10:02 | 08.10.2020
MBH Corporation plc
Original-Research: MBH Corporation plc – von GBC AG
Einstufung von GBC AG zu MBH Corporation plc
Unternehmen: MBH Corporation plc
Anlass der Studie: Research Comment
Kursziel: 1.72 EUR
Kursziel auf Sicht von: 31.12.2021
Analyst: Cosmin Filker, Marcel Goldmann
With 8 acquisitions, the target for the year has almost been reached, high
investment activity should continue, forecasts and price target unchanged
With the publication of the half-year figures for 2020, MBH Corporation plc
(short: MBH) is showing strong growth in sales of 30.5% to GBP 27.37
million (previous year: GBP 20.97 million). This strong growth is primarily
due to the three company acquisitions, which enabled MBH to expand its
investment portfolio to a total of 13 investment companies as of 30 June
2020. Particularly noteworthy here is the acquisition of Robinson Caravans,
a UK-based manufacturer of caravans, in March 2020. The company should
benefit from increased demand, particularly in the environment of pandemic-
related travel restrictions. Since the acquisition, Robinson Caravans has
contributed a total of GBP 4.63 million to Group sales. In parallel, the
Samuel Hobson House nursing home, newly acquired in January 2020, also
contributed GBP 0.49 million to MBH sales for the first time. Logistica
Training, the third acquisition in the first half of 2020, is unlikely to
have made a relevant contribution to revenue due to the fact that it was
not acquired until 9 June 2020. The breakdown of revenue by segment shows
the contribution of the new leisure segment (Robinson Caravans) to the
dynamic growth achieved.
Negative effects in connection with the Covid 19 pandemic can be observed
particularly in the construction services segment. Cape Ltd., which is
active in New Zealand in the field of renovation services, suffered a
decline in sales to GBP 5.55 million (previous year: GBP 11.46 million).
However, this was offset by sales increase in UK and overall the
construction services segment nevertheless achieved sales growth of 5.8% to
GBP 17.48 million (previous year: GBP 16.53 million).
The higher costs associated with the increased investment activity led to a
disproportionately low increase in EBITDA of 12.0% to GBP 1.50 million
(previous year: GBP 1.34 million). All companies acquired in 2020 are
reporting positive earnings. Against this backdrop, the only constant
development of the after-tax result of GBP 0.66 million (previous year: GBP
0.67 million) is due to a significant increase in depreciation and
amortisation as well as higher financing costs. MBH financed the expansion
of its portfolio in 2020 mainly through the EUR50 million bond programme it
launched. This enables the company to finance acquisitions without dilution
even if the MBH share price is low. At the balance sheet date, bonds with a
volume of GBP 14.27 million had been issued.
After 30.06.2020 MBH continued to show very high transaction activity.
After the acquisition of GS Contracts was announced at the end of July
2020, the company took over Ashley David Taxis in August, thus establishing
a new ‘Transportation’ segment. At the beginning of September 2020, the new
‘Real Estate’ segment was established with the takeover of the US-based
companies Meeting of the Minds (MOTM) and Everyday Realty Services (ERS),
while at the same time addressing the US market for the first time. MOTM
provides events and mentoring services for real estate companies and ERS is
a real estate broker and commercial finance company.
With the acquisition of the two US-based companies, MBH has so far made 8
acquisitions and is thus very close to its target of acquiring 10 new
companies over the year as a whole. Our forecast, in which we assumed 8
acquisitions for 2020, has thus also been achieved ahead of schedule. We
are adjusting our estimates to the company guidance. However, the sales
revenues of the most recently acquired companies were well below our
assumptions, which assumed an average increase in pro forma sales per
acquisition of GBP 3.8 million p.a. In 2019, MOTM and ERS had total revenue
of USD 1.23 million (GBP 0.95 million).
Even though we assume that MBH is likely to acquire further companies by
the end of the year, we are maintaining our previous sales and earnings
forecasts. The higher number of transactions will be offset by a lower
inorganic revenue contribution. We do not expect any changes for the
following years and continue to assume 10 company acquisitions per year. In
view of the unchanged forecasts, we confirm our previous target price of
GBP 1.55 (EUR1.72) and, with a current share price of EUR0.44, continue to
assign the BUY rating.
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Date (time) of completion: 08.10.2020(08:15 am)
Date (time) of first distribution: 08.10.2020 (10:00 am)
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