jwfm1985

http://business.financialpost.com/news/fp-street/recovery-for-twin-buttes-debenture-holders-more-than-three-times-what-they-were-originally-offered

ridiculously bad corporate governance.

buying back part of AIG's stake... http://finance.yahoo.com/news/aercap-holdings-n-v-announces-210401626.html http://www.bloomberg.com/news/articles/2015-06-01/aig-to-sell-2-4-billion-of-aercap-stock-51-of-insurer-s-stake

Anyone listen to the call?

That is not always the case. Master service agreements can and will in some cases have exclusive service agreements for a certain amount of time A master service agreement is just an agreement on pricing for future work, to save time negotiating every little job. It doesn't imply a committment to use the vendor for anything. Oil companies will often have multiple master service agreements in place for the same work in the same area as a matter of convenience, and the project manager will pick whoever he/she wants for an individual job. Also, I would expect pricing to decline, which makes a master service agreement of little value, as the customer will want the new lower pricing for any new work.

What are you expecting in terms of quarterly results? As per guidance, there's going to be a huge YOY drop in revenue; around $33m this year compared to $60m last year. I expect an improvement in margins over Q2 but I think it's overly optimistic to assume they'll crank back up to 20%+. Despite the depressed share price, my worry is that the market won't have much patience in this uncertain oil-price environment. (So even substantial margin improvement will be greeted with doubt that it will continue.) As for liquidation value, I assume you're talking into account the valuation management put forward for $30m above book on their equipment? How much faith do you put in that number? What discount do you apply to PP&E when you calculate liquidation value? I'm a pessimist and always give it 30-50% haircut depending on my naive view of asset liquidity (fire sale effect, plus leakage due to "transaction costs"). I'd love to buy a bunch of this company. It looks so cheap! Just haven't been able to pull the trigger. Things like this in the MD&A don't help: "The Company’s legal counsel, Bull, Housser & Tupper LLP bills the Company for legal services and this includes activities related to Mr. William McFetridge, a partner in Bull, Housser & Tupper LLP, who is a Director of the Company. During the six months ended June 30, 2014, Bull, Housser & Tupper LLP billed $391,000 (six months ended June 30, 2013- $209,000) (not including disbursements and taxes) to the Company and its subsidiaries and were based on the agreed terms between the parties. At June 30, 2014 the Company had recorded $311,000 (June 30, 2013 - $45,000) in accounts payable to Bull, Housser & Tupper LLP. During the six month period ended June 30, 2014, the Company engaged The Commercial Capital Corporation to assist in evaluating ongoing financial requirements and other various opportunities. The Company was charged $60,000 as at June 30, 2014 (June 30, 2013 - $nil). At June 30, 2014, the Company had recorded $nil balance (June 30, 2013 - $nil) in accounts payable. Mr. Wayne Albo, Chair of the Company’s Audit Committee and member of its Board of Directors is also the Chairman of The Commercial Capital Corporation." Big YoY drop in Q3 but it's due to project delays and backlog, so Q4 should make up some ground. Would expect about $230M top line for the year, with around $25-28M in EBITDA - if you believe that, which obviously some don't, we're at ~3.5x EBITDA in a depressed year with 2015 looking solid. No, my BV calc does not include the higher "appraised" value, it is based on book value. I do believe the equipment is worth more than book, but prefer to play it safe.

Picked up some more around 2.36. Not expecting much out this quarters results, but this price is too good to pass up. We're trading well below liquidation value now, company is cash flow positive; there is a fair bit of downside protection. Not sure who mentioned Aveda earlier, but pretty compelling value there as well (with better management).

Tied up all morning and kicking myself now unfortunately I added to my position. I’m just wondering what the person who was selling knows… It’s not like we need LNG to happen at these prices. It's not huge volume so I'd suspect it's panicked selling after all this LNG posturing...

Tied up all morning and kicking myself now unfortunately

1. A/R is a non-issue for me. Agreed the company has a large receivables, but the reality is that these guys are in the construction space and this is par for the course. Comparing to Aveda is tough because it’s a different industry with different payment dynamics (for one, they don’t have to deal with government mandated holdbacks on payments). Macro’s days sales outstanding is around 70-80 depending on the time of year. Shaving off 20% off that I would say is just about near impossible. If you want a point of comparison, Aecon in 2013 was paid in about 75 days and Bird was about 100… and these guys are general contractors (they see the money first) with much more clout. 2. Project delays impacted this as well. We probably won’t see significant improvement here until Q4. Agreed some market cap loss is reasonable – the levels we are at are not reasonable (in my opinion). 3. Definitely a mild positive I would say – I think this speaks towards their positive view towards the future and willingness to help Macro grow 4. You need to dig into how this dilution occurred – options were not the driver. At the end of 2011, share count was 23.9M and at the end of 2013 it was 29.9M. The increase was due to 3 things (options being the smallest), 1) exercising of options was 1,075M, with 0.2M shares repurchased, 2) 1.3M of preferred shares were converted, and 3) 3.7M from a convertible shareholder loan. The largest of this is obviously from the loan. From my memory (correct me if I am wrong), the company entered into the loan with the CEO when the stock was well below 0.30, paid 6.5% and had a conversion option at $1.50. He decided to convert money he loaned the company into stock when it made sense – I wouldn’t consider this enriching himself. 5. I don’t think this is fair at all. First off, the company needs a new facility for the massive amount of equipment they have purchased (these custom facilities are very difficult to find and lease, so purchasing likely makes sense) – they aren’t building a shiny new office tower downtown Vancouver. The company is 30% owned by a CEO who is not a polished Bay Street banker, but a construction worker who has built this company from nothing. More guidance would be nice, but I don’t knock him for not loving the shareholder relations side of things and just wanting to focus on building the business.

Also, there are a few reasons this stock is cheap, but I'd say a long collection period isn't really one of them. The vast majority of their clients are blue chip companies with very low credit risk. The 10-15% holdbacks go both ways in that they stretch out your AR and reduce cash flow, but provide some assurance that you'll get paid if projects go sideways.

This is the unfortunate reality of the construction business and not likely to change. Thankfully they improved on their AR position from Q1

Just from a quick glance, I like Aveda as well, but doesn't seem silly cheap like MCR at these levels. What are your thoughts on the valuation? One other key point with MCR is that I think they have a much more scalable platform to take on large contracts (relative to some of the other capex heavy oilfield services companies, i.e. Entrec, Aveda, etc) - they've already made a massive investment in equipment (and to a lesser extent people) to bid on and hopefully win larger contracts. Eventually, if things go as planned, they'll turn into a nice cash cow...

I feel your pain, but bought some more yesterday to average the cost down to just about $4. Seemed like there is some light at the end of the tunnel based on the conference call yesterday.

Macro Enterprises