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GeoNugget - Manitex Intl (NASDAQ:MNTX)

02/01/2012

GeoNuggets® - Quick Check List Highlighting Undiscovered Opportunities (It is very important for readers to see Foot Note 2 to learn more about the GeoNugget process)

On 01/10/2012 we alerted our premium members that we coded MNTX as a GeoBargain @ $5.29

Company Description: Manitex International, Inc. is a leading provider of engineered lifting solutions including boom trucks, cranes, rough terrain forklifts, and special mission oriented vehicles.

Data Ended 01/31/2012

  • Price = $5.89
  • Fully-Taxed Trailing EPS = $0.34
  • Fully-Taxed EPS Estimates = $0.50
  • P/E based on Fully-Taxed Trailing EPS =17.3
  • P/E based on Fully-Taxed 2012 EPS estimates= 11.8

Criteria Check List

MNTX Meets 5 out of 10 of our most important requirements for growth and risk-based quantitative data.

Requirement Comments
no Recent 52-week High (generally within 3 months) Must Reach $6.76
Yes Strong EPS Growth Rate As of 3rd Qtr 2011; Full year 2012
> 30% EPS Growth Rate
  • 3rd Qtr. 2011 EPS increased 50%
  • Full year 2012 estimates implies an EPS growth rate of 61%
GeoPowerRanking (GPR); Number of consecutive quarters that EPS is expected to grow at least 30%. 5
Yes 10% Revenue Growth
  • 3rd Qtr. 2011 revenue increased 49%.
  • Full year 2012 estimates implies a revenue growth rate of 20%
no Strong Operating Cash Flow and Balance Sheet As of 3rd Qtr 2011
Yes Positive Cash Flow

$443 Thousand

No Long Term Debt to Equity Ratio less than 20% 101%
Yes Current Ratio is at least 2:1 2.4:1
Yes Days in receivables < 90. This shows that the company converts its account receivables to cash within 90 days. (measure of liquidity) 62.8
Yes Return on Equity is at least 15% 9.0% run rate
no Minimum Pre-tax Operating Margins of 8% 4.2% as of 3rd Qtr. 2011
Yes Preferably Under 50 Million Shares (Fully Diluted) 11.5 Million shares as of 3rd Qtr. 2011
Yes High Insider Ownership (generally greater than 15%) 16.6% (Yahoo)
no Limited Institutional Ownership (generally less than 20%) 37% (Yahoo)
Yes P/E Divided by Growth Rate (PEG Ratio) is Less Than 1. 0.19

Additional Risk factors to consider in analysis

  • Effective Internal Controls: Yes
  • Needs to raise capital: No

Reasons for Optimism

  1. 40% of MNTX's business comes from the energy sector, which is experiencing a fresh and sustained near term growth spurt in North American markets. Please see our recent article where we briefly discuss this industry trend. Paul Gibson, General Manager of the Company's subsidiary, Manitex Inc, commented in a recent press release (Jan 19, 2012) about the company's record backlog that:

    "Demand for Manitex equipment, particularly our higher tonnage cranes, is being driven by continued activity in the North American energy sector." The current order backlog of $83.7 million as of December 31, 2011 is an increase of 33% from September 30, 2011, a 110% year over year increase, and represents an all-time high for the company."

  2. Significant operating leverage- Earnings are projected to grow at a significantly higher pace then sales throughout 2012. Analysts expect 2012 EPS to grow 61% on a 20% increase in revenues . This leverage is the direct result of cost cutting measures implemented at the end of third quarter 2008.

  3. MNTX has proactively chosen to operate in niche markets where competition based on price is less prevalent. MNTX offers large scale specialized equipment for the commercial, military and governmental customers vs. more "cookie cutter" equipment readily accessible through various distribution/retail venues.

    Ron Clark, General Manager of Manitex Load King, commented on increased demand for one its large scale specialized custom trailers and hauling systems in the 1/19/12 press release.

    "Heightened activity in energy and associated construction projects, as well as in domestic and international mining, and rail activity has resulted in strong heavy duty trailer demand and a consequent significant backlog increase at Load King throughout 2011 which has particularly strengthened during the final quarter of the year. Load King has historically maintained a leading position in these specialized markets with its targeted applications and quality reputation. Our competitive lead-times have provided further impetus to customers to acquire the Load King product. We intend to maintain this momentum with an output increase heading into 2012."

  4. MNTX may be in position to improve its risk profile which could in turn lead to higher valuation multiples. Cash flow from operations was $443 thousand during the third quarter 2011, reversing a trend of negative operating cash flow for the previous two quarters. If this trend continues, increased cash flow could be used to reduce the company's debt burden and high debt to equity ratio.

  5. Diamond in the rough - Investors are underplaying the facts.

    As we stated earlier, roughly 40% of MNTX's total business is generated from the energy industry. We believe the market may be overlooking the fact that MNTX is benefiting from the energy exploration boom taking place in North America. We predict that the stock will rapidly and suddenly rise once investors make this connection. Please see our blog for a growing list of stocks that are beneficiaries to favorable industry trends in the energy sector. Also see notes on recent GeoBargain, Titan Intl (NYSE:TWI), that is also capitalizing from the energy boom.

    MNTX looks poised to crush analyst estimates. Sales to backlog ratio for the last three years has averaged 3.7. Applying the 12/31/2011 backlog of $83.7 million implies that MNTX could generate 2012 revenues in excess of $309 million. While we believe this assumption is too aggressive, even if one was to imply the lowest sales to backlog ratio during the last 3 years(2.3) 2012 revenues would equate to $193 million. Regardless, 2012 analyst revenue estimates of $170.9 million are likely too conservative.

GeoTeam overall subjective/confidence comfort level: Pertains to the ability of a company to achieve solid and consistent EPS growth over the next several quarters (from 1 to 10): 10

Potential Valuation Scenarios if the company can achieve its EPS growth goals (We believe that these valuation scenarios are extremely conservative, as significant upside exists to EPS estimates)

Short-Term Potential value based on trailing EPS

P/E 20 $0.34 = $6.80
P/E 25 $0.34 = $8.50

Short-term Potential value based on 2012 analyst EPS estimates

P/E 15 $0.50 = $7.50

Long-term (Twelve months) Potential value based on 2012 EPS estimates

P/E 25 $0.50 = $12.50

Caveats:

  1. High debt to equity ratio.
  2. In theory, a decrease in energy related commodity prices could lead to less exploration activities.
  3. Tough 2011 4th quarter comparison coming up. Although we believe the 2011 4th quarter will be strong, analyst EPS estimates imply little to no growth compared to the 2010 fourth quarter.
  4. Although MNTX generated positive operating cash flow during its 2011 third quarter , the company still needs to demonstrate that it can continue to generate consistent positive operating cash flow.

1Valuation scenarios are not intended to be investment advice, but are scenarios based on some commonly used investment guidelines. They are provided to aid investors in making their own investment decisions.

2Our analysis is based on Quantitative and Qualitative factors. Even if a company does not meet the majority of our quantitative requirements, strong qualitative factors can still influence our optimism for a given story. Furthermore, gaining alpha in a market entails finding companies before the masses do, which means that there is value added when one can identify stocks that may currently have weaker quantitative data, but will soon improve. The GeoTeam typically considers EPS Growth, Revenue Growth and PEG Ratio as the most important quantitative attributes that affect short term valuation.

Disclosure: Long MNTX TWI

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