Mencast Holdings

THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL OF UNIDIVE MARINE SERVICES PTE LTD (“UNIDIVE”)

Unidive Info

Unidive, together with its subsidiaries (including Unidive Malaysia) (the “Unidive Group”), is principally engaged in the business of the provision of a full range of topside (rope access) and subsea (diving) services for the offshore and inshore marine industry, particularly in inspections, repairs and maintenance.

http://info.sgx.com/webcoranncatth.nsf/V...6001AFD44/$file/Acquisition_of_UNIDIVE.PDF?openelement [SGX Announcement]

Deal Structure

Mencast has proposed to acquire the Unidive Group for $14.85 million which will be satisfied in 4 tranches:

1st Tranche (Completion Date): $6.0 mil cash + $1.212 mil worth of New Shares

2nd Tranche (6 months after C.D): $1.0 mil cash

3rd Tranche (12 months after C.D): $1.712 mil cash + $1.212 mil worth of New Shares

4th Tranche (24 months after C.D): $3.712 mil cash

In total, $12.425 million cash and $2.425 million worth of New Shares will be issued to the Vendors.

Profit Warranty

Interestingly, a profit warranty comes attached with the acquisition. The Vendors have guaranteed NPAT of $6.6 million for the 24 months period (til May 2013). In other words, the acquisition should generate a minimum of $3.3 million NPAT annually which compares well with Mencast FY 10 earnings of $8.49 million (excluding the Top Great acquisition). The expected ROE will exceed 20%. A profit warranty is a shrewd move from the Management since it limits their liabilities in an event that the acquisition fails to perform. Moreover, it gives great incentive for the previous Management to work hard to ensure their Company do not falter.

Vendor Partnership with Mencast

A 3 year service agreement will also be rendered effective between the two Vendors upon completion of the acquisition. The newly issued shares have a 1 year lock up period as well. I like the idea of service agreements as it ensures continuity of the old Management in the Company which they had built up. This will ensure minimal disruption to the overall operation of the Company.

Valuation

This acquisition is worth 1/5 of Mencast current market capitalization. I wish to examine the deal valuation:

FY 2010 NPAT: $3.1 million
NAV: $6.78 million
Mencast Valuation: $14.85 million
ROE (based on Mencast Valuation): 20.8%

Since a profit warranty is in place, I would expect similar earnings going forward for the next few years. Currently, Mencast EPS stands at 5.39 cents for FY 2010 - after the Top Great acquisition, its EPS will increase to 6.68 cents and after the Unidive acquisition, its EPS will further increase to 7.91 cents (based on FY 2010 results). The information is available in the pro forma financial information in the SGX document. It would seem that the 2 acquisitions are EPS accretive and hopefully dividend accretive.

Rationale

The Proposed Unidive Acquisition provides the Group with a new earnings stream from the lucrative Inspections, Repairs & Maintenance business, which is a subset of the Group’s MMRO business. The Unidive Group’s inspection capabilities put it in an unique position to refer service and manufacturing opportunities to the Group and could become an invaluable proprietary channel to sell the Group’s products and services.

The Proposed Unidive Acquisition therefore represents an opportunity for the Group to expand the range of Marine MRO services that it provides and leverage on the good client base, industry reputation and accreditations that the Group has developed over the years. This will allow the Group to create positive synergies, economies of scale and strengthen its value proposition to attract and retain new customers.

Unidive Corporate Website - http://www.unidivemarine.com/

The website is very informative about the type of service the Company provides in the Marine MRO sector. There are also a list of clients which includes major shipyards like Keppel FELS, PPL Yard and Sembmarine, drilling companies like Maersk and Seadrill and government agencies like DSTA and the Police Coast Guard. This could possible expand Mencast clientele base and provide a new revenue steam in its rapidly growing MRO division. As earlier mentioned in the TG acquisition, I was initally confused about the change in the wording of Mencast description in its AR 2010 - it is starting to be clear now as its rapidly expands its scale and revenue stream in the MRO division. This could potentially off-set the slowdown in its traditional sterngear manufacturing division since the shipping over-supply doesn't look likely to end for another 5 years.

Outlook

Notwithstanding the dilution of shares in the next 2 years, I would expect the NPAT generated from the latest two acquisitions to boost Mencast FY profit and EPS this year. Mencast has successfully integrated its FY 09 acquisition of Recon Propellers giving rise to 2 years worth of record revenue and earnings. With the improving shipbuilding sentiments, continuing expansion of its MRO business (ship repair and fleet management), its huge Penjuru facility becoming operational at year end and the profit guarantee of $14.6 mil for the next 2 years, Mencast looks set for another round of record revenue and earnings in the next 3 years. The Management owns 57% stake in Mencast and will suffer dilution as a result of the two deal. The latest two acquisition should be completed in 2H 2011 and will contribute to earnings then. More crucially, the Group will have a net debt of $17.37 million post completion of the 2 acquisitions. This implies a net gearing of 30% which is decent since this is a rapidly growing Catalist company. But in turning to debt to finance the acquisition, there is little room for error since the Group will have to deal with high interest interest expense and loan repayments. If the companies do not perform as expected, this will be a huge cash drag. I guess things will be clearer in 2H 11 results.

FY 2010 Presentation Slides: http://mencast.listedcompany.com/misc/ME...mat%29.pdf

Risk

1) This is a sizeable acquisition. If it doesn't succeed, Mencast might be forced to impair the huge amount of goodwill harming the balance sheet. The drop in core NPAT will not offset the dilution of equity hence reducing the share price.

2) The Penjuru plant may incur start up losses in FY 12 dragging down the Group performance.

3) The Penjuru facility may not attract sufficient clients.

4) The core operations may not perform well in any future recessions.

5) Mencast will no longer be a 'net cash' coy so it is exposed to the volatile credit market and interest rates.

6) Mencast is ultimately a small catalist company and may not be able to raise sufficient capital in the event of a problem.

(Vested)

Just playing Devil's Advocate here, Nick, but do you think Mencast may be too aggressive in M&A? So far it's been two this year and they all involve cash paid in tranches and also the issuance of shares.

Has Mencast factored in the possibility of problems or issues cropping up if these M&A do not turn out as planned?

Thanks!

(Not Vested)

Over the past 2 months, Mencast has proposed to spend $38.85 million on acquiring 2 marine MRO companies. This represents around half of its current market capitalization so this is certainly aggressive expansion. In addition to the organic expansion in its Penjuru Facility, Mencast will incur heavy capex over the next 2 years. Net Debt will rise to $17 mil or 1.1 times the pro forma earnings.

Personally, every M&A carries a new element of risk and we can never safely predict how it will impact the Group until the results are out over the period of 2 years. The 2H 2011 results will be a good sign of what is to come from these acquisitions. I believe the Management has hedged their M&A risk by i) Securing 3 year service agreement with the former Management ii) Profit Warranty for 2 years iii) Stretching M&A payment over a period of 24 months. (i) ensures Management continuity and minimal operational disruptions, (ii) reduces Mencast liabilities in the event the acquisition doesn't work out since it will reduce the cost of the acquisition and (iii) will reduce the annual capex and investment cash out-flow. Moreover, in the case of the Top Great acquisition, the two companies had worked together in their JV company called TG Offshore (which contributed to FY 2010 earnings) and the previous Manager will be appointed in Mencast Board of Directors. Considering the size of local industries in Singapore, I am quite certain Mencast Group would have dealt with their target companies before as partners in projects/jobs etc. This will help them reduce the risk to a significant extent but even then, risk still exist and we can only wait and see how it progress in the coming years.

"With 15 years of steady growth, Unidive is now the biggest provider of quality services to the regions offshore and inshore marine industry.Over the past four years, Unidive’s turnover has grown in excess of 250% and recorded steady growth through the worst recession that the world is currently navigating." - Unidive website

Judging by the above statement, this company growth hasn't been very spectacular with CAGR of 6.9% but nonetheless, if what they say is true, the fact that they recorded growth in 2008/09 would imply a steady business. Let's see how it will bring value to the Mencast Group in the next few years.

I must add that I would be very concerned if they continue to make more M&A this year since the proposed acquisitions are pretty big in size and in terms of Mencast market capitalization - I would expect time is needed to integrate them properly just as Mencast successfully integrated their two acquisitions in 2009 (Denfon and Recon).

it is easier to be successful in acquiring companies in 2009. the price was cheap and the operation would have recovered from the crisis.

now, whether the valuation is still cheap is up to everyone to decide for themselves.

WARNING: LONG POST!

Hi Nick,

Mencast’s cash balance as at December 31, 2010 stood at $11.6 million. The acquisitions will suck up about $12.425 million (UniDive) and $9.6 million (for Top Great) for a total of $22.025 million. That’s almost twice the cash balance Mencast had about six months ago. This may explain why they need to resort to borrowings to the tune of $17.365 million (it’s actually more as this number represents net borrowings = cash less total borrowings).

For the dilution portion, $14.4 million is to be issued as shares as partial consideration for Top Great acquisition. $2.425 million to be issued as shares as partial consideration for Unidive acquisition. Maximum issue price for the Top Great shares is $0.49 while maximum price for Unidive shares is $0.60. For ease of calculation, let’s assume the share price surges and triggers the maximum issue price for both cases, thereby resulting in minimum dilution. From the numbers above, this means that 29,387,755 shares will be issued for Top Great, while 4,041,667 shares will be issued for Unidive; for a total of 33,429,422 shares. Mencast’s current issued share capital before the two acquisitions is 157,657,000 shares, so the new shares represent about 21.2% of the current share capital and about 17.5% of the enlarged share capital. This is rather significant dilution as Mencast has projected the PAT to be just the simple addition of the current PAT of both acquire companies with Mencast’s own FY 2010 profits. They have thus come up with a projected EPS after dilution which shows that the two acquisitions are EPS-accretive.

While I cannot comment on the potential synergistic benefits of the M&A, I do find comfort that the previous M&A of Recon and Defcon was successful and propelled Mencast to greater heights in terms of revenues and profits. However, the flip side which I must emphasize is that this seeming “diversification” in service offerings seems to come as their own sterngear business is suffering from a slump as the shipping sector is still in the doldrums. I see it more as Mencast trying to spread out its expertise into other areas which are related to its core business, and to use M&A as the vehicle for such a diversification. By contrast, MTQ is in the Oilfield Engineering business which is involved in servicing BOP for example, and their business (though not growing much in Singapore) is stable and has adequate demand. To side-track a little, MTQ is growing its business organically on the one hand by expanding into Bahrain (and taking on debt through loans from UOB), while growing its Engine Systems through M&A over in Australia. In terms of contrasting both businesses, I feel Mencast may have hit a plateau in terms of organic growth in its sterngear business as it is rather niche, and therefore seeks out M&A to expand its scope and breadth of services. Maybe I might be wrong on this but this is how I feel for Mencast, your comments are appreciated.

As to impairment of the goodwill, I actually preferred the olden method of amortizing goodwill over X number of years instead of the current treatment whereby one has to test for impairment based on CGU. This would mean that the excess paid over the book value of the acquisition translates permanently into a Balance Sheet item, and never gets recognized as an expense. Technically I feel this is wrong – your purchase should translate into an expense over the years even if the underlying business is doing well, as you paid a sum upfront which is in excess of book value. Then again, this also means that the new method is decidedly subjective, as the acquiree may suffer from poorer earnings or a weaker Balance Sheet, which implies that Goodwill has to be impaired. This may mean a direct and significant hit to the Income Statement all of a sudden, and without warning. Another risk, as you mentioned, is that the core NPAT of Mencast dips due to the aforementioned reasons (core business in doldrums); or if any of the acquiree companies’ NPAT also suffers. Note that the profit warranty is to compensate Mencast either in CASH in case the profits are not attained, or to reduce the amount payable for certain tranches. This does not automatically prevent the companies from reporting lower profits or even losses should business conditions deteriorate. If that should occur, EPS will be affected and so will cash flows. This is the risk I am trying to articulate.

If Mencast is expanding their facility through Penjuru, then it may imply their core business is doing sufficiently well; so the question now is why diversify into so many other businesses and take on so much debt in order to do so? One must question the CEO to see if he indeed believes in his core business; if not why should he be willing to give away part of his flesh (he owns a major stake in Mencast) in return for two companies? This is a very interesting question and is aimed at the heart of Management strategy and quality (not to imply that he is not a good capital allocator, but Mencast’s listing history has not been very long).

Not being in net cash is actually not so much of an issue as long as the Company can continue to generate FCF through its core operations + its acquisitions. The question, of course, is how long it takes; because most of the time M&A involves gearing, huge investing cash outflows, and time to integrate business cultures in order to achieve the desired synergies and economies of scale. Culture clashes are a very real problem and there have been cases of en masse resignations because of this. If the acquisitions really do bring about better cash flows to the Group, instead of just being EPS-accretive, then I would say that the Group is justified in taking on debt (at a current low interest cost) to generate good cash flows and ROE at the same time. This will remain to be seen.

Ultimately, what I have to say is that there are always risks to M&A; and though Mencast may have mitigated the risks to some extent, there is always the dark unknown which may either scuttle well-laid plans, or provide some form of obstacle or unforeseen hindrance to growth. This is the nature of business and cannot be adequately guarded against. Even Boustead, a very well-run company, was caught completely off-guard by the events in Libya, and which has caused the Group to write-off substantially all of its investment there. Of course, there is also the risk of over-paying for an acquisition, as I feel Ezra did with its recent acquisition of AMC at 5x book value.

It will be interesting to track the progress of Mencast over the next few quarters. I will be keenly watching the financials and margins for the Company, as part of my ongoing learning and understanding of what makes a company tick (well).

HI MW, Some of the downside mitigation have been overlooked in your analysis.
1) The consideration of the acquisition would be partly cash and partly shares. The same would be paid out over 3-4 tranches over 2-3 years.

2) Minimum profit guaranty and this PG has been tied to the last tranches of the consideration

3) 3 years of service agreement with the vendors to stay in the company.

Glenndale is similar profile to Ezra's Lionel Lee. Both are son of a retired old hand in the business. Lionel is surely advised by some financial experts. Glenndale has Gay CC as his guru in the financial mkts.

Lionel rode the big upswing with heavy finanmcial engineering + gearing in O&G since IPO. Timing was excellent.
Now Glenndale , suspiciously look like trying that same formula. Timing is now totally different from Lionel's.

Hi MW,

I took some time to craft a reply on some of the points you made. I do agree that Mencast is entering a very critical period of growth and by turning to debt, it brings a whole new element of risk. Yet, I also feel that the key steps taken in the 2 corporate deals to mitigate risk shouldn't be out-rightly discounted. Moreover, I disagree that expanding into new revenue stream within the same industry and location is inherently negative as companies like MTQ have been doing it in the past few years with relatively good success.

Quote:Mencast’s cash balance as at December 31, 2010 stood at $11.6 million. The acquisitions will suck up about $12.425 million (UniDive) and $9.6 million (for Top Great) for a total of $22.025 million. That’s almost twice the cash balance Mencast had about six months ago.

Mencast structured its payment deal for both acquisitions in a 2 year spread. The cash out-flow for the 2 Target Companies from would be $13.0 mil in FY 2011. The current cash balance in Dec 31, 2010 together with the profits generated from the core business and the target acquisitions in FY 2011 should be sufficient in funding the capex required. But it must also be noted that in AR 2010, Mencast has allocated $7.67 million for capital commitments which I believe is for the Penjuru facility and the land.

Let me create a capex cash-flow profile for Mencast:

FY 2011: $20.67 mil (assuming capital commitment will be fully recognized this year)
FY 2012: $3.51 mil
FY 2013: $5.51 mil

Mencast would have to turn to its current cash position, some debt and its earnings in FY 2011 to cover its capex. Debt will most likely be used for Penjuru facility.The FY 2012 – 2013 capex should be manageable since its earnings are very much larger in comparison.

Quote:However, the flip side which I must emphasize is that this seeming “diversification” in service offerings seems to come as their own sterngear business is suffering from a slump as the shipping sector is still in the doldrums.

I must add a clarification here: The sterngear manufacturing segment is in a doldrums at the moment due to lower demand for new vessels. However, the sterngear servicing segment has reported improved revenue over the past few years due to greater fleet size. The shipping sector is being hit by over-supply of vessels which fares well for the likes of Mencast servicing division. The Penjuru facility is meant to correct the slowdown in the manufacturing division by creating products for larger vessels. The current two acquisitions are meant to supplement the rapidly growing servicing segment by introducing new product types and inspections. Mencast has reported 6 consecutive years of increased revenue and earnings (and EPS since listing).

Quote:I feel Mencast may have hit a plateau in terms of organic growth in its sterngear business as it is rather niche, and therefore seeks out M&A to expand its scope and breadth of services.

I wouldn’t say it has hit a plateau in growing organically since much of its earnings growth in the past few years have been fuelled organically despite the lower revenue from its manufacturing base. I would have safely assumed continued growth in FY 11 even if no acquisitions had been made due to a slew of organic growth measures put in place in 2010 namely – the formation of Fleet Maintenance Program, the JV with TG Offshore, the formation of world-wide maintenance teams, introduction of new products like Mewis Ducts and the completion of Mencast Central in Penjuru which will allow it to manufacture products for larger vessels. Barring unforeseen circumstances or downright mismanagement, these programs start to contribute in FY 2011 onwards. The Penjuru facility should experience one off start up cost in 4Q 2011 and 1H 2012 so this might dampen profitability.

Quote:To side-track a little, MTQ is growing its business organically on the one hand by expanding into Bahrain (and taking on debt through loans from UOB), while growing its Engine Systems through M&A over in Australia…If Mencast is expanding their facility through Penjuru, then it may imply their core business is doing sufficiently well; so the question now is why diversify into so many other businesses and take on so much debt in order to do so?

I think it isn’t wise to adopt the mentality that if the Group diversifies into a new business stream or into a new region, it implies that the core business isn’t doing well. There is no justification to view every corporate action in a zero sum game ie expansion implies reduction elsewhere. It isn’t necessarily the case.

In MTQ case, I would recall that people were wondering why the Management were spending money in expanding their very low margin and low ROE engine system business in Australia instead of concentrating on the more lucrative oilfield engineering division. Today, after securing the partnership with Borsch (and its superstore concept) followed by strings of M&A to boost its presence in new regions and cities, the division revenue has proven to be stable and margins improving. Did it mean then that the Management felt that the oilfield engineering business was poor then? Even now, it continues to expand into new Australian cities and potentially re-entering Indonesia – does it imply that the current cities are no longer growing well enough ? Did MTQ foray into Bahrain means that the Singapore business is stuttering ? Ans: No ! MTQ Management had proven itself capable in juggling two unrelated business divisions in different geographic regions. A string of impressive results pays testament to it. Boustead too has massive business divisions all around the world dealing with unrelated things – real estate, geo spatial, water, energy engineering. Did its diversification over the years mean that its original core business was floundering ?

Similarly, Mencast expansion into new revenue stream within its current servicing division shouldn’t be seen as evidence of a stuttering core business. It isn't adopting MTQ strategy of expanding into new countries or investing in an unrelated business division. The Management is acquiring business in similar industry and geographic region rather than expanding into a new country or buying unrelated business which may imply a potential drop in core business. The only way for a company to truly grow is to expand its scale locally and eventually attempting to break into new markets. While organic growth is possible, in a very matured market like Singapore, starting from scratch isn’t ideal due to massive competition; it makes better sense to acquire the top companies (judging by their margins and ROE) and offer them a small stake in the enlarged group while binding them with a service contract.

Ultimately, if Mencast Management is truly capable, it should be able to identify and integrate businesses within the same industry and geographical region barring unforeseen external factors. Ultimately, Mencast is still purchasing business in the same industry and from the same region so it shouldn’t be viewed as evidence of slow growth ahead for its core business. If Mencast started venturing into property development or building ports in China, then I would be afraid !

Quote:Note that the profit warranty is to compensate Mencast either in CASH in case the profits are not attained, or to reduce the amount payable for certain tranches. This does not automatically prevent the companies from reporting lower profits or even losses should business conditions deteriorate. If that should occur, EPS will be affected and so will cash flows.

I disagree here. The profit warranty formula (actual NPAT / Forecast NPAT X Total Payment) ensures that the real price of the acquisition will be reflective of its earning power. In Unidive case, the Company earns $3.1 million in FY 2010, was acquired for $14.85 million and has a 2 year profit warranty of $6.6 million. Let’s assume Unidive was a failure and only earned $1 million per year giving rise to total earnings of $2 million over the 2 year period. This is very atrocious and implies a 67% plunge in profit. Mencast payment will be 2.0/6.6 X 14.85 = $4.5 mil. The ROE in the investment will change to 1 / 4.5 = 22% which is similar to the original one. In other words, the Management has linked its real payment to the Target’s profitability thereby reducing its risk of forking huge sum of dollars for a dud asset. Similarly, the fact that the Vendors have agreed to this and is willing to accept Mencast shares with a lock up period of 1 year and 3 year service agreement shows their confidence in their own Companies.

In Top Great case, the Vendors will top up any shortfall in profits. The cash compensation will reduce the purchase price of the Target Company thereby preserving ROE to some extent. Similarly, the Vendor will be accepting Mencast shares as bulk of the payment, 3 year service agreement and a seat on the Board shows their confidence in the enlarged Group.

Quote:One must question the CEO to see if he indeed believes in his core business; if not why should he be willing to give away part of his flesh (he owns a major stake in Mencast) in return for two companies?

This is an unnecessary zero sum game viewpoint. It doesn’t necessarily mean that when someone gives away a portion of his existing stake in return for something more, it implies that the current stake isn’t good enough. Would you rather by 100% owner of a bag with 2 sweets or trade away your 50% stake in return for 4 additional sweets to become 50% owner of a bag with 6 sweets ? In this case, both acquisitions were EPS accretive which implies both the CEO and the current shareholders (like myself) will see our stake diluted but we now own a much larger and profitable company hence the value of our remaining stake should in turn be higher in terms of earnings. The Management saw its stake diluted during the IPO when it raised $6.8 million – did it mean that he didn’t believe Mencast core business in 2007 was good enough? Clearly not, instead he used the proceeds to build up the Group business thereby increasing its EPS. Similarly, Mr Sim will see his stake undergo dilution over the next 12 months as the Company issues new shares to fund the M&A but judging by the increased scale, product diversification and potential earning power, time will tell whether he did the right thing. Alternatively, he could purchase shares from open market to get back his original stake.

Quote:Of course, there is also the risk of over-paying for an acquisition, as I feel Ezra did with its recent acquisition of AMC at 5x book value.

It will be difficult to draw links with the two deals as i) the AMC deal lacks profit warranty which links the total payment to the Target company performance and ii) the AMC deal is EPS negative. Personally, a good example of M&A deal structure would be CSE Global latest acquisition which structured payment to the Target company KPI over the next 2 years.

Quote:It will be interesting to track the progress of Mencast over the next few quarters. I will be keenly watching the financials and margins for the Company, as part of my ongoing learning and understanding of what makes a company tick (well).

Mencast is a small catalist company with big ambitions or a ‘fast-grower’ as Peter Lynch would term it. In other words, it could be a spectacular performer or a dud in the years to come. Close attention must be paid to it. It shouldn’t take up a big portion in anybody portfolio due to the risk involved here. The growth in FY 2011 and 2012 will be fueled by both business divisions through organic and inorganic initiatives:

Manufacturing
Organic: Introduction of new products (Mewis Duct), Completion of Mencast Central in Penjuru, Strategic Alliance with Becker Marine
Inorganic: Supply of new products from Top Great and Unidive

Servicing
Organic: Fleet Maintenance Program, Worldwide Propeller Teams, TG Offshore JV
Inorganic: M&A of Top Great and Unidive will increase scale in MRO

My investment in Mencast will be a learning journey irregardless of the outcome. A fast grower is always 'seductive' (though not as seductive as a turnaround play) and I think I must be vigilant to see how the corporate actions taken today will impact the results tomorrow. Divestment is the first step in any problems encountered ! I look forward to its 1H 2011 financial statements which should be released in August to view the progress made in its organic growth and the state of its B/S. Since none of its M&A has been completed yet, 1H 2011 will be reflective of the core business. A poor set of results would give a new twist to the current acquisition efforts - declining core business !

Please feel free to correct any mistakes, factual inaccuracies or data error

Cheers !

Mencast uploaded its latest corporate presentation to investors here - http://mencast.listedcompany.com/misc/slides_280611.pdf

It contains some updates on its core business and more detailed information on the 2 M&A target operations and assets. Plenty of pictures. The acquisitions will be completed at end of July. 1H 2011 results should be released in Aug 2011.

(Vested)

Mencast is trading at record high of 60 cents now with over 2 million shares traded. I wonder what is driving this sustained buying over the past few days ???? The main benefit is that the amount of shares to be issued for the acquisition of Top Great and Unidive will be reduced significantly if the share price remains at this level.

(Vested)