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Investment Q&A

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Q: MRE: not a question but a comment. CIBC posted the following early on 22nd, which should explain today's drop. "Nat Rea Comes Out Swinging In His Defense To The Counterclaim
 In Nat Rea's reply and defense to the counterclaim issued by the MRE group, additional issues were raised that appear to be of greater materiality than the original statement of claim. Clearly, the Rea claim will weigh on the stock until a resolution, which will take months.
 One of the most impactful statements was that current CEO Nick Orlando and former CEO Fred Jaekel have collectively steered $50M to $100M out of MRE via kickbacks and misappropriations. For context, MRE reported EBIT of ~$450M from 2001 to Q3 2013. 2013 adj. EBIT est. is $158M.  MRE executives were also said to have overstated earnings of one of MRE's international plants in 2012 and early 2013. In early 2013, several million
dollars were said to be booked retroactively to 2012, with the plant
subsequently instructed to book periodic losses in 2013 to offset the profits.
 These new claims are troubling and given the internal detail only MRE can
put them to rest. Our view remains that we like MRE's fundamentals (better
margins and exposure to light weighting). The timing of realizing this value
has been pushed out which will cap its valuation (2014 P/E 8x, peers 11x+)."
Read Answer Asked by Kurt W on November 23, 2013
Q: Hi, I bought a small position (1.5%) in Martinrea at 8.90$ and have watched it slowly drift all the way down to below 8$/share since their last earnings were reported. While I have not yet ever averaged down I find myself tempted to add some more given my still positive view on the company as a long term hold in my rsp. Any advice on this situation would be appreciated. By the way I also have a 5% position in magna. thanks
Read Answer Asked by Adam on April 18, 2013
Q: MRE
I wish to get your opinion on MRE Q4. LNR also missed recently. AM was OK. MG missed but was positive on outlook so went higher.
Scotia says:
■ MRE reported Q4/12 adjusted EPS of $0.15 (excluding $0.23 in severance costs, restructuring charges, and customer chargebacks), which was below our estimate of $0.19
and consensus of $0.17.
Implications
■ The miss vs. our forecast was on sales (largely North America). D&A was also higher than we expected, resulting in a lower gross margin (including D&A) vs. our forecast. The miss
vs. consensus was on margins, partially offset by better-than-expected sales.
■ Q1/13 guidance a bit light. MRE expects sales (excluding tooling) of $700M-$720M and EPS of $0.22-$0.26. This compares to our estimates of $782M and $0.26, respectively. Q1/13 consensus EPS is $0.25.
■ Operational update. Shelbyville is experiencing improved throughput with less overhead and labour. The facility was profitable in February and cash flow positive in January.
Continued operating improvements are expected. Hopkinsville is improving but not yet profitable.
■ Our take. We are encouraged that operations in Kentucky are improving. Overall, we do not anticipate material changes to our investment thesis.
Read Answer Asked by Kevin on March 21, 2013
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