It has been more than 2 weeks since I promised to write a note on MPS Ltd. I did attempt to do that on 2 occasions but ended up crafting a research note and that is exactly what we are not here for. MPS began as a production unit established by Macmillan to serve the academic and STM(Scientific, Technical and Medical Publishers) publishing community.
The company has shifted gears since ownership change in early 2012 to transform in to a complex projects and Platform as a Service being at the forefront. Post the Highwire acquisition, platform revenue is ~37%. The company is more like an M&A machine completing a host of acquisitions under the new leadership led by CEO Rahul Arora.
2013- Element
2014- EPS
2015- TSI Evolve
2016- Mag+
2017-Think
2018- Tata Interactive Systems
2020- Highwire
Just to understand how much value the promoters have made for themselves and someone who bought it around the acquistion price at 37 in 2012, 6x have been distributed in the form of dividends and buybacks! While the company had just begun its integration and acquisition journey it’s price jumped 20x+ to 900 and the promoters used this to raise a QIP of 150 crore for growth capital in 2015. Since then the revenues of the company have grown through acquisitions primarily and will end FY21 with 2x of FY15 revenues.
The company has managed to finally get the acquistion playbook spot on with the recent Highwire acquisition turning around in less than a year. Now the aim is to get to 40+ margins in the platform business. Frenzy leads to disappointment often and thats what ensued post 2015, it was still not an expensive stock then but the hope was that acquistion benefits might come in a quarter or too which was never the case. Apart from 6x received in dividends and buybacks, even on the current price shareholders/promoters would have made 27+ CAGR from 2012 which is a commendable feat, to top it the company still has 140 cr cash on books.
Coming to the business part, the list of the past acquisitions could be found here and Highwire one here. The business of the company can be split into 3 parts as elaborated on its website in much detail and reported in its quarterly numbers:
Learning Solutions (~13% revenue) - Painful year for this segment which degrew with shrinking margins and negative PBT. The next few quarters could be better as Corporates and Education institutes get back to their usual spends in this area. This also has some element of platform biz, as seen here.
Platform Solutions(~37% revenue) - This includes the PaaS offering of the company and has shifted the company from a IT services company to a platform biz, highwire acquisition has catapulted the growth here. Given another acquisition here and would cross 50%+ revenue and the company targets to reach 40% margins here over next 4-5 quarters. We all know what platform businesses are getting valued at off late! 2 year down the line if it does 200 cr annual revenue with 40% margins, this business alone could be worth 2k crore! Well let us stop our imagination right here.
Content Solutions (~50% revenue) - This is the cash cow business of the company and has been slow growing but has enabled the company to generate cash for its acquisitions. Publishing solutions is also going through a sea change world over and the company through gradual transformation should keep pace.
The company’s current list of clients could be the best among the industry, list here. The latest presentation could be read here. To put it in a nutshell, this is not the typical publisher anymore nor it is an education company which our markets are always wary of given past experiences with education companies. If at all this a platform and innovation driven platform business in the making.