MTQ Corporation

Being a shareholder myself, I've questioned if I should choose cash or scrip. Accepting cash will mean having the flexibility to invest that cash into another company which may be more under-valued than MTQ, while accepting scrip would be advantageous if one felt that MTQ itself was under-valued from a current standpoint.

I think it also matters on the final price of the scrip shares (to be determined later) - if it is a good discount to the prevailing last-done market price, that would provide an even stronger impetus for shareholders to accept the offer of scrip.

(06-11-2010, 04:23 PM)Musicwhiz Wrote: Being a shareholder myself, I've questioned if I should choose cash or scrip. Accepting cash will mean having the flexibility to invest that cash into another company which may be more under-valued than MTQ, while accepting scrip would be advantageous if one felt that MTQ itself was under-valued from a current standpoint.

I think it also matters on the final price of the scrip shares (to be determined later) - if it is a good discount to the prevailing last-done market price, that would provide an even stronger impetus for shareholders to accept the offer of scrip.

Accepting scrip will be a headache for retail investors like us since we will be getting odd lots and selling them in the open market will incur an additional cost

(10-11-2010, 06:32 PM)yawnyawn Wrote:

(06-11-2010, 04:23 PM)Musicwhiz Wrote: Being a shareholder myself, I've questioned if I should choose cash or scrip. Accepting cash will mean having the flexibility to invest that cash into another company which may be more under-valued than MTQ, while accepting scrip would be advantageous if one felt that MTQ itself was under-valued from a current standpoint.

I think it also matters on the final price of the scrip shares (to be determined later) - if it is a good discount to the prevailing last-done market price, that would provide an even stronger impetus for shareholders to accept the offer of scrip.

Accepting scrip will be a headache for retail investors like us since we will be getting odd lots and selling them in the open market will incur an additional cost

I think it very much depends on the individual share price in question. I believe brokerage fees are somewhere around $10/transaction for odd lots? So if you are trading odd lot shares that are worth more per share, the transaction costs prob would work out to be smaller? In the case of MTQ, prob not such a good idea, coz of the lower liquidity + quantum value involved. Just my 1c worth.

If your orientation is towards ownership of a business, then the problem of odd lots would not matter. It would also depend on whether you can redeploy the funds in meaningful ways, assuming you choose to receive the dividend in cash.

For info, there is a one-page writeup on MTQ in this week's The Edge (week ending November 15, 2010). It features an interview with CEO Kuah Boon Wee and his take on the increase in demand for BOP servicing, and how the fallout from BP's disaster may have implications for the O&G industry such that more regulation and certification is required, leading up to more business for MTQ as Cameron would have to send its equipment to authorized OEM workshops such as MTQ for more frequent inspection/certification.

Also, MTQ may have over-estimated the speed at which they could expand their sales network in Australia for their Engine Systems Division. Hence, I would also expect slower sales growth than initially projected, though I still expect margin improvement due to economies of scale.

For the full article, I encourage all to purchase a copy of The Edge (S$3.80) at news stands or bookstores.

P.S. - I will be doing a review and analysis for MTQ's 1H FY 2011 Financials and prospects soon, and will incorporate this article from the Edge into my review too. Will inform when the post is done. Thanks!

Dear all, my analysis of MTQ's 1H FY 2011 Financials is now up on my blog. Please feel free to visit and leave comments, thanks!

A snippet as follows:-

"Inventories under current assets also increased 17.7% to S$19.6 million, and I should attribute this to the increase in stocking up required for the Bosch Superstore concept expansion, and also because of their acquisition of an outlet in Northern Territory back in March 2010, and also due to the subsequent purchase of Highway Diesel (a fuel injection business) in August 2010."

MTQ has announced the scrip dividend price.

The Company wishes to announce that for the purposes of the application of the
Scheme to the Interim Dividend, the issue price of the fully paid new Shares (the "New Shares") to be issued and credited as fully paid to Shareholders who elect to
receive New Shares in lieu of the cash amount of the Interim Dividend, is S$0.83 per
New Share (the "Issue Price").

The price is at the max. 10% discount I think.

It forces the shareholders to take scrip dividends haha....

Yes, I was indeed pleasantly surprised to see that the issue price was $0.83 per share, which is roughly a 10% discount to the last done price. I've also been thinking on this issue and as part-owner of a company, I should accept the scrip in order to raise my stake in the Company at a price which I feel is attractive (and minus brokerage fees too!).

Thus, I have decided to accept the scrip option for my full dividend entitlement, as I believe the Company is in the early stages of growth yet. There may be other scrip dividend options laid out in future too to give shareholders a chance to reinvest their dividends into the business.

The more earnings retained, the less debt needs to be raised for their expansion. Overall a win-win solution.

Though if everyone takes scrip dividends, is it similar to no dividend being declared since everyone gets a proportionate amount of shares and the company retains all of its profit ? So technically, there is hardly any difference ?

(23-11-2010, 03:07 PM)Nick Wrote: The more earnings retained, the less debt needs to be raised for their expansion. Overall a win-win solution.

Though if everyone takes scrip dividends, is it similar to no dividend being declared since everyone gets a proportionate amount of shares and the company retains all of its profit ? So technically, there is hardly any difference ?

In terms of a shareholder's proportional interest, it will NOT change should he fully take up his share of the scrip. But in terms of equity base, it will be strengthened as there are more shares in issue and the market value of the Company will be increased. In essence, it is similar to a reinvestment of dividend by the Company, instead of paying it out as cash.