Ann: Quarterly Activities/Appendix 4C Cash Flow Report, page-9

"The main question is probably to wonder if there is much one off in their cash flow from operation this quarter (obviously not from government help, but perhaps one offs from some recent contracts signed)."

You're right - one quarter's of cash flow numbers does not a summer make.

But even if one zooms out to look at the longer-term timelines, you can see that the past quarter reflects part of a clearly improving trend (remember that SQ20, DQ20 and even MQ21 were Covid-impacted, so that they were also positive is something of a statement, I think):




For heavily Covid-impacted FY2021 to have come in with $5.3m in Operating Cash Flow suggests that an annualised run-rate of $6.5m, or even $7m, in the current financial year is well within the realms of possibility.

Given that investing cash flow is around $1.0mpa, that means the FY2022 Free Cash Flow would be between $5.5m and $6.0m, meaning the company would be exit FY2022 with Net Cash close to $9m (30 June 21 Net Cash was $3.2m).

So, given the current market cap of $60m that means a 12-month, prospective EV of a little more than $50m


And $5.5m to $6.0m Free Cash Flow for the period means that the business would exit the year at a FCF run-rate north of $6.0m pa

But even $6mpa would value the company on a mere 8.3x EV/FCF (or a 12% FCF Yield).

But it doesn't end there - given the significant market opportunity on offer to MSL, the globally-scaleable and capital-light business model, as well as the high quality customer credentialisation of MSL's service offering, there is zero chance that MSL will still be generating just $6m of FCF in 3 or 4 years', time.

Instead, I think that FCF well above $10mpa is highly likely, and possibly closer to $20m is a very distinct possibility at some stage over the next 3 or 4 years.

If and when that transpires, I strongly suspect the company will have an Enterprise Value that is closer to $200m, as opposed to today's mere $50m.

This feels very much to me like one of those investment situations that, on a risk-adjusted basis, gets better even despite the share price rising.

I actually believe MSL is a more attractive investment today than it was when I first started acquiring shares in the business at meaningfully lower prices

Accordingly, I bought more shares this morning.


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