Why Does MFC Industrial Ltd (MIL) Have a Low PE?

Page 1 of 2

MFC Industrial Ltd (MIL), formerly Terra Nova Royalty, has an interesting history and now specializes in global commodity supply chains – it delivers commodities and materials all over the world.  It provides logistics, financial and risk management for the buyer and sellers of commodities.  The stock has an abnormally low P/E for a company not in an awful industry or on the brink of failure.  Adding to the confusion is the stock chart and the dramatic decline in the shares a few years ago.  These two issues warrant further investigation.

MFC Industrial Ltd (NYSE:MIL)

MFC Industrial Ltd (MIL) – A new platform for an old firm

MFC has a twenty-five year history, but has changed significantly in recent years.   That said, management maintains its focus on unlocking value from undervalued or troubled assets.  Shareholders have a compounded return of 20.4% over the past ten years.  It has turned around and restructured firms it acquired.  It spun off assets over the years, most recently in 2010 with KHD.

MFC was involved in many transformative transactions over the years.  In 2010, the  company in its current form emerged.  The business changed its name that year to Terra Nova Royalty and decided to reorganize and focus on its resources businesses.  Industrial services were separated from Terra Nova Royalty and KHD Humbolt International AG was formed.  KHD shares were then distributed to shareholders and it trades in Frankfurt hence the dramatic drop in the share price in late 2010.  In 2011, the firm’s focus was now as a global supply chain platform and it renamed itself MFC Industrial Ltd.

MFC Industrial principally manages its Commodities and Resources segment for their own account.  It is different than competitors since it is larger and can leverage its financial position to improve operations.  In addition, MFC does commit capital and take positions in commodities.  MFC invests in production assets and also purchases them from third parties.  It owns a position in the Wabush iron mine, an iron ore mine in India, a metal refinery in Europe, as well as other operations.   MFC often profits from trades where one of the parties has currency or credit risk that makes finding counterparties more difficult.

Acquisition of Continental Resources

MFC has a TTM price to earnings ratio of 2.42x, very low for any company not facing serious trouble. Even though it is a unique company in the resources and refining industry, shouldn’t it have somewhat of a similar valuation? Nucor Corporation (NYSE:NUE) also extracts iron ore and has refining operations and its PE is 16.  Nucor’s PE is over 6 times the PE of MFC.  Another iron and refining giant, ArcelorMittal (ADR) (NYSE:MT), has a forward PE of 21.  Both ArcelorMittal and Nucor are much larger than MFC with market values of $27 and $15 billion compared to $500 million for MFC, so they may warrant a slightly higher valuation but not 6 times higher.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!