Mattr: Early Stage Turnaround Poised For Strong Growth And Re-Rating (TSX:MATR:CA)

Mattr Corp: High Quality Industrial Trading at < 5x EBITDA

Investment Thesis

Mattr Corp. (TSX:MATR:CA) (OTCPK:MTTRF) stands as a prime investment opportunity, underpinned by its transformation from a hyper cyclical business into a diversified industrial powerhouse focusing on less cyclical, higher margin segments such as composite technologies and connection technologies. This restructuring, led by a competent and visionary management team, marks the beginning of a promising growth trajectory. The compelling case for investment is bolstered by the company’s net cash position, substantial investments in organic growth, and strategic acquisitions. With an attractive valuation, especially in comparison to its peers, and a clear path to significant EBITDA growth by 2025, Mattr is positioned for long-term compounding and value creation for its shareholders.

Near Term Catalysts to Unlock Value

• EBITDA is set to inflect in Q2 and beyond from a ramp up of new manufacturing capacity

• The cash balance should grow to over $2 per share by year end

• Significant share repurchases and accretive M&A could happen this year

• Additional sell side analysts could add coverage and highlight massive undervaluation vs. peers

Company Profile

Originally Shawcor, Mattr has reinvented itself into a diversified industrial entity specializing in materials technology. With a focus on composite technologies and connection technologies, Mattr leverages its unique position to drive growth and market expansion. The new strategic direction aims at doubling revenue by 2030, supported by the commissioning of new manufacturing facilities and the development of innovative products and services.

Composite Technologies sells pipe and tank products into the energy and fueling markets. Significant growth drivers include new product offerings for Flexpipe and the proliferation of large format travel centers driving demand for Xerxes tanks. Stormwater management is an emerging growth market and could dominate the segment in a handful of years.

Connection Technologies sells cable and wiring products for harsh environment applications like nuclear power generation. The segment also includes specialty tubing for the transportation and power generation markets.

Each segment is experiencing secular growth tailwinds that will provide for long term growth visibility and increased pricing power.

Financials & Valuation (All figures in CAD)

The strategic divestiture of hyper cyclical businesses and focus on high-margin segments have positioned Mattr on a solid financial footing. The management’s prudence has led to a net cash balance sheet, enabling significant organic and acquisitive growth opportunities. The company’s forward-looking investments are set to deliver enhanced capacity to meet rising customer demand, projecting a robust increase in EBITDA to $200 million CAD by 2025.

Mattr’s current valuation stands at a market capitalization of $1,070 million CAD with an enterprise value of $970 million CAD. The valuation metrics indicate an EV/EBITDA ratio of 6.0x for 2024 and an even more appealing 4.8x for 2025.

Assuming only 7.0x 2025 EBITDA implies a target price of $24/share or 50% return from here. This valuation is conservative, not fully accounting for potential acquisitions, buybacks, or the possible re-rating closer to peers’ trading ranges of 9x-11x EV/EBITDA.

Risks

Investment in Mattr comes with its set of risks, including operational, regulatory, and market-related uncertainties. The transition from Shawcor to Mattr, while promising, involves execution risks. Moreover, the company’s growth strategy hinges on continuing to make prudent business decisions and managing its capital efficiently in a competitive landscape.

Conclusion

Mattr’s journey from Shawcor represents a strategic turnaround story, marked by a shift towards sustainable, profitable growth sectors. The management team has demonstrated exemplary skill in repositioning the company for future success. Mattr’s current valuation presents a compelling entry point for investors, with significant upside potential as the company continues to execute its growth strategy, expands its market presence, and leverages its strong financial position to enhance shareholder value. The future looks promising for Mattr as it embarks on this next phase of growth and value creation.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.