Bought into MBH after running some calculations and projections based on its current growth rate. It wasn't clear to me back then, but now I can see why Geoff Wilson became a substantial holder in July and why management has recently increased their position.
MBH is the quintessential example of a stock that has emerged stronger and more determined as ever, from a gruelling trial by fire. All their businesses are performing excellently and the new management knows exactly what their objectives are and how to achieve them.
Not too long ago (2019), MBH had $25.75M in revenue but $21.66M in losses. But this year has been transformative. Their annual report showed $45.5M in revenue and only $14.75M in losses, a significant improvement on margins and revenue, even including some one-off costs. Last month, Q1 FY21 showed a 19.2% revenue increase and only $1.02M in losses.
So we can clearly see that revenue is increasing at a rapid pace, while costs are being reduced significantly. The company itself is fully cashed up and is also near cash-flow positive which will prove to be a huge boon going forward. Furthermore, they have a significant number of partnerships and growth plans in the works (as indicated by their last quarterly).
Now, as MBH's net cash-flow is approaching near-positive, I find it apt and suitable to use a TTM revenue multiple for across the industry as a benchmark to identify a fair value price target. The industrial average for Food, Beverage & Tobacco stocks listed on the ASX indicates a 2.3 P/S ratio.
Applying this to the current revenue of MBH, we reach $45.55M x 2.3 = $104.75M MC. Furthermore, as their recent quarter indicated a 19.2% CPC growth in revenue, we reach an approximate overall fair value price of $45.55 x 2.3 x 1.048 = $110M MC. Assuming we obtain no further dilution from CRs (due to the strong cash position and earnings growth), this is indicative of a fair value estimate of $0.53.
Now, I would consider this estimate to be extremely low bound, as we are comparing with mature industry peers, and their revenue and margins growth have plateaued, unlike MBH. Since MBH is a growth stock, I would say $0.53 is more-so indicative of a minimum fair value, and I would expect current true value to be significantly higher (2-4x).
Chart performance going very strong too from a TA perspective. Geoff Wilson knows what he's buying. The man owns over $10M. Director bought $100k worth, around 2 weeks ago too. Goes to show the potential for MBH and how undervalued it is at the moment.
