Mondi Plc – Value Analysis (LONDON:MNDI) : December 19, 2017

Capitalcube gives Mondi Plc a score of 72.

Our analysis is based on comparing Mondi Plc with the following peers – James Cropper plc, DS Smith Plc, Ahlstrom-Munksjo Oyj and Cham Paper Group Holding AG (CRPR-GB, SMDS-GB, AM1-FI and CPGN-CH).

Investment Outlook

Mondi Plc has a fundamental score of 72 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance over the last year is in contrast with the more recent outperformance.
  • It trades at a lower Price/Book multiple (2.03) than its peer median (2.69).
  • We classify MNDI-GB as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • MNDI-GB has relatively high profit margins while operating with median asset turns.
  • Changes in annual revenues (relative to peers) are better than the change in its earnings (relative to peers), implying the company is focused more on revenues.
  • MNDI-GB‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • MNDI-GB‘s revenues have grown more slowly than the peer median over the last few years, which combined with the stock price’s relatively low P/E ratio suggests substandard growth expectations relative to peers.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • MNDI-GB has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

MNDI-GB has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 12.19% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 12.33%), and a well-cushioned interest coverage level of 14.12x, MNDI-GB can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 4 peers for the company have an outstanding debt balance.

MNDI-GB has maintained its Quick & Able profile from the prior year-end.

  • MNDI-GB‘s interest coverage is its highest over the last four years and compares to a low of 4.65x in 2012.
  • The increase in its interest coverage to 14.12x from 11.21x (in 2015) was also accompanied by an increase in its peer median during this period to 9.96x from 7.52x.
  • MNDI-GB‘s debt-EV is its lowest over the last four years and compares to a high of 30.97% in 2012.
  • The decrease in its debt-EV to 12.19% from 14.86% (in 2015) was also accompanied by a decrease in its peer median during this period to 12.33% from 22.05%.
  • Relative to peers, debt-EV rose 7.04 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
James Cropper plc 6.45 2.06 9.96 77.44
DS Smith Plc 24.48 1.01 8.15 26.25
Ahlstrom-Munksjo Oyj 29.99 1.36 4.27 19.79
Cham Paper Group Holding AG 12.33 1.96 30.5 51.18
Mondi plc 12.19 1.39 14.12 71.96
Peer Median 12.33 1.39 9.96 51.18
Best In Class 6.45 2.06 30.5 77.44

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Company Profile

Mondi Plc manufactures packaging and business paper. Its products include kraft paper, industrial bags, containerboard, corrugated packaging, films and laminates-printed and unprinted, pre-made consumer bags, extrusion coated materials, release liner, office paper and professional printing products. Mondi was founded on November 4, 2007 and is headquartered in Surrey, United Kingdom.

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