Undervalued and Undiscovered

[peakyblinderssss]

This is probably the most unheard stock I have ever seen but has such great potential. Do let me know what you think about it

MBH Website
https://www.mbhcorporation.com/



MBH 1H Financial Report Stats:
MBH Corporation (OTCQX:MBHCF): 1H net profit after tax of £1.9M.
Revenue of £49.6M (+81.0% Y/Y)
EBIT increased by 271% to £3.0M vs. £0.8M a year ago.

LINK: https://irp.cdn-website.com/3d13dbd6/files/uploaded/H12021%20unaudited%20financial%20statements%2030%20June21.pdf


MBH Analysis (Pros and Cons)
MBHCF is a holding company which began in 2016 that is actively building a portfolio of profitable, earnings accretive, debt-free small to medium enterprises (SME) that are expected to have a higher-than-normal growth profile as part of a larger organization. The company's operating model leaves management of the acquired companies to operate autonomously and fully accountable to develop and grow their businesses.

Strong financials
The 1H21 report has shown 81% increase in revenue and 271% increase in EBIT. These are great signs about the profitability of this company. Alongside this, the company has a strong and competitive P/e ratio of 8. P/b ratio is also healthy at about 0.3. They have produced surprisingly promising numbers despite the hit taken from Covid-19.

Dividends
The company ended the year in profit despite being heavily disrupted by the Covid-19 virus. The dividend is paid out at $0.0059 per share, which is about 2% of the current share price.

Acquisitions
The company has completed a total of 26 acquisitions so far, with 12 acquisitions in 2020 alone. The rate at which MBH is acquiring companies is impressive, and the acquired companies have very high profitability. MBH has announced on 19 August 2021 that it agreed to the terms for the acquisition of Vista Care Solutions Limited (Vista Care) as the latest step in its extensive acquisition drive. This is the 26th company in Group portfolio and it will be part of MBH's health vertical.



Bullish estimates
Analysts suggest that it could have a price target of $10 based on its financials and projected estimates, resulting in an upside of over 3000%. This price target was reiterated and maintained after the impressive 1H financial report.
Here’s a link to the analyst report:
http://www.hillsresearch.com/wp-content/uploads/2021/10/MBH-1H21.pdf
However, there are still things to consider when looking into such a stock. Here are some things I’m thinking about.

Dilution of shares
The total number of shares outstanding amounted to 70.5M at the end of 2020, up from 39.2M at the end of 2019. Dilution of shares is always a concern as it lowers the EPS. However, it is important to note that the extra shares were issued as payment to acquire companies, so this could very well be a strategic move if these acquisitions generate sufficient profit for MBH. Future profits could also be used to buy back shares to improve EPS. It was announced recently that the company CEO has also just bought back 200000 shares, and has stated that Board members are not allowed to sell any shares. This seems to be a move in the right direction.

Uncertainty about post-Covid situation
We all know how disruptive the Covid-19 situation is, especially to small businesses. It’s not certain if all companies are able to bounce back and operate at their full potential. As such, being an acquisition company, MBH is open to the risk of underperforming if their acquired companies face difficulty in recovering from the situation.

Low volume
The volume can be concerning, as there isn't much coverage for this company and this has resulted in a relatively low trading volume. In the best case, we'll see trading volume pick up as retail and institutional investors come in.
In conclusion, micro-caps are often risky. Whether you enter a position in this stock or not depends on how much you believe in the expansion model and future profitability of MBH.

MBH ESG Rating
MBH Corporation has won five stars for their ESG credentials, getting into the top 1% of the nearly 2,000 businesses in the Support the Goals database. They have achieved this level of commitment through their work with inequality and climate goals. Support the Goals encourages businesses to take responsibility and the organisation expects companies 'to demonstrate how you support the world’s most important action plan'.