General Body Meeting 02.24.11
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Agenda
Announcements News Updates Energy Sector Pitch
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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
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African Stock Competition
MICC Team Marshall Verdi Shashwat Samudra Shashank Samala Andrew Freiman
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News Updates
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Global Unrest
Bahrain Libya
Gold above $1,400 Oil above $100
Nomura: Oil $220? Impact on global & US inflation outlook
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Other News
Home prices at 2002 lows Consumer confidence at highest levels
in three years BOE closer to tightening monetary
policy Treasuries head higher
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Silver (Ag)
Source: marketoracle.co.uk/Article26449.html
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SILV
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Causes?
Investment Inflationary concerns
Increase demand Mature electronic industry New uses
Conductive inks Nanotechnology Etc.
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HP Q1 2011 Earnings
Announced Tuesday, Feb 22 Expected EPS: 1.26-1.32 Reported EPS: 1.17 (up 26% YoY)
Share Price Performance After hours Feb 22: from 48.23 to 43.55
(-9.7%) Today (10:00am): 42.99
Key Concerns Weakness in personal computer,
technology service segments First full quarter with new CEO, Leo
Apotheker
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HP Q1 2011 Earnings
Netbook Decline HP has been a leader in netbook sales,
but these have been impacted by tablets (iPad)
HP not yet released their tablet (WebOS) However: tablet expected within weeks,
HP can claim a market share better than in netbooks
Rise in Price of Computer Components Concern that price increases will compress
margins for PC sales Will affect whole industry
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HP Q1 2011 Earnings
Effect of New CEO First full quarter with new CEO,
shareholders are not yet as familiar as they were with Hurd
Concern over Q1 results magnified by general uncertainty around new CEO
Fears may be calmed at ‘analyst day’, March 14
Long-Term Optimism Uptick in IT spending expected 23% blade server revenue growth, 30%
router and switching revenue growth (increasing market share)
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HP Q1 2011 Earnings
Unified Strategy WebOS as a maturing platform receiving
significant attention More likely than Android to match iOS
user experience, consumer-friendlyness WebOS on printers, computers, represents
a strong strategy (Apple has yet to leverage iOS on their own PCs)
Integration of Palm continues to proceed smoothly
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HP Q1 2011 Earnings
Analyst Day – March 14 Serve as a chance to increase familiarity
with new CEO, calm investor uncertainty “If HP can explain the miss, and rebound
trajectory, shares should rebound materially”
Product Announcement – March 14 “The big unveiling” – to show how
diversified product line will become a tremendous strength
Apotheker: HP has major head-start over Apple in terms of leveraging internet services
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HP Q1 2011 Earnings
My Take: HPQ is cheap, 11.63P/E, beaten up over
soft guidance on PC sales, magnified by general unease about CEO and company strategy
Disappointment over netbook sales will fade as tablet sales take over
Unease about CEO, strategy, likely to be directly addressed and resolved on March 14
HP’s method of leveraging WebOS, product diversity, represents a unique strength – Apotheker just needs to sell his vision
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Energy Sector Pitch
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Overview - Vestas Wind Systems
Wind. It Means The World To Us.
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Thesis
Renewable Energy Expected shift in demand from
conventional to renewable sources Established Platform
Growth potential Price-Pressure preparation Regionalization of production
Undervalued Condition
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Vestas
Wind Power Industry
Development, Manufacture, Sale, Marketing, & Maintenance of Wind Power Systems Expertise within
On-Shore Wind Power Systems
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Onshore
Benefits Construction & logistics Integration with electrical grid network Inexpensive operation & maintenance
Challenges Negative visual impact or noise Obstructions – Buildings, mountains, etc.
Established platform within the onshore sector
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Offshore
Benefits More space; wind is stronger and
consistent Higher power outputs per turbine and
more hours spent generating each year Challenges
Logistical & design challenges High cost – Running sub sea cables to
connect to the grid
Offshore sector’s potential is set to be realized
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Growth Potential – Offshore Expertise
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Growth Potential – Offshore Expertise
Design Better corrosion protection Accessibility & safety procedures for service
technicians Highly sophisticated monitoring and control
systems The Vestas Approach
Producing robust turbines which require a minimum amount of maintenance
Estimated offshore market share of 45% at the end of 2010
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Vestas – Current Operations
Supply Only Supply Only – Supply turbines Supply & Supervision – Supply & supervise
installation Supply & Commission – Supply turbines &
manpower Supply & Installation
Cranes, manpower, installation and transportation. Engineering Turnkey Project
Installation plus balance of the plan
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Vestas – Financial Overview
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Financial Overview
Traded on Copenhagen Stock Exchange Current Share Price
172.1 DKK ~ $ 31.80 ~ €23.01 Market Capitalization
38.35 Billion DKK ~ $ 6.58 Billion Market Share
40% - Offshore & Onshore
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Vestas – Copenhagen vs. ADR Traded on PINK sheets – VWDRY.PK PINK Sheets ADR
Average Volume – 147,000 Copenhagen Stock Exchange
Average Volume – 1.1 million
Liquidity Concern Buy on CO; Hedge FX (if necessary since
KR pegged to the Euro)
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Financial Overview
PE Ratio (TTM) 30X compared to the industry ratio of 6X
and the subsector ratio of 12X Sales Growth
5-year average growth rate of 17% Sales (TTM) vs. TTM 1 Year Ago – 36.25%
Current Ratio – 1.25
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Financial Overview
Valuation Discounted Cash Flow
Using Sales Growth of 1.5% meeting management 2011 expectations
Perpetual Sales Growth after for projected sales to be 10 billion at 2015 well under Triple15
Decrease of COGS, % of Sales, by 0.8% in line with management goals
Valuation: €30.39 - €34.83
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Competitive Edge
Management Undervalued Condition Global Presence Regionalized Production Product Differentiation
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Management
Ditlev Engel – President and CEO since 2005 Trying to use his influence to spread global
prevalence Extremely Involved – Turned the company
around in 2005 by traveling the world-visiting all of the managers/employees to find out problems
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Undervalued Condition
Over 2010, 50% of share value has been eroded 52 Week Range – 154.90 DKK to 380 DKK
Despite the stock condition, order-intake was up 182% Positive signal for future because of
change in accounting policies Announced significant orders from China
and Germany for 2011
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Global Presence
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Global Presence
2009 Locations % of Total Sales
Europe / Africa 68
America 21
Asia-Pacific 11
Total 100
2010 Locations % of Total Sales
Europe / Africa 49
America 29
Asia-Pacific 22
Total 100
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Regionalized Production
Production transfer from Europe/Africa to USA and China € 789 million investment in China & US Lowered manufacturing costs & reduced
transport needs Rail transportation – Significantly cheaper solution Outgoing Shipment Expenses – €287 million (2010)
compared to €511 million (2009) Money tied up in inventories in transportation Boosts competitive edge; allows preparation
for future price-pressures
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Product Differentiation
6 MW Turbine Reduce long term cost
of wind energy Greater electricity
generating capacity thanany commercial offshore product.
Of 3045 MW installed in Europe, 1391 are from Vestas & 1357 are from Siemens Will help further leading position in offshore
turbines
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Product Differentiation
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Competitors
Vestas’ two main competitors are GE and Siemens
Technology upscale versus competitors GE Turbine Range – 2.5MW to 4MW
turbines Patents
Vestas has filed a total of 787 wind turbine patents
General Electric has 666 Siemens Wind Power has 242
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Competitive Edge
Supporting Project Finance Reliable and trustworthy partner, could
contribute to the success of customer’s financing by providing business case certainty through proven technology and product reliability.
Regulatory Expertise Every Vestas business unit across the
Americas, Asia and Europe has a specialized policy and regulatory department
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Potential Risks
Protectionism – Asia-Pacific China – Energy consumption increased
82% Heavy investment in Greentech
advocating growth of local companies Starting to understand the shortcomings
of protectionism – makes solutions more expensive, defers measures and pushes up overall costs
Certain technologies just cannot be provided by local companies
VWS has effective regulatory committees with frontline lobbyists
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Potential Risks
Volatility in commodity prices Vestas depends heavily on Steel Rising raw material prices Increase in Demand
Auto Production (and Construction) seems to be getting back on track
Increased demand from EM economies VWS poised to address input price
increases because of cost efficiency measures being set in place presently
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Prospects for Growth
Market value of the sector is expected to increase to $124 billion dollars by 2014 from $75 billion in 2010
China and the EU have both set aggressive targets for cuts in carbon emissions and for output from green energy sources.
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Recommendation
Buy 70 shares at ~ $ 2266 Time Horizon ≥ 2 Years
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Questions?
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Thanks for coming by!
You have 100 coins, 29 of them are heads, rest are tails.
You are BLINDFOLDED. You can reverse any coin.
Your task is to divide this 100 coins into two groups in which there will be the same number of heads.
How would you divide it?