Could today’s $3m deal be a game-changer for Management Resource Solutions?
Today saw Management Resource Solutions (MRS) announce a major deal with an Australian development firm that is expected to bring in $3m of revenue over the next 12 months. With the company struggling to break out beyond the 8-9p level so far this year, we ask whether the well-received deal could mark a turning point for its current £15.4m valuation.
Through its subsidiaries Bachmann Plant Hire and MRS Services Group, MRS has private and public sector clients in Australian across the mining, civil engineering, construction, and infrastructure industries. It offers a wide variety of support services include plant hire, equipment repair, refurbishment and fabrication, mine rehabilitation, earthmoving, and road construction.
Today saw the business jump 1.9pc to 8p after it announced the contract execution of project works with a Queensland-based construction, consulting, and urban development player called BMD Constructions. The work – awarded to Bachmann Plant – will include stripping and re-spreading of topsoil volume, removal and mixing of contaminated soils, certified compaction of earthworks soils and placement of surcharge material.
Excitingly, MRS said the project is expected to generate $3m of revenue over the next 12 months and underpins the volume assumptions it made during its recent acquisition of new plants and equipment. In a statement, Shaun Fraser, GM of civil and earthworks at MRS, said:
‘The award of this parcel of work reflects the responsiveness, reliability and breadth & capability of the BPH team. This project continues the very strong relationship with BMD, with both organisations focussed on delivering the project safely and on time.’
Today’s news tops off a busy first eight months of the year for MRS across both parts of its business under new chief executive Paul Brenton, appointed in December. It has strengthened significantly since a drawn-out boardroom battle and period of successful shareholder activism last year saw a shake-up of its senior management.
In May, MRS rose 10pc after announcing the acquisition of an engineering maintenance facility in Muswellbrook for $3m to be the operational base for MRS Services Group in the Hunter Valley. It bought the facility to enable it to carry out around $2m worth of work to ‘maximise its full potential’ for clients.
Then, in July, MRS Services Group announced that it had been awarded a two-year contract with Glencore, featuring an option to extend by an additional year. The deal will see it provide a turn-key solution for rehabilitation works at a mine in Australia. It will also deliver a final geo fluvial landform design required by the mining major.
Despite securing a deal with Glencore, MRS has struggled to move beyond 9p for any significant amount of time since soaring at the end of last year after settling several legacy issues. With the firm recently raising around c.£1m of cash to use as working capital, the value of this single deal covers a significant portion of its current £15.4m market cap. Could today’s news end up being the match in the powder barrel?
Both sides of MRS now courting the attention of major players (i.e. Glencore), so it doesn’t seem entirely unrealistic that it could see more deals like today’s – especially given current strength in the mining sector. If that is the case, and significant revenues begin to come in, then MRS could soon look considerably under-valued.
Of course, this is not a guarantee. MRS is a complicated business and given the cyclical nature of the environment it operates in, there is always going to be a risk that interest will periodically dry up. However, the support offered by the company’s leaders is encouraging- in its recent placing directors and management purchased a combined c.£430,000 worth of shares.
If you think today’s deal could mark the beginning of a period of serious momentum for MRS, then it could be worth a punt before shares take off.
You can see and hear more about the company from its 2016 presentation
The author does not hold shares but was remunerated to write the article