Due to my audience having few Australians and both currencies’ being relatively stable, I will be referencing all financials in USD rather than AUD with AUD numbers in parentheses.
How is maintenance capex defined by management? The definition investors should use is the level required to maintain both competitive position and unit volumes. However, I think some managements use it to mean literally the capex they spend on equipment maintenance. Obviously, drills have a finite lifetime, so as well as the cost of keeping existing ones in good nick, it should also cover the cost of replacing the fleet as they expire. I'm just a little skeptical about maintenance capex being $4m when D&A is $18m.
Also, a little confused about the write-off programme. I get investments being immediately written down to reduce taxable income - are the investments also depreciated immediately (or over the course of a year) to 0 in the income statement?
fellow $MSV shareholder here. What were your thoughts on the FY 2024 results? It did strike me that maintenance capex ended up much higher than hoped and capex guide for next year as well...
Yeah, I wasn't a huge fan, I would expect maint capex to stay around the historical norm of $12m AUD from here. Might also lower the value closer to $1.
They're not as cyclical as other commodity group due to their ability to switch between commodities so easily. If there is an overall commodity downturn they would be low on utilization and this would cause an issue but the ability to switch between commodities is why I think they are a 8x instead of 6x/4x.
Is there not a risk that the law keeps getting extended for many years? This is what has happened with the instant write-off law for smaller businesses ($20k write-off) that was introduced in 2015.
It seems like it has just kept being extended. The "aggregated turnover" must be less than $10 million though so MSV aren't eligible for this? I read it was being extended until June 2025.
Yes, I worded it wrong in the article it is not the instant write-off law as that applies only to small businesses. I am referring to the temporary full expensing which did end last year. It did expire.
Thanks for confirming. This is indeed a very interesting setup. How did you come to the conclusion that it will benifit them until 2025/2026? PPL/D&A (FY24) =63/26=2.4 years if I understand it correctly
Interesting idea - certainly looks cheap.
How is maintenance capex defined by management? The definition investors should use is the level required to maintain both competitive position and unit volumes. However, I think some managements use it to mean literally the capex they spend on equipment maintenance. Obviously, drills have a finite lifetime, so as well as the cost of keeping existing ones in good nick, it should also cover the cost of replacing the fleet as they expire. I'm just a little skeptical about maintenance capex being $4m when D&A is $18m.
Also, a little confused about the write-off programme. I get investments being immediately written down to reduce taxable income - are the investments also depreciated immediately (or over the course of a year) to 0 in the income statement?
Hi Jacob,
fellow $MSV shareholder here. What were your thoughts on the FY 2024 results? It did strike me that maintenance capex ended up much higher than hoped and capex guide for next year as well...
Yeah, I wasn't a huge fan, I would expect maint capex to stay around the historical norm of $12m AUD from here. Might also lower the value closer to $1.
Why do you think a 8x FCF is fair and not, for instance, 6x, or 4x? Sorry for the silly questions but I'm just trying to get some more context.
Cheers
They're not as cyclical as other commodity group due to their ability to switch between commodities so easily. If there is an overall commodity downturn they would be low on utilization and this would cause an issue but the ability to switch between commodities is why I think they are a 8x instead of 6x/4x.
Is there not a risk that the law keeps getting extended for many years? This is what has happened with the instant write-off law for smaller businesses ($20k write-off) that was introduced in 2015.
It seems like it has just kept being extended. The "aggregated turnover" must be less than $10 million though so MSV aren't eligible for this? I read it was being extended until June 2025.
Or is this the law you are referring to "Temporary full expensing" which seems to be similar but with no upper cap : https://iorder.com.au/publication/Download.aspx?ProdID=1996-6.2024
It seems like this one has already expired June 30 2023.
I might have not understood this law completely, appreciate if you could put more color onto this :) Thanks
Yes, I worded it wrong in the article it is not the instant write-off law as that applies only to small businesses. I am referring to the temporary full expensing which did end last year. It did expire.
Thanks for confirming. This is indeed a very interesting setup. How did you come to the conclusion that it will benifit them until 2025/2026? PPL/D&A (FY24) =63/26=2.4 years if I understand it correctly