Q: Hello, I have a small position in MEG and would like to add on the possibility of the company being taken over. As I understand it , they have a large Net Operating Loss (NOL) that a major could use to offset their tax. ..
What is your assessment of their financials? From what I see their EPS growth has been -ve for years. Then the question is why would someone buy this company? is it mis-managed?
Thanks
Carlo
What is your assessment of their financials? From what I see their EPS growth has been -ve for years. Then the question is why would someone buy this company? is it mis-managed?
Thanks
Carlo
5i Research Answer:
The company's earnings history is volatile, but now it is highly profitable. We would consider it a possible target, for its large reserve base and growing cash flow. The stock is very cheap and we do not think management would entertain offers yet, but one never knows. Tax pools are typically valued on about 1/10th on the dollar (i.e. $100M in tax pools is worth $10M to a buyer). The financials have improved A LOT and debt is now barely 1X cash flow, and should be near zero in a year, allowing the possibility of dividends, which is a goal for the company.