DXT wins price target raise at Beacon Securities

Following the company’s AGM, Beacon Securities analyst Kirk Wilson has raised his price target on Dexterra Group (Dexterra Group Stock Quote, Chart, News, Analysts, Financials TSX:DXT).

On June 20, DXT reported that all matters at its AGM were approved by shareholders.

The analyst weighed in on where DXT is at right now.

“At its AGM yesterday, Dexterra was clear that the focus is on building the support services in both its IFM and WAFES divisions and away from the asset-based services,” he wrote. “With the pending sale of the modular business (set to close in July), DXT anticipates moving its revenue base from approximately 70%-75% today to the 85%-90% level over the next 4-5 years. The company see its EBITDA growing to $150 million in that time with 60%-65% coming from support services.”

In a research update to clients June 21, Wilson maintained his “Buy” rating but raised his price target on DXT from $7.80 to $8.10, implying a return of 59% at the time of publication.

The analyst thinks DXT will post EBITDA of $96.0-million on revenue of $1.01-billion in fiscal 2024. He expects those numbers will improve to EBITDA of $105.0-million on a topline of $1.05-billion in fiscal 2025.

Wilson says a billion in revenue with $100-million in EBITDA could soon be in the cards for Dexterra.

“Guidance from DXT to this level of financial performance is above consensus of $95 million for EBITDA and means it is confident in not only an increasing revenue base, but also the margin expansion in its IFM business. With an improved transfer of inflation and a greater impact from the recently acquired CMI Management that has margins in the 8%-10% range, DXT remains confident that IFM margins will crest 6% in H2/24. Interestingly, DXT believes it can reach the revenue/EBITDA goal without an outsized contribution from wildfire activity, which delivered $56 million of revenue in 2023 at double-digit margins. A normal wildfire season for DXT would likely see revenues 30%-40% lower than last year,” he added.