February 04, 2014 - 11:42am EST by
2014 2015
Price: 9.02 EPS $1.03 $1.28
Shares Out. (in M): 84 P/E 8.8x 7.0x
Market Cap (in $M): 761 P/FCF NM 9.0x
Net Debt (in $M): 546 EBIT 152 174
TEV ($): 1,307 TEV/EBIT 8.6x 7.5x

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  • Litigation
  • Auto Supplier
  • Canada
* Idea not eligible for membership requirements


Martinrea International (MRE CN) is a Canadian automotive parts manufacturer that has become significantly mispriced as the result of litigation from a rogue ex-shareholder and director of the company. However, a thorough evaluation of the allegations and broader situation reveals an oversold security with attractive upside and imminent catalysts.

  • Litigation:  A detailed review of the litigation leads us to believe that the claims are largely invalid and unlikely to have a material effect on the company
  • Management:  Contrary to allegations, management is very competent and thoughtful with regard to capital allocation
  • Business:  Aspects of Martinrea’s business have both cyclical (Europe) and secular (aluminum) growth prospects
  • Valuation:  As a result of the sell-off, the company’s valuation is attractive on both an absolute and relative basis in light of the growth potential
  • Catalyst:  The resolution of litigation and other issues in the next few months will be a very positive catalyst for the stock

On January 31, 2014 Martinrea added Terry Lyons to its board of directors and Corporate Governance and Nominating Committee. Lyons is a prominent Canadian executive with more than 30 years of operational, financial and governance experience. This is the first catalyst for Martinea to realize value accretion, and will likely continue as the litigation is resolved and the company returns to normalized trading levels.

See full write-up here

I do not hold a position of employment, directorship, or consultancy with the issuer.
I and/or others I advise hold a material investment in the issuer's securities.


  • Resolution of litigation
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