iMpac’t on industry 4.0
The specialist packaging solutions manufacture has seen its growth strategy blossom over the past few quarters, culminating in the highly successful acquisition and integration of Lambert, building on its technology franchise, delivering a very strong performance for FY2019F. As industry moves towards encompassing new productivity and efficiency technologies, surrounding the internet of things “IoT”, Mpac is tactically well-positioned to assist its clients, focusing upon specific industrial segments with proven solutions. In our opinion, the Group is minimally exposed to technology risk, it is an enabler utilising and leveraging newly available resources. FY2019F’s blistering performance bodes well for FY2020F and the underlying development of the Group is assured, in our view, with momentum driving revenues and profitability forward.
09 Jan 20
Small Cap Feast
The Global Sustainable Farmland Income Trust will invest in a diversified portfolio of operational farmland assets located in major agricultural markets including the United States, Europe, New Zealand, Australia and certain countries within Latin and South America. Raising up to $300m. Due 28 February
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08 Jan 20
Excellent Q4’19 and record orderbook
The birth of a new decade spawns an abundance of investment opportunities, not least due to the seismic shift towards ‘Industry 4.0’ (see below). Indeed, despite lacklustre global manufacturing PMIs, this migration towards smart-technologies, improved product quality, lower cost and e-commerce is triggering one of the biggest upgrade cycles in the history of supply chain management, data analysis and system integration.
08 Jan 20
Fourth consecutive upgrade this year
August was brutal for UK investors, with the FTSE100 and AIM indices declining 6% and 12% respectively. Triggered by fears over a deteriorating world economy, manufacturing Armageddon, sliding business confidence, Brexit and a protracted US-Chinese trade war. Worse still, there is presently more than $15 trillion of negative earning debt, with several pundits warning of an imminent recession (not our view) after both the US & UK yield curves briefly inverted last month. The good news is that this rhetoric appears misplaced (at least to us), since many quality businesses are still firing on all cylinders. Take MPAC, who this morning reported strong interims, with FY19 results likewise anticipated to be “significantly above expectations”.
05 Sep 19
Upgrading forecasts after strong H1
“Don’t fight the Fed” is a tried and tested Wall Street strategy that has worked a treat over the past decade. Basically it states that when US interest rates fall, global equities should rise thanks to lower borrowing costs for consumers and corporates alike. Similarly after last week’s dovish testimony to Congress by FOMC Chair, Jerome Powell, we believe this bias towards more monetary easing should keep the economy ticking along, and places a ‘Put’ under valuations
16 Jul 19
Highly synergistic £15m acquisition
Patience is a virtue, and an essential ingredient for M&A. Carefully surveying the environment, not swinging for every ball, nurturing the best ideas and thoroughly doing the due diligence. Before finally putting pen to paper, and signing on the dotted line. Likewise this morning, after waiting 18 months for the right deal, MPAC announced that it had purchased Lambert Automation Limited for £15.0m (excluding a 3 year £2.5m earnout). To us, this strategic acquisition is synergistic, relatively low risk (re similar businesses) and value accretive. Not only from the perspective of being earnings enhancing, but also more importantly delivering RoIs significantly above the enlarged group’s cost of capital.
01 May 19
Gearing up for double digit growth
Amid all the concerns about Brexit, the slowing Eurozone/Chinese economies and trade tariffs, the long-term fundamentals of aging populations, environmental/nutritional awareness and ecommerce remain intact. Not least within the healthcare and FMCG space, where brand owners (eg Unilever, Diageo & Nestle) are increasingly automating their factories with reliable, fast and computer controlled equipment.
05 Mar 19
Wrapping up 2018 in fine fettle
So after Friday’s storming US jobs report, augmented by dovish comments from Federal Reserve Chairman Jerome Powell and extra stimulus measures in China – are we out of the woods? Nobody knows for sure. The equity rebound could simply be a ‘dead cat bounce’ or ‘relief rally’. Either way, with the AIM Index in bear market territory, future returns should at least be better than 4 months ago.
07 Jan 19
Small Cap Feast
Renalytix AI—developer of artificial intelligence ("AI") decision support and clinical management tools for improving early diagnosis, continual monitoring and drug development for kidney disease. incorporated in March 2018 as a subsidiary of EKF Diagnostics Holdings (AIM-EKF). Total fundraising in the range £21 - 25 m. Mkt cap - c. £67.5- £71.0m. Due 2 Nov. Finncap—proposed acquisition of M&A adviser Cavendish Corporate Finance and AIM admission. Offer TBA Kropz PLC—an emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa, a phosphate project in the Republic of Congo and exploration assets in Ghana. Looking to join AIM, offer TBC, market cap TBC. Due Late October. Azalea Energy—oil and gas production and development company based in Louisiana, United States. Net production of 13 MMcfe/D (2,200 boepd) and total 1P proved reserves of 91 Bcfe (15.1 mmboe), 2P reserves of 111 Bcfe (18.5 mmboe) raising up to $38m, expected mkt cap over $100m. Due 29 Oct Path Investments— First acquisition of a 50 per cent. participating interest in the producing Alfeld-Elze II gas field located 22 kilometres south of Hannover in Germany. Seeking £10m raise. Due late Oct Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is exploring its options in relation to a potential move to the AIM market of the London Stock Exchange which, if it were to proceed, would likely take place over the next few months.
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01 Nov 18
Back on track
Online shopping is not only sending shock waves across the retail industry, but also shaking up entire supply chains. Indeed the $39bn global packaging equipment sector is no different: undergoing seismic upheaval, as consumers seek to buy more personalised & environmentally friendly goods, at whatever time of day and in smaller batches. All expected for delivery within hours of purchase.
06 Sep 18
Resetting the bar
Selling high-value packaging machinery to large corporates can sometimes feel like ‘threading the needle’. For the vast majority of the time everything runs like clockwork - however occasionally unforeseen problems crop up. Indeed, at this morning’s pre-close trading statement MPAC revealed it had encountered some technical challenges on two legacy contracts which would result in “material” cost over-runs this year.
18 Jul 18
Small Cap Breakfast
CentralNic-Schedule 1 from the business operating in proprietary retail platforms selling domain names and associated web presence services including hosting and email on a subscription basis, has acquired KeyDrive S.A which constitutes a RTO. Raising £24m at 52p, combined market cap of £88.7m Trackwise—established business that manufactures specialist products using printed circuit technology. Offer TBA. Due Late
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18 Jul 18
Packing a powerful punch
Since taking the helm in June’16, CEO Tony Steels has engineered a meteoric turnaround at MPAC. Firstly, disposing of the sub-scale tobacco division to GD Spa for gross proceeds of £30m (£23.5m net) in August 2017. Then refocusing the business entirely on niche, high-speed packaging solutions within the ‘sweet-spot verticals’ of pharmaceuticals (eg powders), healthcare (contact lenses) and food/beverages. All benefitting from the shifts towards urbanisation, convenience, recycling and nutrition – whilst also expanding at 4%-5% pa (vs global GDP ~3.5%).
06 Mar 18
Small Cap Brunch
VR Education Holdings—a virtual reality software and technology company. Raising £6m, mkt cap c €22m. Due 12 March SimplyBiz, a Financial Services Firm, reported to be considering an IPO targeting a market capitalisation of between £140m and £155m in a listing that would raise £30m of new money. Bacanora Lithium—Readmission. No new money. Mkt cap £140m. Due 21 March. the new holding company for Bacanora Minerals Ltd Core Industrial REIT—established to invest in Irish-based industrial properties, predominantly located in the Greater Dublin Area. Vendor placing and new funds to a total of €225m, Target gross proceeds €207m. Expected Mid March Polarean - Medical drug-device combination company operating in the high resolution medical imaging market. Offer TBC. Due Early March Block Energy—a NEX Listed UK based oil exploration and production company whose main country of operation is the Republic of Georgia, looks to join AIM end of February 2018. Offer TBC
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06 Mar 18
40% top line growth, plus £22m cash pile
A year can be a very long time in the equity markets. Indeed 12 months ago Molins’ shares were languishing between 50p-55p. Today, after conducting a root-and-branch strategic review, involving the £30m (gross) divestment of its sub-scale Tobacco arm in August, the stock has risen 3-fold. And we think there is plenty more runway left.
07 Sep 17
The QCA, which campaigns for smaller quoted companies, says that the latest MIFID II policy statement by the Financial Conduct Authority (FCA) will enable smaller companies to continue to commission research that can be distributed to fund managers for free. This will include when a smaller company is raising additional cash in order to finance growth. There were worries that the EU’s MIFID II directive could have made it more difficult to make small company research available to investors.
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13 Jul 17
Transformational sale of tobacco interests
There are typically only a few key events in a company’s life that can truly be described as ‘transformational’ – such as the launch of Apple’s 1st iPhone a decade ago, or Google’s $50m acquisition of Android in 2005. Likewise (albeit on a smaller scale) we think that Molins’ £30m disposal of its Instrumentation and Tobacco Machinery (I&TM) arm to GD Spa (part of packaging giant Coesia Spa) falls into the same camp. Why?
27 Jun 17
Small Cap Breakfast
Touchstone Exploration— Oil exploration and production company active in the Republic of Trinidad and Tobago. Interests of approximately 90,000 gross acres. Production c. 1,300 boepd. Raising £1.45m. Expected mkt cap £7.5m. Due 26 June. | I3 Energy –Schedule 1. Independent oil and gas company with assets and operations in the UK. Offer TBC, 7 June admission. | Verditek— Schedule 1 update. On Admission, the Company's subsidiaries will be involved in advanced solar photovoltaic, filtration and absorption technologies specialising in providing environmental services. Issue price 10p. Admission in Early June | Tiso Blackstar Group—Schedule 1 update. Media, entertainment and marketing solutions group/ £160m mkt cap. Admission only. Expected late June. | ScotGems—Admission due 26 June. Seeking £50-£100m. To investing in a diversified portfolio of Small Cap Companies listed on global stock markets | DP Eurasia—Intention to float from the exclusive master franchisee of the Domino's Pizza brand in Turkey, Russia, Azerbaijan and Georgia. £20m primary raise plus a partial vendor sale. | Film Finances—Sky News reports that ‘movie financing company with credits including the Hollywood hits La La Land and Nocturnal Animals is plotting a blockbuster premiere on the London stock market that will value it at several hundred million pounds.’ Expected ‘during the summer’. | AIB—Intention to float from AIB, Ireland's leading retail and commercial bank . The Minister for Finance intends to sell approximately 25% of the Ordinary Shares of AIB. Prospectus and announcement of the price range due in mid-June 2017. | Curzon Energy—Report on Proactive Investors of intended LSE float this year with acquisition of coal bed methane assets in Oregon. Looking to raise £3m plus. | NLB Group—financial and banking institution based in Slovenia, with a network of 356 branches. Seeking Ljubliana Stock Exchange listing with GDRs on the LSE. Expected mid June. | Flying Brands (FBDU.L)—Prospectus approved by FCA. RTO of Stone Checker Software, supplier of technology solutions in the field of kidney stone analysis and prevention. Has raised £550k at 3p. Subject to GM on 15 Jun. | AEW UK Long Lease REIT—Intention to Float. Up to £150m raise. Admission early June. UK specialist and alternative property | Kuwait Energy— $150m raise plus vendor offer. Admission due June. 2p reserves 810.0 mmboe
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08 Jun 17
New CEO raises the bar
After a few lean years, what does it take to put a specialist engineering business back on track? First and foremost we think new blood needs to be brought in - not only to shake-up the status quo, inject fresh ideas and re-energise the troops, but also to formulate a winning strategy, initiate change and push through tough decisions.
02 Mar 17
Small Cap Breakfast
First Derivatives (FDP.L) | Field Systems Designs (NEX:FSD) | Base Resources (BSE.L) | Morses Club (MCL.L) | HML Holdings (HML.L) | Molins (MLIN.L) | Total Produce (TOT.L) | Diurnal Group (DNL.L) | S u n r i s e R e s o u r c e s (SRES.L) | Osirium Technologies (OSI.L)
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02 Mar 17
Temporary headwinds starting to ease
Profit warnings are never pleasant, albeit some are far less painful than others. You see that, when caused by transitory, rather than permanent factors, the damage tends to be milder and more short-lived. This is the situation that we think Molins finds itself today, after Q4 trading was said to have been “materially” affected by delayed orders and lower gross margins, due to extended customer procurement cycles and “unfavourable sales mix”. Here, we suspect that some of the deferrals might have also been triggered by macro uncertainties, such as the November US Presidential elections. That said, as the ‘economic fog’ lifts, client capex budgets are returning to normal, generating much improved activity levels, particularly in Packaging Machinery (PM). In fact, so much so that the Board now expects to close 2016 with a “significantly higher” backlog than enjoyed 12 months ago (~£25m 1st Jan’16).
12 Dec 16
Better H2 expected despite tough conditions
Today several western nations (eg US and UK) are struggling with their lop-sided economies - characterised by relatively robust consumer activity (Re lower pump prices and +ve retail sales) offset by subdued business investment. Indeed many corporates are prioritising stock buybacks and dividends ahead of new plant and equipment, benefitting short term profitability and investor returns at the expense of longer term growth and productivity.
24 Aug 16
Trading in line with expectations
Warren Buffet calls it “cigar butt” investing; or buying stocks for less than 50 cents in the dollar. These type of ‘unloved’ companies are extremely rare, since they often trade at around net current tangible assets (NCTA). So what about Molins? Well, we think this niche engineer is another ’special situation’.
22 Apr 16
79% upside vs our 120p/share price target
Fund managers can learn a great deal from physicists. Indeed legendary investor Warren Buffett realised early in his career that by applying Sir Isaac Newton’s 3rd Law of Motion (“For every action there is an equal and opposite reaction”), he could become one of the world’s richest men. You see Wall Street’s wild mood swings often flip-flop between irrational exuberance and manic depression - meaning that by adopting a contrarian view to the herd, canny investors can reap handsome rewards.
25 Feb 16
Given the recent turmoil on the FTSE, it is somewhat ironic that my family travelled more than 5,000 miles on holiday last week to see bears in the wild at Algonquin National Park (Canada), but haven’t yet so much as had a sniff of one. They should have better luck in New York next week where there is certainly no shortage – just look at the Dow!
27 Aug 15