The pandemic has taught ‘value investors’ to rip up many historical norms, and peer instead through the ‘looking glass’. Particularly relating to medicine, sustainable living and technology, which we believe have now all entered golden periods.
Why is this important? There is some scepticism that the best engineering companies could consistently expand the top line at 10%+ organically, whilst delivering 10%+ EBIT margins over the economic cycle. This rarely happens, but due to astute foresight, attention to detail & almost flawless execution, we think Mpac has every chance of breaking the mould.
Helped not only by its 100% exposure to the expanding healthcare, food/beverage and pharmaceuticals industries. But also the secular tailwinds of Ecommence, Industry 4.0, ageing populations, premiumisation, reshoring, biodegradable/recyclable materials and consumer convenience. Elsewhere there are other exciting prospects. Not least in craft beers (re post £10m Switchback acquisition in Sept’20), alongside designing state-of-the-art packaging equipment to manufacture Covid tests and/or vaccine vials, which could add further juice.
This should all contribute towards a highly supportive backdrop, despite short term headwinds that Covid might pose to the global economy from new variants, lockdowns & such like.
Therefore irrespective of the recent price appreciation – we believe there’s still plenty to go for. Lifting our valuation from 445p to 600p/share, yet equally acknowledging that if Mpac can achieve it’s “10+10” target, then the stock would rightly deserve at least a market multiple, driving it to possibly >£10 by 2023.
