Mencast Holdings

[secretinvestors]

Hi secretinvestor,

Thank you for sharing your calculations with us. I did not use DCF method of valuation for Mencast since the earnings and cash-flow can be very volatile. I would agree with you that there isn't much margin of safety at current prices. Whoever buys now, buys for growth solely. It isn't over-valued either. I will keep an eye on how the acquisitions will perform in 2H 2011 results. I hope you will continue to share your views and thoughts in this forum.

Cheers !

Some corporate updates:

http://info.sgx.com/webcoranncatth.nsf/V...5002B2D81/$file/TG_Completion_Announcement_20110722.PDF?openelement - The acquisition of Top Great was completed in 22 July 2011.

http://info.sgx.com/webcoranncatth.nsf/V...5002B2D81/$file/TG_Completion_Announcement_20110722.PDF?openelement - The acquisition of Unidive was completed in 28 July 2011. There has been a change in issue price formula for the New Shares to take into account the rise in the share price recently.

Both acquisitions will have an impact in Mencast 2H 2011 results.

(Vested)

Hi Nick,

I understand that these acquisitions will impact 2H11 results but whats your opinion on the change in issue price to reflect current market price (how will it impact mencast, investors etc)? Also, what valuation model did you use and what is the estimated fair value that you've derived?

(Vested)

The Unidive deal will be satisfied by a cash offer of $12.425 mil and new shares valued at $2.425 mil. The higher the issue price of the New Shares, the lesser the number of shares to be issued and hence the lesser the dilution impact on existing shareholders. This will imply a higher EPS.

Example:

Issue Price: $0.41
No of shares to be issued: 5.91 mil shares

Issue Price: $0.50
No of shares to be issued: 4.85 mil shares

Issue Price: $0.54
No of shares to be issued: 4.49 mil shares

Mencast will reveal the issue price and no of shares allocated to the Unidive and Top Great vendors in the near future.

I don't use financial models to derive an estimated TP for my investments in companies. I tend to look at the operating history, Management's track record, the business prospects etc to judge a company's worth. I am still new in investing and this forum is a great place to learn new things and pick up good habits from the pros here.

(Vested)

Hi Nick,

Thanks for your clear cut explanation about the impact of the adjustments in issue price. Yes, I do agree with you this is a wonderful forum to learn new things from the pros here! Many delighting insights from various people!

(Vested)

[Nick]

Mencast registered 12.5% growth in HY2011 earnings to S$5.4 million

- Revenue surged 60.9% to S$24.4 million
- Order book stood at S$18.7 million as at 30 June 2011
- With enhanced yard facilities and recent acquisitions, Mencast will be able to provide a fuller range of MRO services and tap on a much larger pool of clients in the region

http://info.sgx.com/webcoranncatth.nsf/V...2003993F3/$file/HY2011_Press_Release_040811.pdf?openelement [Press Release]

http://info.sgx.com/webcoranncatth.nsf/V...2003993F3/$file/HY2011_announcement_040811.pdf?openelement [SGX Announcement]

The results includes contribution from Top Great and Unidive as the Company had taken effective control of TG from 1 May 2011 and Unidive from 1 June 2011. The core business experienced a decline in revenue and margins due to the depreciating USD and falling demand from ship-builders.

http://info.sgx.com/webcoranncatth.nsf/V...20034F8FC/$file/Announcement_Appointment_of_WBH_as_Director_20110804.pdf?openelement - Top Great former CEO has been appointed as Executive Director in the Mencast Board. He will continue to manage Top Great and will over-see the Company operations in Penjuru. Based on the 3 year service agreement, he will be paid S$18,000 monthly and in addition, an annual performance fee paid based on the PBT of Top Great. The exact figures are in the SGX announcement.

MENCAST’S SUBSIDIARY UNIDIVE SECURES TERM CONTRACT WORTH S$5.18 MILLION FROM KEPPEL FELS LIMITED

http://info.sgx.com/webcoranncatth.nsf/V...2002E1A31/$file/Mencast_Unidive_secured_contract_with_Keppel_Fels_040811.pdf?openelement [SGX Announcement]

I remain vested in the Group as of today. I will look at the results in great detail tonight.

[secretinvestors]

Thats extremely good news of mencast.. I've sold 40% of my holdings last week at $0.605. I believe the value of mencast will continue to increase appreciably in the future. I guess I will not add to my positions as of yet in view of the uncertainties ahead. Good luck!

(Vested)

[Nick]

I sold all of my shares at 60.0 cents today. I made the decision last night after reviewing the latest results. I was not impressed that the core business revenue and margins have declined due to increased competition. Unfortunately, there is no gross profit breakdown for the 4 segments which makes it difficult to analyze.

I mentioned this in page 4 of the thread in my exchange with MW:

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 !

With the core business declining due to the poor shipping repair climate, I am not inclined to continue holding on at the moment. The new acquisitions might increase its profitability going forward - but at the current market capitalization there isn't any margin of safety if the growth plans fail to materialize. I could be wrong but I am comfortable with divesting it. It is just unfortunate that Mencast had to release its results on the night when the Dow Jones plunge 4% !

It has been a profitable journey both in terms of the capital gain and the knowledge acquired. I will continue to monitor Mencast and view its future developments with great interest.

Disclaimer: This represents my own view. This is not a buy/sell call.

[Nick]

MENCAST’S SUBSIDIARY SECURES CONTRACT FROM SHELL EASTERN PETROLEUM (PTE) LTD

http://info.sgx.com/webcoranncatth.nsf/V...3002CD275/$file/Mencast_Unidive_secured_contract_with_Shell_050811.pdf?openelement

Unidive secured a 1 year + 4 year optional extension to provide its services to Shell.

(Not Vested)

[Musicwhiz]

MENCAST’S SUBSIDIARY SECURES CONTRACT FROM SHELL EASTERN PETROLEUM (PTE) LTD

http://info.sgx.com/webcoranncatth.nsf/V...3002CD275/$file/Mencast_Unidive_secured_contract_with_Shell_050811.pdf?openelement

Unidive secured a 1 year + 4 year optional extension to provide its services to Shell.

(Not Vested)

No contract amount stated, and no idea of the gross margins either. Best to stay watchful as the Company announces more contracts, and see if there is a +ve impact on earnings and cash flows.

(Not Vested)

[Nick]

CORPORATE PRESENTATION - HALF YEAR 2011 RESULTS REVIEW

http://info.sgx.com/webcoranncatth.nsf/V...E0041DBA1/$file/Mencast_Corporate_Presentation_16082011_Part1.pdf?openelement [Part 1]

http://info.sgx.com/webcoranncatth.nsf/V...E004233B9/$file/Mencast_Corporate_Presentation_16082011_Part2.pdf?openelement [Part 2]

There are plenty of pictures detailing the new services/products which Mencast will be offering and the state of their Penjuru water-front facility.

Mencast closed at 53.5 cents this evening.

(Not Vested)

[Nick]

THE PROPOSED TRANSFER OF THE LISTING OF MENCAST HOLDINGS LTD. FROM THE SGX CATALIST TO THE SGX MAIN BOARD (THE “PROPOSED TRANSFER”)

http://info.sgx.com/webcoranncatth.nsf/V...600361F39/$file/Mencast-receipt_of_approval-in-principle_090811.pdf?openelement [SGX Announcement]

Looks like Mencast will be joining the big boys in the Mainboard ! This target was first announced a couple of years ago and it is good to see the Management meeting it by increasing the number of shareholders, its equity, market capitalization and profitability level.

http://www.nextinsight.net/index.php/sto...-gas-foray - recent Nextinsight article with an interview with the CEO after the 1H 2011 results.

(Not Vested)

[Nick]

THE PROPOSED ACQUISITION OF CERTAIN ASSETS OF TEAM PRECISION ENGINEERING AND TEAM INTERNATIONAL DEVELOPMENT

http://mencast.listedcompany.com/newsroo...EC5C.1.pdf [SGX Announcement]

Mencast is proposing to acquire a metal precision components manufacturer for $4.5 million to be satisfied by $0.5 million cash and $4.0 million worth of New Shares. The Company reported PBT of $0.975 million in FY 2010. No figures were given for the revenue. Valuers have accorded a market value for the Company assets of $1.1 million approx. This figures imply an earning yield of 21.7% assuming the profits are repeated in subsequent years. The deals of the transactions are similar to the ones in the past - payment stretched over a period of 2 years, $3.0 million profit warranty over a period of 3 years and 3 years service agreement for the Company's Management.

This is the third M&A deal announced from Mencast this year with total acquisition price of $43.35 million. Together, with the development of Mencast Central in their water-front facility in Penjuru (expected completion at end 2011) and planned transfer to the Mainboard, this will mark a transformational year for Mencast if these initiatives are executed properly and integrated into the Group efficiently. The latest acquisitions is unlike the rest as it is not an expansion of its services but it seems more like a complementary aspect of its business ie manufacturing the components required in MRO. The payment terms are stretched over a period of 2 years and do involve the issue of New Shares - however, it does seem that despite the issue of new shares, the EPS will be accretive. I will continue to monitor Mencast and study their various initiatives.

(Not Vested)

[Nick]

FURTHER INFORMATION AND CLARIFICATION ANNOUNCEMENT IN RELATION TO THE PROPOSED ACQUISITION OF CERTAIN ASSETS OF TEAM PRECISION ENGINEERING AND TEAM INTERNATIONAL DEVELOPMENT

http://info.sgx.com/webcoranncatth.nsf/V...900831480/$file/19Jan2012_Mencast_Clarification_Announcement_Final.pdf?openelement [SGX Announcement]

Further clarity of the salary and incentive structure for the Management of the acquired Company.

(Not Vested)