In uncertain times many investors will prefer to stick with quality, battle-hardened names, underpinned by strong orderbooks & fortress balance sheets - such as Mpac Group. This high speed packaging & automation solutions provider has already navigated the pandemic in fine fettle. Saying today that 2020 adjusted profits would be ahead of expectations, thanks to top line resilience, cost savings and favourable product mix (re healthcare).
Consequently we’ve increased our EBIT estimate by 7% from £5.8m to £6.2m (7.5% margin) on revenues of £82.25m (£88.8m LY). Climbing to £7.6m (+22%) and £95m (15%) respectively in 2021 (see overleaf), assuming life starts to return to normal in H2. The group is also well placed to benefit from permanent shifts in socio-economic behaviour (eg work-from-anywhere), Industry 4.0 and trades (at 420p) on modest EV/EBITDA, EV/EBIT & PE multiples of 9.2x, 11.9x & 13.4x
Our conservative numbers are supported by a robust closing £55.5m orderbook (£55.4m LY) - reflecting positive Q4 bookings in North America & healthcare, in spite of a handful of orders shifting to the right (albeit no cancellations). Alongside an estimated £14.5m net cash pile (worth 72p/share).
We upgrade our fair value to 445p/share (vs 380p before).
