The $20m sale and leaseback of MCE’s Henderson property will strengthen the balance sheet and provide the working capital funding required to take advantage of potential growth opportunities. It comes with a short term rental expense, but given the operating leverage, it wouldn’t take much extra revenue to cover this cost. Offshore capex trends have been positive, although we will need to wait for MCE’s 1H20 results to see whether the improved 2H19 performance was the start of an improving trend. Until then a HOLD call is appropriate, despite the increase in our valuation to $0.45 (prior $0.40).
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