Titanium Transportation Group Inc. (TSXV: TTR) is assets-based transportation and logistics firm that provides services like truckload, dedicated, cross-border trucking services, freight logistics, warehousing, and distribution. The group operates through two operating segments like The Truck Transportation segment and Logistics segment.

Key updates:

• Robust Y-T-D performance: For the 9MFY21, the company reported its revenue of CAD 288.161 million, significantly higher than CAD 134.892 million in pcp. The growth was primarily driven by 181% y-o-y and 59.5% y-o-y increase revenue from Logistics segment and Truck Transportation segment, respectively. The management seems confident to exceed its FY21 revenue guidance of ~CAD 350 million, which looks encouraging. On the other hand, EBITDA stood significantly higher at CAD 22.486 million, as compared to CAD 16.565 million in pcp.
  

• Acquisition of Bert and Son’s Cartage Limited: On January 04, 2021, the group confirmed the acquisition of Bert and Son’s Cartage Limited, based in Brantford, Ontario. With this acquisition, the company would be able to cater to the additional high-growth market within both Canada and U.S. Moreover, the group would be getting the facilities and warehouse of eight acres of land, which is located near to the company’s existing Brantford terminal and indicates easy accessibility. The above collaboration is expected to add operating synergies, maximize opportunities within the combined customer base and geography.

• Robust growth from the logistics segment: Despite the ongoing economic turbulence, the group successfully added its presence across the key markets like Nashville, TN and Chicago, IL etc., which has contributed handsomely to the companies topline. Additionally, during the third quarter of FY21, the group saw an improved volumes from the 3PL environment, which further supported the companies topline. Notably, revenue from the logistics segment stood at CAD 59.448 million, 128.7% on y-o-y basis.
  

• Investing in advanced technologies: In order to mitigate its repairs, fuel and insurance costs, the company has invested in new equipment with augmented technology and has resulted to increase equipment utilization. Notably, TTR introduced IT infrastructure and IS technology which would further lead to efficiencies and enhanced security and hence results to improved consumer satisfaction. Additionally, the company would continue to develop new Power BI tools that allow for better and faster decision making and would subsequently help in operational efficiencies. 
  

• Diversified customer base: The company caters to diversified customers, which majorly includes Manufactured Goods, Food & Beverage, Retail, Automotive etc. and is expected to minimize the dependence on a particular segment and would provide a balanced risk profile. Due to the growing traction for the eCommerce and home deliveries, trucking volumes in North America is expected to grow at an average of 2.6% per year on a CAGR basis till 2024, while the company is highly poised to take advantage of the growing demand.

• Healthy cash conversion period: The company reported a positive cash conversion period of 50.5 days in Q3FY21, as compared to the negative industry median of 12.4 days. This indicates that the group is efficiently converting its investments into cash flows unlike the industry median and is an indication of strong operational efficiency.

Risk associated with the investment:

The company’s reported higher input costs, which has resulted in lower margins, and continuation of the above trend is likely to impact future operations.

Q3FY21 Financial Highlights:

• Strong revenue growth: TTR announced its first-quarter result, wherein the company posted its revenue of CAD 101.688 million, jumped from CAD 52.627 million in the previous corresponding period (pcp). The growth was supported by strong growth from both Truck Transportation and Logistics segments.

• Higher EBITDA: Operating expenses stood significantly higher at CAD 94.449 million, from CAD 45.914 million in pcp, due to higher Carriers and independent contractors’ costs and higher Vehicle operating expenses. However, EBITDA was recorded at CAD 7.239 million, climbed from CAD 6.713 million in Q3FY20, supported by higher revenue.

• Slide in net earnings: The period was marked by higher finance costs (CAD 0. 952 million v/s CAD 0. 671 million in pcp), coupled with a foreign exchange loss of CAD 0.158 million, as compared to a foreign exchange gain of CAD 0.147 million in pcp. Net income stood at CAD 1.354 million, as compared to CAD 2.655 million in Q3FY20.

Q3FY21 Income Statement Highlights (Source: Company Report)

Top-8 Shareholders:  Top eight shareholders of the company together hold approximately 36.76% stake, Trunkeast Investments Canada, Ltd., and Daniel Theodore are the major shareholders in the company with an outstanding position of 27.84% and 7.20%, respectively.

Source: REFINITIV, Analysis by Kalkine Group. 

Valuation Methodology (Illustrative): EV to Sales based

Analysis by Kalkine Group

Stock Recommendation:

In the coming quarters, the company expects solid operating growth supported by easing of operating restrictions and improving economic scenario. The group took meaningful steps and has increased its presence across the key markets of North America market, which has resulted to improved business prospects. Additionally, with the recent acquisition of Bert and Son’s Cartage Limited, the company is well poised to expand its horizon to added prospective locations. We expect the positive momentum is likely to continue and is expected to support the company’s overall performance in the coming years. We have valued the stock using the EV to Sales based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like Cargojet Inc, Algoma Central Corp etc. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock of TTR at the closing price of CAD 2.90 on January 11, 2022.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached 

Technical Analysis Summary

One-Year Technical Price Chart (as on January 11, 2022). Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

*Recommendation is valid on January 12, 2022, price as well.

Disclaimer

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