Hehe...
First thing first.
This is going to be a long reply...
But most important thing is I am just sharing some view points...
and I am not here to convince you that you are wrong nor am I trying to say Marco is a shit company.
and for you know my view points could be wrong......
Anyway, here it goes....
The conversion of warrants issue is a current and real issue.
When warrants are converted, the number of shares increases.
And the impact?
It's simple.
Say company allocates 20 million as dividends payments to shareholders.
If the number of shares increases by 10%, your dividend is going to shrink by 10%.
More slices of the same cake equals less cake received.
I wrote the last posting last month.
From my live screen quotes, I noted the number of shares was 880 million.
This morning my screen showed 899 million...
!!!!! can you see how fast the number of shares increased?
Number of warrants left = 168 million.
To be ON the safe side, for all calculations of dividends + EPS, I would encourage you to use a share base of 1.068 BILLION shares for your calculations.
This way there is no deviation caused by the dilution impact.
next you have Marco itself.
This is the company with the following track record.
2009 - 5 million profit
2010 - 8.9 million profit
2011 - 14.2 million profit
2012 - 14.8 million profit
2013 - 14.7 million profit (latest)
I already mentioned I would discount 2009 and 2010 numbers.
Those are small numbers.
When numbers are small, it goes UP and DOWN in a flash.
The percentages are usually meaningless too.
For example, a company with a million profit, can easily grow to 2 million profit in one year.
But it also can reverse to losses the next.
and a company making just 5 million profit, it's not worth a mention.....
And from the numbers itself, you had concluded it was an average company.
If it was an average company, would it be wise to bet on it just for the dividends?Anyway, since you are mentioning it, I guess it's time I look at Marco reports...
In the latest report, the cash flow showed Marco paid 20 million in dividends.
Which is clearly more than the company's profits...
And logic would dictate such payout is illogical and would not be sustainable.
Where is Marco getting the money to pay the dividends?
Answer? From the cash flow, you can see it's from 'Proceeds from warrants getting exercised......
11 million was raised from the warrants exercise.
Which is funky.
On one hand it dilutes ....
On the other hand, the proceed amounts is quite substantial.
However.....
with 168 million warrants still outstanding as of current date and time...
there's a BUFFER. (ok you can call it safety .... maybe safe to hold for another year or so...ie you SHOULD still get decent dividend payment for the time being....)
but do bear in mind...
once all the warrants are converted....
it's like eat sendiri time....
( yeah warrants expires on May 2014! )
and this is where you need to focus back on the business....
that's from the latest report.
look at the third and fourth column...
revenue is slighty better - 118 vs 114 million.
finished good purchased - Marco bought much less 87 vs 95 million)
expenses - expenses grew - 15 million vs 6.4 million...
my interpretation?
This company is struggling.
Expenses increased a lot....
and if not for the lesser quantity of finished goods purchased...
my guess is .... marco's earnings would have declined much further....
and it goes back to your rating...
AVERAGE.
Which means you are banking on dividends from an average company.
How would you rate your investment?Another question....
Would you have bought Marco if you knew Marco's business was rather average?
Feb 20 2014, 11:48 PM
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