Magellan Aerospace Corporation is a Canadian supplier of components for the aerospace and power generation industries. The company produces jet engines, missiles, gas turbines and satellites. Although Magellan is a very young company founded in 1996, its origins, through its purchases (notably that of Bristol Aerospace), date back to 1930. The company has 3,800 employees.
Les payeurs de growing dividends de qualité se retrouvent d'ordinaire dans des secteurs peu sexy, notamment dans les besoins de consommation courante. Quand ce titre est tombé sous mon radar, je dois dire que j'étais d'abord très sceptique. Rien que le nom de la société me faisait déjà peur. Mais je m'y suis aventuré, et je dois dire que le "voyage de Magellan" ne m'a pas déçu.
Valorization
Le titre se négocie à un prix assez correct pour ce genre d'activité. En effet le cours se monte à 10.2 fois les bénéfices récurrents, 1.89 fois la valeur comptable tangible, 1.17 fois les ventes et 17 fois le free cash flow. Du point de vue du dividende, ce n'est certes pas terrible, avec un rendement de seulement 1.43%, mais ceci s'explique par un distribution ratio ultra conservateur de 14.6% par rapport aux bénéfices et de 24.6% par rapport au free cash flow. Magellan possède donc une marge substantielle de sécurité et de progression pour son dividende. L'entreprise canadienne l'a d'ailleurs augmenté sur un rythme régulier et impressionnant de 36% par année en moyenne ces cinq dernières années!
Balance sheet & result
Just like the dividend, profits, cash reserves and asset values are growing over the long term. Magellan is clearly succeeding in creating value for its owners over the long term and this is reflected in the share price which has more than quadrupled in the last five years.
Les réserves de liquidités sont bonnes, avec un current ratio en hausse, à 2.09, et un quick ratio de 1.16. Magellan n'a donc pas de souci pour honorer ses obligations financières courantes. La gross margin n'est certes pas énorme, avec 18.1%, mais en cours d'augmentation. Surtout, grâce à une bonne gestion des frais généraux, la marge nette et de free cash flow sont bonnes, avec 11.5%, respectivement 6.9%. La rentabilité est excellente, avec un ROA de 11.3%, un ROE de 17.1% et un rendement en cash flow des actifs de 13.2%.
Long-term debt to assets is not only down sharply, but also at a very low level now, at 3.56%. Magellan's total debt has been falling for several years and the company would be able to pay it off in just over a year using its free cash flow. As for the number of shares outstanding, it has been stable for many years, which is a good point for the shareholder who thus avoids any dilution of his assets.
Conclusion
Magellan is a company with very solid fundamentals. Of course, we are "navigating" here in a high-tech and future-oriented sector of activity, which is not usual in an approach oriented towards increasing revenues. Nevertheless, paradoxically, the stock is trading at a very affordable price and the price is not too sensitive to market variations, with a beta of only 0.6.
Let us also note that surprisingly this beautiful company is very little followed by analysts and institutions. We dare not imagine what it will give when this little world wakes up. The contrarians will appreciate it.
I believe the stock should nearly double to reflect its intrinsic value and the dividend should do at least as well. So I just boarded Magellan's ship.
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Good profitability indeed. On the other hand, the low dividend yield and especially the difficulty of predicting the evolution of the field beyond 5 to 10 years hold me back.
It's true that this last point also held me back at first, being normally more used to investing in diapers, yogurts or other companies that no one cares about. On the other hand, in a way, the aerospace sector is also becoming a common consumer good. The best example is GPS, which equips all our smartphones.
Also note that Magellan's 'defense' sector is also defensive in nature if I may say so.
Sale of the position according to stop-loss procedure: https://www.dividendes.ch/2018/05/que-faire-quand-un-titre-devisse/