MCR.V - Macro Enterprises

[Patmo]

Were you guys asleep at the wheel? They have been playing the game this way for years, that they'd rig these options is hardly surprising. I mean yeah it's pure thievery but so was the initial issuance of these options. It's a major part of why the stock price is so low. Figure out the cost of this behavior to other equity holders and whether it is worth holding this stock. No point crying about this when we could see it coming a mile away

[Cardboard]

I don't own it right now but, value remains compelling. Business trend is also heading their way.

 

With all these small caps, I always look at how many options are outstanding and tend to add them all to the existing share count even if they are way out of the money. Because even if they don't reprice them, they will issue new ones at lower prices. And when they run out of space to issue options, they will simply pass a new resolution at the next AGM to increase the amount where few notice and contest.

 

I am not saying it works with every firm since there are some where share count is important and this math does unfairly penalize them but, it saves me from negative surprises.

 

Cardboard

[Travis Wiedower]

^^ I think that's a good practice for all stocks, I do it as well. All options/warrants/preferreds get counted against them no matter the price. Good way to add a layer of conservativeness to all valuations.

[sculpin]

Paradigm note today....

 

MCR has seen a significant increase in share price since the end of November. We think there is still significant upside from this point. MCR trades at 3.0x 2017e EV/EBITDA or 2.7x 2018e EV/EBITDA. This valuation is based around a consensus estimate of $10.4M and $11.2M in EBITDA. The company reported $47M in EBITDA in 2013 and management was confident at that time the fleet could generate $55M in annual EBITDA. With recent project announcements for major pipelines and midstreamers' 2017 capital budgets indicating increased activity for NE B.C.; there is the potential for significant upside beyond our current estimates (which do not account for major project wins). Regardless of a successful bid, MCR sits on $1.07/share of cash and has a TBV of $2.94.

[TBW]

Good news here

 

http://business.financialpost.com/news/energy/petronas-canada-natural-gas-project-buoyed-by-government-incentives-to-first-nations-groups

 

First Nation groups are on board for Petronas Project and only get paid if it goes ahead.  The re-working of original plans to me implies that Petronas are trying to find ways to make this project work rather than finding reasons to kill it.  I especially like the last line of the article.

 

This project could be a home run for Macro.

[Patmo]

Good news here

 

http://business.financialpost.com/news/energy/petronas-canada-natural-gas-project-buoyed-by-government-incentives-to-first-nations-groups

 

First Nation groups are on board for Petronas Project and only get paid if it goes ahead.  The re-working of original plans to me implies that Petronas are trying to find ways to make this project work rather than finding reasons to kill it.  I especially like the last line of the article.

 

This project could be a home run for Macro.

 

Overall O+G activity in the region is picking up as well I believe

[sculpin]

Latest from Paradigm Capital....

 

MCR is well positioned to benefit from increasing demands on infrastructure given recent well results out of the Montney and positive decisions on new pipelines (Trans Mountain, Enbridge Line 3 and Keystone XL). We think there is still significant upside from this point. MCR's base business is built around MSA work that generates ~$20M/quarter in reoccurring revenue for the company. Tenders for projects like Trans Mountain should start to be announced around April. A successful bid would be significant for MCR, providing the company with a significant chunk of guaranteed work over the next two years. We anticipate contracts would be in the range of $100 - $150M in annual revenue (doubling our current 2018 forecast). In the event of an unsuccessful bid we still believe the positives outweigh the negative. Trans Mountain and other major projects absorb a large amount of currently idle equipment. This eliminates current pricing pressure and MCR should benefit from an increase in smaller project work across the Montney. And don't forget there are still whispers of LNG on the west coast..................

 

MCR trades at 3.5x 2017e EV/EBITDA or 3.3x 2018e EV/EBITDA. This valuation is based around a consensus estimate of $10.4M and $11.2M in EBITDA. The company reported $47M in EBITDA in 2013 and management was confident at that time the fleet could generate $55M in annual EBITDA without any large project work. MCR sits on $1.07/share of cash and has a TBV of $2.94. The company carries its PPE on the BS for a value of $47.5M despite a third party evaluation giving the fleet a value of ~$80M.

[_JJ_]

FY2016 results are out

http://www.marketwired.com/press-release/macro-enterprises-inc-announces-2016-fourth-quarter-and-year-end-results-2206674.htm

 

They've got $37.4M in cash and expect work activity to pick up materially starting the 2nd quarter.

 

"The Company incurred business development costs in excess of $3.0 million in 2016, as accounted for in its operating expenditures, relating to large scale projects management remains optimistic will proceed and result in contracts."

 

I think it's still very cheap. More than 60% of market cap in cash, a valuable fleet of equipment and a freeroll on securing contracts for the huge pipeline projects.

[_JJ_]

Q1 results:

 

http://www.marketwired.com/press-release/macro-enterprises-inc-announces-2017-first-quarter-results-2218385.htm

 

Not that great, but they are quite positive about the rest of the year:

 

"The Company expects second quarter revenues to be almost double its first quarter revenues with a corresponding return to operational profitability. (...) Recurring revenues from its existing master service agreements will continue to represent the bulk of activity for the calendar year. The Company anticipates other project work to pick up materially in the latter half of fiscal 2017."

 

[igor]

This write up https://cdn.shopify.com/s/files/1/1713/5887/files/Macro_Enterprises_Idea.pdf?18211421668689574681 suggests that the last option strike price change was not for executives' enrichment.

[KJP]

This write up https://cdn.shopify.com/s/files/1/1713/5887/files/Macro_Enterprises_Idea.pdf?18211421668689574681 suggests that the last option strike price change was not for executives' enrichment.

 

Can that argument be taken seriously?  Based on the last information circular, about 35% of the repriced options belonged to just the three most senior executives and three other board members.  Was there anything that prevented the board from recutting the options of just the "workers," as opposed to the options that also belonged to them and the senior execs?   

[sculpin]

PI Financial report...

 

Earnings Update for August 17, 2017

 

Macro Enterprises Inc. (V-MCR) $2.31 (Intraday)

Recommendation: Buy (unchanged), Target: $3.00 (increased, previously $2.50)

 

Activity Levels Ramping Up

Macro Enterprises reported Q2 FY17 results. Revenue was up 514% to $25.2M, EBITDA was $1.86M compared to ($3.09M) last year and EPS was $0.01 versus ($0.12) (fd) last year. Revenue beat our estimate of $23.6M while EBITDA and EPS slightly missed our forecast of $2.09M and $0.02 respectively.

 

The majority of revenue during the quarter was related to 3 large facility jobs and one large pipeline project with the balance coming from maintenance and integrity work. Management stated that they expect third quarter revenues to exceed total revenues during the first six month of the year.

 

Our revised forecasts include revenue of $100.2M in FY17 (previously $82.8M) and $115.0M in FY18 (previously $97.6M) along with EBITDA of $6.1M in FY17 (previously $5.8M) and $13.8M in FY18 (previously $11.8M).

 

We are maintaining our BUY rating (risk: ABOVE AVERAGE) but have increased our 12-month target price to $3.00 (previously $2.50). Our target represents a 4.7x EV/EBITDA multiple based on our FY18 estimates (previously 3.8x).

 

[igor]

This write up https://cdn.shopify.com/s/files/1/1713/5887/files/Macro_Enterprises_Idea.pdf?18211421668689574681 suggests that the last option strike price change was not for executives' enrichment.

 

Can that argument be taken seriously?  Based on the last information circular, about 35% of the repriced options belonged to just the three most senior executives and three other board members.  Was there anything that prevented the board from recutting the options of just the "workers," as opposed to the options that also belonged to them and the senior execs? 

 

Thanks for getting that 35% number, KJP.  I didn't get to it in the morning.

Your critique is fair.  The author's statement "options were mostly held by managers and not executives." is only technically correct. 

 

 

[TBW]

I wrote that piece.  It was written before the circular came out, so I didn't have all the facts that are out now.

 

I asked management about that options again after circular came out.  They choose to just keep it simple and change it for everyone.  I agree not ideal.  I don't have too much of an issue with the option re-striking going to managers, and some of the management team, but the re-striking really didn't need to occur for board members.  I think they choose the option with the least amount of awkwardness, as only a few people would have been excluded.  To me its not a huge deal, but I would certainly not like to see anything more like this.  The option change for managers I still think is defensible given the severity and length of this downturn. 

 

Earnings report today was great.  Margins a touch light, but outlook was good.  Good to see them finally repurchase some shares.  Not sure if they were limited by lack of volume, but much more would have been great.

[igor]

I wrote that piece.  It was written before the circular came out, so I didn't have all the facts that are out now.

 

I asked management about that options again after circular came out.  They choose to just keep it simple and change it for everyone.  I agree not ideal.  I don't have too much of an issue with the option re-striking going to managers, and some of the management team, but the re-striking really didn't need to occur for board members.  I think they choose the option with the least amount of awkwardness, as only a few people would have been excluded.  To me its not a huge deal, but I would certainly not like to see anything more like this.  The option change for managers I still think is defensible given the severity and length of this downturn. 

 

Earnings report today was great.  Margins a touch light, but outlook was good.  Good to see them finally repurchase some shares.  Not sure if they were limited by lack of volume, but much more would have been great.

 

Thanks for letting us know, TBW!  I liked your piece, especially for the LNG pricing details.

 

The earning report was good news. I kept one eye at NOA during the downturn and they have been much more active in repurchasing shares (~12% in 2016, 25% since 2013).  MCR bought back less than 1% and increased potential dilution by 6% via adjusting conversion policies of the preferred shares.

[Cardboard]

At least somebody is getting some good news today:

 

https://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aMCR-2503410&symbol=MCR&region=C

 

Now it will be a wait and see on that one with the Antifa and Hippies of Vancouver blocking everything.

 

Cardboard

[sculpin]

Paradigm....

 

September 7, 2017

       

Jason Tucker, 403.513.1031, jtucker@paradigmcap.com

 

Macro Enterprises Inc. (MCR-T): Named Contractor for Trans Mountain Expansion Project

 

MCR has received an MOU from Kinder Morgan with regards to the Trans Mountain expansion project. This is a material event for the company and signifies the successful conclusion of several years of work leading up to the announcement. The company will provide full details on the award once negotiations on terms and conditions have been concluded. Should construction on the expansion begin on schedule, this award will materially impact MCR's 2018 operations. Trading at 3.5x 2018e EV/EBITDA before any consideration for the Trans Mountain project, this a cheap stock that is well capitalized and operates a fleet of equipment ideally suited for these large scale projects.

 

Facts:

 

• MCR has been awarded an 85km section of pipeline along the Coquihalla-Hope corridor in B.C., referred to by Kinder Morgan as Spread 5B. Final terms and conditions of the project are still being negotiated.

• MCR was awarded the project as part of a JV with Spiecapaq, a French based pipeline contractor. Spiecapaq has built over 50,000kms of pipeline in more than 60 countries over the past 90 years. The JV will facilitate working capital funding requirements and provide MCR with additional human capital.

 

[igor]

There is some more surface-level information available about that JV.

 

According to this Kinder Morgan presentation, spread 5b and spread 7 are of higher difficulty and constitute 10% total of the C$7.4b project.  Timelines are September '17 to September '19.  Most of the workers are going to be housed starting June '18, so that's probably when the bulk of the activity starts.  Spread 7 goes through the city and looks quite involved.

 

 

[_JJ_]

Fort St. John, B.C. – October 5, 2017 FOR IMMEDIATE RELEASE

 

JOINT VENTURE SIGNS CONSTRUCTION CONTRACT FOR TRANS MOUNTAIN EXPANSION PROJECT

 

Macro Enterprises Inc. (TSXV:MCR) (the “Company” or “Macro”) is pleased to announce that its 50/50 joint venture with Spiecapag Canada Corp. (“Spiecapag”) has successfully negotiated and executed a construction contract with Trans Mountain Pipeline L.P. for pipeline construction work on the Trans Mountain Expansion Project (the “Project”).

 

The contract is for the construction of approximately 85 kilometers of 36 inch pipeline along the Coquihalla-Hope corridor in British Columbia referred to as pipeline “Spread 5B”. The duration of the contract is expected to last until November 2019, with field construction to commence once the regulatory requirements for construction of the Project have been satisfied. The reimbursable type contract will be phased and has an initial estimated contract value of approximately $375 million.

 

Frank Miles, President and Chief Executive Officer of the Company stated, “As a British Columbia based company, we are proud to be part of this important project. We will continue to support Trans Mountain in their continual engagement with stakeholders, specifically working with Aboriginal and local communities ensuring positive working relationships now and in the future”.

 

Spiecapag is part of the Entrepose Group of Companies and is a subsidiary of Vinci S.A. (“VINCI”). Entrepose Group is an international contractor that designs, builds and operates production, transportation and storage infrastructures for the oil and gas and other energy markets. VINCI is a global player in concessions and construction, employing more than 183,000 people in some 100 countries. VINCI is listed at Euronext’s Paris stock exchange and is a member of the Euro Stoxx 50 index.

 

So an initial estimated contract value of approximately $375 million. Not bad to have a 50% stake in this for a $78M market cap company.

 

 

[sculpin]

Macro Enterprises - Canadian Transmountain pipeline builder

 

Canadian pipeline builder Macro - no debt, about $1.30 net cash per share & very large contracts to build Transmountain. $2.60 on the TSX today.

Paradigm...

 

Macro Enterprises Inc.

Rating: Buy

unchanged

12-Month Target: $3.25

 

Ticker MCR-T

 

Jason Tucker, Analyst | 403.513.1031 | jtucker@paradigmcap.com

 

Significant Upside with Limited Downside

 

Investment Thesis. Macro is active in liquids-rich plays like the Montney and has a growing

presence in Fort McMurray. Over the long term, Macro remains well positioned to benefit from

increased activity related to LNG export facilities and the required infrastructure.

 

Event

 

Macro Enterprises Inc. (MCR) announced first-quarter results that were below our

expectations. We continue to believe Trans Mountain will be built in some form or

fashion, but the delays will hamper the company’s 2018 financial performance.

 

Highlights

 

 Industry Slows | MCR reported first-quarter revenue of $8.8mm, an EBITDA loss

of $1.6mm and an EPS loss of $0.07, compared to our expectations of $12mm,

($0.5mm) and a loss of $0.05, respectively. We had anticipated stronger MSArelated

revenue for the quarter.

 

 Busy, Little, Bidding Beavers | MCR remains active on the bidding front,

including bids in conjunction with its current joint-venture partner. The company

remains optimistic that overall activity will pick up in H2 with several large projects

set to be awarded and commence construction in the near term.

 

 We Hear You Nancy | You can no longer resist the urge of the dark side —

you've taken a point of view that Trans Mountain won't get built and neither do

other major oil pipelines or any pipelines related to LNG exports on Canada's west

coast (yes Canada's west coast). At that point you may wonder, what exactly is

the base business and what does this company look like should the bidding

process not go in MCR's favour? First, we remind you of the company's net cash

position and fleet of equipment. Then, if we assume a run rate quarterly revenue

from MSA work for the company of ~$15mm, throw in some small project work to

the tune of $5mm per quarter (actual was ~$3.5mm in Q1/18, so not far off a

worst-case scenario) and you have a moderate annual revenue estimate of

$80mm. Using a 10% EBITDA margin, you are left with a company that if sold at

5.0x EV/EBITDA multiple would fetch $2.18/sh (1.5% downside). Should the buyer

pay book value ($4.72/sh) for the assets that would imply 123% upside.

 

 However... | If MCR were successful in winning two additional major projects of

similar size to Trans Mountain, MSA work normalized back to ~$20mm per quarter

as activity picks up and small projects account for $10mm per quarter, this would

imply $420mm in annual revenue. Assume of gross margin of 10% (given larger

projects come at lower gross margin) and SG&A of $10mm annually, the same

5.0x take-out metric equates to a share price of $5.75, representing 160% upside.

 

Valuation & Conclusion

 

Delays and a reduction in project work and MSA-related spending will impact MCR’s

Q2 results for MCR. However, longer term, we believe the company is ideally

positioned to benefit from a significant increase in large project work. Our forecast

continues to include revenue from Trans Mountain but does not include any additional

large project awards. Successful bids would represent upside to our current forecast.

We maintain our Buy recommendation and $3.25 target price (5.5x EV/EBITDA based

on our 2019 estimates).

 

 

[_JJ_]

https://www.theguardian.com/world/2018/may/29/canada-kinder-morgan-pipeline-trans-mountain

 

Up on this news.

[rukawa]

I don't own it right now but, value remains compelling. Business trend is also heading their way.

 

With all these small caps, I always look at how many options are outstanding and tend to add them all to the existing share count even if they are way out of the money. Because even if they don't reprice them, they will issue new ones at lower prices. And when they run out of space to issue options, they will simply pass a new resolution at the next AGM to increase the amount where few notice and contest.

 

I am not saying it works with every firm since there are some where share count is important and this math does unfairly penalize them but, it saves me from negative surprises.

 

Cardboard

 

Is this different that the fully diluted numbers reported? I assumed that is what fully diluted numbers do.

[_JJ_]

Joint Venture Signs Construction Contract for Coastal Gaslink Project

 

June 19, 2018 08:30 ET | Source: Macro Enterprises Inc.

FORT ST. JOHN, B.C., June 19, 2018 (GLOBE NEWSWIRE) -- Macro Enterprises Inc. (TSXV:MCR) (the “Company” or “Macro”) is pleased to announce that its Joint Venture with Spiecapag Canada Corp. (“Spiecapag”) has successfully negotiated and executed a construction contract with Coastal GasLink Pipeline Limited Partnership for pipeline construction services on the Coastal GasLink Pipeline Project (the “Project”).

 

The Macro Spiecapag Joint Venture has been selected to construct approximately 166 kilometers of a 48-inch pipeline.  The Project will run approximately 670 km (416 miles) in length. The proposed pipeline will deliver natural gas from the Dawson Creek area of northern B.C. to a facility near Kitimat, B.C., where it will be converted to a liquid form for export by LNG Canada. From there, it can be shipped to markets in Asia that are currently powered by coal-fired electricity – a significant source of greenhouse gases.  LNG Canada is a joint venture company comprised of five global energy companies with substantial experience in liquefied natural gas (LNG) – Shell, Petronas, PetroChina, KOGAS and Mitsubishi Corporation.

 

The initial estimated contract value is in excess of CAD$900 Million with a Joint Venture split of 40/60 between Macro and Spiecapag.  In general, the civil work will be performed under a reimbursable type contract model while the mechanical scope will be performed under unit rates.  A Final Investment Decision (“FID”) is expected to be received by Q4 2018, with a full notice to proceed issued shortly thereafter.  Current in-service date of for Coastal GasLink pipeline is scheduled for Q4 2021.

 

Frank Miles, President and Chief Executive Officer of the Company stated, “We are thrilled to be working with our joint venture partner, Spiecapag, on this very technically challenging pipeline project.  The economic benefits of this project will serve to provide numerous subcontracting opportunities for local and indigenous businesses, direct employment for over 900 personnel, and growth to the economy with development of new markets for Canadian gas. As a British Columbian based company, we are proud to be part of this ambitious project.”

 

Spiecapag is part of the Entrepose Group of Companies and a subsidiary of Vinci S.A. (“VINCI”).  Entrepose Group is an international contractor that designs, builds and operates production, transportation and storage infrastructures for the oil and gas and other energy markets.  VINCI is a global player in concessions and construction, employing more than 190,000 people in some 100 countries.  VINCI is listed at Euronext’s Paris stock exchange and is a member of the Euro Stoxx 50 index.

 

https://globenewswire.com/news-release/2018/06/19/1526486/0/en/Joint-Venture-Signs-Construction-Contract-for-Coastal-Gaslink-Project.html

[wisowis]

What is everyone doing with their shares here?

 

Given that this is no longer trading at a discount to liquidation value, I'm thinking of selling and moving on. At this price, we'd be betting on the future earnings power of this company from the new contracts. Less of a margin of safety than before.

[_JJ_]

What is everyone doing with their shares here?

 

Given that this is no longer trading at a discount to liquidation value, I'm thinking of selling and moving on. At this price, we'd be betting on the future earnings power of this company from the new contracts. Less of a margin of safety than before.

 

Hold. I bought my shares in the beginning of 2016. My view has always been that the liquidation value provides a nice cushion and there's lots of upside from new contracts once the market recovers from the cyclical low. Right now it's still only trading at an EV of 65M, so I don't think the market has priced in anything of the Coastal Gaslink project and other contracts it is likely to sign in the short term with their JV partner.