Superior Plus Corp T.SPB

Analysts update

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Another Step Forward

OUR TAKE: Positive. Certarus just announced its largest ever single order for MSUs with its partner, Hexagon. As a reminder, Hexagon is the main provider of MSUs (Mobile Storage Units) in NA. Certarus’ order of next-gen TITAN-450s will allow SPB’s subsidiary to support higher volume, and therefore boost EBITDA per MSU. In our last note, we highlighted how volume and margin expansion will compound SPB EBITDA growth over the coming years. In ‘23, we’re looking for $285k/unit of EBITDA margin (+31% y/y), rising another 10% in ‘24 to $316k/unit. Even if both the volume and margin growth rates trend lower, we could still see MSU EBITDA contribution up 50% in ‘26 over ‘23. The additional trailers are a solid step forward toward SPB’s $700M to $750M EBITDA target in ‘24. Depending on the ancillary equipment ordered, capex per unit could range between US$700k to US$1,000k per MSU. At this cost range, Certarus could order anywhere from 54 to ~75 units, which would lead to an EBITDA lift of $15M to $26M, which is good for 3% growth just on the mid-point of the ‘23 guide. We’re warming up to SPB, and see $15/sh in the cards for the stock, over time.

What are MSUs?

• MSUs are high-capacity trailers that are capable of transporting CNG, RNG, hydrogen and other fuels.
• On average, MSUs cost US$700k to US$1M per trailer, including equipment needed to operate the trailers; delivery time is 9 to 12 months, and so this is order is likely to be reflected fully in ‘25.

• There are two main MSU manufacturers in NA: Hexagon and Quantum (Hexagon is the larger of the two).

• Certarus retains exclusive rights to purchase trailers in Canada, and historically has purchased close to half of the MSUs manufactured in NA.

• Certarus expects to have 727 trailers operational by year-end, or about 4x its largest competitor.

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