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Packaging industry engineering special situation pays off


Gain to date: 53.2%

Original entry point: Buy at 139p, 28 September 2017

A bit of a whirlwind has blown through the boardroom of packaging industry engineer MPAC (MPAC:AIM) recently, dislodging both chairman Phil Moorhouse and finance director Jim Haughey.

After seven years in the job Moorhouse will be replaced by Andrew Kitchingman, a non-executive for the past two years. Haughey’s loss was more of a bolt from the blue although we understand it was purely a personal decision.

That he’ll remain in situ for the next six months should ensure a smooth handover, while analysts flag the ‘considerable bench strength’ in the MPAC finance team.

These departures do provide a timely opportunity to reassess the investment case given that the share price has soared. A special situations investment from the off, we argued that the market was giving too much weight to operating challenges and the pension scheme funding.

The wider market has since cottoned on and the shares no longer look significantly discounted. This year’s (31 December 2018) price to earnings (PE) multiple has shot up to 21.5-times and remains a full-looking 15.1-times on 2019 forecast earnings. There could be more upside but the balance between risk and reward no longer looks so attractive.


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