Market cap : 415 million GBP
Stock price : 1,11 GBP
2025 revenue : 315 million GBP
2025 net income : 57 million GBP
Me Group is a UK based vending machine operator. They install their own self service vending machines (mostly launderettes and photo booths, no food / drinks) in high footfall areas (super markets, gas stations and shopping centers) and they pay the site owner a percentage of each machine revenue. They operate in continental Europe (68% of revenue), UK&Ireland (16%) and Asia Pacific (16%).
These vending machines have very favorable economics, as once installed, they require minimal capex to operate. Once a machine is installed, it pays for itself in the first 2-3 years of operation and is then highly profitable for the remaining life of the unit (about 15 years).
90% of revenues and earnings are derived from 2 core businesses, Wash.Me and Photo.Me :
Wash. Me : The growth part of the business, they currently operate 8,000 launderettes and are adding 1,200-1,300 machines a year with the target of reaching 20,000 machines by 2035. Revenue at 120 million GBP and EBIT at 32 million GBP.
Photo. Me : The legacy part of the business, they operate 30,000 photo booths. Revenue at 160 million GBP and EBIT at 40 million GBP. This segment is probably responsible for the beat up in share price, as everyone thinks this is a declining business. While this may be true in the long term, the revenues have actually increased in the past years. This is still a highly profitable business at 25% operating margins and should be around for the next 5-10 years, even at reduced earnings.
Balance sheet is excellent, with 52 million in cash, and only 25 million in debt. Dividend Yield is 6.9%.
Valuation (sum of parts) : At 32 million GBP EBIT and a conservative multiple of 12, that would put Wash.Me business at 390 million GBP. This is a nice business that grows at 10% a year with excellent margins and unit economics. Even if a mere PE of 3-4 is applied to the Photo.Me segment (EBIT 40 million) for a value of 120-160 million GBP, the total sum of parts would be 510-550 million GBP. Current market cap is 415 million GBP.
So, what is wrong here ? Happy to hear your thoughts on this, and especially any pushback on why this would not work. Would’t be the first mistake I make :)