I think it is fair to say that Manitex (NASDAQ:MNTX) was too ambitious and too aggressive when breakneck North American onshore energy expansion fueled an unsustainable demand for cranes. Management significant stretched the balance sheet in the interests of empire-building, expanding into non-core areas like trailers and liquid storage tanks. When the cycle turned, Manitex found itself with a lot of debt, not a lot demand, and questionable synergies between the units.
All of that can certainly explain why the stock has been hammered worse than other lifting equipment companies like Terex (NYSE:TEX), Manitowoc (NYSE:MTW), Manitou, and Palfinger
since 2014, but it doesn't necessarily make the shares untouchable now
for aggressive investors. Management has pivoted from a
growth-by-acquisition model to more of a value-creation model, with a
stronger focus now on cost control/reduction, cash flow generation, and
sustainable growth in high-potential businesses like knuckle cranes and
the ASV product line.
I'm not as bullish on a meaningful rebound
in the North American energy market as I once was, but I don't think it
will much worse and I think construction (residential, commercial, and
civil) can be a driver for this business. I don't see Manitex struggling
to pay its interest, and I do believe further debt reduction efforts
can unlock some value. My current estimates call for long-term revenue
growth in the mid single-digits and peak FCF margins in the mid-to-high
single-digits, supporting a fair value of $7.50 that could go higher
if/when energy really recovers and/or management shows that it can build
its knuckle crane and ASV operations into disruptive players.
Read the full article here:
Manitex Prioritizing The Right Things During The Downturn