MFB - My Food Bag

[Basil]

Got out of bed and fed the dog early. TRA, TWR and MFB all reporting this morning. Beagle will be a busy dog.

[Basil]

First impressions.  Very solid result and very resilient performance for the first period of trading in FY27. They nearly listened to my loud barking at last years annual meeting and have paid a total dividend for the year of 1.9 cps fully imputed.  (I would have liked to see 2.0 cps for the year)

·Revenue of $170.2 million, up 5.0% on FY25
·EBITDA of $16.4 million, up from $16.1 million in FY25
·NPAT of $6.7 million, up 5.3% on FY25
·Net debt reduced by $5.1 million to $1.9 million and free cash flow of $8.5million
·FY26 H2 revenue growth of 6.2% year on year
·Gross Margin stable at 49.0% and above the 5-year average
·Active customers at 57.1k with improved lifetime value and retention
·Fully imputed final dividend of 1.15 cents per share declared, payable in June

Gosh, almost debt free with only $1.9m debt left, that's a lot quicker than I thought.  No mucking around with the dividend, ex divvy date is 3 June.
What are they going to do with that $8.5m free cash flow in FY27 and beyond ?  3 cps fully imputed dividends for FY27 giving a 15.7% gross yield going forward ?

Early trading in FY27 has remained encouraging, with demand trends continuing to track positively with revenue growth of 5.1% for the first 7 weeks of the financial year, reflecting continued sales growth from the execution of our plan and strength of our customer base.

My Food Bag announced strategic review

As previously announced, the Board has commenced a review to evaluate its ownership, capital structure and strategic options. My Food Bag has engaged Cameron Partners as its financial adviser, but the review remains in its preliminary stages and there is no certainty that any transaction involving My Food Bag will eventuate. My Food Bag will continue to keep shareholders and the market updated in accordance with its continuous disclosure obligations.

Early trading in FY27 looks very robust indeed.  Very impressive.

[lorraina]

Impressed with this;
Net debt reduced by $5.1 million to $1.9 million and free cash flow of $8.5million

[Basil]

Big day today ...profit a fraction higher than guided. ...and a great start to F2 sales wise

Share price over 30 cents by close tomorrow I reckon

I think it deserves to be where you suggested.  I'm very impressed with their resiliency against an incredibly weak economy over the last few years.  Maintaining ~ 5% growth year to date in the current geopolitical turmoil is also very impressive.  With debt coming down at real pace, (almost extinguished), and very strong free cash flow the business is well positioned to steadily grow profitability in the years ahead.  Just on lower interest costs and depreciation alone I see them doing circa $7.3m NPAT, approx 3 cps in EPS for FY27, perhaps a bit more.  At the rate they have been paying down debt they will be debt free before the end of 1H FY27, 6 months earlier than I have been forecasting.
Disc: I topped up with a few more this morning.

[Minimoke]

I'm thinking the economy cant be nearly as bad as media makes out if people can afford discretionary things like MFB

[winner (n)]

I'm thinking the economy cant be nearly as bad as media makes out if people can afford discretionary things like MFB

Only 57,000 households ......less than 3% of total households

Not everybody affected by this K-shaped economy

[LoungeLizard]

MFB  has a static base of 57k households (same as FY25) and it's hard to see how they expect to increase that base without reducing prices. That is unlikely given two of their biggest inputs (transport and  ingredient costs) are likely to go up, not down.
When you look at the actual numbers (instead of the %'s off what is a pretty low base) everything is pretty much static - EPS, profits, EBITDA, customer base, margins. Yet dividend has increased. Hmmm...haven't we been here before?
I'm not a holder so I won't bother looking into their accounts but I would suggest a close look at how their free cash flow and debt reduction was achieved. Just a thought.

[winner (n)]

Suppose a reasonable sales trend since 2018

CAGR 1.7% ....but recent sales growth a bit more so that's good

Sort of supports what liard was saying

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[LoungeLizard]

A quick AI check of MFB customer numbers since listing:

FY21 (Post-Listing): 66,492 active customers
FY22: ~71,500 active customers (Company prospectus & prospective financial updates)
FY23: ~57,500 active customers
FY24: 56,800 active customers
FY25: 57,000 active customers
FY26: 57,100 active customers

So if the market has reached saturation point and the economy is in recession, where is the growth going to come from? Margins and NP are static also. How are dividends going to be maintained, let alone increased?

The hype about their "recovery" reminds me of the hype around their listing. They were all gung-ho about prospects, paid inflated dividends (including a special dividend) then cancelled the final FY23 dividend and significantly lowered future dividends after a strategic review.

And here we are again. Inflated dividend, another strategic review. And dangle the bait about a potential "transaction" whilst at the same time deny any transaction exists. Classic. I'm surprised anyone at all is falling for this, but clearly they are as the SP has gone up. Go figure.
 
MFB is a classic no-growth company trying to convince investors that there's some great runway of growth ahead. There isn't - the customer numbers tell the story.

[Basil]

Here's where I see it for fresh capital applied here at 29.5 cents for FY27 income and beyond.
1. You get 1.15 cps fully imputed back shortly so the net investment for FY27 and beyond income is 28.35 cps.
2. $400K non recurring costs for establishment of My Food bag shop won't repeat, plus approx $500K less interest and bank line fees for FY27 = approx $900K cost savings in FY27, sales continuing to grow, I'm going with a conservative $7.5m net profit after tax for FY27 = EPS of 3.15 cps. Forward PE 28.35 / 3.15 = 9.0 i.e. a no growth PE for a company that is growing slowly despite prevailing economic headwinds.
3. Can easily pay 2.5 cps in fully imputed dividends in FY27 as by my calculations they will be completely debt free within 4 months, 2.5 / 0.72 = 3.47 cps gross / 28.35 cps = 12.2% gross yield for FY27. Should be more in FY28 and beyond as there's no debt for a full year.
4. $6.4m depreciation in FY26, (non cash) could come down in FY27 and beyond.

Summary: Basically now a debt free business that has proven to be extremely resilient despite years of headwinds from recession trading on compelling metrics. The icing on the cake is the stock is "In Play". MFB looks like a very one sided asymmetric bet to me in terms of reward v very modest risk.
Disc: I added more today.

[winner (n)]

Big day today ...profit a fraction higher than guided. ...and a great start to F2 sales wise

Share price over 30 cents by close tomorrow I reckon

On track 30+

[LoungeLizard]

Those forward metrics look, in my view, completely fanciful and ignore the reality of NZ's economic conditions and a product that will struggle to attract more customers. History repeating here. Hype getting ahead of common sense.

[Basil]

Not at all LL. I've explained $900k of cost savings in the year ahead. On top of that its likely depreciation will be lower and in addition to that sales are tracking 5% ahead. Projection is well explained by simple math's.  Maybe if you actually had a look at the financial's you'd get it.

[Auto Rower]

On track 30+

Absolutely winner & I think along with the new offerings of fresh start , Basil sums it up perfectly the maths do make sense a debt free profitable business what the !!!
Condolence's to any one caught up in the I P O slaughter but they need to get over it & smell the coffee