Mader Group, What is this Promising Australian Company?

A scalable boring business in its early stages

Mader is an Australian small cap that provides specialized maintenance services to heavy machinery in the mining, construction, and resources sectors. With a 10-year CAGR around 30% what is the future of the company?

In this article, we will describe the business and identify whether or not it will be able to scale and continue its growth. The outlooks and potential markets will be assessed. We will look at the metrics, estimate the fair price estimation, the risks and opportunities.

Business overview

Mader offer a range of services including mechanical repairs, maintenance, component overhauls, and workforce solutions. Mader Group focuses on ensuring that heavy machinery operates efficiently and effectively, thereby minimizing downtime and maximizing productivity for their clients.

For now, 75% of the sales are in Australia where the company has 40% market share. Most of the rest of the sales are in the US where the company captures 2 to 3% market share.

As the main asset of the company are its employees, the management emphasizes culture a lot: expatriation contract, sports challenges, internal training.

Although the company operates a repair center, the majority of services are outsourced maintenance, which aligns with a capital-light business model. Maintenance is often a pain point for industrial activities:

• It is costly and hard to manage

• OEMs bill their maintenance services at high rates for an efficiency rarely meeting their clients' standards

• Managing all the vehicles at the industrial site becomes time-consuming since OEMs exclusively repair their own vehicles

• Industrial sites also have difficulties finding and keeping the right skills

The company's core activity revolves around mining sites but the company plans to expand to energy market and transports & logistics.

The main advantages of the business model

Mader’s business model has a lot of advantages:

• As we saw, it is a capital-light business model and it proved to be highly scalable

• The business demonstrates resilience despite fluctuating mining cycles, with maintenance proving to be relatively robust. The company can even leverage downturns by hiring laid-off workers

• By being first in this niche, they have the opportunity to create a world leader

• They can expand in close markets like energy and transport maintenance

These advantages are reflected in the company's metrics. Past growth has been 30% over the last 10 years (notably, all growth has been organic!). Equally impressive, the ROIC has consistently remained around 25%.

Outlooks and perspectives