Columbus Energy Resources Share Discussion Threads

[smoggyg] 07/11/2018 15:04

I think that after a big placing, in a year or two, Cerp might be a winner, if they drill to 12000ft in the Cedros Peninsular arry,and I might buy in then. In the mean time here is a winner for you to take a look at.////////Management Resource Solutions (MRS) – Dig a single digit PE that is growing
Michael TaylorNovember 5, 2018 8:42 am 0
Management Resource Solutions (MRS) is a UK listed company operating in the Hunter Valley in Australia, offering maintenance support, mining services, and labour hire. It has seen many a drama, including a long suspension, several board bust-ups, board changes, a deeply discounted placing, and a revolving door of sellers. Despite this I believe, should its debt be refinanced, that there is significant scope for a re-rate.

Opportunity

MRS consists of Bachmann Plant Hire and MRS Services Group (formally Subzero). The company is on track for 2p earnings per share and this is set to grow. With a share price of 6.5p this gives the company a current year PE of just above 3, which is either priced to fail or screamingly cheap!

MRS will never achieve a PE like the FANGs, but could easily trade at 10x earnings given other support services group ratings. A revolving door of sellers has created an artificially depressed price and therefore there is (in my opinion) scope for a re-rate through the earnings cycle, but also as the market re-rates it on a more traditional PE for the sector and earnings prospects.

MRS Service Group (MRSSG)

MRSSG predominantly provides coal industry support services in the Hunter valley in New South Wales (Australia). No contract with MRSSG is bigger than 25% of revenues, which means the company is not dependent on any single customer. The contracts are not just single contracts but they are a multitude of contracts within a client contract. The pricing framework is agreed upon upfront, and once it starts work is often added as and when needed due to the nature of the industry. Some work may be mine work, some work might be vehicle repair, equipment repair etc, all different sectors within the industry. This is why we do not see huge contracts announced with their clients BHP, Rio, Yancoal, Glencore, because a framework is agreed rather than a specific contract. We did see recently an additional contract with Glencore for rehabilitation works.

As long as MRS is on the PSL (Preferred Supplier List) and the company produces good quality work and delivers, it will continue to receive more work. Work is initially agreed upon, and then more work is piled on top additionally. Plenty of client machinery that has been mothballed is now being refurbished due to the miners working flat out, and so there are plenty of large one-off contracts for this. Though these are, of course, not sustainable, this then translates into recurring maintenance revenue. More equipment online simply means more work.

An example of a new business stream is buying pre-cut patented buckets (these buckets are huge, big enough to fit a small house into!) and MRS welding them together. This is a completely new revenue stream that did not exist a year ago. Plenty of low margin business has been discontinued but only if it doesn’t add value to the bigger picture. MRS will literally replace windshields for Glencore (GLEN), which means they are doing the same work that Autoglass do in the UK. This is very low margin but if Glencore want something doing it makes sense to respond – they are a large customer and a FTSE 100 company. A good working relationship is necessary.

Bachmann Plant Hire (BPH)

Bachmann Plant Hire works within the civil construction industry as bulk earthworks specialists. They are the providers of wet plant hire solutions and have over fifty years of service in the civil construction industry. BPH has room for growth in a new strategy of securing opportunities in remote and challenging locations; this means less competition and higher bargaining power on pricing. Currently BPH is operating with a 17% net profit margin and is likely to continue to grow. This is because of the Ipswich Economic Development Plan 2016 to 2031, an initiative driven by the local government, which will require 500 new residential homes every month in order to achieve this plan, meaning there will be no shortage of work should the government keep pressing on.

Recent accelerated bookbuild and turnaround

One of the warning signs that I previously highlighted was that management did not own any shares. They were not incentivised to act as owners and this was shown in the recent placing which was done at the very bottom of the range (6.5p) to allow management and the board in at a lower price than in the previous months’ trading range. One of the advantages was that this did provide some cash for the company, and finally aligned the board with shareholders. The full 14 million shares (£910,000) were taken up by the board, employees, and contractors which is a strong show of confidence in the company.

The swing in MRS’s fortunes are there to be seen in the HY results. From an AUD$4 million loss the company delivered a half year profit of AUD$ 2.5 million net profit after tax, equating to £1.4 million. This is ~0.7p EPS and the company released a trading update recently stating that 2p EPS was on target. The £3.4m expected NPAT versus the company’s £12.8 million market cap at 6.5p puts the company trading on a PE of slightly above 3. I am not aware of a company that is trading on such a low earnings multiple and growing – such PE ratios are usually value traps, where the share price is falling faster than profits!

Competition

There are several slightly smaller companies that are competition but the competitive advantage is that MRS has a big shed, which means a lot of work can be done indoors as opposed to outdoors. This makes a difference in the quality of the welding; doing it inside is better than in a dusty environment. A tent can be used but inside is much more practical given the huge size of some of the trucks, diggers, etc. being repaired. Local competitor Austin Engineering closed its Muswellbrook Upper Hunter facility and also provided an influx of labour; one of the challenges of recruiting more employees is the remoteness of the location and so with the competitor closing this had two positive effects.

The shed

The shed was bought by MRS for $3.0m which was satisfied in cash on completion. Further finance was arranged in order to complete outstanding work in order to bring the shed to its full potential. MRS had bid for the shed and winning was the best possible outcome – there was a lot of work that needed doing on the shed and so they were able to submit a competitive bid. As owners, they are now able to complete necessary work at a lower cost and the money pocketed can be spent elsewhere. Owning the shed provides the company with an asset, lower costs, and no future worries over tenancy agreements.

With regards to the shed, a quarter of the space has been cleared and the rest used more efficiently and this has enabled 50% more work to be done in the same shed.

Debt and cost savings

One of the reasons for MRS’s lowly rating is likely to be its debt. The Hermes facility is 18-20% interest including charges – they are the lenders of last resort, so this is very expensive as at the time the company did not have much of a choice (source: previous NED, confirmed at AGM by Chairman). A review of the debt is on the agenda and would significantly de-risk the company and free up a lot of cash.

Another concern was that maintenance capex was being delayed and so a cash call would come in the future – the company invested $AUD2.4m in existing and additional plant and equipment from June to December 2017 of which all was funded through free cash flow. Trade receivables are likely to stay high as the blue chips tend to pay between 45-60 days and so also not of a concern.

The majority of cost savings have been done and which will continue to show benefits each year; for example rentals have been replaced with leases – this is cheaper and saves on future expenditure too. The fat has been trimmed resulting in a much leaner and streamlined business.

Conclusion

MRS is not without risk – if the company is unable to pay off its debts then clearly it could have serious problems. However, with several operational updates showing good progress, a new and invested board, and a growing macroeconomic environment, I believe MRS offers substantial upside with much of the downside priced in.

[arrynillson] 07/11/2018 09:59

Nexus - many thanks for posting the article from Spain - hopefully going through the political process will generate the reason for the decision which may be helpful- looking like a lose lose situation currently for CERP, the region and the former employees!

[toploadermike] 07/11/2018 08:29

Sure TG, I understand but if you look at CO's like Oilex, they have had all sorts of issues but look at the price over the last couple of weeks, they are in the same game and a lot of it is to do with the Management of the Brokers.

[the guardian] 07/11/2018 08:15

tlm, The price of oil is falling, so most oilers have been falling. CERP is not unique in that respect.

Problem is that we are nearing the $60 zone, which is bad for us.

[captainfatcat] 07/11/2018 07:08

Header looks great thanks

[toploadermike] 07/11/2018 06:59

Chutes,

The point being it should not be going down, it should at least be staying level so the management of the shares on the open market is not being managed correctly, wishing the share price to go up in the future does nothing for shareholders, it is pipe dreams. A good broker will be managing this with the MM's.

ATB
TL

[chutes01] 06/11/2018 23:26

mikey,
Are you getting twitchy my son, settle down, I know of a group of investors stocking up at these levels over next week or so, be patient, the plans are in place for incremental growth over a reasonable period of time, it's not just barrels but good barrels, and a major SA deal to boot which will immediately propel the share price

[nexus7] 06/11/2018 23:03

SPAIN

Burgos loses 90 million and 250 rural jobs because of the Government's non-oil

[toploadermike] 06/11/2018 22:12

We NEED a change of broker!!! A broker buying high and selling low is negative to all shareholders and this seems to be what has been happening here for some time. Look at the graphs and do your own research. Mr LK needs to look at this issue urgently.

ATB
TL

[arrynillson] 06/11/2018 20:17

SmoggyG/12bn -' you cannot expect to predict events I simply have no idea about' - I applaud this epiphany - your posting history since Koot arrived has been lamentable - you claim to have no financial interest in CERP, you say you don't hate CERP - why are you bothering with it?

[nexus7] 06/11/2018 18:42

From bigmj Today 18:04
-------------------------------------

RE: RE: Just goes to show
I am feeling very confident LK will take the share price many multiples from here and certainly it’s not beyond the realms of possibility that my holing will be worth £20m plus here, hopefully LTH’s will see losses eroded and many here able to pay off mortgages etc
Obviously there will be some who will never recover their losses, hopefully many will have the funds and the inclination to average down, once they are confident that this is a whole new business under LK

[nexus7] 06/11/2018 16:41

From offerman Today 11:51
-------------------------------------

Just goes to show
What can happen with good oil reserves .

O/T

I was once heavily involved in PVR and a small company called LOGP had a 10% stake in and oil discovery of Ireland . There is further work for them to do to prove up the field and get it to production . Good reserves already in place .
I made huge losses on PVR Cut and run and interested in LGO made further huge losses but didn't sell an on an added continued adding right through CERP duration.

I only ever held a small position in L0GP about £900 I bought in those at 8p

They dropped right back down to just over a penny . The form out for Barry Road took many many years .

Finally a Chinese company invested a large amount of money .

So my point is , they have gone up 100% in the last week and a half it so.

So look what can happen and will happen with CERP

Our oil is of a much better API than the discovery of ireland which was deemed heavy and waxy and not commercial back when one of the majors drilled . Technologies Moved on a great deal since then and there discovery is commercial it's just a question of how much .

So look at Columbus energy look what we have in SWP
Look what the Waterflood results will probably show very very positive results
Goudron currently has 1.3bboip excellent API 3%rec
Should a successful waterflood ensue then perhaps that may go up to 5 to 7% haps a few percent more .
The current 11 mbo rec for Goudron could turn into 22 mbo quite easily .

Should Co2 then be implemented across that field who's to say 10 -20% could not be recovered .
Then lets not also forget that if Goudron is being fed from below then what oil is taken out using waterflood or CO2
Could be replenished from the feeder below if there are decent enough pressures which at the moment do seem to be the case .
Whilst Goudron has been a disappointment from everyone's expectations including Leos from the 2017 web cast that was only an initial hicup which Leo did also mention there will be bumps along the way and he has been right in this.

Goudron is by no means done and dusted let's wait for the waterflood results and then C02 treatment as the field is massive . A lot of value still to be extracted from there .

That in itself will propel the share price if waterflood is a success and so far with the wells charging it's a very positive start .

And that is not mentioning all of our newly acquired assets over the past year of which we are yet to see the true benefits as work is continuing across those assets.

Look at the share price of LOGP this is what will happen too CERP in the not too distant future you just need to be patient .

The mess has now been sorted out by Leo and the team and good riddance to Spain to allow us to focus on our core assets.

There is so much to look forward to with M&A too but particularly SWP and also Goudron as I truly believe that will come very

[toploadermike] 06/11/2018 12:11

I'm starting to think we need new brokers....

[arrynillson] 06/11/2018 09:16

Chutes01 - Koot in good company re Aberdeen City Council - didn't they reject a £50,000,000 gift from Sir Ian Wood some years ago for regeneration? - the then Labour led Council seem to set the bar quite high!

These matters are important for people with an affinity for Aberdeen but I'd be first to admit it's unlikely to be significant for the development of CERP and I certainly understood why there was encouragement not to develop the thread further chutes!

[the guardian] 06/11/2018 07:41

Thanks jcg. That's much better.

[jcgswims] 05/11/2018 22:34

captainfatcat - header amended as requested.

[chutes01] 05/11/2018 20:38

Remember koot the hoot couldn't win his bid to fill in a big hole in the middle of Aberdeen, he's hardly likely to make a fist of it in spain, with all that corruption/back handers.
However, I hear big news coming soon wrt CERP. Depending on markets, this should see us well over 5p by YE.

[offerman] 05/11/2018 20:09

Thanks Mike ,Yes I love the place/area , the Spanish people and the climate.

[toploadermike] 05/11/2018 15:42

Great part of the coast, not to far from Alicante either. Nice.

[offerman] 05/11/2018 15:33

Mike Near San Miguel

[toploadermike] 05/11/2018 15:27

Probably ccr but why the drop over the weekend?

[toploadermike] 05/11/2018 15:27

Double post, ignore

[ccr1958] 05/11/2018 15:16

The big spread makes this unattractive and is created for a reason ,to keep volume down . Imo.

[arrynillson] 05/11/2018 15:13

Edgar - discussion about Brexit is bound to be divisive and could detract from valid observations you may have on CERP.