Is Decisive Dividend still a buy?

Following its most recent acquisition, Beacon analyst Russell Stanley has maintained his “Buy” rating on Decisive Dividend Corp (Decisive Dividend Corp Stock Quote, Chart, News, Analysts, Financials TSXV:DE).

On April 10, DE announced that it had Techbelt, a manufacturer of belts and tapes, for $6.3-million.

“We are thrilled to add Techbelt, its leadership team, employees and high-margin wear-part products to our growing portfolio of businesses,” CEO Jeff Schellenberg said. “Having the opportunity to add another business that sells wear-parts is a great fit for our dividend-paying model and aligns with our strategy of investing in industry verticals we have previously invested in. The customers these wear-parts are sold to operate in the food and beverage, packaging, textiles, agriculture, and fast-moving consumer goods industries, with locations in the United Kingdom, Europe, Asia, Oceania, North and South America, and Africa, further diversifying our cash flow profile and expanding our non-North American revenue base. Finding another set of legacy minded business owners who care deeply about seeing the business they have built carry forward is extremely rewarding for us, and we are pleased to welcome one of the vendors, Simon Sparkes, to our leadership group. Simon has committed to run the business for a minimum of three years, and the continuity that Simon’s leadership provides will help maintain the trajectory of growth the business has been on under Simon’s leadership, which is a critical piece of this deal to Decisive. We look forward to working with and supporting Simon and the whole Techbelt team to further build the business and take advantage of the market opportunities they have positioned the business for.”

The analyst summarized the development.

“Wednesday after the close, DE announced acquiring Techbelt Limited (private) for $6.3M, including $5.7M in cash (funded by the $100M revolver) and $0.6M in stock. Another $3.8M in earnouts is payable based on earnings performance over the next 3 years. Techbelt is a UK-based manufacturer of PTFE (polytetrafluoroethylene) conveyor belts, tapes, and materials. This transaction expands the company’s wear-parts business, consistent with management’s focus on investing in existing verticals. It also adds new customers in the food and beverage, packaging, textiles, agriculture, and fast-moving consumer goods industries, thereby diversifying revenue/cash flow.

In a research update to clients April 11, Stanley maintained his “Buy” rating and price target of $12.75 on DE, implying a return of 36% at the time of publication, including dividend.

Stanley thinks DE will post Adjusted EBITDA of $30.0-million on revenue of $154.0-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $38.0-million on a topline of $174.0-million the following year.

“DE is now trading at 6.8x our F2025 adjusted EBITDA forecast, representing a 31% discount to the 9.8x average for the comparable group,” Stanley concluded. “Potential company-specific catalysts include the Q1 results next month (details TBA), further acquisition activity, and additional dividend increases. The stock is now off 15% from its late February high at $11.45/sh, though there could be support around $9.65/sh.”