Mailpac Group Limited IPO Analysis

Outlook and Recommendation

We believe there are several external tailwinds that should support the industry Mailpac operates in. These external factors coupled with the company’s long established and well recognized brand, demonstrable track records of organic and inorganic expansion and captive customer base have led us to conclude on a positive outlook for the company.

According to E-Consultancy.com ecommerce sector (the buying and selling of goods and services over an electronic network) has mainly been driven by the rapid increase in online shopping over the last 20 years. According to study done by the United Nations (“UN”), in 2017, global ecommerce sales grew by 13%, hitting an estimated US$29 trillion. The UN also noted a similar increase was seen in the number of online shoppers, which increased by 12% to 1.3 billion people, approximately one quarter of the world’s population. This has been fueled by global consumer sales from the United States (US) market which was the main source of the 21% increase in consumers buying across borders in 2017. (indicate source of info) Given that MGL’s hub is based in Miami, Florida, this provides a positive outlook for the company as shipping from the US reduces transportation fees and delivery time for customers buying from the US. The main driver of MGL’s business is online shopping. According to the World Bank, Jamaica’s internet penetration rose from 37% in 2013 to 49% in 2017.

In addition, the Bank of Jamaica has indicated that there was an increase of 46,398 or 19% in the number of credit cards in circulation in 2017 compared to 2016. The company has plans to grow its own customer base through the introduction of its prepaid MasterCard for shopping online which shows that the country is moving in a direction that supports ecommerce.

All these factors considered, the result of our valuation exercise was an estimated average fair value of J$1.59 relative to the offer price of J$1.00 implying a potential upside of ~59% in the stock price. Given the aforementioned factors we recommend Mailpac as a BUY at the IPO price. We however advise you to consult an investment advisor at Barita Investments Ltd to discuss your individual circumstances before making any investment decision.

Price/share $1.00
Average Estimated Fair Value $1.59
Estimated Fair Value Range J$1.54-J$1.64
Implied Price Upside 58.60%
Recommendation BUY

Read full Analysis here.

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