Mullen Group Ltd.
(MTL-T) C$10.85
2021 Business Plan Update
Event
Mullen Group released its 2021 business plan update.
Impact: POSITIVE
2021 Business Plan Details: Mullen is guiding to 2021 revenues (midpoint), EBITDAS (midpoint), capital spending, and an annualized dividend of $1.25 billion, $210 million, $60 million, and $0.48/share, essentially in line with our estimates of $1.21 billion, $210.1 million, $75 million, and $0.45/share, respectively. The company also reiterated its plan to allocate $100 million to share buybacks over a three-year time-period and its focus on strategic acquisitions in the Less-Than-Truckload and Logistics & Warehousing segments. Details on page 2.
TD View
Continued Resilience into 2021: Although COVID-19 case counts are rising across Canada, trucking fundamentals have been resilient throughout 2020, with Mullen's 9M/20 EBITDAS up 9% year-over-year excluding Canada Emergency Wage Subsidy (CEWS) proceeds, and the midpoint of its 2021 EBITDAS guidance represents a 5.7% year-over-year increase (ex-CEWS) over our 2020 estimate.
Dividend Increase in Line with Our Expectations: In our 2021 Business Plan Preview, we forecast a dividend increase to $0.45/share, slightly below management's guidance of $0.48/share (4.4% yield based on yesterday's close) that is up from $0.36/share previously. We expect that the increase will be viewed positively.
TD Estimates: Aside from updating our capital program and dividend estimates to match guidance, we are not making any changes to our forecasts at this time.
Conference Call: Management will host a conference call today at 11.00 a.m. ET; dial: 1-800-319-4610
TD Investment Conclusion
In our view, Mullen's 2021 business plan sets an expectation of continued strength throughout the COVID-19 pandemic for what has become an increasingly resilient, diversified, and consumer-focused business over time. Although Mullen does have Energy sector exposure, we estimate that total sector exposure is ~25% and that it predominantly consists of higher-quality, production-focused revenue streams. With guidance right in-line, we are maintaining our $15.00 target price and BUY rating.