Willscot

With the price of container shipping, wheat, lumber and host of other commodities tearing higher, there is no escaping the baked in readings of higher inflation that are coming down the pipe. Oil went negative last year, today it’s comfortably north of $50. The market might read the numbers as transitory but that won’t stop the whisper of needing to pack a portfolio with a tight bevvy of companies that can control their own prices, and pass on the rising input costs to their wide-eyed customers. Indeed, with swathes of the market now pricing in an economic normalisation, it is harder to find good value. It is rare, then, to find a market leader, an undisputed market leader at that, that not only has oodles of pricing power, but also sees upside across every end market as the economy heals. Willscot is the number one player in mobile offices, portable storage containers, modular classrooms and various other temporary space solutions. For those not in the know, the company pushed through a highly attractive deal in the teeth of the pandemic, merging with Mobile Mini, to cement its offer, and leaves a business that has much of its fate in its own hands. There are cost synergies from the deal, and potentially more deals to come; there are cross selling opportunities, and multiple levers to be pulled on pricing. The company has been using dynamic pricing tools levered off a crack algorithm for years, but half the portfolio – those parts that have recently been acquired – have yet to see any benefit of this rate management. Nor too has a pricing tailwind come through from a more consolidated market. At least, not yet. For a business with no real peers, the market may start to look at other dominant service companies as a guide on valuation. There are macro risks, but given the levers management have to hand, the earnings power should not be compromised, and the upside in a normalised environment remains compelling. More so in the context of the increasingly bloated multiples of many other cyclical companies, exposed to the same theme of post-Covid, economic repair.