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General Body Meeting 03.03.11. Agenda. Announcements News Updates Macro Sector Pitch. Wall St. Training. M&A and LBO Modeling on Excel Saturday, 3/6: 12pm-6pm Sunday, 3/7: 12pm-8pm No Previous WST experience necessary www.wallst-training.com/cornell. News Updates. Homex Earnings Update.
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Agenda • Announcements • News Updates • Macro Sector Pitch
Wall St. Training • M&A and LBO Modeling on Excel • Saturday, 3/6: 12pm-6pmSunday, 3/7: 12pm-8pm • No Previous WST experience necessary www.wallst-training.com/cornell
Homex Earnings Update • Met Expectations • Down 6% on news • Financials • Revenue rose 12.7% • EBITDA rose 23.5% • Good buying opportunity? • Dr. Doom (Marc Faber) suggests now is time to buy Real Estate • Overreaction by market?
Health Care News: Philip Morris (PM) • U.S. Justice Department mandated apology for all Tobacco Firms • “We falsely marketed low tar and light cigarettes as less harmful than regular cigarettes to keep people smoking and sustain our profits. We knew that many smokers switch to low tar and light cigarettes rather than quitting because they believe low tar and lights are less harmful. They are NOT.”
Industrials News Update Alan Calabrese & Nick Hosseini
Boeing • One of the world’s leading defense and aerospace companies • The company supplies a broad array of products and services to the U.S. Department of Defense • Design, development, manufacture, sale and support of commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems and services
Positive Outlook • The U.S. Air Force announcement as of 2/24 • Selected Boeing’s NewGen Tanker to be its new KC-46A air refueling jet • Next-generation tanker that will replace 179 of the service’s 1950s-era KC-135s • Based on the new Boeing 787 commercial airliner
Positive Outlook • Extremely lucrative • $35 billion contract • Ended decade long dogfight between Boeing and Airbus • Business jet market has been battered both by falling corporate profits and political headwinds • Illustrates Boeing’s ability to transfer technology laterally among different business lines
Burlington Northern Santa Fe Corp. (BNSF) • Berkshire Hathaway Inc.’s Annual Report • 2010 acquisition of Burlington Northern Santa Fe Corporation (BNSF) • “a purchase that’s working out even better than I expected” - Warren Buffet • $16.9 billion in revenue for 2010, up 20% from 2009
MICC: Union Pacific Corporation (UNP) • Only North American railroad company larger than BNSF • BNSF is not publicly traded • Upward trend in railroad industry • Increased confidence, increased investment
Revenue € 60, 737 million (+7.1 % yoy) Organic growth • Lat Am and Europe - +2.7% • Spanish market saw - -1.6% • Mobile data – + 19.3%
Earnings • Target – €2.10 v. Actual – €2.25
Guidance • Revenue growth - +2% • OIBDA – upper 30s • CapEx - + €9 billion • Corporate strategy on contractual and value customers • Grow ARPU
Dividend Increase • Dividend of €1.6/share • 14.3% increase • Currently appx. 6% yield
Concerns • “Flexible” guidance • Uncertainty in Spanish markets
Financial News FORCLOSURES • Bank of America and Wells Fargo said they may face fines or enforcement actions from regulators amid investigations into foreclosure procedures • This past Friday BAC claimed the investigation may lead to “significant legal costs”, while Wells Fargo said that penalties are likely • U.S. regulators may try to extract $20 billion of penalties in a settlement with banks that serviced flawed loans
Financial News FORCLOSURES (2) • Wells Fargo said estimated litigation losses could be $1.2B beyond the reserve already set aside. Bank of America’s losses may be as much as $1.5B. Citigroup said Friday that as much as $4 billion in additional costs from pending legal matters are “possible, but not probable.”
Financial News INSIDER TRADING • SEC accused Rajat Gupta, former director of both Goldman Sachs and P&G, of insider trading • Gupta supposedly passed illegal tips about GS and P&G to Raj Rajaratnam, the Galleon Group founder who is to go on trial next week on insider trading charges • Gupta is the most prominent business executive brought up in the SEC investigation into insider trading on Wall Street
Safe Bulkers Macro Team
Thesis • An improving macroeconomy, will improve market conditions for shipping companies. • Safe Bulkers is a best of breed shipping company.
Marine Shipping • 2008 economic crisis causes massive decline in global shipping volume and rates
Shipping Rates – Dry Bulk Handy < Handymax < Panamax < Capesize/Post Panamax
Short-Term Outlook • Tepid recovery in Post-Panamax rates • Panamax, Handymax, and smaller size carrier rates more resilient • Return to yoy growth in global shipping • Idled ships back on line; few new orders, however
Long-Term Outlook • Solid global economic growth rates increasing shipping volume • Some speculate a container ship supply shortage in 2012 • New orders • Industry consolidation • 2014 Panama canal expansion
Company Overview • Secures dry bulk cargo for international shipping • Coal, grain and iron ore • 16 dry bulk vessels for transportation services • Aggregate carrying capacity of 1,443,800 deadweight tons • Average age of the fleet is 3.80 years (12/31/10) • Nine additional new vessels have been contracted (2013)
Company Overview • Headquarter: Athens, Greece • Founded in 2007 • Corporate structure • 26 subsidiaries • Top customers • Bunge Limited, Cargill International, Daiichi Chuo Kisen Kaisha, and their affiliates
Major Clients • Bunge Limited • Very Strong and Low Risk Company • 2010 Sales of $45.71B with a previous years growth of 9.02% • 2010 Net income of $2.35B with a 552.08% 1-Year Net Income Growth • Cargill International • Private but highly visible and successful • 2009 Sales of $116.58B with a yearly decline of 3.20% • 2009 Net Income of 3.33B with a yearly decline of 15.62% • Daiichi Chuo Kisen Kaisha
Financials • Current Share Price: $9.16 • Div Yield: 6.55% • Market Capitalization: 603.45M • EPS: 1.76 • P/E: 5.22 • Profit Margin: 69.83% • Operating Margin: 67.97% • Quarterly Revenue Growth: 12.9%
Financials • Total Cash:100.42M • Total Debt: 494.74M
Current Shipping Difficulties • Industry severely effected by the floods in Australia, Indonesia and South Africa. • In addition, commodity export bans in countries like Russia and India are effecting business revenue. • Why Safe Bulkers? • Very low operating costs • Low spot exposure for its relatively young fleet
Shipping Potential • Shipping by sea is still the only economical way to transport goods internationally • Shipping rates have remained significantly below pre-recession peaks • The Baltic Dry Index (main measure of shipping rates) surpassed 11,000, it is currently below 3,000 • When the global recovery takes place they are in prime position to capitalize • Increased demand for and prices of commodities • Shippers have not yet caught the attention of investors
Major Competitors • Excel Maritime Carrier Ltd. (NYSE: EXM) • Has a higher spot exposure of more than 60% • High Debt to equity Ratio • Negative Earnings Growth • No dividend • Dry Ships Inc. (NYSE: DRYS) • Highlighted by a 15% loss over the past 6 months • Enormous PE ratio and much less EPS • High operating costs and their recent plan for ultradeepwater rig business (drillships) has yet to be proven – too much risk