group

I have a funny feeling the board feels that the share price is overvalued and are issuing shares because its cheaper than using existing cash flow and/or existing debt facilities. But in saying that, if my opinion is correct, at the end of the day the board is still stiffing the MTU shareholders by issuing shares at over inflated prices.

I admit, I am having a bit of trouble understanding the parts that I have bolded. The last of the bolds seems to be contradicting the first two. Can you please try to explain it again or rephrase it, if it isn't much trouble?

Without looking putting forward an opinion on MTU's valuation, my opinion is that:

If a company receives value in excess of the intrinsic value of each share that it issues then it is creating long-term value for shareholders.

How could this be a bad thing?

 

[sydboy007]

Re: MTU - M2 Telecommunications Group

Speaking on long term fundamentals for MTU... the biggest concern I have with this company is its acquisitions. While most of the acquisitions make sense, the way they purchase these companies doesn't make too much sense (IMO).

They have almost added 100 million new shares since FY2008.

If they limited the issuing of shares EPS could be north of 50c now...

I have a funny feeling the board feels that the share price is overvalued and are issuing shares because its cheaper than using existing cash flow and/or existing debt facilities. But in saying that, if my opinion is correct, at the end of the day the board is still stiffing the MTU shareholders by issuing shares at over inflated prices.

anyone else have opinions on the acquisition strategies?

I'm interested to see how they integrate the recent issues.

M2 has been a Telstra reseller for most of it's life.

The purchase of Primus last year gave it a small DSLAM network and a fairly decent fiber network within and between the capital citiies. Dodo / Eftel are mainly Telstra resellers.

IINet say they make over twice the revenue from an on-net to off-net customer, so IF M2 can migrate a fair number of Dodo / Eftel customers over to the Primus DSLAMs there could be a decent yield improvement.

One thing they do have now is a multi level branding. Dodo for the bottom of the market, Primus at the mid range for those who'd like to speak to a Aussie support staff.

it will be interesting to see how well they handle the integration of the companies, and what synergies are available to prop up the share price. 14+ months ago M2 was a decent yield play, not not so much. It's gotten quite expensive in my mind, but then IInet and TPG are too, along with the big T.

 

[Ves]

Re: MTU - M2 Telecommunications Group

With the benefits of only a few scribbles and a calculator, it would appear that Return on Invested Capital (ROIC) is still growing. Lots of accounting (book) entries to keep in mind from the acquisitions that affect or reduce the accounting profit compared to the real cash profit reality.

It would also appear that the financing of Net Tangible Assets is becoming more and more internally financed over time.... I will leave it up to other posters to make their mind up on the meaning of this circumstance, but I find it very interesting indeed.

 

[skc]

Re: MTU - M2 Telecommunications Group

In the majority of cases the upcoming results are evident in the price action way before the masses are informed.

Boggo, is this statement backed by ancedotes or through your own research with supporting statistics?

We've all heard this before but there's no doubt that there are earning surprises all the time that create large moves on reporting day. If one was to take these large moves into account I am unsure whether the result is always "priced in" by preceeding action.

P.S. May not be the right thread to discuss this in detail, so if you are sharing your research or view, a new thread might be a better place.

Thanks

 

[craft]

Re: MTU - M2 Telecommunications Group

anyone else have opinions on the acquisition strategies?

Clinta

As Ves pointed out your post is contradictory on issuing stocks above fair value.
The other thing to be mindful of is who the shares were issued to, you need to be more concerned about exclusive issuing to vendors, executive options or placements to institutions etc then rights issues and DRP’s.

MTU use of shares is more conservative then the top line 100M would suggest.

My personal view is that the acquisition strategy has added a lot of value and amazingly hasn’t blown things up.

Two reasons’ why it has worked for them - Volume has given them purchasing power and they purchased cheap. The reason they could purchase cheap is to do with relative churn rate abilities – understand the churn and you will understand the power in their acquisition story.

Having said the acquisition strategy has added value I would also like it to take a rest here (debt financing is pretty fully utilised) and the focus to turn for a while totally towards extracting the organic growth and efficiencies available within existing operations.

 

[craft]

Re: MTU - M2 Telecommunications Group

Boggo, is this statement backed by ancedotes or through your own research with supporting statistics?

We've all heard this before but there's no doubt that there are earning surprises all the time that create large moves on reporting day. If one was to take these large moves into account I am unsure whether the result is always "priced in" by preceeding action.

P.S. May not be the right thread to discuss this in detail, so if you are sharing your research or view, a new thread might be a better place.

Thanks

LOL

Good question - I spent ages trying to write a post in response to Bogo's because I just don't get how the masses of uninformed actually impact a share price but in the end deleted it.

The market price is driven by the transaction power of the engaged - before the announcement and after.

It seems the argument is that ‘masses’ (number of people? Transaction power?) don’t impact on the price with their lack of information prior to the announcement but they do impact on the price post announcement with the corrected information. It seems a contradictory argument.

 

[Boggo]

Re: MTU - M2 Telecommunications Group

Boggo, is this statement backed by ancedotes or through your own research with supporting statistics?

We've all heard this before but there's no doubt that there are earning surprises all the time that create large moves on reporting day. If one was to take these large moves into account I am unsure whether the result is always "priced in" by preceeding action.

P.S. May not be the right thread to discuss this in detail, so if you are sharing your research or view, a new thread might be a better place.

Thanks

I am in Sydney until Friday on the iPad so I don't have access to accurate charting etc but have a look at recent price action of MTU for starters.

Will follow up on the weekend time permitting.

 

[Knobby22]

Re: MTU - M2 Telecommunications Group

Why are the transaction costs so large? EPS up only 11% because of them, though they won't figure for the next report. Hopefully they can keep the businesses running as profitably. There is always problems in these mergers.

 

[robusta]

Re: MTU - M2 Telecommunications Group

Having said the acquisition strategy has added value I would also like it to take a rest here (debt financing is pretty fully utilised) and the focus to turn for a while totally towards extracting the organic growth and efficiencies available within existing operations.

This is the major issue to me, there does not seem to be anymore obvious targets out there at the moment and the last thing we need to see is a bidding war between IINET and MTU. Mr Vaughan has done well so far.

 

[Boggo]

Re: MTU - M2 Telecommunications Group

In the majority of cases the upcoming results are evident in the price action way before the masses are informed.

Boggo, is this statement backed by ancedotes or through your own research with supporting statistics?

We've all heard this before but there's no doubt that there are earning surprises all the time that create large moves on reporting day. If one was to take these large moves into account I am unsure whether the result is always "priced in" by preceeding action.

Just a brief reply with a couple of chart examples. Apart from MTU you could also look at the days leading up to the reports from AMP, FLT etc, actually many examples exist where you can get a heads up if you are monitoring your holdings or a watchlist closely in the lead up to reporting day.
Two examples (I went short on CCL at the turn). New thread may be needed if this warrants further discussion.

 

[skc]

Re: MTU - M2 Telecommunications Group

Just a brief reply with a couple of chart examples. Apart from MTU you could also look at the days leading up to the reports from AMP, FLT etc, actually many examples exist where you can get a heads up if you are monitoring your holdings or a watchlist closely in the lead up to reporting day.
Two examples (I went short on CCL at the turn). New thread may be needed if this warrants further discussion.

Hi Boggo, I started a new thread on this so as not to crowd the MTU guys.

https://www.aussiestockforums.com/forums/showthread.php?t=27348&p=792397#post792397

 

[VSntchr]

I thought the result was pretty good.

This offered a decent buying point for a few weeks just below $6.
It is a bit cheaper by my val. metrics than some of its peers - but it has a lot of work to do over the next couple of periods to integrate some of the acquisitions. This result to me looks like they will do pretty well over the next few reports if they manage to integrate well as they have in the past....

I got a few when it dipped below $6, but only a small position and didn't feel it was cheap enough to get set.

 

[skc]

I thought the result was pretty good.

This offered a decent buying point for a few weeks just below $6.
It is a bit cheaper by my val. metrics than some of its peers - but it has a lot of work to do over the next couple of periods to integrate some of the acquisitions. This result to me looks like they will do pretty well over the next few reports if they manage to integrate well as they have in the past....

I got a few when it dipped below $6, but only a small position and didn't feel it was cheap enough to get set.

The report looks a little bit weaker than some of the analyst forecasts I've seen.

E.g. Goldman had EBITDA @ $81.2m, NPAT @ $32.3m and dividend at 13c.

The reported figures were $75.8m, $30.9m and 11.5c.

So a slight miss at the NPAT line and pretty meaningful miss at the EBITDA line. I had my finger on a short on open this morning but was surprised by the strength. Now that it's dipped below into the red I've put the short on to see if hte weakness continues in the afternoon.
The full year guidance is unchanged by MTU.

 

[VSntchr]

Now that it's dipped below into the red I've put the short on to see if hte weakness continues in the afternoon.
The full year guidance is unchanged by MTU.

I hope your short goes well, I'd like some for the portfolio if it can get to below ~$5.50 levels...

 

[skc]

I hope your short goes well, I'd like some for the portfolio if it can get to below ~$5.50 levels...

Haha... sorry can't help you there. I am holding at most 'till tomorrow and just looking for 15-20c range. You will have to ask someone else to whack it for you.