Latest / Investor Exchange / MDR Limited's Impressive Turnaround: 2024 Financial Deep Dive

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MDR Limited's Impressive Turnaround: 2024 Financial Deep Dive · Investor Exchange

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  Music.
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  Welcome back, everybody. Today, we're doing a deep dive into the financials of MDR Limited.
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  We've got their 2H 2024 and full year 2024 reports.
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  We're going to see if we can figure out what these numbers really tell us about
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  the future of this company. Definitely going to be an interesting one, yeah.
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  MDR Limited, they're publicly traded on the Singapore Exchange,
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  and it looks like they do a bunch of different things.
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  Investment holdings, aftermarket services for electronics, so like repairs and
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  parts, They've got distribution, digital printing, even a full-blown investment segment.
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  Yeah, not your typical company, that's for sure. So the big news is MDR swung
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  back to profitability in 2024 after a loss in 2023.
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  We're talking a profit of $5.476 million Singapore dollars versus a $42.476
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  million Singapore dollar loss just the year before. Pretty big turnaround.
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  But before we get ahead of ourselves, maybe we should look at all the pieces of the puzzle.
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  For sure. Looking at their revenue for the full year 2024, it was $232.027 million
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  Singapore dollars, so up about 8% from 2023.
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  Gross profit also jumped by a pretty good amount, 26% to $40.951 million.
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  You know, on the surface, these seem like good signs, but the reports also mention
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  non-cash adjustments that impacted their bottom line. It's not as simple as it looks.
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  Non-cash adjustments. What does that even mean? Like for regular people who
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  don't spend all day thinking about finance.
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  Imagine, let's say you've got a really cool vintage car and all of a sudden
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  the market for that car kind of tanks.
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  Now, you haven't really lost any money. You still have the car.
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  But on paper, yeah, your assets are worth less.
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  And impairments and fair value movements, that's kind of what they are.
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  They reflect changes in how much assets or liabilities are thought to be worth.
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  And that can make profits look different, even if no money actually changed
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  hands. So these profits, maybe they look good at first glance,
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  but we really need to figure out how much of that is because of these adjustments
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  and how much is from them just doing business better.
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  Right. It's like you find out your favorite band's new album is all just remixes of their old songs.
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  It might still be good, but it's not exactly, you know, brand new music.
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  Exactly. To really understand what's going on with MDR, we got to dig deeper
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  into each part of their business.
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  We need to see what's actually making these numbers move.
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  Yeah, definitely. Okay, well, let's start with distribution management solutions. So.
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  DMS. Revenue went up for the full year, but down in the second half of 2024.
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  A bit confusing. Yeah, a mixed bag. And the report says that the reason for
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  the downturn in the second half of the year is partly because walk-in sales
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  at their retail stores were down.
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  But at the same time, more people signed up for their mobile plans,
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  the ZYM mobile SIM plans.
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  That's their mobile virtual network operator service.
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  So maybe they're kind of shifting away from those physical stores and trying
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  to do more with these mobile plans. Yeah, could be.
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  And even with the revenue going up and down like that, their gross margin for
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  DMS stayed pretty much the same. So at least they're staying profitable there. That's something.
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  OK, what about their aftermarket services, AMS?
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  Revenue was down in both the second half and the full year of 2024,
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  but their gross margin actually went up.
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  What's that about? It does seem kind of strange, but when you look at the numbers,
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  it actually makes sense.
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  The lower revenue is mostly from fewer repairs and less money coming in from spare parts.
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  Maybe people are just holding onto their devices longer or deciding to buy new
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  ones instead of fixing them. Yeah, that makes sense.
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  Everybody wants the newest phone or whatever. Exactly.
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  But here's the interesting part. The gross margin going up, even though revenue
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  is down, tells us they're probably making different kinds of repairs now.
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  More complex repairs that make more money. So less work overall,
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  but they make more money on each job. All right.
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  Let's look at their investment segment. This one is interesting.
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  They saw strong revenue growth in both the second half and full year of 2024. Yep.
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  The report says that this growth is mainly because of increased interest income
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  from debt securities and dividend income from equity securities.
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  It looks like they're putting a lot of effort into their investment activities.
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  And in their key highlights document, they really go into a lot of detail about
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  their investment activities.
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  It's like they're saying, hey, this is something important. Check this out. For sure.
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  And that's a good point to move on and break down their investment strategy.
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  What does it tell us about their risk tolerance and what they think is going
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  to happen in the future? So let's look closer at these investments.
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  This key highlights document you gave me actually breaks down their whole investment portfolio.
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  It'll just give us like a summary. They really tell us what they're investing
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  in, where it's traded, even the size of the companies.
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  It's pretty interesting. Yeah, it is. They're very transparent about it.
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  And what's cool is that most of their equity investments are in these three
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  main areas, real estate, financials and infrastructure.
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  Plus, they're big on those debt securities, especially real estate bonds.
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  They seem to really like those large cap companies, you know,
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  the ones that are worth over a billion dollars.
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  So they're not exactly going after those super risky startups or betting on the next big mean stock.
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  Sounds kind of conservative, right? Yeah, I'd agree. Focusing on those well-established
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  companies in those sectors makes me think they want stability and consistent returns.
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  And that makes sense considering they lost money last year. They're going for
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  that predictability, you know, making sure that investment income is steady.
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  And geographically, where are most of these investments traded?
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  Are they sticking to Singapore?
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  Actually, no. While they do have some stuff on the Singapore exchange,
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  a big chunk of their portfolio is actually traded on the Hong Kong exchange.
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  So it looks like they're not just looking at their own backyard.
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  They're OK with taking some risks and investing somewhere else.
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  So they're not just diversifying the types of investments they have.
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  They're diversifying where those investments are, too.
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  Smart move if one market goes down. Yeah, exactly. Shows they're being smart
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  about it, not putting all their eggs in one basket.
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  And get this, they've even got their investments in different currencies.
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  Hong Kong dollars, Singapore dollars, U.S. dollars. They've even got a little
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  bit in Swiss francs and British pounds.
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  Wow. So they're diversified across sectors, different places, and even currencies.
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  Right. So what does all this tell us about how much risk they're willing to
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  take and maybe what they're thinking about the future? Well,
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  sticking with those big companies and well-established sectors like real estate
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  and financials, it seems like they have a moderate risk appetite.
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  They want to invest, but they're not gambling everything.
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  Sounds like that 2023 loss taught them a lesson. It seems that way.
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  And, you know, their key highlights document said they have a cautious outlook for 2025.
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  So they're not ignoring the fact that there could be some challenges ahead,
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  things like geopolitical tensions, trade disputes, and who knows what's going
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  to happen with monetary policies.
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  Right. So they're back in the black now, but they're not celebrating too much,
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  still being realistic. Exactly.
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  And this brings up another interesting thing about their financials,
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  how they treat their shareholders.
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  They're actually going to give out dividends for 2024, even though they're being
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  cautious about the future.
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  That's a pretty big sign they're committed to taking care of those shareholders.
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  Definitely a good sign, especially since they didn't give any dividends in 2023.
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  This one-tier exempt final dividend of $0.0022986 Singapore dollars per share
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  comes out to around $2 million, shows they're ready to share profits,
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  even with all the uncertainty.
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  Yeah, and it could be a way to make investors feel good about the company and
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  attract new investments, especially if they've got big plans for the future.
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  They also finished something called a capital reduction back in December 2024, before.
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  What does that mean? So basically, a capital reduction means they're making
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  the value of the company's share capital smaller.
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  It's a way to give value back to shareholders, especially if the company has a lot of cash.
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  It can also make shares more affordable if someone new wants to invest.
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  Okay, makes sense. But could reducing their capital base hurt them later on?
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  Like, will they have enough money to do what they need to do? It's a good question.
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  They're trying to walk a fine line, you know, keep the shareholders happy,
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  attract new investment, but they still need enough money to run the company and grow.
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  And that's where the shareholder loan from Edward Lee Yu Ming gets really interesting.
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  Oh, yeah. Things are getting complicated. All right. So this shareholder loan,
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  it's not often that you see a company's director and controlling shareholder
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  lending money back to the company they basically control.
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  Seems a little odd. It definitely is. And the thing is, this loan,
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  it's for a lot of money, $27.822 million Singapore dollars, and it's unsecured,
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  and it's up to the company when they want to pay it back.
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  That's a lot of faith in MDR Limited's management. And the interest rate is
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  tied to bank rates, so it's not like he's getting a sweetheart deal here.
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  It almost feels like he's trying to give them some breathing room while also
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  making sure they've got to perform well. That's a really good point.
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  It definitely makes you think about what this means for the other shareholders.
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  Is he saying he's confident about MDR's future.
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  Or maybe is it hiding some problems they haven't talked about?
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  It's hard to know for sure. Yeah.
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  It's a little mysterious. On one hand, you've got the guy who probably knows
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  the company better than anyone else putting his own money in.
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  But on the other hand, it does make you wonder if they really needed this cash
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  more than they're saying.
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  And this kind of goes back to their outlook for 2025. Remember,
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  they said things are cautious. They know there's some stuff out there that could hurt them.
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  Geopolitical problems, trade wars, and who knows what's going to happen with interest rates.
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  Any of that could really mess up their plans. So they're doing better now,
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  but they're not getting cocky. Yeah, I think that's smart.
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  So for someone who's following MDR Limited, what are the big things to keep
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  an eye on over the next year?
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  Well, definitely watch out for those big picture things, the global stuff.
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  Like what happens with geopolitics, trade, and those interest rates?
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  Will it actually affect their business? Right. Can they handle it if things
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  get rough? Another thing to watch is how their different parts of the business are doing.
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  DMS, they seem to be changing things up, moving away from regular retail and
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  focusing more on those ZYM mobile plans.
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  Is that going to work or will they miss those walk-in sales?
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  And AMS, can they keep those good margins even if they're doing fewer repairs?
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  Yeah. That's going to be important for them to stay profitable.
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  And of course, keep an eye on their investments.
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  Are they going to buy more companies or will they play it safe because things are so unpredictable?
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  It's interesting, right? There are so many things that could happen.
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  That's what makes following a company like MDR so interesting.
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  It's like a story that's still being written.
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  Exactly. And that's what's cool about these deep dives. We don't always get
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  clear answers, but we can try to understand things better, see the opportunities
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  and the risks. We've looked at the numbers, we've talked about their different
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  business segments, and we've tried to figure out what they're planning.
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  Now it's up to you to keep learning about MDR Limited. And remember,
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  sometimes the most important stuff is hidden in the details. Just got to look for it.
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  Thanks for joining us for this deep dive. And remember, stay curious.
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  Music.