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On Tuesday, Desjardins initiated coverage on Mullen (NASDAQ:MULN) Group (MTL:CN) (OTC:MLLGF) with a positive outlook, assigning a Buy rating and setting a price target of C$18.00. The research firm sees the company as having undergone significant transformation, diversifying its business away from its previous heavy reliance on the oil & gas sector.
Desjardins analysts highlighted the strategic shift in Mullen Group’s operations, noting that the company’s direct exposure to oil & gas is now approximately C$100 million in annual revenue, which represents around 5% of its total business. This marks a considerable change from 2012 when two-thirds of Mullen’s business was tied to oilfield services. The analysts also pointed out that currently, only about 10% of Mullen Group’s consolidated business is connected to oil & gas, mainly through customers engaged in the repair and maintenance of oil & gas equipment.
A significant change in Mullen Group’s revenue generation was also noted, with only 30% now coming from Alberta compared to approximately 60% a decade ago. This shift has been part of Mullen’s strategy to become a more diversified company, moving away from the image of being predominantly an oil & gas carrier.
The firm’s diversified end markets were cited as a positive factor, with limited exposure to controversial issues such as the Driver Inc model and cross-border freight challenges. Desjardins suggests that despite the company’s successful diversification, there is still a lingering perception of Mullen as an oilfield services company, which the analysts believe is outdated.
The new coverage and price target by Desjardins reflect a confidence in Mullen Group’s strategic direction and its potential for growth as a diversified entity with reduced dependency on the oil & gas sector.
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