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MTQ is not normally a company which releases a lot of corporate updates or announcements. In fact, since its market capitalization is consistently below S$75 million, there is no mandatory requirement for it to report quarterly results; and this actually helps to cut down on manpower costs involved in the additional reporting requirement to SGXNet. However, in the recent month MTQ has released quite a few updates on corporate developments, thus as an investor who keeps a close tab on the company, I feel I should give my thoughts on these developments and how they may impact the company in the next few years.
The first announcement was actually released on March 15, 2010 and concerns the acquisition of a company called Premier Fuel Injection Service Pty Ltd (‘Premier”) by MTQ Engine Systems (Aust) Pty Ltd (“MTQES”). Premier is a privately-owned company and is engaged in the diagnostic and repair of diesel fuel injection parts and engine management systems. The primary reason for this acquisition was to expand MTQES’ network of 9 branches in Australia (recall MTQES also partnered with Bosch as announced back in Nov 2009). Premier is located in Northern Territory, which is one of the few capital cities in which MTQES has no presence in. The consideration for the purchase was A$500,000 (about S$640,000) and will be financed through internal funds and fully settled in cash. MTQES will operate from Premier’s existing workshop for 3+3 years (subject to extension) and they have also employed Brian Agostini (the founding shareholder of Premier) for his technical expertise.
Comments on this announcement – As mentioned in the press release to this announcement, this acquisition will broaden the reach of MTQES and enable MTQES to enhance value to new and existing customers. It can be viewed positively as the transaction did not cost much (valued almost at cost, so MTQ are paying 1x book for it; earnings were not mentioned so unsure what valuation MTQ paid for Premier), and could be funded by internal cash flows are MTQ has a track record of generating steady Free Cash Flows. MTQ was also smart in retaining the founding shareholder to run the business, and this is in line with Warren Buffett’s philosophy of retaining Management to run the business even after he acquires companies. Read more...[caption id="attachment_3169" align="alignright" width="150" caption="Photo by kevindooley"][/caption]
MTQ is not normally a company which releases a lot of corporate updates or announcements. In fact, since its market capitalization is consistently below S$75 million, there is no mandatory requirement for it to report quarterly results; and this actually helps to cut down on manpower costs involved in the additional reporting requirement to SGXNet. However, in the recent month MTQ has released quite a few updates on corporate developments, thus as an investor who keeps a close tab on the company, I feel I should give my thoughts on these developments and how they may impact the company in the next few years.
The first announcement was actually released on March 15, 2010 and concerns the acquisition of a company called Premier Fuel Injection Service Pty Ltd (‘Premier”) by MTQ Engine Systems (Aust) Pty Ltd (“MTQES”). Premier is a privately-owned company and is engaged in the diagnostic and repair of diesel fuel injection parts and engine management systems. The primary reason for this acquisition was to expand MTQES’ network of 9 branches in Australia (recall MTQES also partnered with Bosch as announced back in Nov 2009). Premier is located in Northern Territory, which is one of the few capital cities in which MTQES has no presence in. The consideration for the purchase was A$500,000 (about S$640,000) and will be financed through internal funds and fully settled in cash. MTQES will operate from Premier’s existing workshop for 3+3 years (subject to extension) and they have also employed Brian Agostini (the founding shareholder of Premier) for his technical expertise.
Comments on this announcement – As mentioned in the press release to this announcement, this acquisition will broaden the reach of MTQES and enable MTQES to enhance value to new and existing customers. It can be viewed positively as the transaction did not cost much (valued almost at cost, so MTQ are paying 1x book for it; earnings were not mentioned so unsure what valuation MTQ paid for Premier), and could be funded by internal cash flows are MTQ has a track record of generating steady Free Cash Flows. MTQ was also smart in retaining the founding shareholder to run the business, and this is in line with Warren Buffett’s philosophy of retaining Management to run the business even after he acquires companies. Read more...
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MTQ is not normally a company which releases a lot of corporate updates or announcements. In fact, since its market capitalization is consistently below S$75 million, there is no mandatory requirement for it to report quarterly results; and this actually helps to cut down on manpower costs involved in the additional reporting requirement to SGXNet. However, in the recent month MTQ has released quite a few updates on corporate developments, thus as an investor who keeps a close tab on the company, I feel I should give my thoughts on these developments and how they may impact the company in the next few years.
The first announcement was actually released on March 15, 2010 and concerns the acquisition of a company called Premier Fuel Injection Service Pty Ltd (‘Premier”) by MTQ Engine Systems (Aust) Pty Ltd (“MTQES”). Premier is a privately-owned company and is engaged in the diagnostic and repair of diesel fuel injection parts and engine management systems. The primary reason for this acquisition was to expand MTQES’ network of 9 branches in Australia (recall MTQES also partnered with Bosch as announced back in Nov 2009). Premier is located in Northern Territory, which is one of the few capital cities in which MTQES has no presence in. The consideration for the purchase was A$500,000 (about S$640,000) and will be financed through internal funds and fully settled in cash. MTQES will operate from Premier’s existing workshop for 3+3 years (subject to extension) and they have also employed Brian Agostini (the founding shareholder of Premier) for his technical expertise.
Comments on this announcement – As mentioned in the press release to this announcement, this acquisition will broaden the reach of MTQES and enable MTQES to enhance value to new and existing customers. It can be viewed positively as the transaction did not cost much (valued almost at cost, so MTQ are paying 1x book for it; earnings were not mentioned so unsure what valuation MTQ paid for Premier), and could be funded by internal cash flows are MTQ has a track record of generating steady Free Cash Flows. MTQ was also smart in retaining the founding shareholder to run the business, and this is in line with Warren Buffett’s philosophy of retaining Management to run the business even after he acquires companies. Read more...
