ann out: update-equity raise-suspension, page-32

All good points TL. The major change in the company's financials since August is due to the fact that they either didn't, or couldn't, determine just how much of an impact the underperforming construction projects were having on the company's business model. By my estimates when I bought in at 30c the cost overrun at HD4 was only going to be in the range of $20M to $25M. This figure was based on the initial announcement a few months ago and the impact it would have on profit guidance. As it turns out the cost overruns here are actually far north of this figure, and this is the core of the problem that has arrived. In order to finish up HD4 they needed funds. The debt facility is now overdrawn relative to the profits that MAH will make over the next few months. They couldn't service their debt in a stable manor, and thus they have to firstly raise money to alleviate debt pressure, and secondly they have decided to throw away the construction division so that something like this won't happen again.

To make it clear, this saga is largely due to the cost overruns at HD4, not because of the company's business model with respect to mining. MAH has made great profits in the past on their mining services. The remaining division (mining) left with MAH is far from broken; in fact with CC it has never been better if their order book is anything to go by. Who said the mining sector was dead? MAH's order book is growing stronger than ever with every new and extended mining contract.

While debt pressure has been the source of both problems, the difference here between what HST went through and what MAH are going through now can be summarised in one word: de-risking. HST chose to plough on in vein, while MAH realise that change is needed from the very foundations that formed the company in the first place.

MAH has managed to run its mining services in the past without being pressured by debt issues, so now that the problems caused by their construction are getting mitigated, I can't see why debt should suddenly become a problem for the mining facet of MAH. If debt wasn't an issue before, why should it become one now? Gearing will be less than 5% if I need to remind anyone.

I also see a great deal of contradiction in the arguments of those who oppose this new strategy. On one hand some are arguing that the mining boom is dead and buried so MAH won't receive any new work, but then they also say that mining is capital intensive so the company won't be able to grow as much as hoped. MAH hasn't had financial problems in the past with its mining so point two should not be an issue, and our order book has never been more valuable, so it is hard to agree with point one either.

Short this thing for all you like tomorrow. It seems like some have thrown their common sense out the window to suggest that this will hit 10c (less than 2 times projected earnings of the next financial year!).

5% gearing. 20% net debt. $70M profit anticipated in FY14. MC of $195M at 16c. This thing is far from dead.

Interesting that fat bloater hasn't been able to say who he/she shorts the stock through. It should be quite a simple question really for someone who is such a pronounced short seller of stocks.