I like MPAC and the CEO. It has taken some time and in my opinion there have been one or two false dawns, but before C19 hit they did seem to be progressing in a number of areas and really bringing the one MPAC plan together. So be aware I am less cynical about this business than some. Always DYOR.
In all the information they gave out, both in the update and elsewhere they were guiding to a 20% below plan sales figure for the first half and an honest level of uncertainty for the full year. Equity Development, whose analyst seems to be effectively the company analyst, remains positive on the business and sees it as undervalued against its peers.
In the update the company did say it was strongly cash positive, which is to be expected given it was strongly cash positive before the lockdown. It also said the Order Book was on the rise compared to the December Order Book. This is less positive than it might sound as the Order Book in December was lower than in the past and management had already set out forecasts for 2020 that suggested an Order Book recovery was needed. Slightly worrying is that it hasn’t grown by much. I accept that sales delivery for MPC requires boots on the street. One of the points management made when C19 first became an issue was delayed shipments to India. Staff could not get in to complete delivery. Bit in that case I would have hoped for orders to be coming in and growing the Order Book substantively. I have a position in a slightly similar business and during lockdown the backlog has doubled.
Now the indication is that sales are down only 20% so there may be a rationale for only a slight increase in orders, but it doesn’t suggest there is a massive level of pent up demand, more a slightly improving steady situation in which 2020 will not be a good year but 2021 should be back on track.
My strategy remains no holding greater than 10% and MPAC remains on that line and I am happy to hold it at that level for my portfolio.