My research shows that MMI is trading way under its fair value of $1.16. It has a number of issues that need addressing. A reduction of its debts for starters. Hence, the elephant in this room.
If MMI can:
- Reduce its debt/equity ratio from 85% to below 20% we will see gross margins move from -17% to positive ranging.
- MMI Price to Earning Ratio is -1x. The sector market is trading at 17x earnings.
- Cash runaway is less than 1 year. The last cap raise was Sep 21. 8.6 million shares.
- Shareholder returns [1year -39%] [7day 9.1%] [30 days 38%] [90 days 71%] 'big improvement for shareholders' however MMI underperformed AMMI which returned 24.2%, MMI also underperformed Australian Market which returned 9.5% over last year.
- The price to Book Ratio is 2.6x. The industry is also 2.6x.
- Future annual earnings growth is set to rise by a whopping 74.6% which means MMI is forecast to become profitable over the next 3 years and that's a faster rate than the savings rate of 1.8%! (this is above average market growth) Present ROE is [-251%].
- Estimate Return on Equity ROE should be 53% in 3 years.
MMI has to strengthen its balance sheet as soon as possible. MMI has too much leverage. The balance sheet shows it has $46m debt due within the next 12 months and another $63m debt due long term. But ultimately the future profitability of the business will decide if MMI can strengthen its balance sheet over time.
The takeaway for me is the serviceability of its short term debts. Will its Chinese market continue to buy from MMI? Will it be able to raise more funds to service debt? Give me an answer to MMI's debt issues or if MMI management read this please leave a response to how you intend to bring down this huge debt.
Your auditors, Ernst & Young have expressed concern if you can continue to trade down this path in the current economic state?
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