MARINE & GENERAL BERHAD
KLSE (MYR): M&G (5078)
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Last Price
0.275
Today's Change
-0.01 (3.51%)
Day's Change
0.275 - 0.29
Trading Volume
2,993,400
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3,665 comment(s). Last comment by goldmanbull 6 days ago
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Albukhary
2,719 posts
Posted by Albukhary > 2020-12-23 23:14 | Report Abuse
cccthierry, you must not understand too much about this company.
Let me guide you step by step, so you can understand more.
O&G is a asset heavy industry, all O&G company have to invested a lots in Property, Plant & Equipment (PPE), and all these PPE are finance through term loan / bond.
And because of the asset and borrowing, most of the O&G company are facing accounting loss, because the PPE depreciation cost will be a big portion of its expenses, and the financing cost is even worst.
For M&G, initially this is a company worth 70-80sen, but due to the O&G downtrend in the past few years, its revenue can't even to afford its depreciation and financing cost, and a lot of its borrowing is due soon, so it facing a risk of dissolvency.
However, in the past 18 months, M&G are trying hard to restructure its debts, and finally they have convince the bank to convert the loan into preference share, and this preference share is convertible to ordinary share @ 10sen per share.
After the restructure, M&G short term debt has been resolved, and it has benefited from the debt restructure, as it save about RM100mil financing cost from the debt restructuring. With the new debt term, M&G has solve its cash flow problem, and its save the interest cost for future.
And for the banker, they converted the loan into preference share, so now they become the shareholder of the company. As this preference share are not transferable, so these banker must push the share price above RM0.10, then only they will convert the Preference shares into Ordinary share.
Ask yourself 2 question:-
1)Now M&G is 7.5sen, do you think you have any risk? Since the banker are holding it at the cost of 10sen per share.
2) With the O&G trend coming back, with the lower interest cost in future, do you think O&G will perform worst than the past? This company used to worth 70-80sen, now 7.5sen, don't you think minimum it will back to 20sen.