Mullen Group.
Source: Bosalita Photography.
  • Mullen Group (MTL) is one of North America’s largest logistics providers with a current roster of 38 subsidiaries
  • The company has produced stable and robust net income and free cash flow over the past five years
  • Its role as a transporter of essential goods has afforded it a margin of safety against economic and geopolitical crises
  • Mullen’s share price gives little indication that this margin has been accounted for by the general investing public

With inflation hitting 5.9 per cent in January, public companies are feeling the crunch of higher prices.

With the Bank of Canada (BoC) raising its benchmark interest rate to 4.5 per cent in tow, and with it the cost to borrow money, and unemployment near a record low, the current macro environment is especially difficult to operate at an optimal level without adequate capital on hand.

This is why, during uncertain times such as the present moment, many investors tend to limit their pool of prospective allocations to the cash-flowing and the cash-rich.

With this thesis in mind, The Market Herald’s Cash-Rich Report introduces you to profitable companies with coffers fortified to weather a multitude of headwinds.

A proven logistics leader

Mullen Group (MTL) is one of North America’s largest logistics providers. It’s comprised of dozens of independently operated businesses active in less-than-truckload, logistics & warehousing and U.S. and international logistics, each of them accountable for its own results, returns on capital employed and overall performance.

Far from lone wolves, the businesses rely on the corporate office for strategic planning, while also benefitting from capital and financial expertise, legal support, technology and systems support.

Mullen also offers a diversified set of specialized & industrial services in the energy, mining, forestry and construction industries in western Canada. These include water management, fluid hauling and environmental reclamation. 

Since going public in 1993, the company has finalized over 77 acquisitions from small tuck-ins to larger, well-established name brand companies. Its current roster stands at 38 subsidiaries, accounting for strategic mergers and dissolutions. Throughout this buying spree, Mullen has been unwavering in its pursuit of continuous operating and safety improvements, which have allowed it to grow to over C$1.3 billion in market cap through decentralized, Berkshire Hathaway-style management.

Margin of safety

Every day of the year, Mullen’s fleet of thousands of trucks delivers essential goods to over 5,000 Canadian communities and every state in the continental U.S., on top of approximately 2,700 international business customers – everything from last-mile, late-night Amazon impulse buys, to the lumber shielding you from the elements as you read.

This entrenched network protects the company from unfavorable economic climates, including last year’s ramp up in interest rates, because it deals in products and industrial inputs necessary for basic economic functioning and the carrying on of everyday life.

This protection is evident in Mullen’s positive net income between C$16.45 million and C$42.61 million per quarter over the last five quarters, with over C$60 million per year in four of the last five years.

It also produced free cash flow between C$3.55 million and C$79.90 million per quarter over the last five quarters, with the figure rising to between C$38.03 million and C$159.65 million per year over the last five years.

Such a stellar and reliable performance, supported by a reasonable 2x coverage of assets to liabilities, occurred in the midst of a pandemic, the fuel crunch of the Russia-Ukraine war – a key input for a large-scale transporter – and some of the most restrictive monetary policy in decades.

It seems that, regardless of the business environment, Mullen is structured to carry on as an integral part of the circulatory system between goods and their consumers.

Looking ahead

Following record 2022 financial results, Mullen is preparing for a moderation in consumer spending and a slowing economy as the Bank of Canada steers the country toward its 2-per-cent inflation target. Specifically, this means capitalizing on an expected increase in activity in its specialized & industrial segment and the M&A market overall.

Potential investors should then be prepared to evaluate multiples paid for future acquisitions, as well as the staying power of the natural resource, materials and construction sectors as the macro situation evolves.

Mullen Group (MTL) has gained roughly 20 per cent over the past year, but only 17.5 per cent since 2009, suggesting that the company’s robust cash flows and roughly 5 per cent monthly dividend are not fully reflected in the market.


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