TTNM keeps “Buy” rating at Haywood

Following the company’s fourth quarter results, Haywood analyst Gianluca Tucci remains bullish on Titanium Transportation Group (Titanium Transportation Group Stock Quote, Chart, News, Analyst, Financials TSX:TTNM).

On March 18, TTNM reported its Q4 and fiscal 2023 results. In the fourth quarter, the company posted EBITDA of $14.9-million on revenue of $119.3-million, a topline that was up 7.6% over the same period last year.

“In 2023, the freight transportation industry faced a challenging market including excess capacity, downward pressure on pricing and escalating operating costs,” CEO Ted Daniel said. “Despite these headwinds, Titanium delivered sustainable and profitable growth. In fact, 2023 was the second-best year in company history; we generated $10.2 million in net income, paid $3.6 million in dividends, while buying back $2.6 million in stock. Complementing our focus on profitability, cash management and consequently a strengthening balance sheet, we were able to utilize $39.9 million in cash for our first US asset-based acquisition – Crane Transport. This significantly augments our opportunities to continue our US expansion strategy and drive growth. We expect overall growth to be a combination of organic growth in our brokerage business and opportunistic acquisitions of new asset-based entities.”

Tucci summarized the quarter.

“TNM reported revenue/EBITDA/EPS of $119.3M/$14.9M/$0.03 versus our estimates of $117.3M/$12.0M/$0.02 and consensus estimates of $118.4M/$11.9M/$0.02. Trucking revenue grew 32% to $67.8M with a 19% EBITDA margin while logistics revenue declined 15% y/y to $512.0M with a 10% EBITDA margin despite 9% organic volume growth. Crane contributed $35.0M in revenue for the five-months it has been under TTNM ownership – we remind readers Crane carries lower margins and look for margin accretion over 12-18 months as per TTNM’s playbook. With TTNM’s growth capex cycle in the rear-view mirror, we welcome FCF intensive years ahead and model 2024 FCFPS of $0.83 for a FCF yield of 32% and 2025 FCFPS of $0.70 for a FCF yield of 27%. We remind readers of the ~180 acres of owned land, providing TTNM additional optionality.”

In a research update to clients March 19, Tucci reiterated his “Buy” rating and price target of $5.25 on TTNM, implying a return of 103% at the time of publication.

The analyst thinks the company will post EBITDA of $56.4-million on revenue of $497.5-million in fiscal 2024. He expects those numbers will improve to EBITDA of $64.4-million on a topline of $547.0-million in fiscal 2025.

We believe TTNM has a robust set of operations and has observed strong growth in recent years without the equivalent growth in valuation. We believe as TTNM delivers on intensive FCF and debt reduction, it should see its equity value improve,” the analyst concluded.