1 / 24

Module 4 &5-Forecasting & DCF

Module 4 &5-Forecasting & DCF. Drew Williams. Basic Facts. Energy technology, project management, and maintenance (97% from oil and gas) Headquarted in Paris, France Revenue = 8.2 Billion Euros 11.5 Billion in Assets Employ 38,000 people in 48 countries 2 Major Segments

wendi
Download Presentation

Module 4 &5-Forecasting & DCF

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. Module 4 &5-Forecasting & DCF Drew Williams

  2. Basic Facts • Energy technology, project management, and maintenance (97% from oil and gas) • Headquarted in Paris, France • Revenue = 8.2 Billion Euros • 11.5 Billion in Assets • Employ 38,000 people in 48 countries • 2 Major Segments • Onshore/Offshore • Subsea—niche area

  3. Customers

  4. 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

  5. Products

  6. Major Acquisitions • Global Industries Ltd. • December 2011 • 100% Ownership • Sub-Sea know-how • Further entry into US and Mexican waters • $1.262 Billion Purchase • Issues • Did not produce 2011 Financials • Solution: Use 2010 financials + Extrapolate 2011 Quarterly Income Numbers

  7. Major Acquisitions • Stone & Webster Process Technologies • Purchase segment from The Shaw Group • Refining and Petroleum Chemicals—diversify • Further enter US Market • $295.3 Million Purchase • Isssues • No Financials for this Segment within Shaw • Purchased a segment of a segment • Different Fiscal Year (August 31 Year End) • The Shaw Group purchased in Feb 2013 • Solution: Input=0, cite as flaw in calculation, rely on group members more heavily

  8. Combined Balance Sheet • Potential Issues: • GAAP vs. IFRS • Synergies • Currency Translation Changes • Different Account Classifications • Does not include a major acquisition

  9. Combined I/S • Potential Issues: • GAAP vs. IFRS • Synergies • Currency Translation Changes • Different Account Classifications • Does not include a major acquisition • Extrapolation of 2011 numbers

  10. Forecasting Step 1: Forecast revenues from estimated sales growth rate Step 2: Forecast EPAT via EPM forecasts Step 3: Forecast NEA via forecasts of EATO

  11. Technip Revenue • Analysis: • Extremely volatile revenue growth • Acquisitions call into questions the validity of the growth numbers • Economic Crisis hit industry hard • Taking average would not help • Conclusion: Not particularly helpful *Assumed 2013 growth rate

  12. Industry Revenue Growth • Analysis: • Difficult to come to a consistent growth value • Different firms have vastly different growth rates in the same year • Firms are far from perfect comparables • Firms much more mature than Technip

  13. Other information sources • Analysts and Market Update from Technip • Analysts predict between 4-13% growth • A lot of revenue for 2014 (60-65%) and 2015 (40-45%) are already contracted • 2013 is predicted to be between 9.2-9.4 Billion • 2014 predicted to be between 10.2-10.4 Billion

  14. Revenue Growth Decision • Growth Rate = 9% • Analysts anticipate at least this amount of growth in the next 2 years • Subsequent years are not as clear • Depends on ability to maintain strong backlog of orders • Revenue easy to forecast in short term

  15. Technip EPM • Analysis • Trending upwards • Trend heavily reliant upon Subsea segment (~15% operating margin vs. ~6-7% for On/Offshore) • Opening new manufacturing facility with expected 15% margins

  16. Industry EPM • Analysis: • Variation amongst firms • SLB most steady • Decline in 2012

  17. Technip Market Update • December 17, 2013 • Increase revenue in Onshore/Offshore and slight increase in margin • Subsea Margins will contract for Q1 2014 • Down to as low as 5% vs. expected 15% • Expected to increase in subsequent quarters • Management explanation: we don’t recognize profit on projects in early stages, lots of projects in early stages • Every question except 1 was about this issue • Management’s Belief: Margins will rise to 15-17% in 2015 due to contract timing and better contracts • Analysts = skeptical, price decreases ~13% upon announcement

  18. EPM Decision • EPM = 7.5% • Upward trending • Will continue if Management is correct • Analysts are very skeptical • Recovery of margins is far from certain • New Manufacturing plant and better contracts should give some recovery

  19. Technip EATO • Analysis • Trending down • Larger they become, less EATO • Recovering this in margins • Capital intensive construction • Increased Investment

  20. Industry EATO • Larger firms have smaller EATO • Technip’s likely to decrease as revenues increase

  21. EATO Decision • EATO = 2.0 • Downward trending • Larger firms have lower EATO • Difficulty keeping this high if expansion continues • More capital investments needed, huge ships needed for subsea growth • Getting more into manufacturing--Brazil

  22. Forecast • Still have questions about Revenue growth (may taper off) • EATO may decline further in future • EPM could increase further if management is correct

  23. DCF Valuation

  24. Questions ?

More Related