Mencast Holdings

[shanrui_91]

I think this should be the right approach of funds and the Co. They brought in new life of a once toy casting Co. re-inject new businesses and now on the path to growth.

MRO on steering gear and propulsion are highly specialize work that Spore is lacking. Rope work and diving are high risk, high margin work. So long as offshore is booming - Sembwan marine and Keppel Combined are the world largest offshore rig builder - if not wrong both have heavy demand for uni-dive service. Great is in offshore service and a small technics oil and gas.

Goh multi-fold gain will continue as this Co. has very interesting integration game going on....I m also watching MTQ - son is executing carefully - for small cap cannot miss earnings and MTQ. If MTQ drop worth to take a closer look on how bahrain plant set up is going? Also BOP technology may be changing for high pressure and stricter survey....cannot loss customer otherwise big concern.

Better than listing lots of China S chip and draining confidence and making singaporean loss money and face...I still cannot get over it and hate every time chinese Co. list here!! This is the right way to go... small caps, new hope for Singapore - slow but steady...

This stock does deserve a look but after i read its article 2 weeks ago on the Edge, I am a bit wary of it.

"Indeed, gross profit margins for Mencast fell from 49.8% in 2010 to 41.6%last year", owing largely to adjustments in the pricing of stern gear to stay competitive. Moreover, hit by higher rental and administrative expenses in the period"

Unidive - "if successful, Mencast could join the likes of Mermaid Maritime plc to become one of the few Singapore-listed companies that provide commerical diving services to the marine and offshore sectors ." I went on to check on Mermaid and i find one of the best annual report ever, one that give in-depth detail about the industry. it was stated throughout that price is the most important factor affecting winning of contract though inspection is done on a regular basis

"The market segments and region in which the Group operates are highly competitive. Pricing is often the primary factor in determining which contractor is awarded a contract. Some of its competitors are
larger than the Group, have more diverse fleets or fleets with generally higher specifications, have greater resources than the Group, and/or have greater brand recognition and greater geographical reach and/or
lower capital costs than the Group. This allows them to withstand industry downturns better, compete on the basis of price, and relocate, build, and/or acquire additional assets, all of which may affect the Group’s revenues and profitability.
If other competitors in the industry relocate or acquire drilling rigs or subsea vessels for operations in the region where the Group operates, levels of competition in such region may increase and the financial
condition and results of operations of the Group could be materially and adversely affected."

"The operations of the Group’s businesses rely on assets such as drilling rigs and subsea vessels. The Group is required to obtain and continually maintain as current its drilling rigs and subsea vessels to certain standards including, but not limited to those mandated by international classification societies. For example, its drilling rigs and subsea vessels are required to be dry-docked every five (5) years. Such dry-docking
requires major capital expenditures and there can be no assurance that there will not be any cost overruns.
The Group may have to repair or refurbish its drilling rigs or subsea vessels or incur substantial expenditures for the acquisition of additional spare parts and assets. Further, as most of the Group’s owned tender drilling rigs and subsea vessels are not new, the cost of maintenance and repair may be higher than for newbuilds"


The Edge - "the energy business - which will come into play when the first two units have stabilised - will have a "green" focus and involve the maufacturing of waste management equipment such as storage tanks"
energy business might be dangerous...

nevertheless, i do wish that mencast can turn out to transform into a wonderful business rather than the other way round (for e.g. ABR holding selling off Cocoa tree for only $100 million). It's always better to have 1 more wonderful business in SGX

For some reason, i am unable to upload the article. It is March 12-18 issue

[ValueBeliever]

Uni dive is very small unit. Its main business is not the same as diving in deepwater offshore sector. When the vessel is in Spore water and in need of underwater cleaning and removal of the propeller and rudder, UniDive does this service and there is synergy to the propeller servicing and repair service of the parent. UniDive also do alpinist work at height which most rig will require to do maintenance work.

Mencast is a service contractor to Rig owners and offshore vessel owners. Top Great is a contractor like Technics oil and gas but smaller in size. Collectively, as a group, Mencast now have a much wider coverage. Goh buys into it for very simple reason, Mencast business model need to be executed right with more funding to take on larger scope and depth. It should be able to do a mid size 30mil shipyard/offshore work. With the yard ready, it can now take on Shell, Exxon tanker refit work in its yard or offshore. Margin should improve as there is no reason, why their technical ability to manufacture marine product should hinder them from shipyard which require lesser expertise.

This Co. is too small in size to attract large funding and I appreciate what Goh and SME fund are doing. This is the right approach groom our own industry and not grow the market by taking short cuts (eg S chip Co. of questionable background).

Mencast mangement must not disappoint.

[Musicwhiz]

I applaud what the Management is doing (or trying to do) in terms of growing the business. However, that said, there are always unseen risks when it comes to rapid expansion; and a whole lot of capital is always required.

Assuming Mencast sets up its Energy Division, I guess we can expect higher Admin Expenses and overall costs to rise.

Whether all these will impact bottom line or not is not certain, as sales volume + value will also increase.

What is certain, though, is that people are willing to pay a premium for growth; whether or not it actually materializes. That is the basic question to ask in investing - are you willing to pay for growth, and what is a reasonable price?

[Nick]

This isn't Mr Gay Chee Cheong first foray with Mencast. In 4Q 2010, he subscribed 8.0 million new shares @ $0.3655 while the other 8 private investors subscribed for 7.5 million new shares to raise $5.4 million. The proceeds was eventually used to partially finance the acquisition of the Top Great Group and Unidive Group the following year. Today, the share price has reached $0.60 benefiting the early group of investors well and even more so for the IPO shareholders in 2008.

This article from Nextinsight describes the relationship between some of the key players within Mencast - http://www.nextinsight.net/index.php/sto...-gas-foray

Overall, I do like the proactive style of Management and that the Management has been successful in placing out new Shares at higher prices which means they are doing something right and the Market recognizes it. When I first invested in Mencast, it was a simple sterngear propeller player with the Penjuru facility under development. Now it looks like a totally different animal haha ! I guess results and margins will improve over time since they are incurring start up losses on Penjuru ie rental expenses. They could always do a sale and leaseback in the future if they need cash. The profit warranties should cap the capex in the next 2 years ie if profit declines, the acquisition price declines. The upcoming 1H result will be crucial to see how the integration is going and whether Penjuru has started generating revenue.

(Not Vested)

[shanrui_91]

that's quite some bit of info in the Edge article, maybe some subscriber can attempt to post it?

Currently, 2 of my greatest concerns are as follow:

1) Competition - how strong is the competition in the field and what are the impt factor involved in determining cnotract win?

2)Cyclical - Will they be affected by cyclical forces of the shipping and offshore marine industries? offshore marine does not benefit immediately for rise in oil prices as there's often a lag time. However, the need for regular inspection for oil rig(i think its one year) might be able to counter it

In business, its always no risk no gain, without expansion and venture, some businesses will remain stagnant and even go bust. But, as a small fry, I am often very wary of company's doing acquisition and expansion beyong organic growth. If given a choice, i probably will not have invested in VICOM when it was acquiring SETSCO then. Even with the best management, acquisition can still go wrong due to non-human factor.

This is perhaps one of the wonder of investing, if you are not sure, you can always sit out and adopt a wait-and-see-how attitude. For now, I prefer to see how all this pan out for Mencast being a one-stop MRO service provider. There's certainly some potential and I will likely put it in my quarterly watchlist. As what Valuebeliever says, the management is critical at this stage.

[Nick]

Mencast recently released some corporate updates.

JV of Mencast Energy:

http://mencast.listedcompany.com/newsroo...7C8B.1.pdf [SGX Announcement]

Sale of Property:

http://mencast.listedcompany.com/newsroo...AF4C.1.pdf [SGX Announcement]

2011 Annual Report:

http://mencast.listedcompany.com/misc/ar2011/ar2011.pdf [AR]

Mencast recorded its 7th year of record revenue and profit while transforming itself into regional marine MRO player. Some details about their new division was released in the AR and it deals with the Marine MRO business. Investors will have to judge the merit of their Partner Perfect strategy. The sale of the property will net $6.0 mil cash which can be used to finance their expansion ie payment for the three FY 2011 M&A and development of Mencast Central in Penjuru.

The acquisition of Top Great contributed revenue of $29,807,000 and net profit of $4,027,000 to the
Group from the period from 1 May 2011 to 31 December 2011. The acquisition of Unidive contributed
revenue of $8,643,000 and net profit of $3,061,000 to the Group from the period from 1 June 2011 to 31
December 2011. The acquisition of Team contributed revenue of $251,000 and net profit of $3,061,000
to the Group from the period from 28 November 2011 to 31 December 2011.

Had Top Great, Unidive and Team been acquired from 1 January 2011, consolidated revenue and profit
for the year ended 31 December 2011 would have been $54,126,000 and $10,310,000 respectively.

It is good to see all the acquisitions contributing positively to the bottomline with decent margins.

(Not Vested)

[Nick]

Recent corporate developments -

1) THE PROPOSED ACQUISITION OF 2,100,000 ORDINARY SHARES IN THE CAPITAL OF VAC-TECH ENGINEERING PTE LTD

http://mencast.listedcompany.com/newsroo...29B4.1.pdf [Announcement]

Mencast acquired Vac-Tech from its vendors for $8.4 million in the form of $5.0 million cash and $3.4 million new shares. The format of the acquisition is similar to previous deals ie payment to be made in tranches over 2 year period and profit warranty deal ($5.0 million here). This acquisition will further expand Mencast expertise in the marine MRO sector.

2) Corporate Presentation for May 2012 - http://mencast.listedcompany.com/newsroo...B170.1.pdf [PPT Slides]

Mencast closed at 59.0 cents.

(Not Vested)

[Nick]

Mencast has released its 1H 2012 results - http://mencast.listedcompany.com/newsroo...08A5.1.pdf - reporting 27.7% growth in NPAT to $6.91 million. The Group continues to integrate its recent acquisitions into a coherent business unit and tap on the recently completed water-front facility to secure higher valued projects. It will be interesting to see how this will pan out in 2H 2012.

Mencast closed at 57.0 cents. It generated 1H 2012 EPS of 3.4 SG cents and NAV of 35.5 cents. It also paid 1.2 cents dividends in FY 2011.

(Not Vested)

[Nick]

Mencast released its latest corporate presentation with more information about its business units, interim results and the plans ahead in the future - http://mencast.listedcompany.com/newsroo...B801.1.pdf [Presentation]

Nextinsight has kindly written a summary of the presentation here - http://www.nextinsight.net/index.php/sto...87-mencast- [Article]

Mencast last traded at 57.5 cents.

(Not Vested)

[CityFarmer]

"The Innovation Luminary Award, which celebrates economic development through innovation, went to Singapore-based Mencast Holdings."

http://www.todayonline.com/business/hono...ness-stars

Well, one more potentially good company to research on, added into watch list

(not vested)