Part of the recent price pressure in the share may have been as a result of the PIC having recently taken the decision to convert some of their active managed assets to passive assets. Looking at monthly share holdings distributed by the JSE this appears to have resulted in them trying to flog close on 3m MTA shares. Given the relatively limited trading volumes in the share, exiting such a large stake is bound to push prices down. From a fundamental aspect, FY15 is the first year when MTA starts benefiting from the sale of Start Stop batteries in the aftermarket. Margins on aftermarket sales are multiples of those earned on sales to OEMs. As aftermarket sales ramp up one can expect margin expansion to start coming through. Ukranian battery manufacturers historically provided close on 3m batteries to Russia. Post the Russian / Ukraine standoff, these batteries had to be redirected to markets historically supplied by Rombat. If the Ukranian battery producers go out of business (indications are some have already folded, others are teetering) not only will this reduce the pressure on margins that Rombat felt during 2H14 and 1H15, but there is also the potential for Rombat to eventually replace the imports into Russia historically provided by Ukraine. Finally we are yet to see the benefit of the international aftermarket distribution agreement Metair has signed (last results announcement seemed to indicate it's due to commence end of this year) - access to another 2500 aftermarket outlets across Europe can only be good for MTA. The above factors will take a while to come to the fore - certainly don't expect fireworks at the year end results, but if you're prepared to hang around for 3+ years, I reckon the current price presents a good opportunity to get in.
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