Growing, Expanding, Acquiring with Industry at Capacity Levels
VANCOUVER, BC / ACCESSWIRE / May 6, 2015 / The transportation services sector has been busy lately with M&A and impressive EBITDA.
The area covers services such as trucking, package and courier and waste management. In Canada, the sector is worth an estimated $65 billion representing 4.2% of total GDP. Trucks alone move 90% of food and consumer products for the whole country.
Take a look at some of the biggest movers and deals recently. (All figures are quoted in CAD unless otherwise stated.)
XPO Logistics Inc. (XPO:NYSE; XPO:OTCQX) is one of the largest and fastest growing providers of transportation and logistics services in North America. They’ve been in the news a lot lately.
Their stock went up 15% on Wednesday last week on the news that the company is to acquire French-based rival Norbert Dentressangle for US$3.5bn. Norbert has a large blue-chip client base including many of the world’s largest companies, while XPO has a strong position in freight brokerage. The move will give XPO an inroad to Europe’s largest fleet network and make the combined entity one of the top 10 logistics companies in the world with annual revenue of US$8.5bn, more than tripling EBITDA to US$545m. XPO is a leading performer among the transportation logistics group with an EV/EBITDA ratio of 17.9x for 2015. Using data provided by Dundee Capital Markets, the Canadian transportation sector is trading at only 7.2x, which XPO is way ahead of. Among companies involved in trucking, package and courier services, the median EV/EBITDA is 8.5x, way behind XPO’s 17.9x. XPO is one of the more established logistics stars among the providers.
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Another key performer and industry bellwether is TransForce Inc. (TFI:TO; TFIFF:OTCQX), a transportation and logistics services provider who is based in Canada with a strong presence in the U.S.
TransForce recently posted its full year 2014 financial results and in March declared a quarterly dividend of $0.17 per share. The company has had a very impressive stock performance in recent years, hanging below $9/sh 4 years ago and having tripled that to above $27 today. Their 2014 results indicate rising YoY (year-on-year) revenue with $3.7bn for the full year and net income of $153m. The Truckload and Packages and Courier segments are proving money-spinners. Dundee Capital Markets estimates a P/E for 2015 of 14.4x. 2015 estimated EV/EBITDA (enterprise value to EBITDA) is 8.2x.
The company has made 100 acquisitions over the last ten years and is always investigating potential acquisitions to boost shareholder value. The 2014 performance fits the trend of higher revenue, growth and dividend delivery.
But despite the growing revenues and share prices, there are still undervalued companies.
Take a look at this table provided by Dundee Capital Markets, it provides a benchmark of the comparables:
Image: https://www.accesswire.com/images/988/Dundee%20transportation%20chart.png
One company worth watching is Titanium Transportation Group (TTR:TSX.v) a provider of trucking, logistics and warehousing services across North America. The majority of Titanium’s trucking business is north-south border trucking and within a 600-mile radius of the Greater Toronto Region while their logistics business is active throughout North America.
Profit Magazine ranked Titanium as one of Canada’s fastest growing companies multiple years running, illustrating the vigour and stability of their expansion.
Image: https://www.accesswire.com/images/988/About%20Titanium.png
The company has been on an aggressive acquisition spree since it started buying companies in 2011, recently announcing the closing of its 7th acquisition in 4 years, Muskoka Transportation Limited, a private truckload supplier of flatbed freight and van shipping services. The acquisition added over $32m in revenue according to the company. Titanium expects these acquisitions to be fully integrated within a 3-4 month period, which means that the company’s margins should be in-line with the rest of Titanium by June/July.
There is no sign of their slowing down, as the company reports that it “has a pipeline of future acquisition targets in place,” and just went public in April.
Total revenue has grown from $12.9m in 2010 to $80m in 2014. Last year, EBITDA was $6.8m. That’s a doubling of revenue in just one year. With the acquisition of Muskoka Transport, revenue is now over $100m.
On Tuesday this week, the company reported that their logistics division, Titanium Logistics Inc. achieved record sales in April of $3.5m (unaudited).
From an investor’s point of view and looking at the comparables, the numbers below give you an idea of where Titanium should theoretically be valued at based on their EBITDA:
- 7x EBITDA 2.00/share
- 8x EBITDA 2.32/share
- 9x EBITDA 2.64/share
- 10x EBITDA 2.95/share
- 11x EBITDA 3.27/share
- 12x EBITDA 3.59/share
TransForce trades at roughly a 9X EV/EBITDA multiple. Arguably, Titanium should trade at a much higher multiple because of its size and growth profile, combined with the fact 1/3 of the revenue comes from logistics and comparable logistic companies demand 12-14x multiples in North American markets. Because Titanium is a new public company it may take time for the new valuations to come in-line but this could present an opportunity for investors because of the fact that the story is still very new to the market. Titanium is currently trading at $2.30.
Another strong performer is Trimac Transportation Group, (TMA:TO; TMA:OTCQX) a provider of bulk trucking and logistics services that operates in the North American market and is based in Canada.
Their revenue has been steadily rising in the past few years and in 2014 pulled in $448m and EBITDA of $50m, $16m net.
Dundee puts Trimac at an estimated 2015 P/E of 10.6x and EV/EBITDA of 5.2x. Recapping, the Canadian transport companies media in Dundee’s list have a P/E multiple of 22.8x and EV/EBITDA of just 7.2x. The company appears undervalued.
Trimac’s share price is currently trading at $7.15 – its highest level to date.
Image: https://www.accesswire.com/images/988/Trimac.png
There’s no secret about it, various sectors and industries are tough to be involved in right now, particularly mining. The commodities slump, oil price crash and general economic and market volatility has put stakeholders on a cautious footing. But there are companies clearly reaping rewards looking at the M&A activity mentioned above. These star performers have pulled in top results; some have doubled their revenue in just the past year and others have tripled their share price in the last 4 years. They are growing their revenues and net income, acquiring companies to build revenues, and yet some of them have P/E and EV/EBITDA multiples which suggest their value has yet to be realized.
There are movers and shakers out there but the window won’t stay open for long.
SOURCE: Resource Reports