Management Resource Solu... Share Discussion Threads

[thehitman1] 15/11/2018 14:43

Added a few myself.

[the big fella] 15/11/2018 14:30

Well I have helped out buying 150k at 5.78p. Never like bottom fishing but this looks oversold even by MRS standards.

[the big fella] 15/11/2018 14:15

This one is having a tough time.

[troutisout] 15/11/2018 14:15

SmoggyG

Just go off to your other thread and stop infecting this one with your nervousness...

[smoggyg] 15/11/2018 13:47

Lanarkian,I have no interest at all in you except that you post negatively here. I have asked you several times why you bought in here but you never tell us why. What sort of nutter buys a share and then posts negatively about it? You are either dodgy (eg posting negatively while buying more) or just an old fart who cannot stop moaning. If you think MRS will fall then sell but if,like me,you think it will rise then buy more,I have today!

[lanarkian] 15/11/2018 12:55

Dodgy, SmoggyG? Please elaborate. I don't ask you for your modus operandi (probably because I am not remotely interested) as opposed to your unhealthy (and creepy) interest in me.

[smoggyg] 15/11/2018 12:35

/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 MRSs 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 companys £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 MRSs 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.///// My thanks to the author.

[smoggyg] 15/11/2018 12:35

I think that there are 2 big sellers here at least Lanarkian,Bachmann and Morffew but I do not know their reasons for selling,maybe they want the share price down so they can make an opportunist low bid,who knows? I have asked you several times to explain why you bought in here but you won't,you just say 'I did my research'. OK,what in your research did you find to make you buy in here? ps I don't expect you to give an honest answer,I see you as a very dodgy character.

[lanarkian] 15/11/2018 11:50

I am sorry, SmoggyG that am not joining in your happy-clappy approach to this thread (i.e. you can only comment if you are blindingly optimistic and continually talking up this share). You ask me about my reasons for picking this share and say nothing yourself about the same question so I am not going to explain my modus operandi to you. You talk about a "constant seller" without trying to explain why you think this one person is selling out. I will not be silenced by you just because I look at shares objectively rather than through your rose-tinted glasses.

[smoggyg] 15/11/2018 11:31

Lanarkian,there has been a constant seller here for months now and their selling is the reason for the share price falling but they won't be selling forever. Just what did your research show that made you buy in? You have never said what it was,why? Is it because you haven't bought in or because you just cannot bring yourself to say anything positive about MRS for some reason known only to yourself?

[wooster4] 15/11/2018 10:52

markets are truly dire at the moment. My monitor or (mostly) aim stocks has been dropping lower for months - drops seem rather more aggressive recently. A santa rally would be nice this year.

[lanarkian] 15/11/2018 10:51

Where have I said 'woe is me' SmoggyG? I have made it plain that I am in for the long haul although I may have to revise that and accept a loss. Time will tell. I see that this morning the price has now dropped below 6 despite your constant ramping. Any comment, SmoggyG?

[dave4545] 15/11/2018 10:42

Panic pi's are giving up

[smoggyg] 15/11/2018 10:27

Lanarkian,why didn't you sell out months ago? You have been posting negatively for months, so why didn't you sell out? If you had faith in yourself then you would not have held as the share price fell,unless you are daft, would you? This will come good imo,the best thing you could do is to top up but instead all you do is moan and groan. 'Oh woe is me' groans Lanarkian the silly boy.

[thehitman1] 15/11/2018 10:06

Looks like Sm0ggyG got it wrong too.

[thehitman1] 15/11/2018 08:42

By the way, anyone who paid over 8p will be down approximately 25%.Well done again SmoggyG.

[thehitman1] 15/11/2018 08:40

Another decent thread destroyed, well done SmoggyG.

[sm0ggyg] 15/11/2018 07:54

Thanks for introducing me to this share smogola. Always nice to get in 20%+ below you.

[smoggyg] 15/11/2018 07:21

WOOSTER414 Nov '18 - 13:25 - 352 of 355(premium)
0 1 0
Sm0ggy - so a day ago, you state that the clever and informed are selling, and now you've bought in. What a dreadful individual you must be!!/////// You are a dirty little spiv Sm0ggyG and a twisted stalker,sad for you really. :)

[sm0ggyg] 15/11/2018 00:11

What a bitter little dweeb you are, smoggster.

Did you notice the late reported trades, muppet?