Original-Research: MBH Corporation plc - von GBC AG
Einstufung von GBC AG zu MBH Corporation plc
Unternehmen: MBH Corporation plc
Anlass der Studie: Research Report (Anno)
Kursziel: 1.89 EUR
Kursziel auf Sicht von: 31.12.2020
Letzte Ratingänderung: -
Analyst: Dario Maugeri, Cosmin Filker
Significant growth in the first full year of listing Management skills proved by organic growth and five acquisitions in 2019 Dividend of EUR 0.005 cents per share
For the financial year ended in 2019 MBH Corporation plc (MBH) reported a set of outstanding numbers. Revenues grew from GBP 12.5m to GBP 50.8m, up 306%, while EBIT rose from GBP 1.44m to GBP 4.11m, up 186%. These figures stem from the full-year consolidation of the three founding companies (Cape, Parenta and Acacia), their growth as well as five additional acquisitions. These results confirm the success of the MBH agglomeration model as well as management skills. On this basis, the management decided for a dividend per share of 0.005 cents for the year 2019.
MBH is an acronym for multi-business holding. In a nutshell, the model works out by putting together various private small companies in a PLC ecosystem. After share-for-share exchange acquisition, the subsidiaries are grouped under non-trading companies (special-purpose vehicles) and are supported in growth and tactical acquisition. Joining MBH, the units have gained scale (i.e. larger value contracts) and financing (i.e. access to loans) benefits. Target businesses are in the range of USD 1-10m EBITDA.
Accretive acquisitions over small entities are generally favourable for the listed company. It is expected to boost earnings per share of the holding and to mitigate the dilution effects of a new share issue. Since FY2020 MBH has begun acquisitions combining the payment with a debt issue (i.e. private loan or public debt issue). Eventually, this substantially reduces the dilution effect.
A substantial acquisition pipeline and attractive organic growth are the key drivers of MBH´s value creation. At the time of writing the portfolio is well-diversified in four segments with eleven companies. Organic growth is promoted via an earn-out system on each additional gain over a specific base (i.e. on previous earnings). This also is a way to extract wealth by breaking through their barriers and constraints and to roll out SMEs in different markets or locations.
Group net assets amounted to GBP 43.3m at the end of fiscal year 2019. The main items on the balance sheet were (1) goodwill of GBP 36.54m, stemming from the recent acquisitions; (2) receivables of GBP 21.20m; (3) payables of GBP 14.84m; (4) contingent considerations for earn-out to senior managers and directors of GBP 6.43m. Total cash on balance was GBP 4.50m.
Since our estimations (Initial Coverage) were published at the beginning of March 2020, we have adjusted the forecasts in order to consider the COVID-19 crisis. We have reduced to five the acquisitions for the fiscal year 2020 (previously ten) and then from 2021, again ten deals a year. It remains our assumption for EPS-accretive acquisitions strategy, according to which the dilution effect when issuing shares for new acquisitions is less than the new EPS contribution. Our moderate scenario is also set in reduced organic growth for 2020 while a recovery is expected in FY 2021. We have also considered the deconsolidation of APEV, MBH's largest investment to date in our forecasts, and thus we have adapted our previous shares issue projection from 86.31m to 49.20m. In all, we have reduced the share capital from 142.85m to 83.65m (mainly for the APEV´s demerger) but confirming our BUY rating with the new fair value per share of EUR 1.89 or GBP 1.70 (previous EUR 1.95).
Die vollständige Analyse können Sie hier downloaden: http://www.more-ir.de/d/21157.pdf
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Date (time) of completion: 26.06.2020 (6:30 pm) Date (time) of first distribution: 29.06.2020 (1:30 pm) Target price valid until: max. 31.12.2020
-------------------übermittelt durch die EQS Group AG.-------------------
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