MIDAS SHARE TIPS UPDATE: Packaging pro Mpac concludes market

Packaging is a complex, but lucrative business. Annual sales are almost £1bn and strong growth is forecast, driven by demand from food, drink and healthcare companies.

Mpac is a minnow in this field, valued on the stock market at around £160 million. But it is focused on the fastest-growing sectors of its industry and is expanding at a good pace.

Looking ahead, CEO Adam Holland is determined to pick up the pace, with a five-year plan to double sales by 2028 and deliver even better bottom line results.

Armed with a first-class master’s degree in experimental physics from Cambridge and more than 20 years of industrial experience, Holland is no fool and has already given Mpac a significant boost since taking the helm in spring 2023.

The last few months have been especially dynamic, with three acquisitions in just six weeks. The first was Devon’s Siga Vision, whose machines detect errors in printing and packaging. Then came US-based Boston Conveyor & Automation, which specializes in kits for the food industry. Costing around £14m in cash and shares, the deal complements Mpac’s existing business.

Third on the list was Dutch group CSi Palletising, a 60-year-old company whose equipment automatically stacks boxes onto pallets, so they can be easily transported to stores and warehouses. At £47m, it was Holland’s biggest deal to date, but it is expected to transform Mpac’s fortunes by adding a new line of business that can be offered to both new and existing clients.

To help pay for the transaction, Mpac issued £30 million of new shares at £4 each, of which £1 million was offered to individual shareholders and the remainder went to large institutions. Both were heavily oversubscribed and the shares have risen to £5.51, underlining the market’s enthusiasm for Holland’s moves.

Acquiring three businesses in a row may seem like a tall order, but the first two are already establishing themselves and there are clear synergies between CSi and Mpac, as each specializes in a different stage of the packaging process. Some customers are already shared, but there is substantial room for growth, not least because Mpac is well positioned in the US and CSi has a presence in Latin America.

Brokers are forecasting a 62 per cent jump in revenue from £129 million this year to £209 million next year, with profits rising more than 70 per cent to £18.6 million.

Dividends are being discussed, but for now Holland and his team are reinvesting any excess money into the business.

Midas Verdict: Midas recommended Mpac in 2019, when the shares cost £2.03. They have since shot up to £5.51 and brokers believe there is more to do. Investors who bought shares five years ago may choose to rack up some gains, having more than doubled their money, but they should keep at least some of the shares, as Holland is young, ambitious and determined to turn Mpac into a business. much bigger.

Traded in: Aim Heart: MPAC Contact: group-mpac.com