Our opinion on the current state of MPT

Mpact, a prominent player in the paper and plastics packaging industry in Southern Africa, plays a crucial role in recycling paper and cardboard while producing a range of packaging solutions, including corrugated cardboard containers and polystyrene trays for various sectors, most notably the food industry. Operating 20 manufacturing facilities and employing over 5,000 individuals, Mpact's business primarily thrives in the South African market, which accounts for 86% of its sales.

The company's performance is closely tied to consumer spending trends, which have seen fluctuations due to the COVID-19 pandemic and were further influenced by the onset of the Ukraine crisis. Additionally, Mpact's operations are affected by weather conditions, especially in regions like the Cape, where agricultural demand for corrugated containers is weather-dependent.

In navigating the challenges of the current economic landscape, including load shedding and public infrastructure failures, Mpact has strategically focused on cash preservation and leveraging local suppliers amidst global supply chain disruptions caused by the pandemic. For the fiscal year ending 31st December 2023, Mpact reported an 8% increase in headline earnings per share (HEPS) and an 11.2% rise in net asset value per share to 3363c. This performance reflects the resilience and adaptability of Mpact in the face of a weak economy burdened by high interest rates and prolonged inflation.

Despite a significant drop in share price from a high of R51 in April 2016 to around R8 in March 2020, Mpact's shares have shown recovery, currently trading at 2808c. However, the share experienced a decline in response to the Ukraine crisis. At its current price, Mpact trades at an earnings multiple of 5.48, suggesting that the shares are undervalued relative to the company's earnings potential.

From a technical perspective, Mpact's shares appear to be on the cusp of entering a new upward trend, although they have been moving sideways since August 2022. This pattern indicates a potential shift in investor sentiment and market dynamics, possibly reflecting a growing recognition of Mpact's value proposition amid evolving economic conditions.

In summary, Mpact presents an intriguing investment opportunity, particularly for those looking to invest in a company with a strong focus on sustainability through recycling, and resilience in navigating economic challenges. The current valuation suggests that Mpact's shares are attractively priced, offering potential for growth as the company continues to adapt and thrive in the Southern African packaging industry.