Therefore, if you or anyone can come up with anything negative...

Therefore, if you or anyone can come up with anything negative about MND, and you don't mind sharing it here, I'm certainly all ears. (Unlike some characters in the MSB forum).


I can come up with a very big negative, a medium-sized negative and two potential negatives.


The big negative is the acute cyclicality in the business: when Revenue goes from $2.6bn to half of that, taking underlying earnings commensurately down with it, then that's the kind of business that needs close monitoring, and whose externalities need to be understood.

For many years when the share price was a levels multiples higher than today, the stock would have appeared to be a perfectly decent investment; yet the subsequent permanent capital loss would have been severe. The intrinsic value of this business doesn't rise in a straight-ish line over time; rather it does so with some wild oscillations around the trend.


The medium-sized negative (and this will be the subject of my introductory letter, as "engaged shareholder", to the CEO) is what I think is somewhat sloppy stewardship of the issued capital of the company, which has risen from some $20m in 2005, to $120m today.

Specifically, shares on issue have risen from 78.2m at the end of 2004, to 93.7m today, a rise of 20%. Because this has happened at somewhat muted rates each year (1% to 2% pa), it isn't too remarkable, but over time the dilutive affect adds up significantly.

The reason for this has been varied, including the issue of options to key staff, a DRP, and some small scrip-based acquisitions.

My gripe is that for a company that generates so much free cash flow, at worst, these issuance should be neutralised over time through tactical share buyback programmes.

Because, if I was to still be a shareholder in 10 years' time I would be very unhappy if my interest in the business was diluted by 20% when the company had more than sufficient financial wherewithal to have used cash to fund whatever was funded by the issue of stock.
Or at worst, the stock that was issued needed to be bought back and cancelled.


One potential negative is that the board has been in place for a long, long time, and this has been a cornerstone to the fact that the business has never blown up, where many others have. My concern is that we have a succession of retirements in coming years, at a very time when those crusty, conservative, and grey-haired engineering types might be going to be needed most (i.e. in the event that the company's international adventure becomes more meaningful or, and I hate to say it: aggressive.


The other potential negative is that management, tired and/or bored with waiting for the cycle to turn in the company's favour, go out and make some sort of "company transforming" acquisition (heaven knows, they have the cash to do so...which is why I'd really like to see some of the excess capital being put to buying shares in our own business, rather than the business of some other lucky devils!)