News: MMS Mcmillan Shakespeare HY Net Profit After Tax Attributable Down 1.2 Pct, page-5

The MMS shareprice certainly tanked today. I too was thinking of selling out of both MMS and ECX as they have been very poor performers. Listening to the podcast however, the result may not be as bad as the the market reaction implies.

So the bear case:

• The share has done little for past few years and is tanking further
• The current industry dynamics are terrible
• The propose merger seems to be poorly timed and is subject to a heap of uncertainty and doubt with a real risk of overpaying
• Brexit, finical services enquire, banking royal commission have been and perhaps still are big headwinds
• No one is buying cars

And now the bull case:

• MMS have a well defined strategy that they are sticking to and seem to be happy with their progress. I know that management would always say that but seems to be backed up by metrics which seem to be ok apart from UNPATA being down a little (yes I know that’s the most important metric but may pay to look past short term performance)
• MMS are clearly not rushing the merger so hopefully they will not overpay
• listening to the podcast, management seem to be almost bullish for the second half
• Management seem to be implying that they are outperforming their competitors
• Massive revenue growth for Plan Partners with plenty of upside from NDIS
• Margins are still pretty good
• the dividend has increased every year apart from 1H14 and has been increased again this year
• eventually, people will need to replace their ageing cars and at some stage there will be a pop as the pent up demand is released
• there will be life after Brexit whatever form it takes
• The financial enquire and banking royal commission are largely done and dusted and MMS are confident that they are well placed to meet and regulatory changes
• the merger will be resolved one way or another
• there was an announcement yesterday that nearly 280,000 share were released from voluntary escrow. Perhaps they have been dumped today?
• the share price has already tanked - there is now probably more upside than downside risk

As I said, I own both MMS and ECX (smaller holding). Although many of the above bull points also apply to ECX, given that there is only a 13% implied premium for ECX at today’s closing prices, and little prospect of an increased bid from anyone, I would be inclined to sell ECX before MMS. 

Of course my thoughts only. It’s your money so do your own research!