Management Resource Solu... Share Discussion Threads

[smoggyg] 26/11/2018 08:09

Bye stalker Sm0ggyG,I will be adding more this week. No doubt we will have the pleasure of your deramping soon,again.

[sm0ggyg] 26/11/2018 02:58

I'll be taking profits this week. This is not the sector to be when the forecast recession hits next year.

[thehitman1] 23/11/2018 21:43

For the record, no posts today from smoggy and we ended blue.

[1enigmatic] 23/11/2018 17:25

5k at 5.69 Double your money price

[the big fella] 22/11/2018 16:20

The 150k earlier was my sale. A small trading profit. Have to be grateful of anything you can get in the current market.

[thehitman1] 22/11/2018 16:13

Another 3% down, thanks again Smoggy.

[lufc5] 22/11/2018 02:55

For a change, it's become very quiet as it's stagnated at a low point. I for one am glad. At circa 6p, I may be topping up tomorrow.....then I'll have too many... VRS to fall back on tho....

[smoggyg] 21/11/2018 07:43

It takes very little buying to take the share price up far here but all we have had is chunky sells from Morffew and Bachmann when the share price starts rising. Eventually though they will finish selling or at least allow the buying to raise the share price We know results are out next month,along with predictions for the future and that may be the catalyst for a good rally. If the herd arrives then the share price rise is likely to be very far imo. Once good news arrives it will be too late to accumulate at these silly low prices,so imo take advantage of the sellers,fundamentals will out here,it is just a matter of time imo.

[the big fella] 21/11/2018 06:45

Putting the wider market concerns to one side if they post 2p earnings for the year just gone and provide guidance of say 2.5p for the current year then you may get your wish. The market need to see they can pay down the debt whilst generating growing earnings over a sustained period.

[lufc5] 20/11/2018 23:04

I know what "can" happen. Even to get to 9p, that's a circa 50% rise from here. Doubt it will happen overnight, as soon as it starts to move north the big sellers arrive like a bad smell. 12-18 months should see a different beast. Yes, I'm prepared to wait.....some just aren't.

[smoggyg] 20/11/2018 11:56

I have seen what can happen when the 'herd' arrives at a share and a pop to 9p may only be the start of a big re-rating but dyor and formulate your own opinion.

[lufc5] 20/11/2018 09:51

Re-rating? At the moment, a move back up to 8-9p would be classed as a re-rating....

[smoggyg] 20/11/2018 09:35

Who knows why big sellers like Bachmann and Morffew are selling,there could be personal reasons or a desire to see the share price lower for an opportunist bid or even just out of spite. My guess is Bachmann simply would have preferred cash to shares and is turning his shares into that cash. Whatever the reasons for the selling, fundamentals will out in the end and the share price will re-rate northwards. I do not claim to know when the re-rating will come but it will come at some point imo. I will keep adding as funds allow.

[john henry] 20/11/2018 09:07

Audit is hopefully to be completed by the 30th Nov, results early Dec.

Not too long to what for a complete overview of the company.

[troutisout] 20/11/2018 09:00

Lanarkian,

Do you not think there are several reasons, many nothing to do with MRS?

The Brexit factor has led to lots of AIM stocks receding, as investors take some off the table, just in case.
The political uncertainty is also affecting the mood and this is always taken by MMs to move the market down and will get sellers selling out.
Someone mentioned stop losses on their IG Account, there are a lot of traders within this stock and the stop targets will be there for MMs.
There have been at least 2 large sellers, a legacy of the old days and they have and are caused nervousness with buyers.
All these roll into a bundle of things that then affects everyone's psyche, I bought my last lot of MRS at 6.5p (it seemed a bargain then!), I am looking to get my next lot shortly, so if the price drops some more, I will be happy. however when the price drops and buyers return they go NT very quickly and the ability to buy in size disappears. Which to me suggests most of this isn't down to a large skeleton in the cupboard.
I did discuss the possibility of a fundraise a few weeks ago (for investing into the new workload they are tendering for), but jury is out on that, as I would have thought they would have done any by now, soon after the interviews and TU.

I can wait, as can most here......

[lanarkian] 20/11/2018 08:47

I know I shall get accused of negativity, SmoggyG, but the market is rarely wrong and is aware that results are due. Despite your wild optimism, the price is now 5.8p. Why do you think that is?

[smoggyg] 20/11/2018 08:32

Lets not forget that results are out next month!

[smoggyg] 20/11/2018 08:16

Worth reading again,my thanks to the author.//////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.

[king suarez] 19/11/2018 12:53

Looking at his posting history briefly, I think best left to his own devices(!)...

[zeberdie] 19/11/2018 12:07

Doug you sound deranged, whats that post all about ?