CIBCHave an $18.00 target. GLTA
EQUITY RESEARCH
December 9, 2024 Flash Research
MULLEN GROUP LTD
2025 Budget Reflects A Consistent Strategy
Key Takeaway: MTL released its 2025 guidance. We note that expectations
look to be below consensus expectations. The 2025 targets include M&A,
which we do not (and we suspect neither does consensus), and capex is
higher than expected. That said, we believe MTL is being conservative in its
outlook, which is usually the case. We continue to like MTL heading into
2025 given where its valuation sits (6.3x forward EBITDA) and our view that
the freight cycle is showing signs of improvement. Overall, we view MTL’s
2025 budget as consistent with the company’s growth strategy.
2025 Plan: MTL’s 2025 guidance is below.
Achieve Revenue Of $2.2B And OIBDA Of $350M: MTL released its 2025
budget and is guiding to $2.2B in sales and $350MM in EBITDA. We are
currently forecasting revenue of $2.1B (cons. $2.1B) and EBITDA of
$356MM (cons. $355MM). MTL does note it intends to deploy $150MM
toward acquisitions in 2025 with the expectation that the new acquisitions will
enable it to achieve its 2025 plan. Net-net, the outlook looks to be a touch
below expectations as the company’s outlook includes M&A, which we do not
(and we suspect neither does consensus). If we look at it simplistically,
noting MTL plans to spend $150MM on M&A and assume it gets half a year
contribution on average, that would suggest about $10-$12MM in
incremental EBITDA from acquisitions assuming a transaction multiple of
~6x. That said, we believe MTL is being conservative in its outlook, which is
usually the case. We still like MTL heading into 2025 given where its
valuation sits (6.3x forward EBITDA) and our view that the freight cycle is
showing signs of improvement looking into next year.
M&A Pipeline Is Deep: MTL will enter the new year with a strong balance
sheet – cash of ~$125MM and untapped bank lines of $525MM. The
company has benefitted from a deep M&A pipeline in 2023/24 and we would
expect the same looking out into next year.
$100MM In Capex: MTL is budgeting $100MM in capex including $85MM for
operating capital (to improve business units), $10MM in real estate, and
$5MM on sustainability-focused capital (continued focus on emission
reduction). We are currently modeling $80MM in capex and consensus is at
$82MM.
Shareholder Return Strategy: MTL notes it plans to use its free cash
generated in 2025 to maintain its $0.07/share monthly dividend. On the
buyback, the company will be opportunistic and noted it intends to renew its
NCIB in March 2025.