possible explanation for price weakness

Being a value based investor i was researching into MTS trying to find an explanation for the recent share price weakness.
(Value is only value if the forward estimates are true, just because a share price drops doesnt mean that a there is 'value')

I noticed a couple of interesting points:
1) firstly perpetual decreased its stake, and this got me wondering why? perpetual is a value based funds manager, so they should be increasing their stake not decreasing it (as opposed to some funds management styles that buy/sell based as a 'growth manager' or as a momentum style manager).

I then came about this article:
http://www.franchise.net.au/Article/Come-clean-Franklins-angered-by-Metcash-secrecy/508768.aspx

Come clean: Franklins angered by Metcash secrecy
18 December 2009
Franklins has urged Metcash to reveal the discounts that it hasn't passed on to the supermarket chain, the total value of those discounts and to allow full inspection of its records.

This follows the decision on 16 December by the NSW Court of Appeal that Metcash does not have the right to withhold certain discounts and rebates it negotiated with suppliers on Franklins' volumes.

"Metcash has now acknowledged that it owes Franklins money. Why has it taken them so long to come clean?" asked managing director of Franklins, Aubrey Zelinsky. "Metcash must have known that it negotiated discounts with suppliers that it unlawfully withheld from Franklins. Unfortunately, it has taken a unanimous Court decision to spur Metcash into action."

In an affidavit filed with the Court, an independent forensic accountant from Deloitte concluded that "there is a strong possibility that in respect to at least some of the suppliers, there is an inconsistency between the description or classification of the discount on the face of the trading terms ... and the actual benefit or service provided" and "there would appear to be no uniform practice in relation to the description or recording of the types of discounts negotiated between Metcash and particular suppliers".

Zelinsky said that, the value of the discounts that Metcash has retained, and to which Franklins is entitled, is significant because the supermarket chain had ordered close to $2 billion of goods from them.

This is more serious in my opinion than a single cash and carry outlet being closed down as mentioned in some other posts, as it is a possible structural weakness that will need to be rectified.

I still hold some MTS but will be cautious dollar averaging down on this until this issue is rectified.


As a value based investor one has to consider the overall pyschology of the market. Where market pyschology is weak (as in a declining general market) its generally safer to buy stocks on value because people are reflecting on price rather than value. But where market pyschology is relatively strong (such as now), one must give due consideration as to what does the 'market' know that i dont, thats potentially leading the share price lower.
In other words where the market is going up and an individual share price is trending down, make sure you understand why the share price is trending down, otherwise you could find yourself in a value trap.