Mpac Share Discussion Threads

[bwm2] 07/9/2020 13:08

Mpac smashes analyst estimates

Mpac (MPAC:270p), a small-cap niche packaging engineering business, servicing the healthcare, pharmaceutical and food and beverage sectors, is successfully navigating its way through the Covid-19 pandemic far better than analysts at Panmure Gordon predicted when I last suggested buying the shares, at 263.5p (‘Deep value plays’, 13 July 2020).

First half order intake only dipped 6 per cent to £30.5m, and the closing order book was up 14 per cent year-on-year to £45.4m. Importantly, there have been no Covid-19 cancellations. That’s an impressive performance and one that highlights ongoing demand in Mpac’s end markets which are growing at a rate of 4 to 6 per cent per year, and the company’s ability to capture the growth, too.

For instance, Mpac offers customers digital solutions for artificial intelligence-enabled equipment and robotics in their production facilities and warehouses. Chief executive Tony Steels pointed out during our results call that one consequence of Covid-19 will be an acceleration of the move to automation as more blue-chip clients reappraise their manufacturing efficiency. Mpac is proactively helping its clients to do so and, with more than 85 per cent of its revenue already generated overseas, is incredibly well placed to benefit from this structural change.

Also, around 75 per cent of Mpac’s business is associated with essential consumer products, another reason why end-market demand is robust. Indeed, analyst Paul Hill at Equity Development points out that the second half has started well, noting “unseasonally strong July bookings, especially in North America and healthcare, with food and beverage not far behind.” The Americas accounted for half of Mpac’s first half revenue, so is an important market.

The other key take was the 28 per cent first half surge in high margin service revenue from £7.6m to £9.7m, and at higher levels of profitability, on the back of improved operational supply chain efficiency. Mpac reported “double-digit revenue growth registered across all regions” in the service segment.

Admittedly, disruptions completing installation of equipment did have an impact which explains why Mpac’s first half underlying operating profit of £2.6m on revenue of £36.8m was down from a record profit of £4.6m reported on revenue of £45.8m in the first half of 2019. However, first half operating profit was 30 per cent higher than Panmure had predicted for whole of 2020, highlighting the scale of Mpac’s outperformance. Based on Mpac delivering a second half operating profit of £3m, only £200,000 shy of the 2019 second half result, Panmure now expects Mpac to report full-year pre-tax profit of £5.4m on annual revenue of £81.6m to produce earnings per share (EPS) of 23.5p.

On this basis, the shares are rated on a cash-adjusted PE ratio of 6.7, a harsh rating for a company that has a resilient revenue base and is a major beneficiary of the accelerated change in manufacturing automation. Indeed, after taking account of the net cash pile of £22.5m (112p a share) and the actuarial pension deficit of £35m, I arrive at fair value of 330p a share.

So, having included the shares, at 156p, in my 2018 Bargain Shares portfolio, and now priced on a bid-offer spread of 265p to 270p, I see scope for further upside. Buy.

[arregius] 07/9/2020 12:55

Does it say anything else?

[investor0109] 07/9/2020 12:37

MPAC tipped in IC today: 'Mpac smashes analyst estimates' with BUY rating

[arregius] 07/9/2020 12:35

Has been tipped anywhere?

[arregius] 07/9/2020 11:38

https://www.cnbc.com/2020/07/11/5g-spurs-factory-automation-could-add-trillions-to-economy.htmlVery good insights about where mpac is going

[arregius] 07/9/2020 10:46

Better to be invested before any acquisition gets announced... just saying

[investor0109] 05/9/2020 15:15

bubloo- IC does well to explain pension deficit:

'The US scheme has a £6.2m deficit, and although the UK pension scheme is in surplus on an IAS19 basis (assets of £398m exceed liabilities of £377m), tiny changes in bond yields can have a major impact on the pension liabilities. Also, the assumptions used in actuarial valuations are far more conservative than for IAS19. This explains why analysts believe the current actuarial deficit could be around £50m. Mpac is making a £1.9m payment into the UK scheme to bridge the funding gap, and has agreed to pay additional payments if annual operating profit exceeds £5.5m. Please note that I took into account Mpac’s pension schemes when I suggested buying the shares in my 2018 Bargain Shares Portfolio.'

[investor0109] 05/9/2020 14:53

Arregius- Yes, I believe Simpson too critical of MPAC's performance, particularly given current economic climate. All points made by Simpson are legitimate, though not so troublesome to me, owing to some of the reasons outlined by IC. Pension deficit not to be dismissed, though requires better sense of perspective in my opinion. Deficit halved last year, set to be eliminated by 2024.

[bubloo] 05/9/2020 14:35

Is there a large pension liability. In one half of slide they have surplus but technical analysis shows 40 million deficit. I don't understand this. Anyone competent enough to explain. I would like to buy around 250 if it at all drops there wherein there wild be a good risk read ratio.
help needed with above please

[arregius] 05/9/2020 13:54

This is your opinion? I hold mpac and i am bullish but the points in the pension are legit

[investor0109] 05/9/2020 11:05

Arregius- Mr Simpson oblivious to global economic meltdown? Perhaps not, though believe too critical a view given circumstances. IC view (July 13th):

'...will be an impact on Mpac’s operations this year. Panmure Gordon estimates -24% revenue to £67.6m...strong recovery in 2021 and forecasts sales of £81.5m...expect operating profit £2m, rising to £5.3m in 2021...Panmure far too bearish and overly cautious on 2021 numbers.

Mpac’s current rating fails to adequately factor in a pick-up in second-half orders ...potential for a stronger than forecast earnings rebound in 2021. Mpac’s management is ahead of the game...‘Fast Recovery’ plan to position the company for growth as activity levels return to normalised levels. The Covid-19 crisis...more blue-chip clients reappraise their manufacturing efficiency. BUY.'

[arregius] 05/9/2020 10:24

Mark Simpson in twitter: Too many niggles for me re:MPAC. Reading the results/ED note you'd think they were on a modest rating with a growing order book & no pension deficit. When you look into details you see a mid teens fwd P/E, £40m PD & order book down since YE. Plus TS issues already highlighted ?I holdbut aleays open

[arregius] 04/9/2020 17:27

285p close with 1 share bought? Ahhahaha

[castleford tiger] 04/9/2020 14:26

I was right about Coventry not Tadcaster to close.

tiger

[arregius] 04/9/2020 07:59

I guessed yesterday an update that willexceed expectations. Which are full year revenue forecasts? They seemed very confident to achieve them

[castleford tiger] 03/9/2020 22:32

Rach
I hope so as I am still wanting more.
The land is set for upgrades.
Broker had 350 fair value
About right at the moment

Tiger

[rachael777] 03/9/2020 20:13

Unlucky - looks like you will be able to get it a lot cheaper over next couple of days

[our haven] 03/9/2020 13:54

Decided to top up at 280 as a long term position.

[arregius] 03/9/2020 12:02

Awesome webinar. Very confident to meet full year forecasts and i am guessing an above market expectations update later in the year

[leedslad001] 03/9/2020 11:13

Looking for a 250 entry point

[bwm2] 03/9/2020 11:00

Link to Paul Hill of Equity Development's research note:
hxxps://research.equitydevelopment.co.uk/research/tag/mpac-group-plc
Good to see forecast reinstated at 350p on what he believes to be conservative revenue and adjusted EBIT 2020 forecasts. Nothing pencilled in for 2021 but there should be a sharp increase

[investor0109] 03/9/2020 10:19

Castleford Tiger- quite agree that MPAC a great buying opportunity today. Don't believe share price will close flat, however, as fear seems to have taken hold. Fear of what, I do not know, given MPAC still performing well despite wider economic carnage. Wager the sort to have been frightened away today soon hurry back when MPAC inevitably tipped in coming weeks.

[bwm2] 03/9/2020 09:50

added a cheeky 10k shares