MS International – Net current asset value and financial stability

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MS International (LSE:MSI) has such a strong balance sheet – including £14m of cash and no debt – that it qualifies for my net current asset value portfolio as well as the Warren Buffett portfolio.  This works if I’m prepared to overlook the fact that its collection of freehold property is allocated not to the current asset part of the balance sheet, but classified as non-current assets. I’m also ignoring the pension deficit, which is probably pushing my luck, but then, I’m not actually buying this share as a NCAV investment but as a Buffett-style value investment.  Market capitalisation is currently 16.5m shares x 122p = £20.1m (it has fallen since I bought at 129.2p).

Net current asset value

£m   Half year Oct 2020   Yearend April 2020   April 2019   April 2018
Cash 14.0 16.1 22.9 15.9
Inventories 17.6 15.9 12.6 11.7
Receivables 7.0 4.6 7.0 14.6
Other current assets 3.0 2.5 1.8 1.2
Total current assets 41.5 39.1 44.4 43.4
Minus current liabilities -28.2 -25.2 -26.3 -28.7
Minus non-current liabilities (excl pension deficit & leases) -1.6 -1.6 -1.6 -1.6
Current assets minus all liabilities except pension deficit 11.7 12.3 16.5 13.1
Minus one-third of inventories -5.9 -5.3 -4.2 -3.9
Minus one-fifth of receivables -1.4 -0.9 -1.4 -2.9
Ben Graham NCAV (if we can ignore pension deficit) 4.4 6.1 10.9 6.3
Freehold property 17.7 17.7 17.0 17.2
NCAV plus property 22.1 23.8 27.9 23.5

Can we ignore the pension deficit?  Not really, at £9.1m. But that might be whittled away in a high-bond-yield-greater-inflation environment.

The pension scheme ceased being a defined benefit one in 1997 and is now a defined contribution scheme. The deficit could be wiped out should discount rate rise by two percentage points.

The cash

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