Millennium Services Group Ltd (ASX:MIL) has released a quarterly activity report for the March 2021 quarter, with key trends generally in-line with our current assumptions. Debt has continued to reduce with $2.5m paid down during the quarter and March 31 net debt sitting at $8.7m or 0.9x our FY21f EBITDA. The level of ad hoc revenue has declined as a % of sales from the elevated levels of 1H21, which drove the 1H21 earnings beat on the back of a statutory GP% of 14.8%. Our 2H21 assumptions call for 14.4% GP margins and lower sales relative to 1H21. Q421 revenue only needs to reach $60.4m to achieve our current revenue estimates following $64.3m, $70.7m and $69.4m for the first three quarters of FY21 respectively. Cash generation was $1.19m for the quarter despite some timing issues, putting the group well on track to achieve our cash flow estimates. In the relatively early stages of a strategic reset with a qualified pipeline of ~$532m over the next 18-months, our numbers only assume a fraction of this pipeline. Looking forward we are expecting lower underlying 2H21 NPAT relative to 1H21, but a significant improvement on the pcp, driven by the same drivers as 1H21 (lower costs & higher gross margins) together with lower interest expense. On the valuation front MIL is trading on a forecast EV/EBITDA multiple of 3.0x FY21, well below the likes of selected peers SXE, BSA, SSM and ASH. Our DCF valuation is unchanged at $1.60/share with a higher bond yield offset by a lower beta assumption as debt levels continue to decline. There remains significant room to move on beta assumptions and earnings in the form of contract wins and/or acquisitions.
28 Apr 2021
Tracking to forecast
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Tracking to forecast
Millennium Services Group Ltd. (MIL:ASX) | 0 0 0.0% | Mkt Cap: 63.8m
- Published:
28 Apr 2021 -
Author:
Finola Burke | John Burgess -
Pages:
5
Millennium Services Group Ltd (ASX:MIL) has released a quarterly activity report for the March 2021 quarter, with key trends generally in-line with our current assumptions. Debt has continued to reduce with $2.5m paid down during the quarter and March 31 net debt sitting at $8.7m or 0.9x our FY21f EBITDA. The level of ad hoc revenue has declined as a % of sales from the elevated levels of 1H21, which drove the 1H21 earnings beat on the back of a statutory GP% of 14.8%. Our 2H21 assumptions call for 14.4% GP margins and lower sales relative to 1H21. Q421 revenue only needs to reach $60.4m to achieve our current revenue estimates following $64.3m, $70.7m and $69.4m for the first three quarters of FY21 respectively. Cash generation was $1.19m for the quarter despite some timing issues, putting the group well on track to achieve our cash flow estimates. In the relatively early stages of a strategic reset with a qualified pipeline of ~$532m over the next 18-months, our numbers only assume a fraction of this pipeline. Looking forward we are expecting lower underlying 2H21 NPAT relative to 1H21, but a significant improvement on the pcp, driven by the same drivers as 1H21 (lower costs & higher gross margins) together with lower interest expense. On the valuation front MIL is trading on a forecast EV/EBITDA multiple of 3.0x FY21, well below the likes of selected peers SXE, BSA, SSM and ASH. Our DCF valuation is unchanged at $1.60/share with a higher bond yield offset by a lower beta assumption as debt levels continue to decline. There remains significant room to move on beta assumptions and earnings in the form of contract wins and/or acquisitions.