MS International – Superstructures and Branding

PUBLISHED: 24 Jun 2019 @ 09:07 | Comments (0) |

MS International (LSE:MSI) has been a good share for me, returning over 30% so far. I recently judged that its shares were still good value relative to earnings prospects and other factors, and so bought some more. Today we’ll look at its business making money from supplying petrol station forecourts and in branding petrol stations throughout Europe.

Petrol Station Superstructures

MSI is the number-one designer and builder of petrol forecourts in Europe. They also maintain and repair. Their specialised knowledge and capabilities might mean they have a strong economic franchise with significant barriers to entry. Some encouraging evidence in favour of this is the return on capital.

Petrol Station Superstructure numbers

£m	Revenue	Operating profit	Capex	Assets minus liabilities	Operating profit/net assets
2011	9.0	0.6	0.2	1.8	33%
2012	10.6	1.1	1.9	1.3	85%
2013	12.2	1.5	0.7	1.4	107%
2014	13.6	1.7	0.1	2.6	65%
2015	13.4	0.7	0.2	3.2	22%
2016	10.8	0.3	0.5	7.1	4%
2017	13.8	1.0	0.3	5.7	18%
2018	12.4	0.02	0.1	6.9	0%
2019	16.3	2.1	0.2	6.4	33%
					Average 41%

The average figure for operating profit as a percentage of yearend net assets devoted to the division is a very impressive 41%. But returns are volatile. The lower revenue and profits in 2018 was put down to a hiatus in forecourt construction and refurbishment:

“‘Petrol Station Superstructures’ experienced a check to its growth pattern owing to a notable change in the market it principally serves. Until relatively recently, many of the division’s major customers had been global oil companies but they have accelerated the divestment of their company owned petrol filling station estates, with ownership passing to both large and small independent dealer/retailers. Accordingly, construction of new sites and the refurbishment and expansion of existing facilities are passing through a state of limbo as numerous sale and purchase transactions continue to dominate the attention of the sector’s active participants.” (2018 Report).

As predicted, once the hiatus period was over, profits

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