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Industrial Sector Stock Presentation

Shavkat Nasirov, Jon Misny, Justin Oblak, Eric Zimmerman. Industrial Sector Stock Presentation. Sector Recap. The Industrials sector weight in the SIM portfolio will remain unchanged from its previous weight of 13.1%. We remain cautiously optimistic about the performance of our sector.

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Industrial Sector Stock Presentation

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  1. Shavkat Nasirov, Jon Misny, Justin Oblak, Eric Zimmerman Industrial Sector Stock Presentation

  2. Sector Recap The Industrials sector weight in the SIM portfolio will remain unchanged from its previous weight of 13.1%. We remain cautiously optimistic about the performance of our sector.

  3. Recommendations • Sell all 249 bp of • Hold 363 bp of • Hold 371 bp of • Hold 346 bp of • Buy 249 bp of

  4. Recommendation: HOLD • Current Price: 50.06 • Target Price: 60.00 (20% Upside) • Recent Developments: • Tax on profits of Australian mining companies threatens to decrease demand • Chinese demand for coal strong and this trend should continue into the near future • Eurozone crisis not a large threat because internationally, emerging economies drive most of demand

  5. Recommendation: HOLD • Current Price: 66.00 • Target Price: 90.00 (36% Upside) • Recent Developments • Defense spending expected to decline in near future. • Withdrawal from Afghanistan and Iraq expected to decrease demand for new defense contracts. • Robert Gates keeps questioning current contracts that have gone over allotted budgets.

  6. Recommendation: HOLD • Current Price: 34.23 • Target Price: 50.00 (47% upside) • Recent Developments: • Recent large sale of shares by top executives • Similarly to GD, defense spending cuts will affects sales negatively • Current market downturn hitting industrials the hardest

  7. UTi Worldwide

  8. Company Overview • Freight forwarding • Purchases uncommitted capacity from ocean liners and aircrafts • Solicits clients to fill this capacity • Contract logistics • Warehousing and distribution of goods • Consulting and business specific supply chain solutions

  9. Company Overview

  10. Net Profit Margin • Relative to Airfreight & Logistics Industry

  11. Revenue & EPS Growth Five Year Historical Growth Rate: -1% Long-Term Future Growth Rate:15%

  12. Percentage of Revenues Major Regions Major Countries None of UTi’s clients accounts for more than 4% of it’s revenues. *EMENA represents European, Middle Eastern, and North African countries

  13. Recent Events • Eruption of Eyjafjallajökul in Iceland • Dozens of airports shut down • North Africa, Middle East, Eastern and Western Europe • Continued erupting for 14 months last time • Oil Spill in Gulf of Mexico • Most dramatic indirect effect could be on shipping

  14. Valuations Target Price: $16.42 Upside: 18% Discount Rate: 10.5% Terminal Growth Rate: 4%

  15. Valuations Target Price: $16 Upside: 12%

  16. Valuations Relative to Industry Relative to Sector *Current P/Book, Trailing P/E, P/Cash Flow, and P/EBITDA ratios are all below the median ratios, signaling that the stock may be at a discount

  17. Trade Balance and UTi

  18. Dollars/Euro & UTi

  19. Dollars/Euro & UTi

  20. Regression Analysis UTi Stock Price = -10.15 + 13.0549($/euro) – 0.15169(US Trade Deficit in Billions) If the euro falls to $1.2 and the deficit increases to -44 billion, UTi’s stock price is estimated to be $12.19 We put little credence in this prediction, as the result is an extrapolation.

  21. Recommendation • SELL all 249 bp of UTi Worldwide • Overall Target Price: $16.50, Current Price: $14 • Upside of 18%, so technically we should HOLD • Down 15% in past week • Increased port, rail, and air freight volumes are limiting available capacity for UTi to purchase and making it more expensive • Natural disasters are increasing the costs and complexity of moving freight • An economic slowdown in Europe (Spain) will leave UTi with excess capacity and losses • Despite the upside, the opportunity cost of holding is high with other industrial stocks performing well

  22. Tyco Electronics

  23. Tyco (TEL) Info • Current Price: 28.15 • Target Price: 37.98 (34.9% upside) • YTD performance: +14.66% • Tyco Electronics is an incredibly diverse company with products ranging from electronic components to undersea telecommunication systems. They design, manufacture and market products for customers in a broad array of industries including automotive; data communication systems and consumer electronics; telecommunications; aerospace, defense and marine; medical; energy; and lighting.

  24. Tyco (TEL) Info • Electronics make up the largest chunk of sales (65%) • 35% of sales from Specialty products, Subsea communications, or network solutions • 2009 sales of $10.5b to expected to increase to $11.95b this year • Majority (45%+) of sales are in US dollars • Beat analysts’ expectations with EPS of $0.65 and increased guidance for Q3 of 2010. • Posted a dividend of $.16 for Q3 of 2010.

  25. DCF

  26. Sensitivity Analysis

  27. Diversification

  28. Capital Spending

  29. Capital Spending

  30. Consumer Spending Vs. TEL

  31. Bollinger Bands

  32. Valuation Ratios • *The predictive value of these ratios is questionable because the company spun off from Tyco International in 2007 Relative To Industry Relative To Sector

  33. What questions do you have? HOLD SELL BUY

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