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Magal Security Systems (MAGS) Message Board

  • fivemilx35 fivemilx35 May 30, 2004 1:39 PM Flag

    MAGS REALITY!!!

    First, for those of you who think that the recent oil security threats could somehow benifit MAGS should think again. Never in a million years will Saudia Arabia or a Saudi Arabian company ever buy a security system from an Israeli company. Never.

    Second, I owned MAGS from 2002 through March of this year when the stock hit my target price of $12. The reason I sold the stock was simple, it reached a stretched valuation. Look at it this way, last year MAGS showed negative free cash flow because of significant capex to rollout several new products. If you normally the CapEx, MAGS would have shown FCF of $.6M. The companies current market cap is $168M. Add net debt and the enterprise value is $175M excluding dilution from 144 stock issuance and options.

    MAGS debt currently yields 10.5%. Add cost of equity and their WACC is roughly 15%. For MAGS stock to be worth the current $175M enterprise value they would have to grow FCF by 38% for the next 5 years, 20% for the following 5 years and then 10% forever thereafter. How achieveable is this? Well, Israel has had security problems for a long time. MAGS earnings growth since 1998 is 0%. That's right 0%. Since 2001 it is negative 15% per annum. Not much of growth company.

    MAGS is a solid company. I totally agree or I would have never owned it in the first place. However, it is not worth $21. It may be worth $12, but probably closer to $8 after their terrible last quarter.

    rgds
    5mil

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    • What you say is true, but I belive that the growth that MAGS will experience over the next 5 to 10 years will be greater than its historical frowth rate. What beta did you use in you CAPM? I feel certain that givin the recent volitility in the stock price that the beta has to be very high.

      From a trading perspective, I have been in and out of this stock for three months, buying low and selling highrer.. buying on dips and selling on the runs... from an investment perspective I would not feel comfortable NOT holding the stock, so I hold some so I always have a position - if you wait for he dips too long on this one, you could lose out - one day, this one will get away from us all if we're caught waiting for the dip that doesn't come.

      BOL

    • Wake up please.

      This is why you are not making money with MAGS. You think the market is so logical and all you need to do is do the best mathematics you can to make money ???

      I am sorry but like I said so many times before on this message board, this is not the stock to short now. Your fundamentals and valuations don't matter. Nobody pays attention to that for now.

      The bottom line is that there are a lot more buyers than sellers on the market for now. I don't know when this will change and I don't want to predict when it will change. It might be tomorrow or next year. This delicate supply and demand equation is shown in the daily chart. When you look at the chart, the chart is determined to test the previous high. Like I said before never say never. It will test the critical supply zone around 24 bucks and then it will try to take out the previous high. After then you can expect the second top to be approximately 70 bucks range.

      This is how you make money with MAGS.

      • 1 Reply to helloyou90909
      • I have a question for all you MAGS longs and cheerleaders. And before you all jump on me I am just a trader, have been both long and short on MAGS many many time, so no agebda here.
        A lot of posters are saying valuation doesn't matter, future earnings are going to be huge, the market only cares that MAGS is a security stock and it is nothing but up.
        Well, wasn't MAGS just at 40?? Did it not come down to 12 after that? It would seem the market had alot of concerns about MAGS. But somehow it is different this run? MAGS won't turn around and test 12 again?? Why not?
        Investors are much too happy and giddy when a stock runs up and much too gloomy when a stock comes down.
        Sure is a lot of optimism around here right now. Happy trading.

    • Nice post with fundamental substantiation and opinion, but this is not a May 30, 2004 or prior growth story, it is a 6 month and beyond story.

      You can create any metric you want, as you have done, and come up with a very subjective valuation thesis, as you have done as well.

      But you see, fivemilx35, as you know, the market really isn't about what you or I think it should be, it's about what the overall market thinks will happen down the road.

      And by reading the MAGS stock chart, you will see that market sentiment is telling us that MAGS will probably head to 25 by the end of next week.

      http://stockcharts.com/def/servlet/SC.web?c=mags,uu[w,a]daclyyay[db][pb20!b50][v
      c60][iUb14!La12,26,9]&pref=G


      The market seems to recognize scale, demand, and growth long before anyone else.

      I think MAGS will be a huge growth story in late '04 and '05 and beyond.....and apparently so does the market.

      Good luck to you,

      Kelly

      • 2 Replies to akellyforniagirl
      • MAGS already up more than 140% since Spears security group recommended it. Spears predicted at the time they recommended MAGS is doubling price is a possible reality for 2004. That means ~$16 a share. (up from $8 a share at the beginning of 2004.

        $21.30 is a lot of strengthing from $16. It is doomed to go down next week.

        Before the 5% Div. announcement, MAGS was~$14
        That 5% Div already gave MAGS a 50% run up.
        It is considered an over reaction from the market. It get to go down to the earth again.

        Guys, wake up! party is over. Tuesday open will be below $18.

      • great what you stated, "it's about what the overall market thinks will happen down the road."

        I want to ask fivemilx35 this:
        Just curious � would Saudi buy from a US company (like a Magal subsidiary) that has a product stamp Made in the USA.

        I bet at this stage of the game the royal family in Arabia will do just about anything to stay in power and they must have the oil income to do so.

        Right or wrong�

 
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