Over $1.4 Billion Paid in Dividends to Date

Repurchased 18.5 million Common Shares for $197.3 million since 2020

Revenue CAGR of 11.9 percent since 1993 to $2 Billion in 2022

Consistently generate free cash

Bullboard - Investor Discussion Forum Mullen Group Ltd. T.MTL

Alternate Symbol(s): MLLGF | T.MTL.DB

Industrials Integrated Shipping & Logistics

Mullen Group is one of North America's largest logistics providers with a network of independently operated businesses provide a wide range of service offerings including less-than-truckload, truckload, warehousing, logistics, transload, oversized, third-party logistics & specialized hauling transportation. Mullen also provides a diverse set of specialized services related to the energy, mining... see more

TSX:MTL - Post Discussion

Mullen Group Ltd. > RBC

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Post by retiredcf on Jul 02, 2021 8:42am

RBC

Current and upside scenario targets are $15 and $18. GLTA

June 30 2121

Mullen Group Ltd.

Acquisition marks meaningful shift in strategy towards US market page1image2456836816

Our view: The acquisition of QuadExpress marks a meaningful shift in strategy for MTL towards the US market. While modest in size, we view the transaction as a key positive which we believe opens up a much larger growth platform for the company. Moreover, we believe the technology acquired in today's deal is scalable and will provide management with key data that we expect will be used to better understand the US market for future M&A. Reiterate Outperform, PT remains at $15.

Key points:

Strategic deal announced in the US. MTL today announced a US$40MM deal to acquire QuadExpress, a 3PL player based in the US with US$135MM of annual revenue. While the transaction is modest in size it represents a meaningful shift in geographic focus for management, and provides in our view a key growth platform outside of Canada.

US market the key opportunity. Prior to the deal, MTL had operated within Canada and this transaction marks MTL's first entry into the US. While we view the US market as more competitive, we are nevertheless positive on MTL's entry into the US reflecting superior growth opportunities south of the border. Management highlighted MTL remains well positioned (leverage <3x) for further deals, which we now expect to be focused in the US.

Technology key consideration. During the call management emphasized the importance of the technology platform operated by QuadExpress. Key is that management believes the size of the US market will allow them to scale the platform for further growth. Our view aligns with that of management and we also expect the platform to give MTL key transportation data (i.e. pricing in specific lanes) that we expect to be used to better understand the US market, and eventually for further deals.

Raising estimates; price target unchanged. We are taking up our 2021 and 2022 estimates following the QuadExpress transaction (we also adjusted our estimates higher for the previously announced (and small) TriPoint deal. Management did not provide margin detail on the call and we were therefore conservative in our margin assumption (lower end of 3PL company margins). Our 2021 EBITDA estimate increases to $230MM (from $228MM) and our 2022 estimate to $260MM (from $257MM). We had already factored in M&A into our valuation, and our PT therefore remains at $15.

Our take: US opens up new growth opportunities. Despite the ~7% move in the stock today we still see upside in the shares at current prices. We believe that MTL's balance sheet is well positioned for further deals, especially in the US, despite a pick-up in activity YTD. We continue to view M&A as a key catalyst and expect management to remain active in the medium term. Moreover, we expect freight conditions to tighten in Canada as the economy reopens and believe that MTL will be a key beneficiary of this dynamic. Reiterate OP..

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