1 / 46

Final Valuation

Final Valuation. Drew Williams. Agenda. Who is Technip ? Reformed Financial Statements Recalculation of WACC EATO Analysis EPM Analysis Growth Rate Determination Final Valuation. Who is Technip ?. Who is Technip ?. Financial Goals and Operating Priorities.

avital
Download Presentation

Final Valuation

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Final Valuation Drew Williams

  2. Agenda Who is Technip? Reformed Financial Statements Recalculation of WACC EATO Analysis EPM Analysis Growth Rate Determination Final Valuation

  3. Who is Technip?

  4. Who is Technip?

  5. Financial Goals and Operating Priorities 6-8% margins on Onshore/Offshore projects ~15% margins on all subsea projects Continue to be the leader in tough climate and subsea contacts Keep a consist and robust order backlog Continue to innovate through extensive investment in R&D Focus on high growth areas i.e. Asia, Middle East, Brazil

  6. New Reformulation

  7. Carl how is your valuation going? Where are all the Disclosures????????

  8. Ashlee? OMG!!!

  9. New Reform Financials Same process as before Line by line Determined whether financing or enterprise No major issues All numbers changed from before Operating Leases were the biggest change to the Balance Sheet Revenue/Cost of Sales by Division biggest change to Income Statement

  10. New Reform I/S

  11. New Reform B/S

  12. New Reform B/S

  13. Analysis Balance sheet is much longer Easier to forecast going forward Income Statement numbers are much easier for analysis Life Goal: Train a parrot to say “help I’ve been turned into a parrot”

  14. It’s hump day Recalculation of WACC

  15. Cost of Debt Capital New info on debt expense Change from -57% to 11.31% Operating Leases/New Disclosures painted a clearer picture

  16. WACC • WACC = 10.28% • Cost of equity = 10.17% • Used to be 11.59% • Bloomberg = 10.1% • Feel much more comfortable with WACC after reformulation

  17. 10.28%--Laser Cat Approved

  18. EATO Analysis

  19. EATO--Process Inverse EATO for each line item Averaged each Inverse EATO item Looked for yearly outliers in each line item Looked at yearly differences Averaged just 2012 and 2013 Made a judgment call for each line item based on the information

  20. Example—EATO Analysis • Land decreasing vs. Vessels increasing • EATO increasing for land vs. decreasing for vessels

  21. Final EATO • 1.58 for 2014 • 1.56 thereafter • EATO seemed to be very different in 2011 compared to 2012 and 2013 • Relying on more recent numbers • Number is trending down • May continue in future, but likely offset by EPM gains

  22. The only thing that’s cooler than skipping class is painting your chest EPM Analysis

  23. Historical Analysis

  24. EPM Analysis • EPM down significantly last year • Mix of Sales Problem • 4th Quarter of 2013 and 1st Quarter of 2014 • Timing of Revenue and Expenses on Cost of Completion accounting • Order backlog increasing mix of Subsea • Analysts initially responded poorly • Optimism has increased

  25. Where will EPM go? • I was going to fight the witch, but her ability to turn people into cats gave me pause

  26. EPM Effect on Stock Price

  27. EPM Decision • Looking to gain more sales in Subsea area • Higher profit margin • EPM has been historically higher • One time hit or long term problem? • Believe EPM will improve • Valuation is heavily dependent upon this assumption

  28. Evidence for future rise in EPM

  29. Making a Site Visit

  30. EPM Forecast

  31. Next GQ Cover Sales Growth Determination

  32. Sales Growth • Initial Assumption = 9% • Works for short term, not for long term • Backlog of orders gives good estimate for the next 2 years • Much more difficult to forecast beyond that • Expect Growth, but overall industry does not expect much • Will inhibit Sales growth moving forward

  33. Sales Growth Forecast • Growth roughly 9% next year • Looks to decrease in 2015 • “modestly” • Focus seems to be on shifting of product mix • Subsea sales are harder to generate and predict

  34. Shifting of sales

  35. Sales Growth Determinants Great Analysis Drew!! I should start a Boy Band Heavily dependent on oil and gas prices Overall economic conditions will also drive sales Industry outlook is not great

  36. Sales Growth Decision • Start with 9% and fade out to 2025 • Sales have the potential to fluctuate throughout this period depending on economic conditions • Have been able to increase order backlog • Not necessarily a guarantee moving forward • Harder to generate subsea sales as opposed to onshore/offshore sales

  37. Let’s mix together those inputs and get a value! Valuation Models

  38. DCF Model

  39. Residual Income Model

  40. Abnormal Income Growth Model

  41. % Value Captured Abnormal income is a ROCK SOLID valuation

  42. Adjustments for as of 4/23/2014 Valuation Enterprise Value * (1+WACC)^(113/365) Enterprise Value * (1+WACC)^0.5 Enterprise Value = 9.949 Billion Euros Debt = 934. 56 Million Euros Equity Value = 9.015 Billion

  43. From Equity Value to Share Price • Equity Value/(# of shares *4) *Exchange Rate • Trades as an ADR • Estimated Share Price = $27.98 • Yesterday’s Close =$26.67 • Been rising steadily

  44. Sensitivity Analysis

  45. Final Recommendation Seems like a Soft Buy

  46. Questions?

More Related