New Capital
Contrarian, deep value, long/short equity, special situations

Emeco Holdings - The Bear Case

I am writing this in response to a recent bullish article (by Alpha Vulture) on Emeco Holdings (OTCPK:EOHDF). Although the article covers liquidation value assessment quite extensively and mentions some of the risks (low equipment utilization, haircuts on book value upon sale and debt burden), I believe some vital bearish arguments are missing.

Cycle is not likely to bottom out yet

Emeco's valuation in the previous article rests on the assumption that 2013 was the bottom of the cycle in the mining industry and things will improve going forward. However, if history can give us any clue, mining industry cycles usually take longer than a year to revert. See the charts below depicting volatility of Caterpillar sales and...

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