Urban Revitalization And EV Charging Will Drive Powerful Long Term Parking Demand

Catalysts

About Mobile Infrastructure

Mobile Infrastructure owns and operates structured parking facilities in growing urban markets, focusing on demand rich downtown districts undergoing redevelopment.

What are the underlying business or industry changes driving this perspective?

• Large scale downtown redevelopment and convention center reopenings in markets such as Cincinnati, Denver, Nashville and Detroit are expected to restore and then expand hotel, event and transient traffic, supporting a multi year recovery in RevPAS and accelerating revenue growth.
• The rapid expansion of higher value residential and commercial monthly contracts, now a growing share of management agreement revenue, is building a durable base of recurring cash flows that should improve earnings visibility and underpin steady net operating income growth.
• Urban revitalization initiatives including mixed use projects and metropolitan entertainment districts, such as the over $1 billion Oklahoma City program, are increasing the density of demand generators around Mobile garages. This should drive higher utilization and operating leverage as fixed costs remain stable.
• Modernization of mobility infrastructure, particularly the shift toward EV charging as a profit center, is creating new revenue streams per stall in select high utilization locations, which should enhance net margins as charging economics improve and consumer behavior adapts.
• Balance sheet repositioning through asset backed securitization, sale of noncore low yielding properties and disciplined share repurchases at a deep discount to published NAV is concentrating capital in higher growth core assets and reducing share count, supporting faster adjusted EBITDA growth per share and potential earnings multiple expansion.

Assumptions

This narrative explores a more optimistic perspective on Mobile Infrastructure compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Mobile Infrastructure's revenue will grow by 16.6% annually over the next 3 years.
• The bullish analysts are not forecasting that Mobile Infrastructure will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Mobile Infrastructure's profit margin will increase from -45.1% to the average US Commercial Services industry of 6.9% in 3 years.
• If Mobile Infrastructure's profit margin were to converge on the industry average, you could expect earnings to reach $3.9 million (and earnings per share of $0.09) by about December 2028, up from $-16.0 million today.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 97.4x on those 2028 earnings, up from -8.6x today. This future PE is greater than the current PE for the US Commercial Services industry at 24.6x.
• The bullish analysts expect the number of shares outstanding to decline by 0.7% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.5%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Prolonged weakness in transient demand driven by persistently lower hotel occupancy, fewer consumer events and cautious event organizers in key downtown markets could limit the anticipated recovery in RevPAS, constraining top line revenue growth and reducing operating leverage benefits on earnings and net margins over the long term.
• Extended construction cycles, access disruptions and project delays around convention centers and urban redevelopment sites in markets such as Cincinnati, Detroit, Fort Worth, Houston and Nashville may last longer than management expects, depressing stall utilization and pushing out the timeline for revenue and NOI recovery. This in turn could weigh on long term earnings power.
• The slower than expected leasing pace at newly converted downtown residential properties reveals a structural risk that urban residential demand may not fully materialize. This would cap growth in higher value residential monthly contracts, limit the shift toward a more stable recurring revenue mix and constrain improvements in net margins and earnings.
• High financial leverage, with total debt of $213 million and continued reliance on asset backed securitizations and asset sales in a rising rate or less liquid capital markets environment, increases the risk that refinancing or deleveraging becomes more expensive or constrained. This would pressure interest coverage, reduce flexibility for repurchases and acquisitions and ultimately dampen net income and earnings per share.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Mobile Infrastructure is $7.0, which represents up to two standard deviations above the consensus price target of $6.17. This valuation is based on what can be assumed as the expectations of Mobile Infrastructure's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $7.0, and the most bearish reporting a price target of just $5.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $56.2 million, earnings will come to $3.9 million, and it would be trading on a PE ratio of 97.4x, assuming you use a discount rate of 9.5%.
  
• Given the current share price of $3.27, the analyst price target of $7.0 is 53.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.