“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
Not that MPAC especially needs any outside help, given this morning’s positive H1 trading statement. Indeed the business is literally flying with FY19 results anticipated to be “significantly above market expectations” - thanks to a rich seam of new orders for its advanced high speed production/packaging machines and complementary services. Underpinned too, by increasing demand for customerised ‘endto-end’ & ‘smart-enabled’ solutions (re Industry 4.0).
Better still, we suspect that a big chunk of this incremental revenue is coming from the ‘economically resilient’ healthcare sector, where a large contract was secured in 2018. Here there are multi-year upselling opportunities, involving upfront system design, factory equipment sales, implementation and ongoing service, spares & diagnostics.
With regards to the numbers, we have upgraded our FY19 & FY20 turnover forecasts to £85.0m (+25% organic growth in packaging) & £95.5m respectively – which has likewise pushed adjusted EBIT higher to £5.5m (+20%, vs £4.6m before, £1.4m LY) and £6.5m (+2%, vs £6.4m) for this year and next.