MTQ Corporation Limited

[kennynah]

I very much doubt Mr. Kuah Kok Kim's conservative style of Management can be deemed "equities speculation", unless you have evidence and facts to back up the claim.

it wasnt a claim...it was a question...

u say no then no lor...why so edgy?

and i never knew that it is "quite normal for companies to own shares in other companies" unless it is a direct investment that compliments her business... otherwise, it is speculation to me...eg, SIA buys a stake in NOL... totally a world apart...but understandable that google wants to buy into a smaller advertising company....

and of cos, you will want to know...i am NEVER EVER in my life interested in such a company like MTQ and even if i was...as if what i say will cause the price to move unfavourably for you...

so relag lah... ok ?

[Musicwhiz]

If it was a proper, legitimate question, then please do phrase it as such. As I said, from the tone, language and way it was phrased, I take it to mean something else. It's not a matter of being edgy - for me when I invest I go by facts and figures, if it's bad I can tell you right now that it's bad, and at the same time I will consider divesting. But if the facts point to neutral or good aspects then I will also say it as such. Investing, to me, is simply business.

There are companies out there whose sole job is to invest in other companies, but these are quite few and far between (as they would act like Fund companies). From my understanding, "normal" companies can also own shares in other companies and periodically buy and sell to (as I said) raise cash levels or because of some other reasons. It need not be speculative in nature - in fact the reasons may be as legitimate as any other retail value investor. After all, companies are run by people.

Thanks for letting me know you are never ever interested in a company like MTQ. The more low-key it is, all the better.

[kennynah]

so we cool?

or next time i write about companies you have shares in, i must write in Queen's english?

and you owe me an apology for wrongly accusing me making a claim when it was a question...how about it now?

[Musicwhiz]

so we cool?

or next time i write about companies you have shares in, i must write in Queen's english?

and you owe me an apology for wrongly accusing me making a claim when it was a question...how about it now?

Dear Kenny,

I sincerely apologize. Of course we're cool.

[kennynah]

nice...we cool...

but i can share with you very clearly that i gain nothing from bad mouthing a company... this is a forum...we "speak" whatever that comes to mind within reasons...

and abt MTQ, it truly was a question and not a claim that they speculate in equities to boost her profits...although, from their statement, it is quite easy to make that inference.

all the best to your investments

[Musicwhiz]

Business Times - 01 May 2010

MTQ Corp posts 10% rise in full-year earnings

By VINCENT WEE

OILFIELD equipment engineering solutions provider MTQ Corp turned in a 10 per cent rise in net earnings to $12.0 million for the full year ended March 31 although revenue fell 9 per cent to $82.0 million as the downturn in the oil and gas sector last year took its toll.

Weaker demand for the repair, complementary fabrication and equipment rental businesses resulted in revenue of the oilfield engineering division falling 27 per cent to $40.3 million. This made up 49 per cent of total revenue, down from 61 per cent in FY09.

The decrease was partially offset by a 17.5 per cent growth in revenue for the engine systems division, which resulted in revenue contribution of $41.2 million and accounted for 50 per cent of the total, up from 39 per cent previously.

Basic earnings per share increased from 12.10 cents in FY09 to 13.67 cents in FY10. The group is giving out a two cents per share dividend. With the one cent interim dividend, FY10 dividend stays unchanged at three cents per share. MTQ does not give quarterly breakdowns for its full-year results.

MTQ continues to maintain a strong balance sheet with net cash of $16.9 million as at March 31, 2010, supported by healthy net operating cash flows of $3.9 million. Net asset value per ordinary share stood at 84.02 cents a share.

Looking ahead, chairman and CEO Kuah Kok Kim said: 'As the economic conditions improve, the rise in oil prices has triggered greater level of oil and gas activities, which in turn creates good demand for our products and services under the oilfield engineering division.'

Mr Kuah is especially bullish about the prospects for the group's new plant in Bahrain. The two-phase development plan for the 40,000 sq m project is expected to cost US$20 million over the next two to three years. First phase is expected to be completed by early 2011.

Mr Kuah warned, however, that there are variables to be considered as this is a greenfield project. He is determined to make sure the fundamentals of getting a good manpower base installed are put in place and is prepared to accept higher costs in the start-up phase to train local workers for four to five months.

These costs are likely to be seen in H1FY11, he said but declined to anticipate how much they would amount to. 'Manpower will be the biggest cost but is very essential as the success of the venture depends on this.'

'In the near term, we do not expect MTQ Bahrain to contribute to the group performance due to startup costs, but once it is fully operational, it will contribute significantly to our group's performance and expanded network in prominent oil-producing regions such as South-east Asia and the Middle East.'

MTQ's Australian engine systems business continues to do well with 14 per cent topline growth. 'We recently extended our reach to the Northern Territory via the acquisition of business assets of Premier Fuel Injection, which has proven effective in broadening our exposure beyond Australia, to as far as Indonesia and Timor Leste,' added Mr Kuah.

The group maintains a cautiously optimistic stance for its outlook for FY2011. MTQ shares closed one cent higher at 85 cents yesterday.

[kennynah]

i'm curious why this above reporter omitted to highlight a critical piece of information regarding MTQ's $12.1mil profit...as the below reporter did..

April 30, 2010, 2.59 pm (Singapore time)

MTQ's FY2010 net profit up 10% on sale of shares

By ANGELA TAN

SINGAPORE - MTQ Corporation said on Friday that its net profit for the full year to end March 2010 rose 10 per cent to $12.03 million (US$8.78 million), boosted by a $1.9 million gain from the sale of shares

if i was an investor, looking at this latest report, i would not know that ~15% of the said profits was due to the sales of shares (duno whose shares that is)

and if i was an investor i would be very keen to know how they made that $1.9mil from the sale of those shares reported... becos, a company can make millions and also lose millions "investing" in shares... so, this quarter, she made; very good. what if next quarter, this company reports losses of $5million becos it sold some shares and consequently refuses to pay dividend and worst, cause its share price to dip?
in other words, i will want management to explain what those shares transactions were...

i'm just curious.....

[Musicwhiz]

Hi Kenny,

Bottom line is - don't trust what reporters write. They can choose to include/omit key pieces of info as they are merely reporters and have no vested interest in any company (Heck most of them are not even financially trained). It's always better to go through the numbers yourself with a fine-toothed comb.

In this case, the dividend came from recurring operating cash inflows, and not just due to the one-off gain from sale of shares, I believe. The effects for quoted equities are that during "bad" times, they record a mark to market loss and in good times, one can have the liberty to record a mark to market gain. Of course, selling equities means realizing the loss or gain, and crystallizing the subsequent cash inflows. However one looks at it, it's a one-off transaction and one should not base valuations on that. News-worthy articles are mostly not sufficient for investment decisions.

[kennynah]

Hi MW : good point

my point in drilling this very hard is my disdain for companies that invest its cash in risky assets, such as equities, in especially when her business is remotely connected to this function. purchasing a stake in another company that can contribute to material gains to the buyer's primary business is a different and perhaps justifiable corporate action. but purely purchasing shares should be refrained without very good reasons.

even though, CFOs have a need to maximize any free cash, we will benefit to remember that in Dec07/Jan08, there was a local listed firm whose CFO's FX trades went sour and caused the firm a huge amount of losses. consequently, company's balance sheet was badly affected. more critically, the focus of the management comes to question.

in a not so complicated way, it might resonate easier, if i had used an example of a Ah Tan running a coffeeshop in geylang, who then took $10K revenue from the cashier's drawer and bought MTQ shares...
what connection is there between Ah Tan running a coffeeshop and buying shares? what Ah Tan could do is perhaps to purchase a stake in his coffee powder suppliers' business. this way, Ah Tan gets to control somewhat his raw material purchase. this is acceptable.

of cos, Ah Tan can do what he likes with his own money...but listed companies management has a fiduciary duty to ensure that all company monies are utilized to advance its business within acceptable risk parameters, and not to use it for other purposes, unless it can justify the purposes transparently.

clearly, MTQ's CEO has the opportunity to explain this recently reported shares transactions... whether he did or not, i don't know... but that is less important than why this firm even dabbled in shares transactions, even if it was just once.

your thoughts?

[Musicwhiz]

Hmm, from what I understand, MTQ's Violetbloom had subscribed for Hai Leck's IPO back then at 24 cents per share, and they had got a >5% stake as a result of the ballotting. Subsequently, they also added some more shares. This was part of my initial research into the company. There was no concrete reason(s) given for the investment in Hai Leck, but in terms of business there are obviously some overlaps, as Hai Leck also serves the O&G industry but in terms of scaffolding works, while MTQ does Oilfield Engineering.

I think the example you are thinking of is the Labroy Marine case and also the Semb Marine case where the hedging went horribly wrong and resulted in huge losses for the Group(s) in question. No details were given on how those hedges turned sour, but if it was a pure hedge then one's position should square off, and accounting wise such a large loss should not have been allowed to build up. Suffice to say there were internal control issues then (i.e. someone was sleeping on the job).

I guess companies buying shares in other companies can be justified on the grounds of synergy in terms of business overlap or even supplier/customer relationship; but there are cases where a company buys into another company purely for long-term investment. If we take MTQ's example (again), they bought shares in RCR Tomlinson in 2003 and subsequently even paid for a rights issue by the company to maintain their stake; and then when the market went nuts in 2007/2008, sold out their stake for a huge gain. Opportunistic? Maybe. But then companies have a fiduciary duty to make money for their shareholders (as you rightly stated), and seeing over-valuation at the time, the Management decided to realize a huge gain and declare a bumper dividend. Personally, I think it's acceptable as the original intent of the Company was to purchase shares for long-term investment.

Recall that a company's objective is to grow shareholders' funds,, and this can be through the core business (in MTQ's case, oilfield engineering and engine systems), or through "other investments", which do include private and quoted equities too.

By the way, if the Company sells within +/- 1% of their original stake, there is no need to declare the sale. For example, if last declared stake was 6.3%, they can sell till they breach the 5.3% stake, then declare. If not, then they can buy/sell within the 1% range (up till 7.3%) without needing to declare. This is my personal understanding.