MS International – The Defence Division and the Forging Division

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MS International (LSE:MSI) is comprised of four business.  Today I’ll look at two of them. Tomorrow’s newsletter will cover Petrol Station Superstructures and Corporate Branding.



The Defence division mostly makes naval guns, selling to 20 countries, with 300 systems already in place. It also services those guns – a source of continuing revenue in times of order drought. The guns have now been adapted for land use, which seems to be a hit with the American army in particular.

Defence division numbers

£m Revenue   Operating profit   Capex   Assets minus liabilities   Operating profit/net assets
2011 32.6 5.4 0.0 16.6 33%
2012 29.9 6.6 0.1 15.8 42%
2013 28.0 2.9 0.1 16.7 17%
2014 19.4 0.9 0.1 14.4 6%
2015 17.0 -0.2 0.1 14.1 -1%
2016 21.9 2.0 0.2 14.2 14%
2017 20.8 1.8 0.2 12.2 15%
2018 21.9 2.6 0.02 21.5 12%
2019 26.7 2.8 0.07 10.4 27%
2020 23.5 -0.3 0.08 10.0 -3%
Half year to Oct 20 annualised 17.3 -2.3 0.16 9.3 -25%
Average 12.5%

From the table I detect a feast-and-famine type of business. There are years when defence ministries order many new guns and others when they hold back. Having said that the profit numbers in recent years have been far lower than those of the early part of the decade. And now they have fallen into losses; hence a major cause of the share price falls from over £3 in 2011 to under £1.30 now.

Even if the profits to net assets ratio merely remains the same in the next eleven years as it was in the last eleven, i.e. 12.5%, shareholders will benefit from the business by over £1.2m per year on average (market capitalisation of the Group is £21.3m). But things could be better than that given the directors confidence that recent innovations will restore sales. I’ll look at their optimistic statements after an overview of the business.

The defence products and services offered

The Seahawk naval ship gun is at the centre of the Defence Division, based in Norwich.  The Seahawk is the primary weapon on smaller ships and a secondary weapon on frigates and bigger ships. Cannon options include 5.56mm, 7.62mm, 12.7mm, 14.5mm, 25mm, 30mm & 40mm.

A key part of modern weapons is the computer and other tech link up. The Seahawk has a day camera, thermal imaging camera, laser rangefinder and a remote fire control system. Computerised motion stabilisation is also crucial.

There is a commando version for unmanned speedboats using remote control settings (trails showed it to be “best in class” for accuracy and dispersion in challenging sea conditions).

In recent years MSI has used its knowledge of guns to move into land-based systems. Its Terrahawk (launched 2019) can be mounted on a Humvee or tracked vehicle with gizmos such as computer tracking of thermal and colour images within the terrain.  It also has laser sensors.

The Terrahawk can act as a heavy machine gun with 12.7mm, 7.62mm and grenade launcher weapon options. It has available 400 rounds of ammunition and can swing through 360 degrees. It can be manually or remotely controlled. Retrospective fitting on already-in-use vehicles is possible. It can also be fitted on unmanned platforms for remote operation. (The videos on the MSI Defence Systems website showing the guns in action are fun to watch).

Over 300 Seahawks and Terrahawks (mostly Seahawks) have been delivered to or are on order for over 20 international end users.  They have been developed from combat experience, fulfilling multi-role requirements for a variety of naval, military and constabulary services.

MSI’s in-house support services works on over 300 naval gun systems already in use offering

(a) a 24/7 telephone support,

(b) customer in-country depot / maintenance facilities,

(c) on demand field service support, surveys,

(d) repair and replenishment,

(e) ongoing training for operators, maintainers and depot support personnel, and

(f) obsolescence management and performance enhancements to coincide with evolving operational and technological demands.

Progress of this division
The strategy pursued is to keep ahead of the competition through R&D spend, building on its current pre-eminence, and to grow the non-UK market “so that we can effectively counter the varied current constraints on UK MoD decisions regarding future requirements and expenditure.” (2019 Report).

And this approach is bearing fruit: “It is pleasing to report that once a………………To read more subscribe to my premium newsletter Deep Value Shares – click here

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