MTQ Corporation

(02-12-2014, 09:51 AM)Belg Wrote: From July till now, MTQ has experienced a dip of nearly 40% from 1.57 till 1.04 today.

I did a study of their business and they are mainly engaging in the aftermarket business nature for the O & G industry. It is unlike the nature of the business for Rig and OSV builders as their business flavor really coincides with the oil price movement.

As I have always been involved in the aftermarket business in O & G, it is very recurring in nature and a lot of businesses are based on trust and long term relationship. This sharp dip in share price might be the works of the sellers based on sentiments.

Since every single O & G based machinery are still rotating and turning, regardless of the oil price, repair and refurbishment business at MTQ corp will still be coming in. Thus, it might be worthwhile to pick some shares on MTQs on the dips.

The above is just my 2 cents worth, look forward to comments.

Belg.

I just feel that the directors are paying themselves too much relative to the dividends they payout. As much as 88% of the dividends paid out to sharehodlers are as directors remuneration in their 2014 AR. Google sgminorityshareholders got a list. i cant post link

GG, well said! That's my opinion on O&G sector as well.

(02-12-2014, 09:57 AM)greengiraffe Wrote: Overall, in view of the weak sentiment towards O&G, I m refrain from exposing to O&G sector as a whole since the lull may take a long time for shakeout and recovery and such secular trends may not be as swift as what equity market players perceive to be...

Not Vested
GG

Bro Belg:

Thanks.

1. Are you saying the oil rigs, they need to service the rig and replace parts once running and cannot stop operating?

2. There some OEMs e.g. Haliburton that have setup their own servicing team. Will this affect MTQ in anyway? What can MTQ do to maintain their relevance?

3. Now that oil price drops so much, surely will MTQ customers will ask for lower prices for the servicing and the parts. How likely is this to happen?

Thank you very much.

(02-12-2014, 09:51 AM)Belg Wrote: From July till now, MTQ has experienced a dip of nearly 40% from 1.57 till 1.04 today.

I did a study of their business and they are mainly engaging in the aftermarket business nature for the O & G industry. It is unlike the nature of the business for Rig and OSV builders as their business flavor really coincides with the oil price movement.

As I have always been involved in the aftermarket business in O & G, it is very recurring in nature and a lot of businesses are based on trust and long term relationship. This sharp dip in share price might be the works of the sellers based on sentiments.

Since every single O & G based machinery are still rotating and turning, regardless of the oil price, repair and refurbishment business at MTQ corp will still be coming in. Thus, it might be worthwhile to pick some shares on MTQs on the dips.

The above is just my 2 cents worth, look forward to comments.

Belg.

(02-12-2014, 02:04 PM)Contrarian Wrote: Bro Belg:

Thanks.

1. Are you saying the oil rigs, they need to service the rig and replace parts once running and cannot stop operating?

I am coming from the perspective of a current machinery OEM who happens to be what MTQ is doing. To us, MTQ is like a "pirate" shop who takes things away from the OEM to service at a cheaper rate. Sometimes, in order to have that niche, the vendor needs to be able to do the servicing faster, better and cheaper.

As long as the rig is running and not mothballed (stop operating), the operator will do all that they can to squeeze the remainder oil/gas out before their contract expires. I am citing an example of the rigs in Malaysia where EPMI (Exxon) and Shell are doing. They had a contract in place to return the field to Petronas once its passed a dissipated date.


2. There some OEMs e.g. Haliburton that have setup their own servicing team. Will this affect MTQ in anyway? What can MTQ do to maintain their relevance?

Haliburton and MTQ are from a different part of rig operation. They are never competitors and definitely if they can form a partnership, they would be synergy. Haliburton is doing more of the drilling operations (main heart) of rig. While MTQ deals with the machinery - moving parts.

For O & G customers, as long as they have a repair shop close to their proximity, they would be happy to send in their critical assets for repair or refurbishment. MTQ did well to arrest this fact by having a repair shop in Dubai to cater to the middle east customers.

Not sure if MTQ has a ready team of service personnel to handle the Turnaround exercise for every maintenance cycle. Cause nowadays, customers are going to turn key - lump sum deals to push responsibilities back to the vendors. Now if there are lump sum deals, one need to be careful. Cause most of this deals are overrun and the vendor had to be smart enough to have exit clauses to handle such situations.

3. Now that oil price drops so much, surely will MTQ customers will ask for lower prices for the servicing and the parts. How likely is this to happen?

My customers didn't ask me for a discount and are glad to accept my increase in price every year. As long as we can meet their turnaround targets and of cause tip top customer's satisfaction.

Recently though, we have b[/color]een seeing alot of customers asking us to reduce the turnaround time - in terms of number of days on site. This can bring a lot of savings for them. Likewise for MTQ, customers would negotiate with them for a shorter duration of repair or servicing time. That will be the niche for them if they can bring it across the table.

Thank you very much.

(02-12-2014, 09:51 AM)Belg Wrote: From July till now, MTQ has experienced a dip of nearly 40% from 1.57 till 1.04 today.

I did a study of their business and they are mainly engaging in the aftermarket business nature for the O & G industry. It is unlike the nature of the business for Rig and OSV builders as their business flavor really coincides with the oil price movement.

As I have always been involved in the aftermarket business in O & G, it is very recurring in nature and a lot of businesses are based on trust and long term relationship. This sharp dip in share price might be the works of the sellers based on sentiments.

Since every single O & G based machinery are still rotating and turning, regardless of the oil price, repair and refurbishment business at MTQ corp will still be coming in. Thus, it might be worthwhile to pick some shares on MTQs on the dips.

The above is just my 2 cents worth, look forward to comments.

Belg.

Please refer to my answers in BLUE. You can try to google aftermarket Oil and Gas services if need to.

Very detailed answer Bro Belg.

So MTQ works like a very efficient and capable service workshop. Excellent service, super fast speed, and as many bases near the customer as possible.

(02-12-2014, 02:52 PM)Contrarian Wrote: Very detailed answer Bro Belg.

So MTQ works like a very efficient and capable service workshop. Excellent service, super fast speed, and as many bases near the customer as possible.

I am not sure how is their service but they are quite experience to capture their main customer base in Dubai.

If one would be monitoring them closely, it would be good to have a look at their financials when oil price are low. A good services company will be able to ride this out with good recurring incomes. A single customer cannot provide a recurring revenue (if turnaround is every 3 years). Thus, MTQ has to have a big customer base to capture every quarter's number. It is going to be a challenge.

I have enjoyed the ride on MTQ since 2012 and divested in July this year when the valuation became excessive. With the substantial fall in share price, the price has started to look attractive to me again. Notwithstanding that, it is important to note that the Management has always been quite optimistic when it made forward looking statements but the tone of the guidance the Management gave in its latest (2Q15) financial statement was less optimistic.

1Q15
"The immediate outlook for the oil and gas industry still remains positive in the markets that the Group operates in, notably the Middle East. The Group remains committed to growing its oilfield
engineering and subsea services businesses and remains well poised to capitalise on opportunities moving ahead."

2Q15
"With significant new drilling assets poised to join the market, market sentiment is likely to remain muted. Notwithstanding this business environment, the Group will continue to drive efforts to
secure sales while looking to expand service offerings in new markets."

I have started to accumulate MTQ slowly as I believe in the Management's ability to grow the business after following this stock for the last two years. It is now trading at an extrapolated PER of 8.4, which is attractive to me.

The information provided by Belg has made me understand more of MTQ's competitive advantage.

MTQ may continue to experience price weakness in the short-term; hence, I am accumulating its shares slowly.

(02-12-2014, 04:00 PM)shn Wrote: I have enjoyed the ride on MTQ since 2012 and divested in July this year when the valuation became excessive. With the substantial fall in share price, the price has started to look attractive to me again. Notwithstanding that, it is important to note that the Management has always been quite optimistic when it made forward looking statements but the tone of the guidance the Management gave in its latest (2Q15) financial statement was less optimistic.

1Q15
"The immediate outlook for the oil and gas industry still remains positive in the markets that the Group operates in, notably the Middle East. The Group remains committed to growing its oilfield
engineering and subsea services businesses and remains well poised to capitalise on opportunities moving ahead."

2Q15
"With significant new drilling assets poised to join the market, market sentiment is likely to remain muted. Notwithstanding this business environment, the Group will continue to drive efforts to
secure sales while looking to expand service offerings in new markets."

I have started to accumulate MTQ slowly as I believe in the Management's ability to grow the business after following this stock for the last two years. It is now trading at an extrapolated PER of 8.4, which is attractive to me.

The information provided by Belg has made me understand more of MTQ's competitive advantage.

MTQ may continue to experience price weakness in the short-term; hence, I am accumulating its shares slowly.

I am always learning a lot from the buddies here and it is always right to give back on what I know from my work.

Everyone in the aftermarket repair business is suffering now from this dip. Even the OEMs are going into un-chartered waters of doing non OEM repairs. I did a search on MTQ's scope, it seems that they are working on together with Haliburton etc. It could be a part repair and service contract from main con - Haliburton.

If what MTQ say in 2Q2015 is true, we would be keen to know what new customers or projects which they will get to build on this recurring income of the business.

Thanks,
Belg.

Entire supply chain will be affected. It takes a lot of patience and conviction to go against the tide.

But a bear market is the best time to analyse and pick out the alpha stocks. I've met management and pretty impressed that he said he had not met expectations. Most people don't say that.

In a bull market even sh*t floats. In a bear market is where you can see who were swimming naked and you can point out the decent ones

(02-12-2014, 05:21 PM)specuvestor Wrote: Entire supply chain will be affected. It takes a lot of patience and conviction to go against the tide.

In the short-term, when oil price falls, producing wells should continue to pump so long as the marginal market price of oil is above the marginal cash cost of production of those wells. Otherwise, those wells with marginal cash cost of production higher than the marginal market price of oil would simply shut down. The economics are quite simple, but would have to apply to individual oil and gas well. Of course, we must also remember that many oil and gas companies spread their risks over many wells by taking up fractional stakes in them, so if their overall finances remain ok, such companies will likely survive a major downturn.