Significantly undervalued
​Molins is a technology-led service provider, with the tobacco industry accounting for around 45% of 2015 sales. 90% of revenues are derived from outside the UK, with a third coming from aftermarket services. Often times of market turbulence can produce silver linings, particularly in small caps, where some valuations currently appear deeply oversold. Take Molins for example: at 75p the stock trades at its lowest level for over 3 years. This is equivalent to EV/EBITA and PE multiples of 4.8x and 5.0x respectively, representing more than a 55% discount to the wider engineering sector. Part of the reason is due to the £9.7m net pension deficit (£13.6m gross). Yet, even if this is treated as straight debt, or the associated £1.8m pa of recovery payments are deducted from adjusted earnings, then the corresponding figures would still only climb to 7.3x and 9.8x. Furthermore, the shares offer a 7.3% dividend yield that is more than twice covered. Today's interim results for the 6 months ending June 2015 were bang in line with our estimates, with performance also on track for a strong 2nd half. In total, revenues rose +1.5% to £39.5m on the back of 'continued momentum' in Packaging (+19% and +26% constant currency), partly offset by more "challenging conditions" in Instrumentation & Tobacco (-14%). There is no change to our adjusted PBT forecasts for this year and next, and therefore we retain our price target of 138p per share based on the fundamentals.
Mpac Group is focused on its Packaging Machinery business, Mpac Langen, which designs, precision engineers and manufactures packaging solutions, machinery and high specification automation, secondary packaging equipment and end-of-line robotics and at-line instrumentation and testing solutions as well as providing solutions including the design and integration of packaging systems.
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