Titanium Transportation Group Inc.

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.

Key updates:

• Strong performance metrics: For 9MFY21, the company reported its revenue of CAD 288.161 million, significantly higher than CAD 134.892 million in pcp. The increase in revenue was primarily driven by significant growth within the U.S. logistics operations, coupled with the positive impact from the acquisition of ITS Group. Notably, EBITDA stood significantly higher at CAD 22.486 million, as compared to CAD 16.565 million in pcp.
  

• Investing in advance technologies: In order to mitigate repairs, fuel and insurance costs, the company has invested in new equipment with augmented technology. The group also 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. The above is expected to lower 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. 
  

Q3FY21 Financial Highlights:

• 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.
• 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, jumped to CAD 6.713 million in Q3FY20, supported by higher revenue.
• 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 Highlight (Source: Company Report)

Risks: 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. 

Valuation Methodology (Illustrative): Price to Earnings based

Stock Recommendation:

Within the North America, the logistics & carrier industry is highly fragmented nature, wherein the top 100 carriers in Canada account for only 6% of all trucks in Canada. Hence, the above indicates ample opportunity to increase its market share, which is a key positive. Notably, the company has a proven track record of eleven acquisitions in the ten years, and the continuation of the above trend is likely to support the company’s upcoming performance. The stock of TTR carries an attractive dividend yield of ~3.226% on an annualized basis, which looks attractive considering the ongoing interest rate ratio. We have valued the stock using the Price to Earnings based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like Telus Corp, 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 2.48 on December 15, 2021.

*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 December 15, 2021). Analysis by Kalkine Group

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

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