Myers Industries, Inc.

MYE Details

Myers Industries, Inc. (NYSE: MYE) is engaged in the manufacturing and commercialization of plastic and rubber products. The company produces a wide range of polymer products for industrial, agricultural, automotive, and consumer industries. The company operates in two segments - Material Handling and Distribution. The former is engaged in the manufacturing of products like plastic reusable material handling containers, custom plastic products, consumer fuel containers, military water containers, ammunition packaging, and shipping containers. The Distribution segment is engaged in distributing tools and equipment supplies used for tires, wheels, heavy trucks, manufacturing of tire repair, and retreading products. The company’s market capitalization stood at USD 770.44 million as of May 11, 2021.

Price Increases: In March 2021, the company announced the additional price rise of the Material Handling segment products. In its statement, the company informed that with effect from April 1, 2021, there will be an additional price increase of 9% to 12% of material handling segment products. The company had already announced the 8% price increase effective March 1, 2021. It is due to the continued increase in raw material cost of resin and steel.

MYE Long-Term Growth Vision (Source: Earnings Presentation, Q1FY21)

Robust Q1FY21 Results: The company reported a steep increase of 42.68% of net sales to USD 174.43 million in Q1FY21 (ending March 31, 2021) compared to USD 122.25 million in Q1FY20 (ending March 31, 2020). The Material Handling segment contributed 74.46%, while the Distribution segment contributed 25.54% to the net sales in Q1FY21. The company reported a 56.32% decline in net income to USD 7.30 million in Q1FY21 compared to that of USD 16.72 million in Q1FY20. As of March 31, 2021, the company has cash of 16.66 million while a total long-term debt of 70.92 million.

Key Risks: The company’s basic raw material includes resins, colorants, and natural and synthetic rubber. Over the past several years, the company has realized a rapid increase in resin prices. If it continues for a longer period, the company’s operational and financial affairs may be materially impacted by the decline in margins.

Outlook: In its Q1FY21 earnings call, the company stated that it is expecting strong sales growth in Q2FY21. Selling, General, and administrative expense (SG&A) are expected to be approximately 23% of the net sales. The company is projecting its FY21 outlook for adjusted EPS to be in the range of USD 0.90 to USD 1.05 with a CAPEX of approximately USD 15 million. 

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation

(Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

MYE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Stock Recommendation: MYE stock has declined 4.89% over the past three months and is currently trading in the higher band of the 52-week range of USD 10.87 to USD 23.98. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 23.76. On the technical chart, the next support level is USD 19.49. Considering the decent fundamentals, expected growth in earnings over the medium-to-long term, and reasonable dividend yield, and we recommend a “Speculative Buy” rating on the stock at the closing price of USD 21.35, down by 1.61% as of May 11, 2021.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level. 

 

Teekay Tankers Ltd.

TNK Details

Teekay Tankers Ltd. (NYSE: TNK) is a provider of oil marine transportation services to global oil industries. The company’s fleet size increased from nine owned Aframax tankers in 2007 to 52 owned and leased tankers and one Very Large Crude Carrier (VLCC) as of December 31, 2020. The capacity of the tanker fleet has also been increased from 980,000 deadweight tons (dwt) in 2007 to approximately 7,268,00 dwt as of December 31, 2020. The company operates in two segments, namely 1) Tanker segment, which consists of operations of tankers employed on full-service lightering contracts. 2) Ship to Ship transfer segment consists of company non-U.S. lightering services, LNG terminal management, and consultancy procurement services. As of May 11, 2021, the company’s market capitalization stood at USD 467.95 million as of May 11, 2021.

FY20 Results: The company reported a slight decline of 6.08% in total revenue to USD 886.43 million in FY20 compared to USD 943.91 million in FY19. The Tanker segment contributes 99.21%, while the ship-to-ship transfer segment contributed 0.79% of the net sales in FY20. The company reported a sharp increase of 111.10% in net income to USD 87.31 million in FY20 compared to USD 41.36 million in FY19 due to a decrease in income tax expense.

Spot tanker rate (Source: Earnings Presentation, February 25, 2021)

Key Risks: The tanker industry is cyclical in nature. The companies in this industry have witnessed frequent changes in profitability due to rapid changes in the economics of tanker capacity and oil products. Hence, there might be a significant increase or decrease in the company’s revenues and profitability. In the current context, an extension of pandemic-related curbs and travel bans can weigh on the oil demand, thus affecting volumes and rates and hence, the company’s profitability and cash flows.

Outlook: There is a significant possibility of acceleration in oil demand growth in the near-to-medium term due to the rollout of vaccines globally and the consequent lifting of curbs and travel bans. The company is projecting its vessel operating expense to be around USD 4 million for the Q1FY21. The company is expecting its General and Administrative expense to get increased by USD 1 million in Q1FY21. 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

TNK Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Stock Recommendation: TNK has declined 10.34% in the past nine months and is currently trading in the slightly lower band of the 52-week range of USD 8.90 to USD 19.39. The stock is currently trading above the 200 DMA levels. We have valued the stock using the EV/Sales based relative valuation methodology and arrived at a target price of USD 15.32. On the technical chart, the next support level is USD 12.59. Considering the correction in the stock price in the past nine months, expected improvement in oil demand growth, and the company’s large fleet size and tanker capacity, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 13.87, down by 3.55% as of May 11, 2021.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.