Mader Group just released its Q4 FY23 quarterly update. Just yesterday we talked about the possibility of debt fuelling Mader’s consistent ROE of c. 30%. Well the surprise today is Mader has increased FY23 NPAT guidance to at least $37 million while reducing net debt to $42.7 million. That’s c. 43% net debt on equity, less than the average net debt over the last 5 years. Consensus analysts forecasts are for FY23 NPAT of $38 million. So, the earnings upgrade was anticipated.

Mader just keeps pulling out the surprises. It is reasonably capital light as @Bear77 eluded too. The model hasn’t changed much from when Luke Mader started the business with a ute, a toolbox and a competent diesel mechanic…the key expansion unit!

Disc: No longer held

EXECUTIVE SUMMARY:

 Generating revenue of $172.9m in Q4, Mader delivered another record quarterly performance, an increase of 46% versus the prior corresponding period (‘PCP’) and 11% growth quarter on quarter.

 FY23 revenue closed at $608.8m (unaudited), exceeding Mader’s twice-upgraded market guidance of revenue of at least $580m (initially $510m+, upgraded in October 22 to $550m+ and further upgraded in February 23 to $580m+). This represents year on year growth of 51%.

 Mader reaffirms its FY23 NPAT will be at least $37m (initially $33m+, upgraded in October 22 to $35.5m+ and further upgraded in February 23 to $37m+). Mader expects to release its audited NPAT results on Tuesday, 22 August 2023.

 Customer demand for core services in Australia remained strong, delivering revenue of $130.5m, an increase of 31% vs PCP. Mader continues to experience success in the market penetration of new vertical service offerings.

 The North American segment delivered $40.4m of revenue, a 139% increase vs PCP (123% on a constant currency basis). Continued momentum within North America was delivered through expansion into new regions and an expanded customer base.

 Net debt closed the financial year at $42.7m (unaudited), a reduction of $8.2m since December 2022 reflecting strong operating cashflows in 2H FY23.

24/08/2021 - Today Mader Group announced a pleasing FY21 result, ahead of expectations - Results Presentation

FY21 HIGHLIGHTS:

• Record revenue of $304.3m delivered, up 11.2% from $273.5m in FY20
• EBITDA of $35.7m delivered, up 8.2% from $33.0m in FY20
• NPAT of $19.3m delivered, up 10.5% from $17.5m in FY20
• 3.4m hours of specialised equipment maintenance delivered to over 240 customers across 370 sites, up from 2.7m hours in FY20
• Net debt of $23.9m, equating to net leverage of ~0.7x
• A final full franked dividend of 1.5 cents per share, taking the total dividend relating to FY21 to 3.0 cents per share.

FY22 OUTLOOK:

• Continued growth in activity levels across the global mining industry underpin a positive outlook for the business in all markets and geographies in FY22
• Expecting strong growth in FY22, with forecast revenue of between $355m - $365m delivering a forecast NPAT of between $23m - $25m.

Executive Director & Chief Executive Officer, Justin Nuich said the company had a solid balance sheet, strong cashflow, low capital intensity and significant global and local growth opportunities.

My Take

Revenue was 13% higher than what analysts were expecting, and NAPT was in line with expectations.

Mader is bullish about 2022 growth forecasting revenue to be up 17% - 20% and NPAT to be up 20% -30%. Earnings growth is higher than what analysts have been forecasting forecasting prior to the announcement.

Organic growth is driven by penetrating into new markets with a proven business model. 

Revenue in North America grew by $10.3 million (75%) contributing about 1/3rd of the revenue growth for Mader in 2021.

Mader Group is expanding its fleet and plans to enter Canada in the near term.

Due to COVID Mader has scaled back in other parts of the world where revenue was down 47%. Mader is intending to scale up again as the situation improves. By the close of FY21, Mader ramped up its international services in five countries including Papua New Guinea, Mongolia, Laos, Zambia and Mauritania.

Mader have an enormous potential for organic growth over several years. Mader has identified $6 billion in addressable markets in Canada and South America alone (see attached map).

Given the potential to rapidly expand into new markets using a proven business model with a return on shareholders equity of 30%, I am happy to maintain my valuation for Mader of approx $1.60.

Disc: Held SM and IRL

Today Mader Group advised that it intends to release its full year financial results for the year ended 30 June 2021 pre-market open on Tuesday, 24 August 2021.

The results will be presented by Chief Executive Officer and Executive Director, Justin Nuich, and Chief Financial Officer, Paul Hegarty, via an investor briefing at 8:45am AWST (10:45am AEST) on 24 August 2021.

Investor briefing details are as below:
Date: Tuesday 24 August 2021
Time: 8:45am AWST / 10:45am AEST Access Link: https://services.choruscall.com.au/webcast/mader-210824.html

The investor briefing will include a presentation of the Company’s FY2021 full year results and a Q&A session immediately after.

The investor briefing will be accessible on the Company’s website shortly after briefing conclusion: www.madergroup.com.au/investor-centre

Mader has just announced a pleasing result with a record quarter and FY21 revenue above consensus forecast. I think the businesses is currently 30% undervalued.

Full ASX Announcement

OVERVIEW:

• Record quarterly revenue of $86.4m, up 24% on the prior corresponding period (PCP), and up 14% on the previous quarter. Second consecutive quarter of record quarterly revenue.
• FY21 revenue of $304m, above consensus forecasts, and up 11% vs FY20.
• Revenue generated in Australia increased to $77.0m, up 21% vs PCP, driven by high levels of customer demand. Revenue up $8.7m, up 13% vs Q3 FY21 indicating growing momentum throughout the business.
• In North America, quarterly revenue increased to A$6.8m, up 45% vs PCP excluding foreign exchange movements (30% on an A$ basis). Preparations for operational delivery into Canada now complete with customer negotiations well advanced.
• Rest of World operations generated A$2.6m in revenue, up 568% vs PCP. Growth across active regions has continued to be impressive despite mobility and health restrictions.
• Revenue growth delivered and sustainable profit margins maintained due to the unique Mader business model which is broadly protected from labour market conditions due to our in-house skilled labour and flexible pricing terms on which it is engaged by customers.
• Continued growth in activity levels across the global mining industry and improving personnel mobility levels continue to underpin a positive growth outlook for the business into FY22.

Disc: Held

Mader is on Sale Today!

Mader are on sale today (18/06/21), at 85c shares were down over 7% during intraday trading. What happened?  No announcements...I have no idea!

Is this a good opportunity to back up the truck?

What's to like about Mader?

• Forecast earnings growth 18% over next 3 years
• Track record of consistent earnings growth since 2017
• Current PE 9.64
• ROCE 39%
• Future ROE 30%
• PEG 0.6 (cheap!)
• Excellent founder management
• Recent strong insider buying (over 700,000k shares between 85 - 96c) latest by CEO at 96c on 30 April
• Debt/Equity 45%
• Dividend 3.4% fully franked (conservative 34% payout ratio)

What is Mader Worth?

2021 earnings: $19 million/200 million shares x 10.9 (average PE) = $1.04

2022 earnings: $23.7 million/200 million shares x 10.9 = $1.29 ($1.16, discounted at 10% per annum)

2023 earnings: $27.3 million/200 million shares x 10.9 = $1.49 ($1.20, discounted at 10% per annum).

Simply Wall Street DCF valuation = $1.85

Conservative valuation, $1.20/share

Disc: added more shares today (RL)