Miclyn Express Offshore Limited
As you know at Montgomery Investment Management we have held a very cautious view on iron ore for almost a year, noting the apparent over-investment in supply and reliance on Chinese demand. However, we have a more positive outlook in other areas.
Energy is one area where we feel that the supply and demand outlook is more favourable, and we have turned our minds to which companies might benefit from this.
As we have written about elsewhere, one such company is Miclyn Express Offshore Limited (ASX:MIO).
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Peter Lorber
:
Morning Roger. Just a comment on my previous post in regard to MIO being a possible takeover from PE. I feel as though this may occur sooner rather than later. Firstly,Private Equity is termed Private rather than Public for a very good reason.Market conditions in the offshore oil and gas industry are quite robust(growing E&P investment by oil companies).The industry is entering a high utilization period,MIO is well positioned with new vessels entering the fleet replacing old(higher gross margins versus relatively lower).Record fleet utilization in FY12 and forecast to grow.MIO came out of PE and to my knowledge CHAMP tend not to leave their investments public.I believe that an imminent takeover is possible prior to half year FY13 results being announced which would be a catalyst for the stock to re-rate and increase with a result exceeding expectations.Hence,if it indeed were PE’s intention to take the company private it would make sense to do so sooner rather than later.
Hiten Ravani
:
Roger, what are your views on the owners earnings for this company? Just so we are both on the same page. By owners earnings I mean Free cashflow, after capital spending has been deducted from the company’s profits. Quick look at the company’s financials shows negative owners earnings.
I would not be comfortable investing in such a company. There are many other companies on ASX producing healthy FCF. Happy to wait patiently for the market to meet the price I am willing to pay :)
Roger Montgomery
:
Thats the investment in expanding their fleet. We expect it to slow down but the return on the investment to increase.
Hiten Ravani
:
Fair enough.
Brian Aitken
:
Thank you for bringing this stock to our attention Roger. I will certainly have a look at it on Skaffold. It may be worth an investment of a small proprtion of my portfolio. I’m also a member of your Fund, which has performed very well to date. Thanks again
Brian
Roger Montgomery
:
Be sure to seek and take personal professional advice and keep in mind we take a portfolio approach to these things.
Peter Lorber
:
Good call.appears to be in the sweet spot in regards to earnings growth.what also attracts is the sale of Macquarie’s interest to private equity firm Champ.One would assume due diligence was undertaken.Currently Champ and Headland own 58% of the company with an equal shareholding.A possible takeover from private equity ?
john stanning
:
Do you see MIO incorporation in Bermuda as a negative as you now have two large overseas funds with a greater than 20% stake which would make it probably less likely as an acquistion target?
Roger Montgomery
:
Its a good point John and something we are always wrestling with ourselves.