MCR.V - Macro Enterprises

[investor-man]

Short of the sky literally falling, there is no way to lose money at current share price.

 

With all due respect - on the Venture, there's always a way to lose money.  My biggest fear with Macro is that they'll blow themselves up chasing big projects, particularly in a competitive environment. 

 

A few thoughts on the share price:

 

- This was a 40 cent stock in 2012.  The rise to $7 was meteoric.  I'm always amazed how far these parabolic stocks can crash.

- There haven't been any insider purchases despite the stock tanking, so there's no evidence to suggest they think the company is as cheap as you do.

- Management was pretty blunt on the CC about projects being delayed.  They even dialled back some positive-sounding news in the Q release. (They said they were in discussions regarding a contract. Discussions have since stopped.)  So I'd guess lots of players are looking at this as "dead money", at best.

- If we get some bad headline news on the LNG front,  everything in this space will drop substantially from already depressed levels.

 

I was going to login to mention that there is actually one way to lose money. I don't think it has to do with chasing big projects or anything on the operational side, mgmt is solid on that. However they have shown selfish tendencies on the financial side in the past. Nothing worth raising the pitchforks over, but certainly not worth applaud either. If the idiots keep selling off hard enough, my boy Frank and his pals could be tempted to buy out & go private for pennies on the dollar. Not a favorable end game for the reasonable investor.

 

This stock is definitely NOT worth only 40 cents a piece. Don't forget there's a difference between price and value. It's trading at literally half net assets right now. There's nothing I can do if people are this insane but wait and/or buy more.

 

I think next year will be bad. They'll likely take a hit on their margins because they don't have negotiating power, and they'll probably lock themselves into some iffy contracts that they'll have to deliver on throughout the full year. Once that's done hopefully business will pick up again.

[doc75]

No, no... I wasn't implying it was worth .40 today. 

 

My point was simply that it's easy to shake out weak hands in these small venture stocks.  Prices can always get crazy this time of year, and with this oil-price backdrop we could see some totally insane valuations.  So while I think the current valuation is silly, there's no need to rush into a purchase.  I think it's more likely than not that next year's numbers will be poor.

 

 

 

 

 

 

[Patmo]

Oh, quite agreed then.

[igor]

Hello fellow investors.

 

Did anyone see the portion of the repair and integrity (recurring) revenue of MCR.V reported somewhere? I think I saw it mentioned somewhere, but cannot find an official number in the reports.

 

If not, what would be a good way to estimate it?

 

This information would be helpful for evaluating the impact of lower oil prices on their revenues, which I'm sure many people here thought about :) Thanks in advance.

[Laxputs]

I phoned them. They won't come out and say it exactly. But it's about 50%.

[bizaro86]

Hello fellow investors.

 

Did anyone see the portion of the repair and integrity (recurring) revenue of MCR.V reported somewhere? I think I saw it mentioned somewhere, but cannot find an official number in the reports.

 

If not, what would be a good way to estimate it?

 

This information would be helpful for evaluating the impact of lower oil prices on their revenues, which I'm sure many people here thought about :) Thanks in advance.

 

Although that work will continue, I wouldn't expect them to earn the same margins on it if pipeline construction isn't busy/oil prices aren't high. There's a few reasons for that. The first is that some repair/integrity work can be delayed. Although a producer will eventually have to do it, there's less money for non-return investments in a downturn.

 

Secondly, the producers have much more negotiating power during a downturn, because the people/equipment that would normally be doing big capital expansions will bid on repair work. Also, producers put more focus on wringing every last dollar out of their suppliers instead of sole sourcing it with whoever they used last year.

 

 

[igor]

Thanks for your inputs, bizaro86 and Laxputs.

 

Although what you bizaro86 said seems correct, one could add that they have four master service agreements with big customers, which is probably somewhat helpful.

[bizaro86]

Thanks for your inputs, bizaro86 and Laxputs.

 

Although what you bizaro86 said seems correct, one could add that they have four master service agreements with big customers, which is probably somewhat helpful.

 

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.

[jwfm1985]

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

Thanks for your inputs, bizaro86 and Laxputs.

 

Although what you bizaro86 said seems correct, one could add that they have four master service agreements with big customers, which is probably somewhat helpful.

 

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.

[bizaro86]

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

Thanks for your inputs, bizaro86 and Laxputs.

 

Although what you bizaro86 said seems correct, one could add that they have four master service agreements with big customers, which is probably somewhat helpful.

 

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.

 

Certainly an MSA sometimes has exclusivity to access the fixed pricing. In my experience the type of work they do isn't often done with exclusivity, but that doesn't mean those MSAs don't have exclusivity. I was trying to indicate that I wouldn't count on those as being a guaranteed source of work.

 

No position here, and if they've disclosed that those are exclusive then I'm sure they are.

[Laxputs]

Recent insider purchase:

 

https://www.insidertracking.com/node/7?ticker=MCR*CA

[Laxputs]

Ah, the "CA" was left off so it showed a different company. Just copy past this whole thing if anyone is interested.

 

https://www.insidertracking.com/node/7?menu_tickersearch=Macro%20Enterprises%20|%20MCR*CA

[Travis Wiedower]

Just got approval to repurchase 5% of outstanding shares in the next year:

 

http://web.tmxmoney.com/article.php?newsid=72317620&qm_symbol=MCR

[Patmo]

Just got approval to repurchase 5% of outstanding shares in the next year:

 

http://web.tmxmoney.com/article.php?newsid=72317620&qm_symbol=MCR

 

Nice. It will wash away the option grant, at a cheaper price. Unless of course they get re-rated but we will see.

[Fat Pitch]

5% is pretty weak. They must not feel confident about their prospects or they might have an acquisition in mind with that war chest of theirs. C'mon Frank Miles let's see what you can do.

[Travis Wiedower]

Yeah they should be buying back shares hand over fist at this valuation. As Patmo said, basically negates the options.

 

On the bright side, we're gonna have a classic Ben Graham net-net if this thing falls much farther  :D

[Patmo]

Am I the only one still a buyer? When stock went all the way down to 50% of my initial stake I decided to revisit in case I missed something. Most conservative value (way too conservative) I can put on the company is in the $6 range... Biggest risk right now is pricing risk, we are embarking on the bad side of the cycle so price might get even cheaper if results are a mimic of 2008 era.

[investor-man]

I'm not buying right now, but I will if oil drops below $40, and again if it drops below $30 (assuming their price follows oil). This is not a scary stock to own because their balance sheet is so great. I like that they've announce buybacks, but I guess I'd like them to be somewhat conservative with them because the future is uncertain.  My biggest worry is that Macro doesn't have many customers. What happens if those customer cease to exist?

[Laxputs]

Around half of their revenue is integrity/infrastructure work. They should still have earnings coming through and new large project piplelines will eventually get built. The strong balance sheet is key. I added a little while ago but Enterprise and Future Bright are also very undervalued so only have so much cash for these oversold companies.

[Travis Wiedower]

Kind of an odd press release yesterday: http://web.tmxmoney.com/article.php?newsid=73153561&qm_symbol=MCR:TSV

 

Am I the only one still a buyer? When stock went all the way down to 50% of my initial stake I decided to revisit in case I missed something. Most conservative value (way too conservative) I can put on the company is in the $6 range... Biggest risk right now is pricing risk, we are embarking on the bad side of the cycle so price might get even cheaper if results are a mimic of 2008 era.

 

I know everything O&G has been pummeled but I still can't believe how cheap Macro continues to get. I'm planning on revisiting everything related to this stock in the coming week or two. Unless I missed something, good chance I'm buying more. It's below a conservative liquidation value right now.

[yadayada]

Read the bullboard comments. Some of those comments almost literally hit you in the head with their stupidity. Seems like a large part of shareholders probably have no clue how to value something, and just blindly sell off.

[doc75]

Read the bullboard comments. Some of those comments almost literally hit you in the head with their stupidity. Seems like a large part of shareholders probably have no clue how to value something, and just blindly sell off.

 

It cuts both ways. There's plenty of blind bullishness on the boards, too.  (e.g. It is now 50% down from my purchase price so must be the buying opportunity of the lifetime.)

 

MCR is clearly undervalued today on an asset basis.  That's plain as day.  But if oil does indeed stay low for a couple years then all these small service companies are going to get hit hard.  MCR's strong balance sheet will allow them to muddle through a pretty deep downturn.  However, if you're bearish on oil then you certainly wouldn't expect this stock to make you any money in the near-medium term. 

 

I personally haven't sold.  A while back we were talking about how ridiculously cheap this was at $3, and the people who were selling at that point look a lot smarter than me.

 

 

 

 

 

[Patmo]

Read the bullboard comments. Some of those comments almost literally hit you in the head with their stupidity. Seems like a large part of shareholders probably have no clue how to value something, and just blindly sell off.

 

It cuts both ways. There's plenty of blind bullishness on the boards, too.  (e.g. It is now 50% down from my purchase price so must be the buying opportunity of the lifetime.)

 

MCR is clearly undervalued today on an asset basis.  That's plain as day.  But if oil does indeed stay low for a couple years then all these small service companies are going to get hit hard.  MCR's strong balance sheet will allow them to muddle through a pretty deep downturn.  However, if you're bearish on oil then you certainly wouldn't expect this stock to make you any money in the near-medium term. 

 

I personally haven't sold.  A while back we were talking about how ridiculously cheap this was at $3, and the people who were selling at that point look a lot smarter than me.

 

At $3 you paid for the assets net of debt and had the future earning power for free, a pretty good gig. Now you're paying for the working capital net of debt and getting all the fixed assets and future earning power for free. Market price today has nothing to do with how smart the market looks compared to you, we'll see in a couple years who was right.

[Guest 50centdollars]

If LNG gets built, then this company will print money and from what I have been reading, companies are still planning to go ahead. The market is just looking at the price of oil and selling everything down. I would bet that LNG gets built even without oil going back up.

[Travis Wiedower]

LNG news has been hit or miss the past few months. One producer (Exxon I believe) recently announced they expect to make a decision by 2017; a couple others have said they're delaying the decision for now. LNG is just a free (albeit large) option at this point though--this investment should be a winner regardless.

 

Oil sands work isn't going anywhere. Suncor and ExxonMobil already said they expect 2015 oil sands production to be greater than 2014. The initial costs of oil sands projects are way too high to stop production during troughs and their opex cost only need oil to be in the ballpark of $35 to still be profitable. Two new projects even came online in late 2014 after a lot of the price drop already happened.