Mullen Group Ltd.
(MTL-T) C$13.35
Q1/21 Results
Event
Mullen Group reported Q1/21 results.
Impact: NEUTRAL
Q1/21 Results: Mullen reported Q1/21 EBITDAS of $47.1 million, below our estimate of $51.4 million and in line with consensus of $47.1 million. Our estimate featured $5.5 million of Canada Emergency Wage Subsidy (CEWS) proceeds compared with actual CEWS proceeds of $6.0 million. The main difference between our estimate and actual results was lower Specialized & Industrial segment revenues (-18%) and segment EBITDAS (-24%) due to a combination of lower demand for large diameter pipeline hauling, fluid hauling and civil construction services in northern Manitoba. Details on page 2.
Outlook Commentary: Management believes that the logistics and freight industry is "ripe for further consolidation", particularly as it relates to smaller tuck-in acquisitions that are the most common size of acquisition that Mullen Group typically pursues. To this end, management is evaluating several additional acquisition opportunities.
Estimate Changes: Despite two meaningful acquisitions announced year-to-date, management did not provide any updates to its 2021 guidance. As a result, we are increasing our 2021 EBITDA estimate to $219.9 million at the high end of management's guidance range, despite Q1/21 results coming in below our estimate. Our 2022 EBITDAS estimate increases 4% to $251.8 million, with our revised 2021 and 2022 estimates now reflecting the Bandstra Group acquisition (full report).
Conference Call: Management will host a conference call at 11:00 a.m. ET today; dial: 1-800-319-4610.
TD Investment Conclusion
Mullen Group has consistently generated strong financial performance throughout the COVID-19 pandemic, highlighting its resilient, diversified, and consumer-focused business. With no major surprises in the quarter, we are maintaining our BUY rating while modestly increasing our target price to $17.00 per share ($16.00 previously), to reflect our revised estimates that now include the Bandstra Group acquisition