PART3: Is Logistec a compounder?

Valuation extravaganza (EPS Growth, PE, P/S, RoE, management ownership, debt)

In this last article on Logistec, the author is looking at Logistec from different angles to assess whether this company is a compounder. Compounders are companies that can deliver sustainable and long-term eps growth with a good RoIC.

The following is a list of criteria to assess whether the Company is a compounder and is attractively priced.

1. Sustainable EPS growth discussion (EPS growth > 10% CAGR)

2. Current and historical PE and PEG

3. Current and historical P/S

4. Current and historical EV/EBITDA and Debt level

5. RoE and RoIC

6. Under-followed and Illiquid

7. Competitive advantage and Moat

8. Skin in the game - Management ownership

This following is a deep dive article on Logistec. The article constitutes the authors’ personal views and is for entertainment purposes only. Please refer to the disclaimer at the end of this article for more details.

Sustainable EPS growth discussion

The following figure shows the Earnings per Share (EPS) for Logistec as a whole since 2012.

The 2022 EPS number (4.45$) is based on the author’s estimates. Currently, the trailing 12mo EPS is 4.09$. The marine business is running at a much stronger pace in 2022 than in 2021, as such it is expected that marine EBT in Q42022 will be much higher (estimates $15 million for Q4 2022) than $2.3 million (actuals in Q42021). As mentioned previously in Part1, EBT was penalized by almost $6 million by one time expenses in the 2021 Q4. The environmental business is running a bit slower in 2022 than in 2021, as such the author estimates that this unit will generate $10 millions EBT in Q42022 versus $13.8 million in Q42021. Those estimates are conservative but there is a risk that the drop of EBT generated by the environmental business could be more significant. The Company will publish annual result in mid March.

UPDATE: On March 22nd 2023, The company has released EPS of 4.12 so below my estimates but still much higher than 2021.

2018 EPS was a real low point in terms of earnings, due to the FER-PAL acquisition struggle. 2016 was also difficult where both businesses had seen sales pressure. From 2018, the EPS has grown very steadily at a very high rate. Part 1 demonstrated that the marine business EBT has grown at a rate of 14% + CAGR since 2012. Furthermore, the growth being about 2/3 organic and 1/3 originating from bolt-on acquisition, it is likely to project that the marine business can compound at a rate ranging from 10% to 15% over the next five (5) years. The contribution of the marine business to the overall EPS is projected to be 70% in 2022.

For the environmental business, the author is much more conservative and would expect a mid single digit EPS growth through margin improvement and some revenue growth.

As such, Logistec as a whole could steadily grow its EPS by 10-12% over the next 5 years with some bolt-on acquisitions in the marine business.

Current and historical PE

The following shows the historical PE ratio based on the historical year end stock price. For 2022, the ratio is based on the author’s 2022 estimates and the current price (January 27th closing price).