In our review of 21 Jun (Hold – $1.045) we set out a wish list for MMC Contrarian. And six weeks later our top wish has been granted, with the resignation of the company’s chairman, Simon Rowell. He will be replaced by the hard-nosed Kevin Eley of HGL.

The fact that Eley is not ‘independent’ doesn’t bother us unduly. We expect him to make a much better fist of the job than his predecessor. HGL is MMC Contrarian’s largest shareholder and Eley, in turn, is a substantial shareholder in HGL. This should focus his mind squarely on maximising the company’s value.

The same announcement also flagged a likely 70% increase in pre-tax profit, to $37m, for the 2007 financial year. But that figure is all but meaningless for an investment company, as it includes changes in the value of the investment portfolio (which should be treated very differently for valuation purposes than the more predictable operating profits from, say, Woolworths).

Returning capital

MMC Contrarian also released its quarterly investment update for June, which flagged a final dividend of 4 cents per share. We’re happy with that, in the sense that it returns capital to shareholders, though it doesn’t look like a sustainable payout based on the group’s recent performance. The mooted 10-cent capital return is apparently held up at the Australian Taxation Office, but is expected to get the nod and be voted on by shareholders at the coming annual meeting.

The group’s investment portfolio has undergone something of an overhaul, which we’d suggest is related to Erik Metanomski’s departure. There’s clearly a new sheriff in town and he’s cleaned out some larger positions entirely, such as PMP and The Warehouse Group.

More potential

By far the most interesting development for shareholders, though, has been the emergence of Guinness Peat Group (GPG) on MMC Contrarian’s own share register. We understand it has been seeking to buy stock from some larger shareholders as recently as Friday.

If our valuation is close to the mark, there’s not an awful lot of upside in this stock from here – perhaps 5 or 10 cents per share. But we suspect GPG sees more potential than that. Its plans may include some kind of corporate deal with insurer and funds manager Tower, of which GPG owns 25%. For the moment, we’re content to hang around and observe GPG’s moves. HOLD.

Disclosure: Interests associated with the author, Greg Hoffman, own shares in MMC Contrarian, as do other staff members.