Member Info for RogerMellie50

Hi Ox,

You asked before about the prospects of MSi getting some more European contracts. They announced new production capacity in Poland (where they have existing works for the signs division), but as ever no specifics mentioned. The land-based systems that have been sold (to Ukraine via MoD and Jordan Airforce) were made in collaboration with a Polish company called APS, who have landed some significant European contracts recently.

https://www.reuters.com/business/aerospace-defense/kongsberg-gruppen-wins-17-billion-drone-defence-order-poland-2026-01-30/

I don't know what MSi's current arrangement is with APS, as they've been showing new seahawk/terrahawk products that have sensors and tracking systems made with Uk-based Openworks, amongst others. The whole 'space' is obviously very fast moving, but I hope MSi can get a foothold, as competition is fierce. As for MSi's orderbook/visibility, I've no idea, as they keep their cards very close to their chest.

Hi Pharmall,

Just seen your suggestions, thank very much. Been very busy last week, but have some time on my hands now to do some reading. I had my eye on ENSI - looks promising, but need to go through results and presentation more thoroughly. Similar sector, are you still in MWE? Hoping for some contract announcements prior to FY results in a month or so.

Evening John,

Yes, that press coverage is the work from US navy contract announced last year, hopefully MSi can wangle a 3-year contract rather than the current year-on-year set-up. We'll find out by October-ish.

Morning John,

I'm no expert on these things, but I suspect they were likely a sell and instant buy back, someone realising a gain/loss for CG tax, or moving shares into tax efficient account. Same amount of shares, but the second trade was a tiny amount (10th of a pence!) more expensive. I 'bed and ISA's' (sold from my dealing account and bought back in my ISA) 2k shares back in January, and my broker managed to do it for only 1.5p difference per share.

Hi Chillphill,

My amateur answer to your questions' Have the board kept back some dry powder?':

There are orders yet to be booked, but I think it is highly unlikely that there will be a delayed, bumper load in the second half of this financial year. Managing Director has already flagged this in comments to IC, saying it will likely be a poor second half, and could potentially continue in to H1 of next financial year. I don't know if 'the market' has priced this in or not. Small share issuance and low free float, MSi can move quickly on relatively small amounts of retail activity who quite often have done virtually no research in to the company. Shore Capital could drum up some new/additional institutional investment though

Potential catalysts are positive news on disposal of non-defence businesses and news of new contracts. Anyone's guess about the former, but they are making efforts to attract trade buyers, so something could come out of the blue and it could cause some of the previous financial buyers sharpen their pencil. As for new contracts, they did say that they might RNS an order for the land-based systems, but it would depend on the size. My interpretation is they will only RNS any new contracts if they simultaneously come in to the public domain (as per previous US Navy contracts and Palladin order for Ukraine through MoD). They are in negotiations on a 3-year contract with the US Navy instead of the current year-per-year set-up, but unlikely to hear about that before renewal date in October (from memory).

MSi is one of my largest holdings having first bought over 4 years ago. I sold 15% at 15 quid, and bought some back at 12 quid a few weeks ago. I intend to buy a few more back and get my holding up to 15K shares, but I am waiting for the timebeing. I think the most likely scenario is no news between now and full-year results in the Summer, so there is a good chance that the SP will drift downwards, or we may hover around these levels. I think the current price is good value with a longer (1.5-3 years) timeframe though.

What type of silver do you collect, out of interest?

Hi Chillphill,

Yes, I think I'll keep hold of them. You're right, combination of a precious and industrial metal, currently high demand for both. They're Danish stamped early 20th century, 92.5 sterling. I'm an applied/decorative arts enthusiast, but they're of no antique value. I've held physical gold for 15 years now, and will hold until I either pop my clogs or go bankrupt! I'd never thought of the silver as an 'asset' before, just something in a suitcase that came from my aunt's house. I think it's doubled contents value on my home insurance though!

Hi Pharmall,

Well done on TKO. I sold for the same reason a few months ago for 350 (I think), having bought at 250 shortly before. Should have kept them longer, but I can't stand directors who carry on like that. Other news, did you see Costain yesterday? Hopefully 2 quid on the horizon this year. Been a long road to recovery, but I'm now well back in profit (although I've held for 9 years!). I'll give Elix a look too.

Mentioning the silver price in your report John, I'm still in two minds about what to do with my silver sterling that I inherited. 92.5% is over £2 a gram scrap now. My aunt, God bless her, left me about a kilo of it in very plain cutlery 5 years ago! I own a small amount of physical gold, which I keep regardless.

Morning John/Pharmall,

Echo your points there Pharmall (although I would argue that historically it's more like 2 items of news a year, AGM statement last year was a debut one!). Having said that I, bought 1k shares yesterday for a tad under 12 quid (having sold 2k at 16 quid). I will wait and see about having another 1 or 2k, bringing my holding up to 14/15k. Ultimately, I'm prepared to pay 12 quid a share with a long-term view, but I may well be able to get in much cheaper.

I agree, I don't expect to hear any M&A stuff soon, although maybe some of the financial buyers might up their bid if there's some prelimniary trade interest.

I've said before here, after attending the AGM last year I'm more or less convinced they intend to sell the defence division as well once the non-defence assests are disposed of. Michael Bell (80 yrs old) has a thrid of the the share issuance (along with his wife), Michael O'Connell (79) has 6.52%, ex life-long employee and previous executive board memeber and non-exec member David Pyle (79) has 9.4%.

Nicholas Bell, Michael Bell's son, (1%) early 50s, said one sentence (I'm not joking) in the entirety of a 2 hour AGM. He is a complete spare part and put out to graze heading the forks division. There is zero chance of him being groomed to take over the chairmanship. The promotions to the board of Shelley Ashcroft and John Meldrum are internal window dressing (they couldn't carry on as they were without a FO given the growth of the company). The two non-execs are both 80. If they were serious about 'leading the company in to the future', they would be getting younger, experienced defence industry experts in externally as non-execs etc. They have no such intentions.

It was comical looking at the board, like an HM Bateman cartoon from Punch magazine. Roger Lane Smith (a very successful lawyer, but no experience of defence) has been awarded 100k phantom shares. The reference to 'incentivising' him is preposterous, but more informative is the clause about vesting on change of control:

Company has granted a phantom award in respect of 100,000 notional shares, exercisable at nil

value, to Roger Lane-Smith to reflect his significant contribution to the Board, and the Company’s

progess and international development, and in order to retain and incentivise future service to the

Company (the “Phantom Award”). The Phantom Award will be cash-settled in reference to the share

price on the date of exercise. The vesting of the phantom award is subject to continued service and

will only vest in the event of a future change of control of the Company. The Phantom Awards will

lapse if they have not vested within 10 years of grant.

How long it might take is anyone's guess, but I think the clues as to the BoD's intended outcome are staring us in the face.

Seems like another collaboration, putting MSi's gun mount system with RBAT's (Rheinmettal/Qatari JV) sensors?

https://www.linkedin.com/posts/msi-defence-systems-ltd_airdefence-cuas-navy-activity-7419012238503469056-MeCq

Morning John,

This is one to keep an eye on, they aim to have the prototype ready for MoD trials before end of Q2 this year.

https://defenceleaders.com/news/ukraine-testing-aspiration-for-new-milrem-robotics-ugv-collaboration/

Maybe looking for trade buyers for non-defence might make the financial buyers sharpen their pencils a bit, although I don't expect to hear anything from the company anytime soon. Snooze button for the next 6 months, I imagine. I don't know, but I assume the company will push F/Y numbers back a month to be in line with H/Y now in Jan?

You're already well in profit here John, never a bad idea to take some. There could be more institutional buying, but who knows. I've managed by position here a bit, and will add again on weakness, but I see it as a multi-year prospect (I've already been invested over 4 years!) where the return will be substantially higher than present share price. I'll re-assess after the AGM in the summer anyhow and monitor the trade press for any clues!

Hi Squad...,

I was at the last AGM, and the question was asked about what they might do with proceeds from sale of non-defence divisions. They were non-committal (obviously) but entertained the possibility of either a speccie or doing a share buyback (which would be my prefered option, as I ultimately think they aim to be acquired by a bigger player). They also said that they do 'run the rule' over smaller companies, but haven't made any acquisitions themselves ever, so I'm not sure how seriosuly to take that.

Hi Duckberry,

To the best of my knowledge, there has only every been one delivery to Ukraine, which was announced as part of an aid package by the MoD in October 2023. The footage and press coverage a few months ago of the Terrahawk system in action in Ukraine is from that original delivery, not any new ones, the revenue from which has already been booked. Happy to stand corrected if anyone has news to the contrary.

Evening John,

I was in Turkey for a wedding, only there a few days but nice to get a bit of sun!

Not much to add to what others have already said about H/Y nos, but I wasn't expecting Petrol Stations to come up trumps, that's for sure! Good that they've recruited someone in the US to lead sales efforts. Also, interesting mention about investing in defence capacity in Poland; that's where they have the corporate branding/signs division, but I assume this is separate. Maybe it's in conjunction with APS, Polish company with whom they produced the first Paladin systems with and sold to Jordan and MoD for use in Ukraine?

Company doing a bit of 6/12 month expectation management with a few words to the IC, first time they've ever bothered to engage with that type of thing. We may get some news on non-defence business disposal and maybe a contract announcement of land-based systems before F/Y numbers, but it will probably be silence until then. SP could consolidate or sell-off on silence and investor boredom. I sold 2k shares at 16 quid, leaving me with 12k. I shall re-invest at some stage, but will wait for the time being. Patience is definitey needed with any company involved with defence procurement, but I think on a 2 to 3 yr timeframe, MSi is a very good bet at this price. I shall certainly be at the AGM again in the summer.

Evening John,

I'm bullish on MSi and take a multi-year view, but I'm at the stage now where I want to start seeing some conversion of the interest in land-based systems in to actual sales. I went to the AGM in August and the BoD mentioned that they felt they were ahead of the market there. Let's see what they have to say.

I also think they aim to sell the defence business at some stage, but I'll explain my rationale for that another day!

Usual retail investor behaviour in the lead up to results: sometimes bought in to, sometimes sold in to. No insider information, and what we know about the company is exactly the same as it was back in June( nobody has just read the statement about revenue recognition from last year's results today and decided to sell!). Small share issuance and a low free float, MSi can move quickly in either direction.

Got an early flight tomorrow, so will only be able to give results a quick look at 7, and then check back later in the day. Hoping for progress in sale of non-core businesses (although I wouldn't bet the farm on them announcing that they've agreed a sale) and an increased interim divi of 7 or 8 pence (I assume going X on 28/01, and paid on 25/02, as per usual time frames). More importantly, I'm looking at a confirmed new order/s of land-based systems, outside the ones we know about to Jordan).

If things are going well, but there's an over-reaction to lower revenue recognition, I may be tempted to add some, but I'll have to give the medium-term prognosis some consideration first ( as I'm heavily overweight here!).

A friend said the Spoons in the town centre was packed by 9am. Will help the club's finances, I'm sure, as they went bankrupt only 5 years ago!

17 is still well below Cohort/Chemring/BAE, but I suppose MSi aren't (yet) a pure defence business. Obviously we can't do forward P/Es without company forecasts.

Didn't you mention on here before you were a Crystal Palace supporter, John? I don't follow football at all, but I see they're playing my hometown in the FA Cup this afternoon!

Thanks for that Pharmall. As you say, your forecast is infinitely more accurate than any 'broker' ones by virtue of the fact it exists!

I think the marketing costs could push SGA up a bit, as they have been at every single expo possible. Also, R&D doubled to 2.44 in y/e 25. This might have increased even more given the collaborations and new systems we've seen. I have to say, I don't fully understand the new 2024 tax credits for R&D and how that affects MSi's accounting.

I put 'read up on Savanah Energy over the weekend' on my 'to do list' earlier in the week. Bugger it! Well done there though. MWE ticking up again, hoping selling pressure eases off and it can tick on.

Evening John - not sure about that P/E you mentioned compared to Cohort? Closing price of 1550 divided by trailing eps of 90 puts us on about 17. Pharmall's EPS forecast of 39 were only h/y numbers, although I may be missing something (which I usual am!).

Pharmall - just saw RC Fornax's share price! Well done averaging down there. I have to say, I thought it was a fairly ballsy move after the previous profit warning and Octopus jumping ship!

We'll find out next week anyhow, but do you have your own forecast for h/y numbers?