Buying wonderful businesses that are benefiting from multiple secular growth trends, at attractive prices is part & parcel of successful long term investing. The problem as always, is finding these rare situations, and then having the stomach to step in, irrespective of the broader macro concerns doing the rounds.
We think Mpac falls into this camp. Today releasing “excellent” 2019 revenues, adjusted EBIT and EPS that were in line with expectations at £88.8m (+52%, +24% LFL), £7.7m (margin 8.7%) and 39.5p respectively. The dividend was also reinstated to 1.5p, reflecting good H2 cashflows and closing net funds of £18.0m (vs £9.6m June’19), equivalent to 89p/share.
Better still, after strong pipeline conversion in H2, forward visibility is robust with the backlog closing Dec’19 at £52.2m (vs £53.1m LY) - split across a wide customer base, and skewed towards higher margin healthcare orders.
In terms of the Coronavirus, the Board believe the outbreak shouldn’t materially impact future profits. The vast majority of Mpac’s top line growth is coming from Healthcare (74%) within the US (58%). Whilst it’s relatively modest supply-chain/demand exposure within AsiaPac (8% 2019 turnover) is manageable.
Going forward, we’ve nudged up our 2020 EBIT to £7.7m (2.7%) on the back of the slightly better out-turn, and maintained both the revenue at £95.5m & 350p/share valuation.
