CIBC World Markets Inc. lowered its price target on shares of Mullen Group Ltd. (TSE:MTL) to $24 from $25, while maintaining its "Sector Performer" rating.
The brokerage lowered its 2012 EBITDA estimate to $314.15 million from $331.88 million and its 2013 estimate to $328.95 million from $373.84 million.
As of April 8, CIBC is transferring coverage of Mullen Group to analyst Kevin Chiang with an unchanged "Sector Performer" rating and lowered price target. The firm applies a 7 times EV/EBITDA multiple to derive its price target, a 0.5-point discount to Mullen's average historical multiple to reflect the uncertain outlook for drilling.
The "four horses" that pull Mullen can be divided into: trucking/logistics, production services, infrastructure & oi l sands and drilling. For 2012, Mullen has taken a cautious tone on drilling due to the low gas price environment. The outlook for the other segments remains strong.
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Mullen has been an active and disciplined acquirer, paying no more than 5 times to 6 times EBITDA, with recent acquisitions weighted towards oilfield services. Potential acquisitions include tailings management, trucking and drilling (if valuations decline on the back of weak commodity prices).
While the brokerage has a positive bias towards Mullen reflecting its end-markets, it believes much of this has been accounted for in its share price. CIBC's total return to price target of 19% reflects a "Sector Performer" rating within its coverage universe.
Mullen Group is a provider of specialized transportation and related services to the oil and natural gas industry in western Canada and is a supplier of trucking and logistics services in Canada. It operates in two segments: Oilfield Services and Trucking/Logistics.
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MTL is trading down 2.98% at $20.52 on Monday.