{"id":489,"date":"2024-03-18T01:01:00","date_gmt":"2024-03-18T01:01:00","guid":{"rendered":"https:\/\/bluegemresearch.co.za\/?p=489"},"modified":"2024-03-18T04:17:40","modified_gmt":"2024-03-18T04:17:40","slug":"metrofile-holdings-h124-results-tougher-than-expected-interim-period","status":"publish","type":"post","link":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/?p=489","title":{"rendered":"Metrofile Holdings \u2013 H1:24 Results \u2013 Tougher than Expected Interim Period"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><em>Share Code: MFL \u2013 Market Cap: R1.1bn \u2013 PE: 8.5x \u2013 DY: 6.3%<\/em><\/p>\n\n\n\n<div class=\"wp-block-file\"><a id=\"wp-block-file--media-5883e54a-2518-4e7b-806c-e2a74682f7d4\" href=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2024\/03\/Metrofile-Holdings_H1_24_Results-Note.pdf\"><strong>Metrofile Holdings Result Note &#8211; H1:24<\/strong><\/a><a href=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2024\/03\/Metrofile-Holdings_H1_24_Results-Note.pdf\" class=\"wp-block-file__button wp-element-button\" download aria-describedby=\"wp-block-file--media-5883e54a-2518-4e7b-806c-e2a74682f7d4\">Download<\/a><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>H1:24 Results: Headwinds constrained revenues &amp; hurt margins<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Metrofile Holdings reported a much tougher H1:24 period than we had expected with several headwinds either constraining revenue growth or negatively impacting short-term margins.<\/li>\n\n\n\n<li>Revenue grew +2% but this below inflationary pressures (labour costs increased +11%) and EBITDA decreased 4%.<\/li>\n\n\n\n<li>Higher interest rates increased the financing burden and saw HEPS for H1:24 decline 13% to 13.0cps (H1:23 \u2013 15.0cps).<\/li>\n\n\n\n<li>In line with earnings, the dividend was lowered to 7cps (H1:23 \u2013 9cps) and management bought back 1.5m shares in the market at a c.297cps VWAP.<\/li>\n\n\n\n<li>The Group\u2019s cash flow remained exceptionally strong (R160m of EBITDA converted into R143m of operating cash flow) and debt levels remained reasonable.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Our Thoughts: Strong recurring underpin to revenues &amp; cash flows<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Physical and digital subscription revenues make up 62% of Metrofile\u2019s revenue, underpinning a strong base of recurring cash generation from which management continues to build out the Group\u2019s digital strategy, this period being no exception.<\/li>\n\n\n\n<li>On this digital strategy, IronTree, cloud &amp; digital service revenue continue growing &amp; we expect their contribution to Group revenue mix to grow (see <strong>Figures 2, 3 <\/strong>&amp;<strong> 4<\/strong> in this report).<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Forecast, Valuation and Implied Return: Undervalued<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>We see Metrofile\u2019s fair value as 390cps (previously: 423cps), implying an EV\/EBITDA of 7.0x &amp; a PE of 12.9x (comparing attractively to Iron Mountain\u2019s current EV\/EBITDA of 18.9x &amp; PE of 129x).<\/li>\n\n\n\n<li>Rolling our fair value forward, we arrive at a total return 12m TP of 456cps (previously: 500cps), implying a high c.78% return (including dividends) from these levels.<\/li>\n\n\n\n<li>Our short-term forecasts were optimistic &amp; have been lowered. Yet the fundamentals remain in place for Metrofile to defend its core business while it keeps investing in faster-growing, long-tail digital services businesses that are steadily transforming the Group. See <strong>Table 8<\/strong> in the report (or below) for global comparisons.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image size-large\"><a href=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2024\/03\/Figure-8-MFL-vs-Global-Peers.png\" target=\"_blank\" rel=\"noreferrer noopener\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"752\" src=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2024\/03\/Figure-8-MFL-vs-Global-Peers-1024x752.png\" alt=\"\" class=\"wp-image-492\" srcset=\"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2024\/03\/Figure-8-MFL-vs-Global-Peers-1024x752.png 1024w, https:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2024\/03\/Figure-8-MFL-vs-Global-Peers-300x220.png 300w, https:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2024\/03\/Figure-8-MFL-vs-Global-Peers-768x564.png 768w, https:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2024\/03\/Figure-8-MFL-vs-Global-Peers-624x458.png 624w, https:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2024\/03\/Figure-8-MFL-vs-Global-Peers.png 1093w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure>\n\n\n\n<div class=\"wp-block-file\"><a id=\"wp-block-file--media-5883e54a-2518-4e7b-806c-e2a74682f7d4\" href=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2024\/03\/Metrofile-Holdings_H1_24_Results-Note.pdf\"><strong>Metrofile Holdings Result Note &#8211; H1:24<\/strong><\/a><a href=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2024\/03\/Metrofile-Holdings_H1_24_Results-Note.pdf\" class=\"wp-block-file__button wp-element-button\" download aria-describedby=\"wp-block-file--media-5883e54a-2518-4e7b-806c-e2a74682f7d4\">Download<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Share Code: MFL \u2013 Market Cap: R1.1bn \u2013 PE: 8.5x \u2013 DY: 6.3% H1:24 Results: Headwinds constrained revenues &amp; hurt margins Our Thoughts: Strong recurring underpin to revenues &amp; cash flows Forecast, Valuation and Implied Return: Undervalued<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[132],"tags":[13,15,133,147,60,20,30,16],"class_list":["post-489","post","type-post","status-publish","format-standard","hentry","category-metrofile-holdings-mfl","tag-equity-research","tag-jse","tag-metrofile","tag-metrofile-holdings","tag-research","tag-small-cap","tag-small-caps","tag-south-africa"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/489","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=489"}],"version-history":[{"count":3,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/489\/revisions"}],"predecessor-version":[{"id":494,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/489\/revisions\/494"}],"wp:attachment":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=489"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=489"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=489"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}