MaxiTRANS is an old-style industrial, in that it makes things. At its Brisbane and Ballarat factories it makes transport trailers for the general freight, temperature-controlled freight and bulk transport market sectors, and tippers for the agriculture, mining and construction industries.
It’s been a tough few years for road transport manufacturer MaxiTRANS Industries (MXI), which became collateral damage from the winding-down of the mining construction boom, which forced the company into a succession of crippling profit downgrades over 2013, 2014 and 2015. Heavy discounting and rising costs caused by a falling Australian dollar also eroded MaxiTRANS’ profitability, with earnings per share (EPS) falling from 13.8 cents in FY2013 to 2.4 cents in FY15.
Volatility in the mining and agricultural industries can have a significant impact on MXI’s earnings, but the potential headwinds don’t end with commodity prices: in the most recent financial year, MaxiTRANS said the uncommonly long Federal Election – combined with the disagreement within the transport industry over the (now-repealed) Road Safety Remuneration Tribunal (RSRT), or sub-contractor minimum rates legislation – was responsible for a 10 per cent reduction in volumes in the second half of the year.
As recently as May, MXI shareholders were dealing with yet another profit downgrade, which pointed to a FY16 net profit of $7 million–$8 million, well below previous guidance.
In the end, FY16, revenue increased by 3.3 per cent, to $340.2 million, while underlying net profit surged 39 per cent to $8.75 million. Reported net profit after tax came in up 16 per cent to $5.2 million, after significant items relating to Bundaberg factory closure costs and impairment of intangible assets.
FY16 was a big improvement on FY15, which saw revenue down 6.5 per cent, underlying net profit down 63 per cent to $6.3 million and reported net profit down 73.7 per cent to $4.5 million. It was no surprise that MaxiTRANS shares surged 17 per cent on the profit news.
From a share price peak of $1.48, MXI slid as far as 39.5 cents, in September 2015. But hard-won efficiency gains – and the FY16 result – have helped the stock rebound to 61 cents, and according to Thomson Reuters, the analysts that follow MaxiTRANS have a consensus price target of 75 cents on the stock.
MaxiTRANS is an old-style industrial, in that it makes things. At its Brisbane and Ballarat factories it makes transport trailers for the general freight, temperature-controlled freight and bulk transport market sectors, and tippers for the agriculture, mining and construction industries.
Through leading trailer brands Freighter, Maxi-CUBE, Hamelex White, Lusty EMS and AZMEB, as well as rigid truck body brand Peki, MaxiTRANS provides high quality engineered solutions for almost every sector of the road transport industry. MaxiTRANS has the engineering capability to create specialised designs or to modify standard designs to create customised solutions.
The company is the only trailer manufacturer to make its own urethane insulating foam, and MaxiTRANS also manufactures fully fabricated fibre-reinforced plastic (FRP)/foam sandwich panels for use in the manufacture of vans and for sale to vehicle body builders. MaxiTRANS has its main foam and panel manufacturing facility in Hallam in Melbourne. Additionally, MaxiTRANS has operated a JV panel and foam plant (MTC) in China since 1996: in late 2013, MaxiTRANS moved MTC production to an all-new manufacturing facility in Yangzhou, China, which has three times the capacity potential of the old plant.
MaxiTRANS also offers repair and service support to the Australasian transport industry through its network of company owned and operated repair and service divisions and its franchised dealer networks. Through its MaxiPARTS division, MaxiTRANS is also a major supplier of parts and consumables to the road transport industry. Customers range from other trailer manufacturers through small and large transport companies to companies in the resources sector.
The company sprang from Maxi-CUBE, which specialises in using composite materials to make specialised dry freight and temperature controlled vans, which it has been doing for 40 years. MaxiTRANS is Australasia’s largest supplier of this kind of transport equipment, supplying temperature controlled (refrigerated) and dry freight vans for the carriage of a wide range of goods ranging from furniture through to groceries, frozen foods, meat, dairy products and fruit and vegetables.
In the early 1990s, Maxi-CUBE established a Chinese joint venture operation with THT, a major Chinese transport equipment manufacturer, to produce insulated fibreglass wall panels. The joint venture, MTC (Yangzhou Maxi-CUBE Tong Composites Co. Ltd) manufactures panels for refrigerated and dry freight trailers in China. MTC has seen significant growth in sales and profitability and MaxiTRANS bought out its partner in 2011, subsequently selling 20 per cent to MTC’s management. The increasing sophistication of the Chinese logistics sector, and MTC’s leading position, means the division is building its customer base and providing solid growth prospects to MaxiTRANS.
In FY16, the flagship Australian trailers business grew its revenue by 7 per cent, despite a 10 per cent sales slump in the June half-year due to the Australian Federal election announcement and the RSRT issue. But the trailers order book ended the year up 31 per cent.
Maxi-Cube was the company’s best-performing product line in FY16, with unit sales growing 26 per cent, and also ended the year with a strong order bank. The freighter business saw sales slip 12 per cent – also impacted by the RSRT issue – but ended FY16 with an order book 12 per cent higher than at the end of FY15.
The tippers business recorded a sales rise of 4 per cent, but strong rains, which boosted confidence in agriculture sector across eastern Australia, saw the order book more than three times stronger at the end of FY16 than a year earlier. The New Zealand trailers business reported sales growth of 5.8 per cent, driven by a 34 per cent surge in Freighter sales.
The MaxiPARTS division was hit by weaker market conditions in Queensland and Western Australia, which drove a 7 per cent revenue decline, but new business initiatives launched in the second half of the year – including the MaxiSTOCK customer inventory management system, an expanded truck parts range and the AirMAX proprietary suspension solution – all point to a stronger FY17. In China, MTC lifted revenue by 43 per cent and more than tripled its profit, as the Chinese supply-chain business made rapid strides in sophistication. MTC launched a range of new value added products for China and other export markets, and the company expects this to fuel additional growth.
MaxiTRANS was, understandably, loath to give FY17 guidance at this stage, but notes that growth opportunities exist for Freighter, Maxi-CUBE, MaxiPARTS and the Chinese business. On Thomson Reuters’ collation, the analysts’ consensus expects EPS to rise by 25 per cent in FY17, to 6.5 cents, and then by a further 12.3 per cent in FY18, to 7.3 cents. At 61.5 cents, that prices MXI on 9.5 times prospective FY17 earnings and 8.4 times FY18 earnings – those are very undemanding price/earnings (P/E) ratios.
The fully franked dividend is expected to rise from 3 cents in FY15 to 4.1 cents in FY16, and then to 4.7 cents in FY18. On dividend yield, MXI trades at a prospective FY17 yield of 6.7 per cent, and 7.6 per cent for FY18. On those numbers, MaxiTRANS would reward buying at 61.5 cents.
