Buyers Returning To MML, page-4

What will move the sp here is institutional funds buying back in. Medusa has been doing a lot of presentations, mainly to institutions over the past 6 months in:
WA
Melbourne
Sydney
Zurich
London

Institutions sold out of/sold down holdings when Medusa came out of the ASX200 last year. No doubt some of them will be keen to get back in now that new management is consistently engineering a self sustaining recovery. Others who missed the boat last time when the sp went from c.50c to $8 would be interested to get on board early this time as well.

Medusa is now consistently meeting or exceeding guidance over the past 3 quarters which is essential for a fund manager's (and PI's!) peace of mind. Institutions will be reassured by the progress seen last week in Q3 results and some will be looking to position themselves at these bargain prices during quiet trading times such as these so as not to move the price against themselves.

Here are some recent comments on institutional issues with MML by an ex-fund manager:

"Also some thoughts regarding liquidity. The stock is trading around 1 million shares a day. An institutional investor would only trade 10-20% of that maximum otherwise they would move the price too much. So a position can only be built at the pace of A$100k to A$200k per day.

Further, a fund manager will have a minimum position size for a portfolio. Having a holding in a portfolio has a cost in terms of monitoring the position, so you would only ever build a position if you can get it to a significant enough size to impact on performance. Nowadays, the smallest funds are around US$100 million (you need a certain size to cover compliance costs, marketing and so on). So to build a 1% position (about minimum) would take at least a month. And what would take a month to go in, would take a month to come out of. This is a big turn off for institutional investors.

Of course, if you double the share price and double the daily shares traded, liquidity will start to ease a bit. If we can get to that point, things should get interesting!

Another thing is ASX index inclusions. Unfortunately, we have already experienced the downside of this, whereupon exclusion led to forced dumping by institutions out of an illiquid stock. Being forced to puke stock into an illiquid market is every fund manager's worst nightmare (I know I've been there).

If management can get the stock price up, however, we will get the reverse once market cap reaches sufficient size: find managers being forced to buy into an illiquid market! I am not sure if ASX rebalancing is an automatic process based on market cap or whether a committee is involved in the process? Does anyone know?

Obviously, we are a long way off at current share price, but given the volatility of this stock is worth keeping an eye on this trigger point."