Q: Good afternoon 5i team,
Following MDI's acquisition of all shares of Explomin Perforacio,lately,will this add to their bottom line, will the synergies be well viewed by the market? MDI is "cheap" and this acquisition does not seem to be much of a catalyst as viewed by the market! Should I move on and would you view a similar company as a better option?
Many thanks,
Jean
Following MDI's acquisition of all shares of Explomin Perforacio,lately,will this add to their bottom line, will the synergies be well viewed by the market? MDI is "cheap" and this acquisition does not seem to be much of a catalyst as viewed by the market! Should I move on and would you view a similar company as a better option?
Many thanks,
Jean
5i Research Answer:
The $63M deal gives MDI more exposure to South America and expandes its copper exposure. MDI indicates it is immediately accretive but does not quantify this. We think the deal makes sense. The company's fortunes often lag the mining sector somewhat. Right now, with miners doing very well on pricing, this 'should' result in higher spending by the sector, which 'should' improve MDI's fortunes. But miner confidence also of course plays a role in their spending patterns. But, with MDI having a very strong balance sheet and a very low valuation, we think it is worth holding a while longer.