Original-Research: MBH Corporation plc (von GBC AG): Management Interview
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Original-Research: MBH Corporation plc - von GBC AG
Einstufung von GBC AG zu MBH Corporation plc
Unternehmen: MBH Corporation plcISIN: GB00BF1GH114
Anlass der Studie: GBC Management Interview Empfehlung: Management Interview Kursziel: - Letzte Ratingänderung: Analyst: Dario Maugeri, Cosmin Filker
MBH Corporation plc is an investment holding company based on an innovative Agglomeration Model that allows SMEs to convert their private shares into MBH shares. Private owners may thus take advantage of a public limited corporation (plc) structure. Currently, the group is divided into three segments: education, construction and engineering across the UK, New Zealand and Singapore. GBC-analyst Dario Maugeri spoke with Callum Laing, CEO of MBH:
Dario Maugeri: Mr. Laing, MBH's Agglomeration Model is an innovative 'buy and hold' approach which is building up a diversified portfolio of profitable companies. Which would you define as key strengths of this approach?
Callum Laing: There are several strengths to this model. Diversification is for us about protecting our shareholders first and foremost and not leaving us too exposed to inevitable cycles in different industries. Geographic diversification also gives us some protection against different macro-economic or currency exposures. Beyond defensive, it also provides us with a much bigger pool of companies to choose from and this allows us to announce material acquisitions on a regular basis leading to greater scale and liquidity in the company.
We end up with the ultimate in fast growth, decentralized management who has earned the authority and autonomy to respond to opportunities on the front line in real time without having to be weighed down by too much bureaucracy. The three key drivers of value in the Agglomeration Model are: Acquisitions are all EPS accretive, Organic growth and Synergistic growth through collaboration.
Dario Maugeri: Can you briefly describe to us your accretive growth principle?
Callum Laing: A small business will typically trade at a lower multiple than a big PLC. Our model exploits the arbitrage of this effect for the benefit of all shareholders. Acquisitions are completed on earnings per share (EPS) accretive manner. It's effectively issuing shares at lower price-to-earnings (PE) multiples than MBH's PE ratio.
Dario Maugeri: Under the brands Acacia Training and Parenta you built up the education segment. How is the segment currently performing and what are the key market drivers?
Callum Laing: Education is a very interesting industry for us with many opportunities to work with great companies around the world. It is highly fragmented with some great entrepreneurs and that is exciting for us.
Acacia is just one great example of a company successfully leveraging the benefits of joining MBH to thrive. We are seeing good organic growth within the business. Plus, they have been adding opportunistic tactical acquisitions to further bolster and enhance the service offerings of the group which should result in higher EBIT growth. This leads to more synergies and great opportunities.
Dario Maugeri: Beside the construction and education segments, you recently acquired a company engaged in the engineering services segment: the Asia Pacific Energy Ventures Pte Ltd (APEV). They should become the most significant revenue contributors for the whole MBH group. Which development do you expect for APEV?
Callum Laing: APEV is a fantastic company and I believe that with the benefits of a PLC it will be able to bid for and win even more impressive projects. However, whilst APEV is significant today, we are confident of adding many more companies of the size and quality of APEV over the coming years to complement the group. We also have companies in the group that are growing fast. The beauty of the Agglomeration Model is that, as we grow, our material dependence on any one business lessens, which makes the model even stronger for investors.
Dario Maugeri: Mr. Laing with around nine companies in portfolio you are also encouraging synergies between companies or segments. Could you offer us an example of synergies developed or underway?
Callum Laing: Education is a good example - the companies are now sharing resources which include sales and finance.
Construction - the companies are now providing various services for projects which reduce the requirement to engage sub-contractors.
Beyond those synergies we are also seeing a very strong culture emerging of sharing best practices amongst companies even across different industries. For many of the business owners joining this could be the first time in 20 years they have had a support network. Despite the differences there are many more things that successful small businesses have in common than separates them.
Dario Maugeri: Since the listing of MBH the number of acquisitions has grown consistently year on year. In the guidance you mentioned the target of 15-20 acquisitions per year. Which segment do you intend to strengthen the most?
Callum Laing: We have only just completed our first year of listing but, yes, we are very bullish on growing the group over the coming years. The advantage of MBH is that there is no need or requirement to strengthen various sectors. The sectors will naturally grow due to the entrepreneurial nature of the principals in the company. We are sector-agnostic. So, over the coming years, you will see us bring on companies in many other verticals and every time we do so it will also attract others like them to join us.
Longer-term industries can peak and trough but we will continue to add great companies in an accretive manner enhancing the value for all shareholders. We don't see any shortage of great businesses that can thrive in an environment like ours.
Dario Maugeri: Mr. Laing, MBH revenues have risen consistently due to organic growth and portfolio expansion in the last year. For a better understanding of the true value of MBH shares, which key elements would you point out to investors?
Callum Laing: The recent announcement on pro forma revenue and EBITDA growth should help to explain things more clearly for investors. I mentioned in the Chairman's Letter when we first listed that we don't need organic growth for this model to create massive shareholder value. However, if we weren't seeing organic growth, then we would probably need to ask ourselves some hard questions. Fortunately, and I acknowledge it is still very early days, the companies in the group are thriving.
For us, the metric we focus most on is EPS. It is easy to get carried away with doing acquisitions but being bound to focus on increasing EPS with the majority of acquisitions is a very good discipline and it allows us the freedom to have the growth pace of a tech company but by not using cash for acquisitions we can pay dividends in the future as a more mature company might.
Dario Maugeri: Where do you see MBH in the next five years?
Callum Laing: At our current trajectory we should comfortably have a market cap in the multibillion range. Whilst that's exciting it's not what we focus on internally. We will continue to focus on the drivers of value that we can control; Accretive acquisitions, Organic Growth and Group Synergies. We are lucky that we attract fantastic small business owners to us and increasingly we are attracting good, long-term investors that also appreciate the bigger picture of what we are trying to do. We will continue to focus on the fundamentals and getting our EPS up.
Dario Maugeri: Mr. Laing, thank you for the interview.
Die vollständige Analyse können Sie hier downloaden: http://www.more-ir.de/d/19763.pdf
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http://www.gbc-ag.de/de/Offenlegung +++++++++++++++ Date (time) of completion of English version: 13/12/2019 (09:29 am) Date (time) of first distribution of English version: 13/12/2019 (10:00 am)
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