New Zealand
Becoming cautiously bullish on Mainfreight. We like MD Don Braid’s recent on-market purchase of ~$600k worth of shares, we like the recent weakness in the stock price, and we have become avid readers of interviews with Don — especially this one. Some highlights:
“…those P&Ls we’re talking about, they’re part of everyday life at Mainfreight — those P&Ls go up on the cafeteria wall. So it doesn’t matter whether you’re loading freight, taking customer service calls, out making sales calls, or an operations transport manager, you understand those disciplines early on in the piece”
“ it’s not about the short game, it’s about the long game. We’re thinking about being around for a hundred years. We’re not thinking about selling our shares, we’re not thinking of getting out when the going’s good — we’re here for the good and the bad — so we’re preparing the business for that next 100 years.”
“I think empathy is really important. To trust your people too, to give them the responsibility. People thrive on being given responsibility. I learned that early in the piece and I think it’s stood me in good stead. If you trust your people, look after them and give them responsibility, they’ll deliver”
We like mgmt which has these values — it reminds us of what Buffett looks for in a manager. While we expect freight volumes to normalise over the next 1-2 years, we think it looks like a solid long-term hold. We have also been watching MOVE Logistics (no view), as they are now run by an ex-Mainfreight lifer.
Metro Performance Glass We attended the MPG AGM this morning. A very spirited crowd of shareholders lobbed hard questions at management. We don’t like it as a stock — selling the Australian business doesn’t make sense to us, when its margins are much better and less lumpy than the NZ business, while the company’s debt is a looming issue. We think the best outcome here is if Masfen and co manage to take it over.
Aus
Lynas shares are currently up +4% after announcing the signing of a follow on contract with the United States Department of Defense (DoD).
This contract relates to the construction of the heavy rare earths component of the Lynas U.S. Rare Earths Processing Facility in Texas. The release reveals that the updated contract is an expenditure-based contract under which all of Lynas’ properly allocable construction costs will be reimbursed. A contribution of approximately US$258 million from the U.S. Government is now allocated to the project, which is up from approximately US$120 million previously. We remain BUY rated. Wastewater treatment company De.mem shares are also up the last couple of days after reporting its highest quarterly cash receipts of $5.8m, with 17 consecutive quarters of cash receipt growth. With several contract awards receiving over teh quarter, supporting strong outlook for the second half of 2023. Cash balance remains sound at $4.1m, and nearing breakeven – we are still (patient) buyers below $0.20.