Strong Q4'19 drives 5th profit upgrade in a row
Alongside cloud, 5G, IoT & artificial intelligence, there’s another equally significant, yet lesser-known technological revolution occurring – namely ‘Industry 4.0’. Indeed this seismic shift in supply chain management is triggering one of the biggest upgrade cycles in the history of manufacturing, data analysis and system integration. With cutting edge equipment, infrastructure and robotics being deployed in all sorts of factories, warehouses and distribution centres across the world - in order to improve product quality, lower cost and satisfy increasing online demand.One business riding this wave is MPAC, which provides the required expertise in high speed production, packaging & automation machines, along with turn-key / remote diagnostics services (c. 20% turnover).
So much so, that this morning the company said it had enjoyed a strong Q4, especially in terms of order intake (US & Healthcare), project execution, profit margin (re 22.5% EBITDA drop through rate) and cashflow (H1 working capital unwind & receipt of customer deposits) – all ahead of expectations. Consequently we have raised our 2019 sales, EBIT and yearend net cash forecasts to £89m (vs £87m B4), £7.5m (£7.0m) and £17.8m (£11.0m & £9.6m Jun’19) respectively (see below) – the latter representing 88p/share.
Better still, we reckon the Dec’19 backlog closed at a record £52m (vs ED £40m B4 & Jun’19 est. of £35m) - not only providing robust visibility, but also underpinning our revised 2020 EBIT target of £7.5m (up 15% from £6.5m) and 27% hike in the valuation to 350p/share (vs 275p previously). Even after factoring in a slight forex headwind for the year ahead, reflecting the £’s recent strength against the $ & € (c.80% of turnover derived overseas).
At 208p, the shares trade on a meagre 2020 PER of 6.2x vs 16.7x for the sector.
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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