Interesting threads and posts on this stock and great to see such great fundamental debate. I haven't looked into MES in a huge amount of detail, but I would say that some like gustie seem a bit optimistic and are clouded by their confidence.
Granted its cheap on many metrics. However there are reasons why its so cheap. This is a highly capital intensive business with huge amounts of price competition and huge variability from managing cost inputs. A 10% move in this oil-related input cost wipes out all of EBIT in one fell swoop as can be seen from the variability of 08/09/10. Also I would watch out when the majority shareholder's DRP commitment expires to see if they strip profits from the company. I would also regard any major vertical/horizontal m&a expansion as risky to say the least.
There are also major currency risks, tariff and trade risks and other variables which can easily effect margins and the fact that its a China co and listed here still puzzles me.
Are these risks accommodated in the low price? Maybe.
Its difficult to get real earnings predictability from this co as there are so many variables and margins can swing significantly. Therefore this risk is apparent in the share price.
To me biggest risk is the fine line between managing volatile cost inputs with highly competitive forces from buyers. Not a low risk, easy business thats for sure.
Will be interesting to see how they go 2011/2012
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