Ms Share Discussion Threads

[johndoe23] 29/12/2022 14:29

Can sell at 661p, bid should be ticking up

[johndoe23] 29/12/2022 12:47

Market makers having a field day here with the volatility and spreads!

[someuwin] 29/12/2022 11:39

Great analysis illiswilgig. My reasoning for buying heavily here is simpler, the fact that one customer has tested the new gun system and has put in a £22.4 million order suggests that there will be more customers and more orders to follow.

[illiswilgig] 29/12/2022 10:48

CJohn – Thank you for those estimates on profit and EV for FY23. I don’t think you are so far out. Perhaps I am a little more cautious in view of the short timescales and lack of information.

Prior to H1 results in early december I’d been estimating likely FY23 earnings in the range 45 to 50p, most likely 48p.

After the quietly confident commentary in H1 my estimates upgraded this to most likely 50p on the basis that Forging and Superstructures did better than I had forecast and although Defence was lower than I anticipated - the costs of moving production facility only reduced it to breakeven with likely some deliveries delayed into H2.

After the ‘pleasant surprise’ of the pre-xmas announcement I estimate FY23 most likely 55p eps.

Could be more, might be less. There are way too many variables for this to be accurate, and there is very little known about the new contract other than its £22.4m in calendar year 23 to be delivered ASAP. We have to read between the lines. But I do like to have a forecast so that I can check outcomes against my assumptions and revise my future forecasts.

My assessment of this contract is [1] it’s too big to be for a trial - it’s for in-service use and a trial must have already occurred in some way.
[2] It’s way too fast for a normal defence procurement process.
[3] Likely the in-service dates are important to keep from drifting in time as far as possible.
[4] Hence likely that authority to procure long-lead items has already been made in advance of the contract so that sub-contractors can stay on the time-line.
[5] and that actual delivery dates are on a ‘best-efforts’ basis.
[6] This appears to be a high priority project - there may be some slippage to other deliveries (with customer agreement) as its not possible to scale this kind of work instantly so that might reduce overall margins for the FY. But as I say, this is all reading between the lines – with my (limited) experience of defence procurement situations where customers need your product with a challenging in-service requirement.

On this highly-speculative basis I make a simplistic estimate of additional 5p eps to make 55p eps for FY23 based upon a 20% operating margin for this contract with 25% revenue and profit in FY23.

At the current 625p Sp that puts it on 11x current year earnings. Not at all demanding considering that FY24 is likely to achieve considerable growth in the defence division.

And as you say, in terms of EV, its even cheaper, though I am perhaps more cautious with the valuation.

The cashpile of £23m at H1 is significant against the current mcap of around £101m.

Contract liabilities are a good point and have been stable over the last year at around £20m. Inventories have also been stable over the last year at around £17m, whilst cash has risen significantly from £14m to £23m.

Might rise significantly, or might fall at year end - as contract assets and/or inventories rise. But just sticking with a round number - £20m cash is around 125p /share and reduces the ev to 500p or 9x earnings – very cheap for a defence contractor with new products in demand and visibility of longterm contracts?

There is an awful lot of 'mights' in this. As I say, the only thing I do know about my estimates – is that they are not accurate. Hopefully muddle (oops freudian typo ) - thats middle - of the road. But it does help me to confirm my decision not to sell any of my shares at this price,

cheers,

[django44] 29/12/2022 10:42

MSI-DS 30MM COUNTER-UAS COMPLETES LIVE FIRE COUNTER DRONE TRIALS

Neat video about the anti-drone capability.

"...The MSI-DS LW30M 30mm CUAS system provides a proven hard kill capability, for the drone and airborne threat. ..."

hxxps://www.msi-dsl.com/msi-ds-30mm-counter-uas-completes-live-fire-counter-drone-trials/

[someuwin] 29/12/2022 09:39

Rebound on!

[someuwin] 28/12/2022 09:20

Profit takers out. New buyers moving in.

[johndoe23] 28/12/2022 09:04

Predictable

[johndoe23] 28/12/2022 09:03

Predict drop this morning, let's see where this settles!

[cockerhoop] 27/12/2022 13:24

They actually say the land based contract is going to be delivered in calendar year 2023 so a large proportion is likely to be delivered in FY24.

I've no real idea on the FY23 numbers as lots of variables including revenue recognition in defence (i'm unclear of the status of the Ukraine Naval order for example but possibly 4 mounts in H2) but what is clear is the defence division is going to be operating on a different scale once the US Naval contract is in production alongside the new land based sales.

I was quite shocked they've picked up this business so close to the product launch - it's very encouraging. I was also very shocked they RNS'd it - perhaps a sign they intend to keep their cards less close to their chests in future.

[cjohn] 27/12/2022 12:47

Remember enterprise value: they have £20m + freehold property and £23m net cash, (though as explained earlier on the thread the lion's share of that is advance payments for goods that need to be funded.)

Post-fulfilment of the anti-drone gun contract that net cash figure will be significantly higher. I'd not be surprised to see net cash closer to £40m, when cash flow from the other businesses is included. (It depends on the timing of payments either way for the drone gun contract; but they do say the contract is to be delivered before end of fiscal year 2023.)

At 745p, current market cap is £122.5m. Subtract say £55m for property and cash. EV of about £67m.

PBT of £3.46m in H1 from the other businesses. Double that to £7m. Add £7-10m (my estimate) of gross margin from the anti-drone gun contract. Gives PBT of $14-17m. Post-tax of about £10.5-£13m.

So likely EV/post-tax of about 6. Which is still on the cheap side.

[johndoe23] 27/12/2022 11:24

Interesting to see what the price action will be this week. Large and rapid rise, but still priced only around 12 times earnings ( I'm presuming 60p earnings). In a definite sweet spot too with momentum. Any thoughts?

[someuwin] 26/12/2022 12:55

Drone attacks making the news today. Ukraine / Russia, North Korea / South Korea, China / Taiwan. All counties will have to beef up their anti-drone defence capabilities - on land and at sea.2023 should be a good year for MSI!

[gorse] 23/12/2022 13:09

Happy to have stuck with this for 20+ years through thick and thin, that is, mostly thin and very thin.

[this_is_me] 23/12/2022 13:00

All holders are having a happy Christmas! May we have an even more prosperous new year!

[gorse] 23/12/2022 12:24

Top-sliced a seventh as it became more than my cut-off percentage of my total portfolio.

[johndoe23] 23/12/2022 11:45

Merry Xmas!! Regretting not adding at 470p

[someuwin] 23/12/2022 11:42

Still very cheap for a defence weapons manufacturer now with a proven counter drone gun with land and sea variants.

[hybrasil] 23/12/2022 11:16

Sold 12.5% of my holding at £6.80 having bought them 5 years ago at £1.90.

Not a bad return