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DSKE: Daseke Announces Preliminary 2017 Results: Net Income Bolstered By Tax Act

02/22/2018
By Steven Ralston, CFA

NASDAQ:DSKE

SUMMARY OF RECENT EVENTS

On January 2, 2018, Daseke Inc. (NASDAQ:DSKE) announced that Belmont Enterprises (a truckload carrier dedicated to hauling residential glass) merged into Daseke’s SPD subsidiary (Smokey Point Distributing). Operating out of Olympia, WA, Belmont specializes in transporting STOCE (sheets of clear and coated glass), which measure 102 inches by 144 inches long, with a patented swivel tie-down system.

On February 12, 2018, Daseke announced preliminary 2017 results: revenues between $840 and $850 million, net income between $27 and $29 million, Adjusted EBITDA between $90 and $92 million and pro forma Adjusted EBITDA between $140 and $142 million. 

• The primarily driver for the increase in net income is a substantial tax benefit from the recent passing of the Tax Cuts and Jobs Act. 
• With the closing of the latest mergers, 2017 pro forma Adjusted EBITDA is anticipated to be $141 million, which exceeds management’s guidance of $140 million. Also, Daseke is expected to announce that 2017 pro forma revenue is calculated to be $1.3 billion.

The company has been very successful in raising capital to help fund its growth initiatives, including management’s consolidation strategy.

• In September, the company raised $68.1 million through an upsized equity offering of 5,675,967 shares. The offering was oversubscribed by 5 times. Net proceeds were approximately $63.6 million. 
• On December 1, 2017, Daseke, Inc. announced a Second Amendment to the Term Loan Agreement with Credit Suisse AG, which provided for a $150 million tack-on to the existing Term Loan Facility, which helped in closing the acquisitions listed above.
• On February 12, 2018, Daseke completed a follow-on public offering of public offering of 7.5 million shares (7.42 million by the company & 80,000 shares by a stockholder) priced at $10.60. Net proceeds to Daseke Inc were approximately $73.3 million.

The company continues to build awareness by attending Analyst Conferences

• Liolios 6th Annual Gateway Conference (September 6, 2017)
• UBS Industrials and Transportation Conference (November 15, 2017)
• 2017 Southwest IDEAS Investor Conference (November 15, 2017)
• 8th  Annual Craig-Hallum Alpha Select Conference (November 16, 2017) 
• Furey Research Partners Hidden Gems Conference (November 16, 2017)
• Credit Suisse 5th Annual Industrial Conference (November 30, 2017)
• Stifel Transportation & Logistics Conference (February 2018)

Daseke Inc. is the major consolidator in the highly fragmented open deck trucking industry. The company has grown significantly through a series of mergers over the last 6 years. Having become a publically-traded company through a merger with a SPAC (Hennessy Capital Acquisition Corp. II) in February, Daseke is poised to benefit from the improvement in flatbed line-haul rates that began in December 2016. The recent announcements of eight mergers/acquisitions since May 2017 demonstrate that Daseke is the leading consolidator of premier open deck trucking companies.

Daseke is poised for continued growth through additional mergers, bolstered by organic growth via operating and integration synergies along with positive industry trends, especially industrial output growth. Since 2008, Don Daseke (the company’s founder and CEO) has been pursuing the goal of building the premier open deck trucking company. Daseke has created a national network of open deck trucking companies, a scalable platform with which to continue pursuing a strategy of consolidating premier open deck trucking companies within a highly fragmented market. The company’s record of growth in revenues and Adjusted EBITDA has been driven by a combination of strategic acquisition driven and organic growth strategies.

The flatbed trucking industry continues to benefit from the economic expansion exemplified by rising flatbed rates. However, demand for over-dimensional loads (specialized services) has not yet improved as projects related to large capex plans industrial activity stimulates the manufacturing, construction, building, aerospace and energy industries in North America. Also, the proposed increase in infrastructure spending to upgrade the nation’s roads and bridges should benefit Daseke.


Indicated Target

Based on comparative analysis that utilizes the valuation metric of EV/EBITDA, a mid-second quartile industry multiple indicates a share price target of $15.10.

READ THE FULL RESEARCH REPORT HERE.

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