Mullen Group Ltd.
(MTL-T) C$11.96
2022 Business Plan Update
Event
Mullen Group released its 2022 business plan update.
Impact: MIXED
2022 Business Plan Details
Financial Guidance: Mullen is guiding to 2022 revenues of between $1.6 billion and $1.7 billion, and EBITDAS of $260.0 million. EBITDAS guidance is 3.0% below the consensus estimate and 5.5% below our estimate. In our view, management has a strong track record of achieving guidance, barring any unforeseen macro events that negatively affect the business lines that it operates in.
Dividend Increased: The Board has approved an annualized dividend of $0.60/share, returning its dividend commitment to pre-COVID-19 levels and representing a 25% increase over its previous dividend and an implied yield of 5.0%. Management has previously indicated a willingness to return the dividend to pre-pandemic levels; so this announcement is positive, in our view, but not entirely unexpected.
Capital Spending Guidance: Mullen is guiding to $70.0 million in capital spending that includes $60.0 million of maintenance and $10.0 million toward sustainability initiatives. Acquisitions or facility investments are not contemplated in the guidance.
NCIB: The company also reiterated its plan to allocate $100 million to share buybacks over a three-year time-period ($93.8 million repurchased in 2020/2021) and will request approvals to renew its share buyback program in April 2022.
Acquisition Commentary: Management is prepared to use its balance sheet to pursue acquisitions focused on the consumer part of the economy, where it sees the best growth opportunities.
TD Estimates: Our 2022 and 2023 EBITDAS estimates decrease by 5% and 6%, respectively, with our 2022 estimates in line with management's guidance. Details on page 2.
TD Investment Conclusion
Although modestly below our estimates and consensus on an EBITDAS basis, Mullen's 2022 business plan did not have any material surprises, in our view. Mullen has become an increasingly resilient, diversified, and consumer-focused business over time. As a result of our reduced estimates, we are reducing our target price to $17.00 (from $19.00 previously) and maintaining our BUY rating.