MIDAS SHARE TIPS UPDATE: Packaging pro Mpac wrapping up the market
Packaging is a complex business – but a lucrative one. Annual sales amount to almost £1trillion and solid growth is forecast, fuelled by demand from food, drink and healthcare companies.
Mpac is a minnow in the field, valued on the stock market at about £160million. But it is focused on the fastest growing sectors of its industry and is expanding at pace.
Looking ahead, chief executive Adam Holland is determined to up the tempo, with a five-year plan to double sales by 2028 and do even better on bottom line profits.
Armed with a first-class master's in experimental physics from Cambridge and more than 20 years' industrial experience, Holland is no fool and has already given Mpac a significant boost since taking the helm in the spring of 2023.
Recent months have been particularly turbo-charged, with three acquisitions in just six weeks. First up was Devon's Siga Vision, whose machines detect errors on printing and packaging. Then came US-based Boston Conveyor & Automation, which specialises in kit for the food industry. Costing around £14million in cash and shares the deal complements Mpac's existing business.
On a roll: Mpac focuses on packaging for growing industries
Third on the list was Dutch group CSi Palletising, a 60-year-old firm whose equipment automatically stacks boxes on to pallets, so they can be easily transported to shops and warehouses. At £47million it was Holland's largest deal to date, but is expected to transform Mpac's fortunes by adding a new line of business which can be offered to new and existing customers alike.
To help pay for the transaction, Mpac issued £30 million of new shares at £4 a pop, £1million of which were offered to individual share-holders with the rest going to large institutions. Both were heavily oversubscribed and the stock has risen to £5.51, under-lining market enthusiasm for Holland's manoeuvres.
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Snapping up three businesses in succession may seem a tall order, but the first two are already bedding in and there are clear synergies between CSi and Mpac, as each specialises in a different stage of the packaging process. Some customers are already shared, but there is substantial scope for growth, not least because Mpac is well-positioned in the US and CSi has a presence in Latin America.
Brokers forecast a 62 per cent leap in revenues from £129million this year to £209million next, with profits surging more than 70 per cent to £18.6million.
Dividends are under discussion but, for the moment, Holland and his team are ploughing spare cash back into the business.
Midas verdict: Midas recommended Mpac in 2019, when the shares were £2.03. They have since soared to £5.51 and brokers believe there is a lot further to go. Investors who bought shares five years ago may choose to bank some profits, having more than doubled their money, but they should keep at least a chunk of stock, as Holland is young, ambitious and determined to turn Mpac into a much larger business.
Traded on: Aim Ticker: MPAC Contact: mpac-group.com
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