Description

I am recommending as a long shares of Manitex, International Inc.  (“Manitex”) a leading provider of truck mounted cranes for a variety of industrial uses.  Manitex is headquartered in Bridgeview Illinois.  Their two primary drivers of value for the company are boom trucks and knuckle boom cranes.  Boom trucks are straight, telescopic cranes with a winch and hook attached to the end and transported on the back of large sized trucks.  Knuckle boom cranes have articulated arms that are compact enough to fit on a truck that might also carry materials to a jobsite. 

I wish I could say that this company was cheap based on an easily observable financial metric such as ev/ebitda, gaap earnings, book value, or even sales.  It just isn’t.  Instead this is a bit of a story stock where we are going to need management to execute on their ambitious growth plans and a situation where we think we can map the eventual catalyst.  We like that the management has put their money where their mouth is, and is both properly incentivized and has a near perfect prior career experience to maximize the chances of success.  Importantly, at the current price I don’t think we are taking a lot of risk on this story.

The market for standard boom trucks is relatively small and dependent on new housing starts and the oil industry.  Manitex owns this market in North America.  By comparison the market for knuckle boom cranes is very large and forecasted for future growth.  While Manitex dominates the straight boom crane market, they are in early stages of entering this knuckle boom market.  Manitex entered the knuckle market with the acquisition of PM Group (Northern Italy based) out of bankruptcy in January of 2015.  Apparently this was bit of a coup by management, specifically the current Chairman and largest individual shareholder David Langevin.  There were multiple debt holders spread about geographically with a complicated balance sheet and stuck in Italian bankruptcy court. Langevin was uniquely positioned for this opportunity, having spent the bulk of his career at Terex buying and selling crane companies.  The PM Group currently has a tiny portion of the global market for knuckle boom cranes, which Manitex estimates will be 2.3 billion in sales globally for 2020, with most sales occurring in Western Europe.

Enter Japanese based Tadano limited, the largest Japanese crane manufacturer and the seventh largest crane manufacturer in the world.  Tadano is committed to building out a full array of crane products to complete their product offering.  The one type of crane missing from their arsenal is (or was) a knuckle crane.  Unable to beat Langevin in his successful purchase of the PM Group, Tadano did the next best thing by buying 14.9% of Manitex in May of 2018 at a price of 11.19 per share.  Informed conjecture is that Tadano is a very long term oriented and strategic player intent on making the articulated crane a primary driver of growth for Tadano.  Tadano is now marketing and selling PM Group cranes through their dealership network in Asia.  Interestingly, the cranes bear the logo of Tadano, not PM.

Tadano is currently digesting their largest acquisition to date.  They recently acquired Demag Mobile Cranes from Terex.  Who ran Demag? And who lead the initiative to sell that business to Tadano?  Answer:  Steve Filipov.  After successfully selling Demag to Tadano, Steve Filipov resigned from Terex and it was shortly announced that he would be the CEO of Manitex.  Steve’s number one job is to grow sales at PM Group and stream line their manufacturing capabilities.  Steve is, I think, the right person at the right time to take PM to the next level.  I believe he is working closely with Tadano and PM to position the company to eventually be wholly owned by Tadano.

I like that I see recent open market purchases by the CFO and the Filipov.  I like that the chairman, David Langevin, owns close to 5% and seems to have the majority of his net worth invested in this company.  Most importantly, I like that I can buy stock at 5.75, compared to 11.19 that Tadano paid. 

Catalyst

Growing knuckle crane sales in Western Europe should drive earnings.  Possibility of Tadano acquiring all of Manitex at some point in the future.