Millennium Services Group Ltd (ASX:MIL) has released its FY22 September quarter activities report incorporating some trading commentary. Revenues for the quarter were $65.6m (RaaS $65m), 2% above Q1FY21 but 5.3% below Q4FY21. Both Q1FY21 and Q1FY22 were impacted by COVID-related lockdowns at shopping malls but considering the extent of the most recent lockdowns, contracted and ad hoc revenues are proving very resilient. Despite lockdowns lifting we expect quarterly revenues for the remainder of FY22 to be down on FY21 due to net contract losses. The loss of the $28m per annum QIC contract has been slightly offset by the $6m per annum Westfield Southland contract (net $22m loss or 8% of FY21 revenue). Operating costs and working capital have and will continue to be a little volatile quarter to quarter. Head office support for the QIC contract will be removed, limiting NPAT damage but will predominantly be seen in 2HFY21. The timing of wage payments can have a massive impact on cash flows quarter to quarter given the size of the workforce (~4,800) and low gross margins, with Q4FY21 net cash from operating activities +$9.9m and Q1FY22 -$4.3m. Despite contact losses we continue to see value in MIL at current share price levels, trading at a forecast 2.5x FY22 EV/EBITDA against a peer average of 4.8x. The average peer multiple would imply a share price of $1.20/share.
25 Oct 2021
Resilient revenues in lockdown
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Resilient revenues in lockdown
Millennium Services Group Ltd. (MIL:ASX) | 0 0 0.0% | Mkt Cap: 63.8m
- Published:
25 Oct 2021 -
Author:
Finola Burke | John Burgess -
Pages:
7
Millennium Services Group Ltd (ASX:MIL) has released its FY22 September quarter activities report incorporating some trading commentary. Revenues for the quarter were $65.6m (RaaS $65m), 2% above Q1FY21 but 5.3% below Q4FY21. Both Q1FY21 and Q1FY22 were impacted by COVID-related lockdowns at shopping malls but considering the extent of the most recent lockdowns, contracted and ad hoc revenues are proving very resilient. Despite lockdowns lifting we expect quarterly revenues for the remainder of FY22 to be down on FY21 due to net contract losses. The loss of the $28m per annum QIC contract has been slightly offset by the $6m per annum Westfield Southland contract (net $22m loss or 8% of FY21 revenue). Operating costs and working capital have and will continue to be a little volatile quarter to quarter. Head office support for the QIC contract will be removed, limiting NPAT damage but will predominantly be seen in 2HFY21. The timing of wage payments can have a massive impact on cash flows quarter to quarter given the size of the workforce (~4,800) and low gross margins, with Q4FY21 net cash from operating activities +$9.9m and Q1FY22 -$4.3m. Despite contact losses we continue to see value in MIL at current share price levels, trading at a forecast 2.5x FY22 EV/EBITDA against a peer average of 4.8x. The average peer multiple would imply a share price of $1.20/share.