Mpac is well placed to survive the COVID-19 induced downturn, exploit opportunities that arise and flourish when the economy eventually gets back on its feet. With a £18.1m net cash balance (or 89p/share as at Feb’20), on top of an undrawn £10m credit facility, this provides ample fire-power to not only weather even the most extreme of scenarios, but also take advantage if some less well capitalised rivals ever became available at distressed levels.
Mpac have reduced/deferred capex (£2.3m 2019) and discretionary spend, alongside utilising government aid. They have, however, remained mindful not to harm the long term design and operational capability.
With regards to valuation, the stock at 235p remains attractively priced - trading on a 2019 EV/EBIT multiple of 7.4x (see below) vs 11x–15x typically for peers (pre CV19).
Sure the coronavirus will impact 2020 numbers, yet ultimately we believe Mpac will prosper. Benefitting from secular tailwinds (eg Industry 4.0, Direct-to-consumer deliveries), improving margins, a large installed base, positive cashflows and a host of loyal, blue-chip customers.
