MLG future

After reviewing MLG and some of its peers, i can not see this business going anywhere. It looks alot like it was just an exercise for the Director and major shareholder to cash out a bit, reduce his personal risk while still maintaining control.

Comparing to a couple of peers MLG has very low margins at time of listing. Both NWH and MLD had significantly higher EBITDA and NPAT margins when they listed and over time their respective margins have reduced significantly. While that may be understandable due to expanding businesses are harder to keep control of with more sites, workforce and equipment etc. Also head office with more executives, BOD and ASX compliance will all add expenses. There are a host of reasons but the fact is bigger contracting businesses have lower margins

Where does that leave MLG going forward?

MLG has already flagged a much softer half yearly about to come out and it hasn't even been listed for a year. How much softer? How much have margins reduced? How much have borrowings increased?

NWH had a NPAT of $32.8m and EBITDA of $79m on a T/O of $107m in 2010 compared to a $75M NPAT and EBITDA of $266m on a T/O of $2.3B year just gone. So in 13 years to achieve an approx 2.3 times of NPAT that had to increase their T/O 21 times. NWH was much the same story as MLG starting from a small privately owned operation to listing and then going to pay squillions in acquiring businesses to seeming to increase T/O. It certainly hasn't been to increase NPAT margin. They have raised hundreds of millions and diluted shareholders to get to where they are and increased borrowings significantly also.

Is this the future here?

Also WA has been in a "resource boom" for the last near 10 years. What happens when things slow? Probably safe to say that contractors have had their time in the sun for this cycle and when things slow everyone will fight over the lower amount of work and that only leads to lower rates.
WA has always been cyclical and probably always will.

In its first year being listed MLG posted a $254m T/O, $42.7m EBITDA and a $12.5m NPAT which is an approx 17% EBITDA and a 5% NPAT. in comparison NWH had a 74% EBITDA and a 30% NPAT on it first year after listing. Significantly lower starting point

Another point i see a major red flag is that in a presentation they put out is that they are gloating over a cash position at 30 June 2021 of $9.7m however across the page is stated they have current receivables of $42.2m but payables of $47m. So all they have done is hold back payables to increase their cash holding. And this Inventories in their current assets is clutching at straws. The vast majority of that is spare parts they have purchased for sites ( refer annual report ). They should be expensed immediately, not propping up a balance sheet

All i see is lower margins & increased borrowings. Any increase in T/O will come from acquisitions which for any reasonable business they will have have to pay they same multiple they are valued at and increase their borrowings to do so or organic growth which will require capital which = borrowings. Very capital intensive business model with alot of risk

I was sold this thing via a broker that said it should rocket on listing and continue to steadily rise but i just don't see it. Should have researched alot more before getting in. Live and learn!