Specialist
Senior executive at Portakabin Mobilraum GmbH
Agenda
- Competitive positioning of Modulaire Group vs peers and pricing ability in European markets such as Germany
- Growth vs maintenance CAPEX dynamics and container depreciation life cycle
- Secondary container market – scrappage vs refurbishment and extent of variations across construction cycle
- M&A outlook, including roll-up potential and synergies, plus utilisation drivers for Modulaire vs the market
Questions
1.
What are your thoughts on Modulaire’s competitive positioning? Previous Interviews have outlined that Alho is by far the largest modular building player in Europe with 43,000 units, with Kleusberg closer to 13,000. Modulaire has 260,000 modular units in total, including the containers. Are there any meaningful threats to the company? How does this affect its ability to price?
2.
How do you assess Modulaire’s ability to price in a market such as Germany, where it’s the third-largest player, vs in other European markets where it’s the leader? Part of the company’s strategy is to increase revenue per unit, so what’s reasonable to expect in Germany vs other regions?
3.
How does Modulaire’s CAPEX split between growth and maintenance? Can it ramp down growth CAPEX or would this have a meaningful impact on its competitive positioning?
4.
Could you estimate maintenance CAPEX for Modulaire’s business? It spent EUR 72m on rental equipment purchases in the three months ending 30 June 2021. How much of this would be maintenance CAPEX?
5.
You mentioned a life cycle of 10 years. What do you think of 30-year depreciation terms?
6.
You said the container fully depreciates over 10 years, but mentioned it is still sold after that. What resale or scrap value would be obtained?
7.
Is the scrap value a similarly high percentage of the original purchase price for the modular buildings as it is for the containers?
8.
What’s the use case of the container once it’s fully depreciated? Is it scrapped and turned into steel?
9.
The secondary market seems very buoyant – the resale value of a container is a high percentage of the original purchase price after fully depreciating. I imagine this is in normal conditions. If the construction cycle were to slow and CAPEX decrease, the secondary market for containers may dissipate as buyers seek free cash flow. Is this the case, or do those buyers remain in the market? Who’s the marginal purchaser if they leave and what price would it pay? Would it be a scrapper?
10.
What market share could Modulaire capture over the next five years from acquisitions? Are bids for purchasers getting more expensive as the industry consolidates, or is there still enough fragmentation and targets out there to have relatively uncompetitive auctions?
11.
What synergies would you expect from a 5,000-10,000 unit acquisition across SG&A, top line and so on?
12.
What risks are associated with acquisitions? Are there challenges to acquiring particularly weak fleets, compared to the core business, that require meaningful renovation CAPEX?
13.
Modulaire had around 87% utilisation at the end of Q2 2021. How does this compare to the wider market and what drives any variation?
14.
How willing are customers to bear the increased cost of logistics?
