capex plan, page-5

Matrix benefits from a falling AUD. Assuming the AUD retreats to a somewhat more level Matrix's profitability should increase substantially.

Having said that, they have a weak order book, appear to have no real competitive advantage and have been poor at explaining the dynamics of their business to the market. Their order book appears to be an industry-wide experience.

The main issue that I have with Matrix, is the lack of disclosure combined with director selling during the capital raising. They would have been aware of their order book at the capital raising, and the impact that this information would have on the market. They choose not to reveal it, I see that as moderately misleading given the expectations that existed in the market. Having Aaron Begley sell into the CR, that's downright wrong. There is a massive credibility and corporate governance issue with MCE that exists in the market.

Normalised earnings for MCE depends upon the level of demand in the market. By this, I mean that when demand is strong the price that MCE can charge for goods will rise due to demand outstripping supply leading to expanding gross margins. And vice versa, as we are seeing now, declining gross margins due to lower levels of business. Long term driver of demand is the oil price, which is forecast to move up. This is a strong tailwaind for MCE.

In spite of the negatives I listed, Ibelieve the current price is cheap for the long-term. For the short-term, MCE could well issue another earnings downgrade given worldwide economic volatility. The thing that could make MCE expensive is if they were to need to raise more capital at current prices, which is hard to judge until we see their half-yearly.