MTQ is a relatively unknown in the investment community due to its small cap and that it is in the O&G support industry which is now unloved. MTQ has 2 core divisions - Oilfield Engineering and Engine Systems. Due to the recent downturn in the O&G space, the company has been burning cash and making losses. My investment thesis is simple- I am buying and hoping that MTQ turnaround and becomes profitable.
MTQ has a gearing level of about 17% based on its latest quarter results. However, this will fall because of the recent rights issue of $12 million. With the rights and warrants, MTQ is likely to be able to weather the O&G storm for another 2 years.
Post Rights and warrants, the company's reported NAV will be $0.41. Hence buying at $0.218, I have a good margin of safety as the company continues to report quarterly losses of about $0.02 each quarter.
With only 247,220,000 shares after this equity round, a simple turnaround to an annual profit of $15 million will mean an EPS of 6 cents- 3.7 times PE. This is possible given that MTQ's gross margin is about 15.0%. What is needed is for MTQ to begin getting more order book and in turn increase in revenue. MTQ will need about 200 mil in revenue to hit there again. The first milestone though is for MTQ to report a positive EBITDA.
MTQ is being run by the Kuah family who have been fairly prudent. One of their actions was to suspend their dividends when the industry turned to conserve cash. MTQ used to give out dividends in the yield of 5% region.