MS International – Mr Market misses the good news

PUBLISHED: 07 Dec 2017 @ 09:23 | Comments (0) |

MS International (LSE:MSI), a small engineering company with a market cap of only £32m, is frequently overlooked by analysts and private investors alike. The shares are largely held by directors, or by investors who have no intention of trading, thus weeks go by without any trades.

It is understandable that such an illiquid, small company should be ignored when it reports something good in the notes to its accounts. It is especially understandable when the good news comes after years of decline.

Last week it reported a jump in first half revenue from £25.00m to £34.63m and a greater than doubling in profit after tax from £0.54m to £1.28m. Most of the improvement came from a division that was created two years ago, building on an acquisition costing £2.6m.

Its sales have rocketed and it accounted for more than 100% of the half’s profits. Admittedly, taking a glass half empty attitude, that means that the profits on the other three divisions deteriorated, with one actually making a loss of £0.51m.

Nevertheless, I think the company now has at least three good businesses, with a fourth in recovery, and is busy reinforcing them with an emphasis on investment for the future “Maintaining these valuable investment programmes at the expense of short term profit, is undoubtedly important to sustaining our long term progress.” (Interim report to 28^th October).

It has £14.54m in cash, almost half its MCap. It has not made a loss in thirteen years and has a history of positive cash flow from operations.

Dividend yield is 8.25p/190p = 4.3%. All in all, it has a very low probability of going bust or missing its dividend.

Previous newsletters on MSI: 8^th – 15^th July 2015, 1^st Dec 2015, 23^rd – 24^th June 2016, 19^th July 2016, 14^th – 16^th July 2017, 9^th and 14^th November 2017)

	Earnings per share	Dividend	Profit after tax £m
2006	15p	2.78p	2.50
2007	18.2p	3.6p	3.02
2008	22p	4.5p	3.93

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