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 £1 trillion 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 £160 million. 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 £14 million in cash and shares the deal complements Mpac’s existing business. 

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 £47 million 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, £1 million 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. 

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 £129 million this year to £209 million next, with profits surging more than 70 per cent to £18.6 million.

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