manual of ideas 14 presentations
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Selected Session Highlights from Best Ideas 2014
SAHM ADRANGI,PORTFOLIOMANAGER,KERRISDALE CAPITALMANAGEMENT
JONES LANG LASALLE(NYSE: JLL): Industry leader in real estate advisory services. Asset-lite,
service-based business model (roughly 40% of revenue is recurring). Prestigious brand name with
global footprint can attract and retain talent. Leading competitive position in an oligopoly industry (#1
market share in Europe and Asia). One of only two brokerages (C.B. Richard Ellis) with global scale
and full product suite. Financial crisis has allowed JLL to consolidate weaker, regional brokerages.
Ability to reinvest cash flows at attractive ROIs. Roll-up of boutiques provides for continued
compounding (generally preferably to buybacks; pays 78x EBITDA for its deals, translating into
immediate value creation ). Global commercial real estate transaction volume remains 35% below
pre-recession levels. JLLs 14.5x 2014 P/E multiple appears too cheap given its competitive position
and projected earnings growth of 15%+ based on European real estate recovery, a strengthening
U.S. economy, and emerging market growth. Even after deducting revenue contributed from
acquisitions, JLL has grown at a 12% CAGR over the past seven years. Margin expansion opportunity
as JLLs EBITDA margin is ~300bps below CBRE and newly installed, GE-trained CFO may drive
cost efficiencies. Advisory-focused investment banks (Lazard, Evercore, Greenhill) are a decent
comparable and they trade at 22x 2014E P/E versus JLL at 15-16x. At a 22x 2014 P/E multiple,
which, is warranted given JLLs growth prospects, competitive position in a oligopoly market, and
exposure to the emerging markets, JLL would be worth $155 per share, or a 50% increase from the
recent share price. Adrangi's discounted cash flow model yields a $150 per share fair value.
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http://www valueconferences com/2014/01/ideas14 sahm adrangi/
JEFF AUXIER,CHIEF EXECUTIVE OFFICER,AUXIER ASSETMANAGEMENT
LABCORP(NYSE: LH): ~15% share price decline since mid-November provides an opportunity to
buy a compounder in the attractive clinical lab industry and benefit from a shareholder-friendly
management team. Recent concerns about declining volumes and pressures on reimbursement rates
are likely temporary as doctor visits have been delayed due to a slow recovery out of the recession
and uncertainty over health care legislation. But, in time, this will change as patients cannot delay
critical health testing forever (similar to Zimmer's experience over the past few years in knee and hip
replacements). Bigger picture: long runway for demand growth as 10,000 people a day are turning 65
and that age group has historically been the biggest user of lab tests. Also, recent negative Supreme
Court ruling related to competitor Myriad Genetics may provide opportunities for increased volumes
for certain products. LabCorp has historically invested well in technology and relationships with
doctors and through its increasing scale has become the low-cost provider in an effective duopoly
with Quest. Potential for value-enhancing acquisitions as temporary pressures on volumes and
reimbursement rates disproportionately hurt smaller-scale providers. Generating $600+ million ofFCF, which implies a high single digit free cash flow yield. CEO David King has been a disciplined
capital allocator (50% of cash flow has historically gone into buybacks, rest into acquisitions). Since
2002 shares are down from 147 million to 86 million.
http://www.valueconferences.com/2014/01/ideas14-jeff-auxier/
CHRIS CRAWFORD,CHIEF INVESTMENT OFFICER,CRAWFORD FUNDMANAGEMENT
MYRIAD GENETICS (NASDAQ: MYGN): Stock out of favor (~30% decline since November end
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DAVID ROLFE,CHIEF INVESTMENT OFFICER,WEDGEWOOD PARTNERS
EMC(NYSE: EMC): EMC stub valued at just 4-5x earnings, adjusting for VMware stake at market
value (~$30 billion) and net cash (~$8.5 billion), which account for about 75% of EMCs recent market
capitalization. EMC's forward P/E, on a non-adjusted basis, is still only 11.5x. This is too low given
EMC's entrenched ecosystem (services represent ~45% of revenue), sticky customers and
unparalleled distribution (direct sales force). Companys strategy of both R&D and scalable
acquisitions drives competitive product/service offerings. At the recent valuation, the bear case
(current decelerated growth is secular, not cyclical; flash storage and software-defined storage will
cannibalize traditional hard disk drives; public cloud is only a threat and not an opportunity; VMwares
entrenched vSphere gets displaced by Open-Source and Microsofts Hyper-V; and recent premium-
priced acquisitions of Data Domain and Isilon are evidence of lack of internal product development)
has to be so overwhelmingly right as to render EMC a broken growth company. - which Rolfe does
not see materializing. Therefore, the new $6 billion stock buyback should be quite accretive at current
valuation. Rolfe see downside of about 10% to $22 and fair value of $32-35, or 30%+ upside.
http://www.valueconferences.com/2014/01/ideas14-david-rolfe/
JAKE ROSSER,MANAGING PARTNER,COHO CAPITALMANAGEMENT
UCP(NYSE: UCP): One of the cheapest ways to participate in the recovery of the U.S. housing
market. Asymmetric return potential with low downside risk and significant upside. Simple NAV story,a dollar trading for $0.50 based upon undeveloped land. UCP is a hybrid land developer and home
builder focused on high growth western markets with three quarters of operations based in California
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PAUL LOUNTZIS,PRESIDENT,LOUNTZIS ASSETMANAGEMENT
PEPSICO(NYSE: PEP): Potential separation of snacks and beverages businesses to create value
(50%+ upside from recent share price). While investors still think of Pepsico as a beverages business,
the majority of value is in the snacks business, which has better growth prospects than beverages.
While management's willingness to effect a spinoff and an eventual timeframe are difficult to predict,
Lountzis believes Yum! Brands, which was spun-off by Pepsico in 1997, represents a precedent for
spin-off success at the company. Another issue favoring a spin-off is that Frito's volume weakness in
recent years is likely linked to the weakness in the Americas beverages business. Lountzis agrees
with shareholder Trian that the status quo is not a viable long-term option. However, Lountzis prefers
the option of a simple separation of snacks and beverages to the more complex alternative (also
proposed by Trian) of merging Pepsico and Mondelez, followed by a snacks/beverages separation.
Separately, Lountzis also likes the following two preferred stock ideas for income-oriented investors:
USB SERIES F(FRAP), WFC SERIES R(FRAP)
http://www.valueconferences.com/2014/01/ideas14-paul-lountzis/
CHRIS SWASBROOK, PORTFOLIOMANAGER,ELEVATION CAPITALMANAGEMENT
POST HOLDINGS(NYSE: POST): Third-largest cereals business in the U.S. (market share: 10%)
after Kellogg (34%) and General Mills (33%) undergoing a significant, yet still underappreciatedtransformation under hall of fame capital allocator and CEO Bill Stiritz of Ralston Purina fame. A dollar
invested with Bill Stiritz when he became CEO of Ralston Purina was worth $57 nineteen years later.
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peers) due to structural advantages (owns midstream assets; shipper status on pipelines; relationship
with Walmart; small format). This gives the company competitive fuel gross margins while also being
a low-cost provider and making the business less sensitive to oil price swings. Recent insider buying.
Likely year-end portfolio clean-up selling pressure (spin-off). Trading at discount to peers and
absolute sum-of-the-parts value: 7.1x LTM EBITDA-capex (normalized), 7.0x base case CY2014E
EBITDA-capex. Growth opportunity: plans to open 60 stores per year with 200 openings over the next
three years and 400-500 more through 2020 within Walmart network. Equity offers 50%+ near-term
upside. Downside protection: Retail segment real estate worth more than current enterprise value.
Strong balance sheet. Catalysts: 1) sale of non-core ethanol plants; 2) increased appreciation of the
quality of the business and its near-term growth prospects; 3) margin expansion from higher mix of
larger floor plan stores; 4) announcement of dividend or restructuring (conversion to REIT or MLP).
http://www.valueconferences.com/2014/01/ideas14-eric-delamarter/
CHRIS KARLIN,CHIEF INVESTMENT OFFICER,AQUITANIA CAPITALMANAGEMENT
CHIMERA INVESTMENT(NYSE: CIM): Mortgage REIT formed in 2007 and managed by FIDAC, a
subsidiary of Annaly Capital Management. Owns non-agency residential mortgage backed securities.
Why this company might be mispriced: 1) financial statements are not current due to accounting
restatement; 2) potential NYSE delisting resulting from non-current financials; 3) limited
communications with investors; 4) GAAP accounting treatment deviates from cash economics; 5)
priced below $5 per share; and 6) trades with agency mortgage REIT peer group although facingdifferent set of risks and opportunities. Karlin views Chimera as effectively a closed-end bond fund
selling at a deep discount to NAV. Closed-end because of delinquent filer status (which should
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long ways off. In the meantime, investors collect a 4% dividend yield on a debt-free balance sheet.
Earnings growth and multiple expansion are likely due to improving business sentiment in the U.K.,
possible higher utilization of balance sheet, and moving past prior issues (ICM, Sanofi). If, as Olesen
believes, Creston is 30% undervalued (at a low teens fair value earnings multiple), and value
increases 10% per year, a 20% IRR is possible if the stock is fairly valued in three years.
http://www.valueconferences.com/2014/01/ideas14-christian-olesen/
RANDALL ABRAMSON,PORTFOLIOMANAGER,TRAPEZE ASSETMANAGEMENT
MANITOK ENERGY(Canada: MEI): Western Canada oil and gas company trading at $2.15 per
share compared to Abramson's estimated value of $4.50 and growing. Short term noise has created
an opportunity as the recent flow-through financing created an overhang on the stock and the
company revised downward 2013 guidance (due to disappointing third quarter results) related totiming issues and production mix. In addition, the Entice acquisition created uncertainty about the
future direction and the COO left the company. However, management are astute buyers of the stock
and there has been insider buying recently. Currently trading at an enterprise value of $35,000 per
boe/d, 4.5x Q3 annualized cash flow and 2.3x 2014 cash flow guidance. It is also trading at a discount
to its 2012 reported reserve-based NAV per share of $2.84. Value added through 2013 and the
addition of Entice should raise the current NAV to about $3.50. Abramson's private market value
estimate is $5.75 per share in a takeout scenario based on an EV per boe/d of $85,000.
http://www.valueconferences.com/2014/01/ideas14-randall-abramson/
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BEST IDEAS 2014: January 7-8, 2014*
Ideas sorted by company (as compiled by the ValueConferences team)
Price at Close
Instructor Company Ticker 6-Jan-14 Link to Session Recording
Josh Young Austex Oil Australia: AOK AUD 0.15 http://www.valueconferences.com/2014/01/ideas14-joshua-young/
Jean-Pascal Rolandez Bourbon France: GBB 20.08 http://www.valueconferences.com/2014/01/ideas14-jean-pascal-rolandez/
Chris Karlin Chimera Investment NYSE: CIM $3.04 http://www.valueconferences.com/2014/01/ideas14-christopher-karlin/
Christian Olesen Creston UK: CRE 0.95 http://www.valueconferences.com/2014/01/ideas14-christian-olesen/
David Rolfe EMC NYSE: EMC $24.86 http://www.valueconferences.com/2014/01/ideas14-david-rolfe/
Robert Deaton H&R Block NYSE: HRB $28.48 http://www.valueconferences.com/2014/01/ideas14-robert-deaton/
Sahm Adrangi Jones Lang LaSalle NYSE: JLL $102.79 http://www.valueconferences.com/2014/01/ideas14-sahm-adrangi/
Jeff Auxier LabCorp NYSE: LH $90.35 http://www.valueconferences.com/2014/01/ideas14-jeff-auxier/
Randall Abramson Manitok Energy Canada: MEI CAD 2.12 http://www.valueconferences.com/2014/01/ideas14-randall-abramson/
Eric DeLamarter Murphy USA NYSE: MUSA $41.78 http://www.valueconferences.com/2014/01/ideas14-eric-delamarter/
Chris Crawford Myriad Genetics Nasdaq: MYGN $21.03 http://www.valueconferences.com/2014/01/ideas14-chris-crawford/
Paul Lountzis Pepsico NYSE: PEP $82.28 http://www.valueconferences.com/2014/01/ideas14-paul-lountzis/
Chris Swasbrook Post Holdings NYSE: POST $49.50 http://www.valueconferences.com/2014/01/ideas14-chris-swasbrook/Jake Rosser UCP NYSE: UCP $14.50 http://www.valueconferences.com/2014/01/ideas14-jake-rosser/
The Manual of Ideas - Top Ideas from Best Ideas 2014 Issue: Best Ideas 2014 Issue (click on link below, then look in right sidebar)
The Manual of Ideas Harvest Natural NYSE: HNR $4.54 http://www.valueconferences.com/events/ideas14/
The Manual of Ideas Strayer Education Nasdaq: STRA $35.18 http://www.valueconferences.com/events/ideas14/
The Manual of Ideas Weight Watchers NYSE: WTW $31.89 http://www.valueconferences.com/events/ideas14/
* Discla imer:
The content presented here is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. The content is distributed for informational purposes only and should not be
construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the
accuracy, completeness, or results obtained from any information set forth here. BeyondProxys officers, directors, employees, principals and/or contributing authors may have positions in and may,
from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein. This summary is meant in no way to limit or otherwise circumscribe the full scope and
effect of the complete Terms of Use available at: http://www.beyondproxy.com/terms/
http://www.valueconferences.com/2014/01/ideas14-joshua-young/http://www.valueconferences.com/2014/01/ideas14-jean-pascal-rolandez/http://www.valueconferences.com/2014/01/ideas14-christopher-karlin/http://www.valueconferences.com/2014/01/ideas14-christian-olesen/http://www.valueconferences.com/2014/01/ideas14-david-rolfe/http://www.valueconferences.com/2014/01/ideas14-robert-deaton/http://www.valueconferences.com/2014/01/ideas14-sahm-adrangi/http://www.valueconferences.com/2014/01/ideas14-jeff-auxier/http://www.valueconferences.com/2014/01/ideas14-randall-abramson/http://www.valueconferences.com/2014/01/ideas14-eric-delamarter/http://www.valueconferences.com/2014/01/ideas14-chris-crawford/http://www.valueconferences.com/2014/01/ideas14-paul-lountzis/http://www.valueconferences.com/2014/01/ideas14-chris-swasbrook/http://www.valueconferences.com/2014/01/ideas14-jake-rosser/http://www.valueconferences.com/events/ideas14/http://www.valueconferences.com/events/ideas14/http://www.valueconferences.com/events/ideas14/http://www.valueconferences.com/events/ideas14/http://www.valueconferences.com/events/ideas14/http://www.valueconferences.com/events/ideas14/http://www.valueconferences.com/2014/01/ideas14-jake-rosser/http://www.valueconferences.com/2014/01/ideas14-chris-swasbrook/http://www.valueconferences.com/2014/01/ideas14-paul-lountzis/http://www.valueconferences.com/2014/01/ideas14-chris-crawford/http://www.valueconferences.com/2014/01/ideas14-eric-delamarter/http://www.valueconferences.com/2014/01/ideas14-randall-abramson/http://www.valueconferences.com/2014/01/ideas14-jeff-auxier/http://www.valueconferences.com/2014/01/ideas14-sahm-adrangi/http://www.valueconferences.com/2014/01/ideas14-robert-deaton/http://www.valueconferences.com/2014/01/ideas14-david-rolfe/http://www.valueconferences.com/2014/01/ideas14-christian-olesen/http://www.valueconferences.com/2014/01/ideas14-christopher-karlin/http://www.valueconferences.com/2014/01/ideas14-jean-pascal-rolandez/http://www.valueconferences.com/2014/01/ideas14-joshua-young/ -
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CONFIDENTIAL INVESTOR PRESENTATION
Manual of Ideas: Best Ideas 2 14January 2014 Kerrisdale Capital Management, LLC
1212 Avenue of the Americas, 3rd Floor
New York, NY 10036
Tel: 212.792.7999Fax: 212.531.6153
Email: [email protected]
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Page 1/ Confidential
Jones Lang LaSalle (NYSE:JLL)
Industry leader in real estate advisory services
Transaction-based: Leasing, capital markets, and property development
Recurring: Property management, advisory (valuation/consulting), and investment management
Operations in 1,000 locations spanning 70 countries
Leading competitive position in Asia and Europe
Source: August 2013 Investor Presentation
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Page 2/ Confidential
Asset-lite, service-based business model
Roughly 40% of revenue is recurring
Prestigious brand name with global footprint can attract and retain talent
Leading competitive position in an oligopoly industry
One of only two brokerages (C.B. Richard Ellis) with global scale and full product suite
Financial crisis has allowed JLL to consolidate weaker, regional brokerages
Global commercial real estate transaction volume remains 35% below pre-recession levels
$500m expected in 2013 versus $758m in 2007
Industry cap rates have largely priced in future interest rates increases
14.5x 2014 P/E, mid-single digit FCF yields, and projected earnings growth of 15%+
JLL will benefit from a recovery in EMEA transaction volume, a falling U.S. unemployment
rate, and long-term exposure to emerging market growth
Margin Expansion Opportunity
JLLsEBITDA margin is ~300bps below itsclosest competitor, CBRE
Newly installed, GE-trained CFO may drive cost efficiencies
Investment Highlights
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Page 3/ Confidential
Modest valuation relative to growth expectations
JLLs14.5x 2014 P/E multiple appears too cheap given its competitive position
European real estate recovery, a strengthening U.S. economy, and emerging market growth
should lead to 15 20% EPS growth for the next few years
Capitalization & Multiples Financial Statistics
Fiscal Year End Dec 31st 2009 2010 2011 2012 LTM
Share Price (US$) $102.63 Americas $1,032.7 $1,261.2 $1,525.3 $1,746.7 $1,850.3
Diluted Shares 45.2 EMEA 646.5 728.8 973.7 1,048.9 1,165.3
Market Cap $4,635.1 % Growth (25.8%) 12.7% 33.6% 7.7% 28.8%
Add: Debt 815.6 Asia Pacific 541.2 678.5 816.5 875.6 933.7
Add: Deferred Obligations 130.3 Invest Mgmt 260.2 245.5 275.5 285.4 275.5
Less: Cash (119.7) Corporate 11.4 (6.4) (23.9) (23.9)
Enterprise Value $5,461.3 Total Revenue $2,480.3 $2,925.5 $3,584.9 $3,932.8 $4,200.9
% Growth (8.0%) 17.9% 22.5% 9.7% 9.6%
Trading Multiples
EV / LTM EBITDA $475.8 11.5x EBITDA(1) $238.6 $336.8 $394.9 $436.2 $475.8
EV / 2014E EBITDA 530.6 10.3x Capex (44.2) (47.6) (91.5) (94.8) (95.1)
LTM P/E $5.62 18.3x EBITDA - Capex $194.3 $289.1 $303.4 $341.4 $380.7
2014E P/E 7.07 14.5x EPS(2) $1.75 $3.77 $4.83 $5.48 $5.62
2015E P/E 8.08 12.7x ROE 5.7% 11.3% 13.2% 13.5% 13.0%
Source: JLL Corporate Filings
(1) Excludes non-recurring restructuring and acquisition costs
(2) Excludes non-recurring and intangible amortization expense
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Page 4/ Confidential
Top-Tier brand with leading position in Europe and Asia
JLL's Holds Leading Market Share in Europe and Asia
2010 2011 2012 LTM
Americas Revenue
Jones Lang LaSalle $1,261.2 $1,525.3 $1,746.7 $1,850.3
C.B. Richard Ellis 3,217.5 3,673.7 4,103.6 4,393.1
Europe Revenue
Jones Lang LaSalle $728.8 $973.7 $1,048.9 $1,165.3
C.B. Richard Ellis 936.6 1,076.6 1,031.8 1,141.9
Asia Revenue
Jones Lang LaSalle $678.5 $816.5 $875.6 $933.7
C.B. Richard Ellis 669.9 788.8 817.2 866.1
#1 market share inEurope and Asia
Lipsey's Commercial Real Estate Brand Survey
Firm 2013 2012 2011 2010 2009
C.B. Richard Ellis (CBRE) 1 1 1 1 1
Jones Lang LaSalle 2 3 3 3 4
Colliers 2 2 2 2 3
Cushman & Wakefield 3 4 4 2 2
Newmark Grubb Knight Frank 4 5 5 6 5
Cassidy Turley 5 7 8 8 9
Source: Lipsey Commercial Real Estate Training
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Page 5/ Confidential
Global real estate transaction volume continues to recover
Transaction volume remains 35% below pre-recession levels
$500m expected in 2013 versus $758m in 2007
JLL expects global transaction volumes to grow by 10% in 2014
Source: JLL Q4 2013 Market Perspectives
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Page 6/ Confidential
European volumes are accelerating
Source: JLL Q4 2013 Market Perspectives
EMEA transaction volume grew 31% in Q3 2013
JLL's EMEA Division is Under-Earning
2008 2009 2010 2011 2012 LTM
Americas
Revenue $933.0 $1,032.7 $1,261.2 $1,525.3 $1,746.7 $1,850.3
EBITDA 115.0 134.0 184.0 201.0 210.0 214.1
% Margin 12.3% 13.0% 14.6% 13.2% 12.0% 11.6%
EMEA
Revenue $870.8 $646.5 $728.8 $973.7 $1,048.9 $1,165.3EBITDA 50.0 11.0 38.0 57.0 75.0 95.7
% Margin 5.7% 1.7% 5.2% 5.9% 7.2% 8.2%
Asia
Revenue $536.2 $541.2 $678.5 $816.5 $875.6 $933.7
EBITDA 18.0 44.0 62.0 70.2 78.0 79.6
% Margin 3.4% 8.1% 9.1% 8.6% 8.9% 8.5%
JLLsEMEA business should experience operating leverage as it grows
Source: Company filings
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Page 7/ Confidential
Industry consolidation has favored the largest competitors
The 2009 financial crisis led to an industry reshuffling
Grubb & Ellis, formerly a Top-5 firm, filed for bankruptcy in February 2012 and merged with
Knight Frank in April 2012
Poorly positioned middle-market brokers have lost market share
Full product-suite model has cost advantages over boutiques
Transitionally-oriented boutiques (HFF, Eastdil Secured, Marcus & Millichap, etc.) generally
dontoffer property management and leasing services
JLL can underbid on transactional fees in order to win recurring property management
business and long-term client relationships
Along with CBRE, JLL is the only firm with a truly global footprint
Real estate is a local business, and global clients demand expertise in various geographies
Representatives for multi-million dollar transactions are risk-averse
Harder to be fired for hiring a top-tier brand like JLL or CBRE
The real estate services business has evolved more and more into two models, the global model where you have mulitiple service
lines and very broad geography to service clients around the globeThen you have the niche models. Anything in the middle is hard
because either youre competing against a global company with clout and infrastructure or a niche player who does a single job in a
single location better than anyone.Cushman & WakfieldsCEO (March 2012)
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Page 8/ Confidential
Ability to reinvest cash flows at attractive ROIs
JLL has taken advantage of the crisis by investing in growth
55% of earnings have been reinvested into acquisitions over the past three years
Roll-up of boutiques provides for continued compounding (generally preferably to buybacks)
Generally pays 7 8x EBITDA for its deals, translating into immediate value creation
Acquisitions have translated into robust growth over the past three years
13% revenue and 18% EPS 3-year CAGR expected in 2013
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Page 9/ Confidential
Long-term Organic Growth CAGR
Even after deducting revenue contributed from acquisitions, JLL has grown at a 12%
CAGR over the past seven years
This compares favorably against 16% total revenue growth
JLL's Organic Growth (Illustrative)
2005 2006 2007 2008 2009 2010 2011 2012
Total Revenue $1,390.6 $2,013.6 $2,652.1 $2,697.6 $2,480.7 $2,925.6 $3,584.5 $3,932.8
% Revenue CAGR 16.0%
Inorganic Revenue Contribution2006 - Spauling & Slye ($150m) 97.3
2007 - 13 bolt-on deals 151.0
2008 - 15 Deals incl. Staubach 386.0
2009 - No acquisitions
2010 - No acquisitions
2011 - King Sturge ($350m) 197.0
2012 - 4 deals ($16m) 8.0
Implied Organic Revenue $1,390.6 $1,916.2 $2,403.7 $2,063.2 $1,846.4 $2,291.3 $2,753.2 $3,093.5
% Organic Growth 37.8% 25.4% (14.2%) (10.5%) 24.1% 20.2% 12.4%
% Organ ic CAGR 12.1%
Source: Company filings, press releases, CapitalIQ
(1) Based on management's estimate of 7% growth contribution for H1 2006
(2) Management indicated that M&A added 5-10% to 2007 growth
(3) Deals contributed $193m to 2008 revenue, and we annualized that figure since Staubach closed in July 2008
(4) Undisclosed. We assume that JLL paid 2x revenue
(1)
(2)
(4)
(3)
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Page 10/ Confidential
New CFO may improve JLLs cost structure
JLLsconsolidated EBITDA margins remain 300 bps below CBRE
Christie Kelly, former CFO of Duke Realty and a 20-year veteran of General Electric, joined
as JLL as the CFO in May 2013
Margin expansion is one of Ms. Kellystop priorities
Begun to exit unprofitable segments (e.g. closure of U.K. branch offices, sale of Swedish
asset management business, etc.)
Will introduce new internal productivity measures to balance growth versus profitability
6%
8%
10%
12%
14%
16%
18%
2005 2006 2007 2008 2009 2010 2011 2012 LTM
C.B. Richards Jones Lang LaSalle
Comparative EBITDA Margins
300bps gap
Source: Company filings
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Page 11/ Confidential
Interest rate risks are overblown
Average U.S. cap rates are 6.5% - 7.0%, representing a 400bps spread to 10-yr treasuries
This wide spread reflects a well-choreographed expectation of higher interest rates
Source: HFF Q3 2013 report
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Page 12/ Confidential
Transaction activity is more dependent on a strengthening economy
Indicators such as GDP growth, unemployment rate, and the health of capital markets are
more predictive of transaction volumes
Leasing, in particular, is highly correlated to the unemployment rate
Leasing revenue, representing 32% of JLLs business, has lagged the transactional
segments on high E.U. and U.S. unemployment
Source: HFF Q2 2013 report
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Page 13/ Confidential
JLL is under-covered by Wall Street
$5bn business covered by a small hand-full of analysts
J.P. Morgan and Barclays are the sole bulge bracket analysts
Business model mismatch: J.P. Morgansanalyst covers the REIT industry
The sellside focuses on relative rather than absolute valuation
Relative valuation is not applicable when an entire sector becomes cheap
Moreover, a direct comparison to CBG fails to capture JLLs exposure to a European
recovery, long-term Asian growth, and margin expansion opportunity
Source: Bloomberg
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Page 14/ Confidential
We believe JLL should trade at a premium to the S&P
Advisory-focused investment banks are a decent comparable
Business posses robust capital efficiency, strong brand names, and minimal principal risk
At a 22x 2014 P/E multiple, JLL would be worth $155/share, or a 50% increase from the
current share price
We believe a 20x 25x P/E is warranted given JLLsgrowth prospects, competitive position
in a oligopoly market, and exposure to the emerging markets
A European real estate recovery, a strengthening U.S. leasing market, and growth in Asia
should drive consistent EPS growth of 15 20%+
Valuation Capital Efficiency
LTM EV / LTM 2014 LTM LTM
Mkt Cap EV EBITDA P/E P/E ROA ROE
Investm ent Bank s
Lazard 5,765 n.a. n.a. 25.1x 18.5x 3.6% 14.5%
Evercore 2,175 n.a. n.a. 37.0x 21.4x 7.2% 14.6%
Greenhill 1,726 1,737 21.5x 37.3x 25.8x 12.2% 15.3%
Average 33.2x 21.9x 7.7% 14.8%
Global CRE Brok ers
Jones Lang LaSalle $4,635 $5,461 11.5x 18.3x 15.5x 6.0% 13.0%
C.B. Richard Ellis $8,735 $10,253 10.4x 21.1x 16.1x 6.3% 21.6%
Sources: Company filings, CapitalIQ
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Page 15/ Confidential
An illustrative discounted cash flow model yields a $150 fair valueHistorical Est Illustrative Kerrisdale Projections Term Value
($ in Millions) 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E 2019E
Americas $1,525.3 $1,746.7 $1,921.4 $2,113.5 $2,324.9 $2,510.8 $2,661.5 $2,821.2
% Growth 20.9% 14.5% 10.0% 10.0% 10.0% 8.0% 6.0% 6.0%
EMEA 973.7 1,048.9 $1,206.2 $1,387.2 $1,595.2 $1,754.8 $1,895.2 $1,971.0% Growth 33.6% 7.7% 15.0% 15.0% 15.0% 10.0% 8.0% 4.0%
Asia 816.5 875.6 $945.6 $1,002.4 $1,082.6 $1,212.5 $1,358.0 $1,520.9
% Growth 20.3% 7.2% 8.0% 6.0% 8.0% 12.0% 12.0% 12.0%
Investment Mgmt + Corp 269.1 261.5 $253.7 $261.3 $269.1 $277.2 $285.5 $294.1
% Growth 4.7% (2.8%) (3.0%) 3.0% 3.0% 3.0% 3.0% 3.0%
Total Revenue $3,584.6 $3,932.7 $4,326.9 $4,764.3 $5,271.8 $5,755.3 $6,200.1 $6,607.1 $6,572.1
% YoY Growth 22.5% 9.7% 10.0% 10.1% 10.7% 9.2% 7.7% 6.6% 6.0%
EBITDA $396.5 $437.5 $484.6 $571.7 $685.3 $805.7 $930.0 $991.1 $985.8
% Margin 11.1% 11.1% 11.2% 12.0% 13.0% 14.0% 15.0% 15.0% 15.0%EBIT $313.7 $358.7 $397.9 $476.2 $579.7 $690.4 $805.8 $858.7
Less: Taxes (25% Rate) (78.4) (89.7) (99.5) (119.1) (144.9) (172.6) (201.4) (214.7)
Net Operating Profit After Tax $235.3 $269.0 $298.4 $357.2 $434.8 $517.8 $604.3 $644.0
Add: Depreciation & Amortization $82.8 $78.8 $86.7 $95.5 $105.6 $115.3 $124.2 $132.4
Less: Capital Expenditures (excl M&A) (91.5) (94.8) (100.0) (118.2) (127.0) (138.7) (149.4) (159.2)
Less (Add): Changes in Working Cap (99.5) (7.7) (34.1) (37.9) (43.9) (41.9) (38.5) (35.2)
Free Cash Flow $127.1 $245.3 $251.0 $296.6 $369.5 $452.6 $540.7 $582.0
Discount Factor (10% Discount Rate) 0.95 0.87 0.79 0.72 0.65 0.59
Exit EBITDA Multiple 10.0x
Implied Terminal Value $9,858.2
Discounted Terminal Value $5,836.3
Add: Discounted Forecast Period Cash Flows 1,726.0
Less: Existing Net Debt (826.2)
Discounted Cash Flow Valuat ion $6,736.1
/ Diluted Shares Outstanding 45.2
Fair Value per Share $149.15
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Wall
Streets
Clouded
View
on
EMC
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EMC:The
Alphabet
Soup
of
Data
InformationStorage70%ofrevenues. Virtualization23%of Products(Hardware&Software)55%ofRevenues. Services4revenues.
GrossProfitSplit: 65%Storage&31%Virtualization. EMCsAlphabetSoupofProducts(AGeeksWonderland): StoNetwork(SAN),NetworkAttachedStorage(NAS),DirectAttac(DAS),VirtualSAN,AllFlashXtremIO,Atmos,Avamar,,DataDIsilon,Pivotal,ViPRSoftwareDefinedStorgae,VMAX,VNX(CeCLARiiON),VNXe,VPLEX,VSPEX.
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The
Bear
Case
EMCscurrentdeceleratedgrowthissecular,notcyclical.Flash
storage
and
software
defined
storage
will
cannibalize
trharddiskdrives.
Publiccloudisonlyathreat(andnotanopportunity)thatdisintermediatesITspendfrombothEMC(hardware)andVM
(software).
VMwaresentrenchedvSpheregetsdisplacedbyOpenSourceMicrosoftsHyperV.
Recent
premium
priced
acquisitions
of
Data
Domain
and
Isiloevidenceoflackofinternalproductdevelopment.
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ValuationandTheBullCase
EMCforwardP/Eonly11.5X. EMCstubvaluedatjust45XeVMwarestake($30billion)andnetcash($8.5billion)accoun
EMCs
market
cap
($51
billion).
TheBearCasehastobesooverwhelmingrightastorenderEbrokengrowthcompany.
Given
the
Companys
entrenched
ecosystem,
sticky
customersunparalleleddistribution(directsalesforce)keynewproducPivotal(theAndroidoperatingsystemofcloudcomputing),andViPRshouldrampupquicklyinthehundredsofmillions
Companys
new
$6
billion
stock
buyback
quite
accretive
at
cuvaluation.
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The information and statistical data contained herein have been obtained from sources,whic
reliable,but
in
no
way
are
warranted
by
us
to
accuracy
or
completeness.
We
do
not
undertake
to
a
changeinfiguresorourviews.Thisisnotasolicitationofanyordertobuyorsell. We,ouraffiliadirectororstockholderoranymemberoftheirfamilies,mayhaveapositioninandmayfromtimorsellanyoftheabovementionedorrelatedsecurities. Pastresultsarenoguaranteeoffutureres
Thisreportincludescandidstatementsandobservationsregardinginvestmentstrategies,individeconomicandmarketconditions;however, there isnoguarantee that thesestatements,opinioprovetobecorrect. Thesecommentsmayalsoincludetheexpressionofopinionsthatarespecul
shouldnot
be
relied
on
as
statements
of
fact.
WedgewoodPartnersiscommittedtocommunicatingwithourinvestmentpartnersascandidlyawebelieveourinvestorsbenefitfromunderstandingourinvestmentphilosophy,investmentprocmethodologyand investortemperament. Ourviewsandopinionsincludeforwardlookingstateormaynotbeaccurateover the long term. Forwardlookingstatementscanbe identifiedbywthink, expect, anticipate, or similar expressions. You should not place undue reliance o
statements,
which
are
current
as
of
the
date
of
this
report.
We
disclaim
any
obligation
to
update
orlookingstatements,whetherasaresultofnewinformation,futureeventsorotherwise. Whilewreasonable basis for our appraisals and we have confidence in our opinions, actual results may dif
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Fat Pitch Capital, LP
"... we try to exert a Ted Williams kind of discipline. In his book The Science ofHitting, Ted explains that he carved the strike zone into 77 cells, each the size
of a baseball. Swinging only at balls in his "best" cell, he knew, would allow him
to bat. .400; reaching for balls in his "worst" spot, the low outside corner of thestrike zone, would reduce him to .230.
In other words, waiting for the Fat Pitch would mean a trip to the Hall of Fame;swinging Indiscriminately would mean a ticket to the minors."
Warren Bu ffet
Robert W. Deaton, CFA
Managing PartnerFat Pitch Capital, LP
1355 Greenwood Cliff, Suit #150Charlotte, NC 28204
T# +980-207-0252Cell# +704-996-0828
R. J. Meurer, Jr.
Managing PartnerFat Pitch Capital, LP
1355 Greenwood Cliff, Suit #150Charlotte, NC 28204
T# +781-452-7365Cell# +781-812-3407
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High Percentage Idea for Manual of Ideas Conference 2014
THE
MANUALOF
IDEAS
TM
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Our high percentage idea for 2014 is H&R Block. The companys
stock looks good when viewed through the prism of our checklist.
The Fat Pitch Capital Checklist:
Durable competitive advantage with fortress balance sheet
High returns on invested capital with low capital intensity
Shareholder oriented management team
A price that affords a margin of safety
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Durable competitive advantage
World's largest tax preparer
12,000 offices with 80,000 tax professionals
98% brand awareness(similar to Coca-Cola, McDonalds and Walmart)
Over 25 million tax returns filed in 2013
Industry leading client retention
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Fortress Balance Sheet
No net debt
Foolish flow ratio:
(current assets - cash) / current liabilities = 26.18%
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High returns on invested capital with low capital intensity:
ROA (TTM): 11.9%*
ROE (TTM): 51.8%*
Cap-ex as % of revenue: 4%
*Source: Morningstar
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Shareholder oriented management team:
William Cobb became CEO in May 2011
Streamlined operations
Shareholder friendly capital allocationFY 2012Dividends $200 millionShare Repurchases: $200 million
FY 2013Dividends: $217 millionShare repurchases: $315 million
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H & R Block in 2011
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H & R Block Today
Tax Preparation Assisted Online, Mobile, Desktop International
Financial Services Emerald Prepaid Debit Card
Refund Transfer Emerald Advance Line of Credit Peace of Mind
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A price that provides a margin for safety:
Rev 2900
Ebitda margin 0.3
Ebitda 870
Cap ex% 0.04
Cap ex 116
Taxes 214
FCF 540
FCF yield 7%
Shares outstanding 274
Market price 29.53
Market cap 8,091
Net cash 285
Enterprise value 7,806
Free Cash Flow 540
FCF yield 7%
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Price Target
Target price = $38, based on 5% FCF yield
Current price = $29.28
Discount to estimated intrinsic value = 30%
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Potential catalysts and opportunities
Sell bank
Affordable Care Act expands market byapproximately 24 million
Online returnsgrowing faster thanleading competitors
Tax plus: Continued growth of Emerald Debit Card
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HR Block = Fat Pitch
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M U R P H Y U S A I N C . ( N Y S E : M U S A )
B E S T I D E A S 2 0 1 4
Half Moon Capital
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2
Half Moon Capital
DisclaimerHalf Moon Capital, LLC (HMC)is not providing investment advice through this material. This presentationis provided for informational purpose only as an illustration of HMCsinvestment philosophy and shall not beconsidered investment advice or a recommendation or solicitation to buy or sell any securities discussedherein. As of the date of this presentation HMC continues to own the securities discussed herein. Theseopinions are not intended to be a forecast of future events, a guarantee of future results, or investment advice.Past performance is not indicative of future results, and no representation or warranty, express or implied, ismade regarding future performance.
HMC or its affiliates may engage in securities transactions that are inconsistent with this communication andmay have long or short positions in such securities. The information and any opinions contained herein are asof the date of this material, and HMC does not undertake any obligation to update them. Informationcontained in this presentation has been obtained from sources which we believe to be reliable, but we do notmake any representation as to its accuracy or its completeness and it should not be relied on as such.
This material does not take into account individual client circumstances, objectives, or needs and is notintended as a recommendation to any person who is not a client of HMC. Securities, financial instruments,products or strategies mentioned in this material may not be suitable for all investors. HMC does not providetax advice. Investors should seek tax advice based on their particular circumstances from an independent taxadvisor.
In reaching a determination as to the appropriateness of any proposed transaction or strategy, clients shouldundertake a thorough independent review of the legal, regulatory, credit, accounting and economicconsequences of such transaction in relation to their particular circumstances and make their ownindependent decisions.
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3
Half Moon Capital
Overview
Launched July 1, 2011
Classic value-oriented investment partnership in the spirit of BenjaminGraham and the original Buffett Partnership
Focused on equity securities in less efficient areas of the market Intensive research driven investment process
Concentrated portfolio of best ideas
Goal: Consistent, positive returns compounded over the longer-term
Top 10 performance in 2012 and YTD 2013 in long-bias hedge fund category*
*Per Barclay Hedge rankings
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4
Half Moon Capital
Investment Philosophy
Value: Trading price significantly divergent from intrinsic value
Technical and behavioral dynamics lead to inefficiencies in the near and medium-term
Disconnects create asymmetrically skewed risk/ return opportunities
Emphasis on margin of safety for downside protection
Selectively contrarian mindset
Unbiased analysis of overlooked and out-of-favor companies
Generalist approach
Flexible mandate to look across all industries and sectors for the most appealing opportunities
Concentrated fund of high conviction ideas Deep knowledge of each situation provides an edge and mitigates risks
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5
Half Moon Capital
Sources of Opportunity
Small and mid-capitalization companies
Frequently neglected or lack institutional following ($300M - $5B market capitalization)
Out-of-favor and misunderstood companies
Structural shifts in company and industry dynamics Market overreaction to a large, but solvable challenge
Special situations
Corporate actions and market events create mis-pricings
Perceived complexity or lack of easily accessible information causes investor aversion
Spin-offs, post-reorg equities, stressed/distressed, demutualizations, merger securities, recaps, etc.
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6
Half Moon Capital
Investment Strategy and Process
Identify mispriced securities
- Idea generation: Systematic screens, news media, recurring situations, personal network, etc.
Evaluate reason for the mispricing through intensive research- Assess fundamentals: FCF generation, earnings quality, ROIC and asset value relative to price- Public filings, primary calls, management, trade publications, etc.
Find catalysts that may lead to value realization
Size Position
- Particular consideration to conviction/ edge, liquidity, leverage and market/ sector exposure
Closely monitor and track
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7
Half Moon Capital
Eric DeLamarter - Curriculum Vitae
Prior to founding Half Moon Capital in 2010, Eric DeLamarter earned an M.B.A.from The Heilbrunn Center for Graham & Dodd Investing at Columbia BusinessSchool, with a concentration in applied value investing. While attending ColumbiaBusiness School, Eric was a research analyst at Stelliam Investment Management,
a value-oriented hedge fund, where he focused on identifying and evaluatinginvestment opportunities across various sectors. Prior to Columbia BusinessSchool, from 2006 to 2008, Eric was an associate at Lineage Capital, LLC, amiddle-market private equity fund, where his responsibilities included evaluatingand structuring leveraged buyouts. From 2003 to 2006, Eric was an investmentbanking analyst at RBC Capital Markets and during 2001, Eric was an equityresearch summer associate at Merrill Lynch. Eric earned a B.A. in history from theUniversity of Michigan in 2002.
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Half Moon Capital
Murphy USA Inc. (NYSE:MUSA)
8
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9
Murphy USA (MUSA)
Summary Gas stations adjacent Walmart
Misunderstood business model
Obscured fundamentals
Underappreciated return and growthprofile
Overstated risks
Insider buying
Several catalysts
+50% upside
30.00
32.00
34.00
36.00
38.00
40.00
42.00
44.00
46.00
48.00
Aug-13
Aug-13
Sep-13
Sep-13
Sep-13
Oct-13
Oct-13
Oct-13
Nov-13
Nov-13
Nov-13
Dec-13
Dec-13
NYSE:MUSA - Share Price
Note: Net debt includes $131 net proceeds from 12/17 sake if ND ethanol plant
Current Trading Statistics
(USD in Millions)*
Ticker NYSE:MUSA Net Debt / LTM EBITDA 0.7x
Date 12/27/2013
52-Week Range $46.91 - $36.12 EV / LTM EBITDA 5.9x
Stock Price $41.88 EV / 2014 EBITDA 6.4x
Shares Out. (Basic) 47.0 EV / LTM EBITDA - capex 6.3x
Market Cap $1,968.4 EV / 2014 EBITDA - capex 7.0x
Net Debt $249.0
Enterprise Value $2,217.4
Earnings Yield (LTM EBIT/EV) 13.9% EV / LTM FCF 9.5x
Earnings Yield (2014 EBIT/EV) 12.2% EV / 2014 FCF 10.4x
FCF Yield (LTM FCF/EV) 10.5%
FCF Yield (2014 FCF/EV) 9.6%
ROIC (LTM) 28.4%Float 95.6% Target Price $65.00
Short Interest 8.8% Premium to Current 55.2%
ADTV 20.6
*Except per share data; Note: FCF = EBITDA - capex - cash taxes - chg. WC
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10
Background
Regional owner and operator of small-format retail gas stations Founded in 1996 based on the European kiosk-style gas station in retail parking
lots
Focused on volume sale of retail fuel vs C-store merchandise
1,200 locations in the SE and MW, 85% adjacent to Walmart
Murphy Oil (MUR) Spin-off
Spun-off from $12B market cap E&P and S&P 500 constituent MUR on August19, 2013
Rationale: focus business and unlock value
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11
Murphy USA (MUSA)
Thesis
Consensus erroneously focus on lower margins and consolidated financials (which include volatile,non-core segments that have been sold or are being sold)
Obscured higher EBITDA and FCF, attractive return profile (ROIC 2x peers) and structuraladvantages which make the on-going business less sensitive to oil price swings
Cursory sell-side coverage, wait and see mentality from buy-side
Meaningful recent insider buying; likely year-end portfolio clean-up selling pressure (spin-off)
Trading at significant discount to peers and absolute SOTP value
7.1x LTM EBITDA-capex (normalized), 7.0x base case CY2014E EBITDA-capex
Equity offers +50% near-term upside
Downside protection: Retail segment real estate worth more than current EV
Strong balance sheet
Catalysts
Sale of non-core ethanol plants Estimated after-tax value: $44M-47M
Removes low return, volatile segment and focuses the business
Increased awareness and appreciation for the quality of the business and its near-term growthprospects
Margin expansion from increased composition of larger floor plan stores
Announcement of dividend or restructuring (conversion to REIT or MLP)
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12
Investment Merits: Overview
Operational Advantages1. Own midstream assets
2. Shipper status on pipelines
3. Relationship with Walmart
4. Small format
Result
Maintain competitive fuel gross margins while also being a low cost provider
Lower % margins, but much higher dollar margins at the unit level
More rapidly manage oil price fluctuations Highly scalable business
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13
Investment Merits: Strategic Assets
Fuel Sourcing Advantages Midstream Assets: Owns 6 terminals
Wholesale business (fuel sales toexternal customers)
Priority is to source low cost gas for retailsegment, remainder sold in the market
Consolidated within its retail segment numbersfor competitive reasons
1B gallons were sold wholesale (to externalcustomers) at a 4c per gallon margin in 2012
Shipper status on Colonial pipeline:
Procure gas at lower prices than competitors
Opportunistically sell space on the pipeline whenprices are elevated (as it did in 2012 for 8c agallon rather than sell wholesale at 4c)
Real Estate
Owns +90% of locations
Current Station Sites
Midstream Assets
x
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14
Investment Merits: Walmart Relationship
Walmart Relationship
+10 year relationship
910 of 1,200 MSUA locations with agreement to purchase and build +200 moreover next 3-years
Discount program: 1-3c per gallon customer reward paid by WMT
Walmart card reduces interchange fee Proximity to highly trafficked supercenters supports high volume model
MUSA owned land provides independence
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15
Investment Merits: Unit Economics
Store Metrics
Lower overhead
Lower breakeven
Higher GM/ ft2
Higher EBITDA
ROIC 2x peers Optimized layout
Margins will convergewith its peers asconverts and rolls out
more 1,200 ft2
stores
* NACS 2012 State of the Industry Report; CST, PTRY, CASY, ATD reportingNote:- Existing footprint: 208 ft2 (77% of locations) and 1,200 ft2 (4% of locations). Average size for CASY, CST, PTRY and SUSS is 3,000 ft2- Top Quartile' includes MUSA; 'Large Franchises' is comprised of 28 companies (including MUSA) that each have >500 stores
Unit Economics Comparison (Annual per Store)
($000s, except unit l evel data) MUSA Industry*
208 ft2Layout 1,200 ft
2Layout Average Top Quartile Large Franchises
Capital Costs
Capex - Buildout & Land 1,850 2,100 2,460 2,460 2,460
Capex - Maintenance 26 31 37 43 38
Fuel
Gallons Sold 3,324 3,324 1,526 1,985 1,477
Cents/ Gallon 12.9 12.9 18.1 13.2 17.7
Gross Margin 428 428 267 364 262
Breakeven Margin (Cents/ Gallon) 5.5 5.5 8.5 7.5 5.0
Merchandise (Including Foodservice)
Revenue 1,860 1,980 1,384 1,968 1,626
Revenue/ ft2 8.942 1.650 0.461 0.656 0.542
Gross Margin 242 307 392 632 540
GM%Revenue 13.0% 15.5% 28.4% 32.1% 33.2%
GM/ ft2($s) 1,163 256 131 211 180
Total
Gross Margin 670 735 659 996 801
Overhead (SG&A, CC, etc) 360 360 526 714 593
EBITDA 310 375 132 282 209
EBITDA-Maint. Capex 285 344 95 239 171ROIC 15.4% 16.4% 3.9% 9.7% 6.9%
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16
Investment Merits
Result
Maintain competitive fuel gross margins while also being a low cost provider
Operates at 56% of the average industry operating costs with lower breakeven fuel margins*
Cash breakeven: 6.6c vs 12.1c industry ave
High volume, low cost position leads to lower % margins than its peers, but
much higher dollar margins at the unit level Per store: 50% higher EBITDA and 65% higher FCF per store and 2x the ROIC
More rapidly manage oil price fluctuations
Largest GM drop from 2010-2011 was 34bps vs 300bps for its public peers
Since 2009 fell below cash breakeven only once in Q109
*Per NACS 2013 data
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18
Management
CEO Andrew Clyde
Joined at the spin-off
Formerly downstream industry consultant at Booz & Co.
Strategy consultant to MUSA
Architect of the optimized 1,200ft2format
Insider Ownership
Hold 6% of S/O
Insider purchases
CEO Clyde, 2k shares (12/13-12/16)
Direct Deming, 25k shares (11/25)
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19
Non-core Assets
Ethanol Facilities
Began sale of both plants following the spin-off
Dec. 19: Sold Hankinson, ND plant for $170M, $131M after-tax
130M gallon capacity sold for $1.31/ gallon
Remaining Hereford, TX plant being sold ($47M after-tax value)
105M gallon capacity estimated sale at $0.60/ gallon
Result
Removes non-core, low ROIC, volatile business
Performance drag: Drought in 2012 compressed corn crush for ethanol,
resulting in a $38M hit to MUSA consolidated earnings Proceeds used for debt reduction and future growth capex
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Renewable Identification Numbers (RINs)
Overview
RINs are created by blending ethanol and bio-diesel fuels
Sold in the market (exchange trading started on CME in May) to companiesthat are unable to meet annual quotas as set by the EPA
In 2012 D6 ethanol RINs traded for $0.05-0.10 per gallon
FDAs increasing requirements under Renewable Fuel Standards 2 (RFS2) ledto a spike in RIN prices (ethanol RINs up to $1.45 per gallon in July 2013)
RINs prices currently $0.30
MUSA
RINs created in MUSA Wholesale business (not related to ethanol plants) 15M RINs per month capacity with 100% contribution margin
Normalized EBITDA: $30M per year ($0.25 per RIN, 10M RINs/ month)
http://www.cmegroup.com/trading/energy/refined-products/d6-ethanol-rins-argus-2013_quotes_globex.htmlhttp://www.cmegroup.com/trading/energy/refined-products/d6-ethanol-rins-argus-2013_quotes_globex.html -
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Financial Performance
On-going Retail Business
Excludes: ethanol and refining(divested in 2011)
Strong FCF Profile: Lowmaintenance capex and zero toslightly negative WC
requirements
Financial Performance
($000s)
Revenue 2010 2011 2012 LTM
Petroleum 13,377,841 16,586,845 16,854,985 16,253,824
Merchandise 1,969,220 2,115,567 2,144,347 2,162,496
Other (RINs) 9,042 9,538 11,708 79,954
Total Revenue 15,356,103 18,711,950 19,011,040 18,496,274
Fuel Gross Profit 484,186 625,683 556,668 602,641
Fuel GM 3.6% 3.8% 3.3% 3.7%
Merchandise Expense 1,717,177 1,851,867 1,855,641 1,881,595
Merchandise GM 12.8% 12.5% 13.5% 13.0%
Total Gross Profit 745,271 898,921 857,082 963,496
Total GM 4.9% 4.8% 4.5% 5.2%
Total EBITDA 263,026 374,110 300,448 377,596
Margin 1.7% 2.0% 1.6% 2.0%
EBITDA (ex-RINs) 253,984 364,572 288,740 297,642
Capex
Growth 147,347 48,626 72,895 178,145
Maint. (Including Terminal 29,900 28,890 30,250 23,050
Total Capex 177,247 77,516 103,145 201,195
EBITDA-Maint. Capex 233,126 345,220 270,198 354,546
Less: Chg. WC
Less: Taxes (38%) 81,380 123,618 92,059 121,965
Unlevered FCF 151,746 221,602 178,139 232,581
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Murphy USA (MUSA)
Risks Secular decline in gasoline consumption: MUSAs stations are located in the SE and
MW, regions with a lower adoption of alternative fuel vehicles and limitedtransportation alternatives to cars
Spike in oil prices: low cost sourcing and history of effectively managing throughchallenging pricing environments
Walmart relationship: MUSA is not permitted to sell higher margin prepared foods,but are allowed to sell fountain drinks. WMT also has right of first refusal on thesale of any MUSA land. Mutually beneficial relationship mitigates risk of separation.MUSA owns land limiting WMTs leverage
Downside Protection
Real estate value of retail network greater than current EV Strong balance sheet
Asset base could be a source of liquidity (collateral for an ABL or through sale-leasebacks)
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Valuation
Relative Basis
5.9x EV/ LTM EBITDA, 3-4 turns less than its closest peers
EBITDA-mcapex and EBIT multiple gap even more pronounced
More attractive return profile, growth prospects, competitive advantages andasset-base (terminals, ethanol plants and 90% of store real estate owned)
9-10x LTM EBITDA implies $65-75 per share, 55-80% upside tocurrent ($59-67 per share, 40-60% upside normalized *)
Peer Comparison(US$ in Millions)
LTM LTM EV/ Stores EBITDA/ EBIT/ RE EBITDA Total Fuel Fuel % Capex
EV EBITDA EBIT EBITDA EBITDA-MCapex EBIT (000s) Stores Stores ROIC % Owned Margin GM GM of GM % Rev.
Casey's General Stores, Inc. CASY $3,404 $375 $254 9.1x 11.5x 13.4x 1,749 $214.7 $145.3 16.4% 99% 5.2% 16.5% 14.2% 23% 4.4%
Alimentation Couche-Tard Inc. TSX:ATD.B $17,436 $1,522 $986 10.9x 13.5x 16.7x 5,878 $258.9 $167.8 13.1% 23% 3.7% 12.8% 22.5% 26% 1.5%
CST Brands, Inc. CST $3,368 $399 $277 8.4x 9.4x 12.2x 1,034 $385.9 $267.9 23.0% 61% 3.3% 9.8% 18.8% 47% 1.8%
The Pantry, Inc. PTRY $1,283 $205 $88 6.2x 9.0x 14.6x 1,562 $131.5 $56.2 6.0% 26% 2.9% 11.4% 11.4% 26% 1.0%
Murphy USA Inc. MUSA $2,217 $378 $307 5.9x 6.3x 7.2x 1,179 $320.3 $260.7 28.4% 90% 2.1% 5.8% 12.9% 68% 0.9%
*RINs: 10M gallons/ month x 30c/RIN
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Valuation
Absolute Basis
Good business at a low quality business price
Normalized LTM: 6.6x EV/ EBITDA, 9.0% FCF yield
Normalized 2014: 6.4x EV/ EBITDA, 9.5% FCF yield
Financial Performance
($000s)
Revenue 2010 2011 2012 LTM 2014E 2015EPetroleum 13,377,841 16,586,845 16,854,985 16,253,824 16,994,880 18,338,880
Merchandise 1,969,220 2,115,567 2,144,347 2,162,496 2,427,840 2,619,840
Other (RINs) 9,042 9,538 11,708 79,954 36,000 30,000
Total Revenue 15,356,103 18,711,950 19,011,040 18,496,274 19,458,720 20,988,720
Total Gross Profit 745,271 898,921 857,082 963,496 928,231 992,791
Total GM 4.9% 4.8% 4.5% 5.2% 4.8% 4.7%
Total EBITDA 263,026 374,110 300,448 377,596 346,561 365,121
Margin 1.7% 2.0% 1.6% 2.0% 1.8% 1.7%
EBITDA (ex-RINs) 253,984 364,572 288,740 297,642 310,561 335,121
EBITDA-Maint. Capex 233,126 345,220 270,198 354,546 316,261 332,624
Unlevered FCF 151,746 221,602 178,139 232,581 213,828 223,137
Assumptions:- RINs: 10M gallons/ month x 30c/ RIN; Fuel margin: 13c/ gallon; tax rate: 38%; Ave stores: 1,265 (2014), 1,365 (2015)
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Valuation
Sum-of-the-Parts Analysis
(US$ in Millions)*
Downside Base Upside Notes
MUSA Stores (Core bus iness )
EV/ EBITDA 1,500.0 2,800.0 3,150.0 6x $250M EBITDA, 8x and 9x $350M LTM EBITDA (peers trade 8-10x)
EV/ EBITDA-mcapex 1,840.0 3,200.0 4,160.0 8x $230M, 10x and 13x $320M LTM EBITDA-capex (peers trade 10-13x)
Retail Franchis e As set Value 2,458.0 2,693.8 2,811.7 1,179 x $2.0, $2.2M and $2.3M per owned s tore + $100M term inal as sets
MUSA Current (Average above) 1,932.7 2,897.9 3,373.9
MUSA Growth Plan 210.0 300.0 300.0 200 stores over next 2-3 years, cost $2.1M/ store, 20% IRR
Ethanol Assets
Hankinson, ND 131.0 131.0 131.0 Sold 12/19 for $170M, 130M gallons x $1.31/ gallon ($131M after-tax)
Hereford, TX 44.0 47.0 47.0 105M gallons x $0.50-0.60/ gallon; after tax (acquired in 2010 for $40M)
Total Proceeds - Assets for Sale 175.0 178.0 178.0
Enterprise Value 2,317.7 3,375.9 3,851.9
Total Debt 642.4 642.4 642.4
Total Cash 262.5 262.5 262.5 Excludes proceeds from Hankinson plant sale
Less: Current Net Debt 379.9 379.9 379.9
Equity Value 1,937.8 2,996.0 3,472.0
Equity Value per Share $41.23 $63.75 $73.87 47M shares outstanding
Premium to Current (1.6%) 52.2% 76.4%
*Except per share data
M h USA (MUSA)
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26
Murphy USA (MUSA)
Catalysts
Sale of remaining ethanol plant
Estimated after-tax value: $44M-47M
Removes low return, volatile segment and focuses the business
Increased awareness and appreciation for the quality of the business and itsnear-term growth prospects
Demonstrated stand-alone financial performance
Margin expansion from increased composition of larger floor plan stores
Announcement of dividend or restructuring (conversion to REIT or MLP)
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Half Moon Capital
Appendix
27
M h USA (MUSA) D t il d Fi i l
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Murphy USA (MUSA): Detailed Financials
Notes:- Historically MUSA consolidated financials includedrefining in 2010 (divested in 2011) and ethanol (being sold)
- MUSA does not provide separate financial information forthe wholesale segment for competitive reasons
- Any fluctuations in its financial contribution can beconsidered intercompany since the wholesale businessspurpose is to support retail
- In order to estimate contribution separately from core-retail, wholesale and RIN, retail EBITDA per store isassumed to be is $320k per year and RIN revenue is
assumed to have 100% EBITDA margins
Financial Performance
($000s, except unit level data)
Revenue 2010 2011 2012 LTM
Petroleum 13,377,841 16,586,845 16,854,985 16,253,824
Merchandise 1,969,220 2,115,567 2,144,347 2,162,496
Other (RINs) 9,042 9,538 11,708 79,954
Total Revenue 15,356,103 18,711,950 19,011,040 18,496,274
Fuel Expens e 12,893,655 15,961,162 16,298,317 15,651,183
Fuel Gross Profit 484,186 625,683 556,668 602,641
Fuel GM 3.6% 3.8% 3.3% 3.7%
Merchandis e Expens e 1,717,177 1,851,867 1,855,641 1,881,595
Merchandise GM 12.8% 12.5% 13.5% 13.0%
Total Gross Profit 745,271 898,921 857,082 963,496
Total GM 4.9% 4.8% 4.5% 5.2%
Station Expense 396,053 433,821 447,102 458,464
SG&A 86,192 90,990 109,532 127,436
D&A 55,336 61,136 66,913 70,219
Other 261 449 1,893 2,043
EBIT 207,429 312,525 231,642 305,334
Taxes 81,380 123,618 92,059 121,965
Tax % 39% 40% 40% 40%
EAT 126,049 188,907 139,583 183,369
Total EBITDA 263,026 374,110 300,448 377,596 Includes overhead
Margin 1.7% 2.0% 1.6% 2.0%
EBITDA (ex-RINs) 253,984 364,572 288,740 297,642
EBITD A (R etai l, ex-w ho le sal e) 34 3,680 3 56,48 0 3 67 ,0 40 37 2,640 $32 0k/s tore
Implied Wholesale EBITDA 9,042 9,538 11,708 4,956
Capex
Growth 147,347 48,626 72,895 178,145
Maint. (Including Terminals) 29,900 28,890 30,250 23,050
Total Capex 177,247 77,516 103,145 201,195
EBITDA-Maint. Capex 233,126 345,220 270,198 354,546
Less: Chg. WC
Less: Taxes (38%) 81,380 123,618 92,059 121,965
Unlevered FCF 151,746 221,602 178,139 232,581
M h USA (MUSA) U it Fi i l
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Murphy USA (MUSA): Unit Financials
Unit Level (Per store) 2010 2011 2012 LTM
Stores
Start 1,048 1,099 1,128 1,150
New 51 30 37 30
Closed (1) (1)
End 1,099 1,128 1,165 1,179
Avg Number Stores 1,074 1,114 1,147 1,165
Revenue and Costs
Fuel margin per gallon (dollars) 0.114 0.156 0.129 NA
Gallons sold per month 307 278 277 NA
Merch. revenue per month 154 158 156 NA
Merchandise margin 13.1% 12.8% 13.5% 13.0%
Fuel Costs (Annual) 12,005 14,328 14,210 13,440
Merchandise Costs (Annual) 1,599 1,662 1,618 1,616
Station Costs (Annual) 369 389 390 394
SG&A (Annual) 80 82 95 109
M h USA (MUSA)
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Murphy USA (MUSA)
M&A Appeal: Private Equity FCF profile and asset base (ie. real
estate, terminals) support leverage
Lower economic sensitivity
Fragmented industry presents
consolidation opportunity for anestablished platform such as MUSA
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Half Moon Capital
Half Moon Capital, LLC
304 Park Avenue South, 11thFloor
New York, NY 10010
Ph: 646.490.6744
www.halfmooncapital.com
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Land Developer Needs TLC
Build your dream portfolio with UCP
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Company Overview
IPO in July 2013 at $15.00 per share UCP is a hybrid land developer and home
Primarily acquires and develops land forresidential use
Increased push into home building promisunlock significant value
Focused on high growth western markets three quarters of operations based in Cali
and a growing presence in Washington
Ticker: UCP
Price: $14.50
Capitalization
Mkt Cap: $266M
UCP
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UCP, an Orphaned Home-Builder LookinHome
Poorly received IPO Underwhelming results from conglomerate parent diminished deman
Small market-cap ($266M) failed to attract institutional interest
Poorly timed IPO
Concurrent with IPOs of several mainstream homebuilders includingTPH and TMHC
Taper tantrum hammered housing stocks immediately after IPO
Hybrid business model focused on development first and busecond adds complexity.
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Wilbur Ross LikeHistory
Markings of a Wilbur Rossdistressed industry roll-up
PICO capitalized UCP in 2008 totake advantage of fire-sale prices
during the worst of the housingcrisis.
Over $190M in capital deployed totake advantage of dislocation inhousing market.
Over 80% of lots acquired between
Lots by Vin
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Significant Land Holdings consisting of 6,Lots in Strategic Coastal Locations
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Land Portfolio to Fuel Future Growth
Ample land supply provides visibility into futuredevelopment potential No need to recycle cash flow into land replenishment
Existing holdings equate to 8 years of supply at current
Deliveries through 2015 sourced from current inventory Land pipeline should allow UCP to grow through t
housing recovery Guidance for revenue growth of 100% in 2014
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Hybrid Homebuilding and Land Development StrateProvides Optionality
Flexibility of land development and home buildingfor highest return of capital
Less capital intensive than home building alone resultininventory carrying costs
Land sale versus development decision is determined capital
Land holdings are a hidden asset dampening the needreinvestment and creating potential for capital return to
shareholders.
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Significant Value Capture through Home Building
Funds raised from IPO will allow UCP to develop its land ho
Home building subsidiary, Benchmark Communities, launch
Increased community count from 2 to 9 over the last year
Expects a doubling of community count in 2014 withapproximately 1,100 lots
Existing land portfolio capable of supporting 62 commu
Increased home deliveries from 5 to 62 on year over year bQ3
Rise of 27% in Y/Y home ASPs from $271K to $345K
Lower gross margins at 22% compared to 33% for land dev
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What is UCP worth?
Book value analysis P/B multiple of 1.2 compared to industry average of 2.2
Return of 83% with industry multiple
Newly minted Homebuilding IPO peers including TPH, WLH, WCIC apossess a P/B value of 1.7
Return of 67% with rerating to IPO peer P/B
Direct comp of TPH has a P/B value of 1.9 indicating a potential retu
Trades below liquidation value Enterprise value of $208M including net cash of $58M
Compare to $171M in real estate assets, carried at historical cost,alo
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Long-lived Assets Understate True Economic Value
GAAP accounting standards require land be carried at lowehistorical cost or fair value
Accounting treatment materially undervalues UCPs raw land holding
More than 80% of lots purchased before 2012 with the majority of pu
incurred in 2008/2009, the worst years of the housing crisis. According to Case-Schiller, in UCPs core markets of San F
and Seattle, housing prices have risen 53% and 25% respectrough levels.
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UCP Markets Have Seen Rapid Price Appreciation Over the P
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Private Buyer Recent Deals Highlight Value
Tri-Points (TPH) acquisition (Nov, 2013) of Weyerhaeusershomebuilding lots.
A total of 27,000 lots spread across Arizona, California, Nevada and $2.7B or $100k per lot
On balance, lots in CA are more expensive than lots in AZ, NV and T
Applying comp to UCP equates to $665.9M a 2.2x return from curren
Toll Brothers (TOL) acquisition (Nov, 2013) of lots owned byheld Shapell Industries
A more direct geographical compare to UCPs geographic footprint
A total of 5,200 lots concentrated in San Francisco, Los Angeles
TOL paid $1.6B for the lots for a price per lot of $308K. We apply a 7
to TOLs per price to account for TOLs focus on higher-end homes. Applying comp to UCP equates to $615M a 2x return from curre
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Housing Fundamentals Support Strong Case for Apprec
According to the Case-Shiller 20-city Composite Home Pric
home prices remain 20% below peak levels. According to NAR, homes are more affordable now than anprevious 40 years prior to the crash in 2008.
Current cycle has legs Most up-cycles in home prices last 5-10 years
The US is clearly in a home-price up-cycle that has a lot of room to Zandi, Chief Economist for Moodys Analytics
Household creation dipped to .5M for five years between 20compared to normalized levels of 1M suggesting significant
demand
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Historic collapse in housing starts
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Household Formation has Recovered More Quic
Housing Starts
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US Households Have Restored Their Balance S
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Risks
Real estate cycle Job growth, interest rates, population growth, and consumer confide
strength and duration of cycle
Execution risk Build-out of new communities must show attractive returns on capita
investors Small market cap and thin trading liquidity (75K shares per
Limited float and small market cap make it less likely that UCP is incestate ETFs and index funds
Less attractive to institutional investors
Majority ownership
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Catalysts
Valuation is its own catalysts - trades below liquidation valu
Ramp in Home-building operations should spur developmevalue
Increase in housing starts increases the value of UCPs land
Attractive buyout candidate
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Conclusion
Homebuilding operations should catalyze growth in book vaexpand margins while creating a long run-way for growth.
One of the cheapest ways to participate in the recovery of thmarket
Asymmetric return potential with low downside risk and signupside
Simple NAV story, a dollar trading for $0.50 based upon undland
Buyout candidate Homebuilders are land constrained and UCP provides exposure to h
west coast markets$
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Thank You
We try to profit by always remembering the obv
from grasping the esoteric. It is remarkable how m
term advantage people like us have gotten by try
consistently not stupid instead of trying to intelligent.
CHARLIE
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CRAWFORD CAPITAL PARTNER
Crawford Fund Management, LLC
Two Oliver Street, 6th FloorB MA 02109
Best Ideas 2014 Conference
January 8, 2014
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Important Notices
This presentation is not intended as, and does not constitute, an offer to sell any
solicitation of any person or any order to purchase any securities. No person sh
information in this document, but should rely exclusively on the Confidential O
Memorandum in deciding whether to invest in the partnership. This presentatio
informational purposes only and should not be construed as investment, legal, tadvice.
Investments in the Fund are subject to risks and uncertainties, including the risk
principal as described in the Funds Offering Memorandum. Investors are enco
the Offering Memorandum and direct any questions to management of the Fun
investing. There can be no assurance that the Funds objectives will be met or
not be incurred.
This confidential document has been prepared solely for the information of the
whom it has been delivered on behalf of the Fund and may not be reproduced o
other purpose. Each person accepting this document agrees to return it to Craw
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Leading well-managed player in genetic based diagnostic medicine
Exposed to high growth segments in early innings of adoption
Innovative companyan R&D leader with a promising pipeline of new pr
MYGN($21.11)
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Myriad Current Products
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Myriad Market Opportunity
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New Product Pipeline
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Current New Product Launches
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MYGN: Core Investment Tenets
Innovative long-term focused company exposed to high growth markets in their infancy IP pioneer in gene diagnostics; leading creator of new products
Important growth fieldgene tests add insight to save lives and costsdoctors must adopt to stay relevan
Competent management with meaningful stock ownership, Excellent sales, marketing and R&D
Protective moats around the business
Beyond the tests, MYGN has built proprietary database of gene variants with superior error performance t
Reputation built over years with prescribing physicians dealing with critical diseases on a daily basisnee
comparability, fast turnaround timesvery hard to do thisrequires much more than a lab
Largest portfolio of IP resulting from focused accumulation of R&D investment conducted in licensed lab
Strong business economics and financial position
Strong FCF generator; High and rising ROIC (see appendix), Adding to intrinsic value rapidly
No debt and 516 mil in cash ($6.22/share) for buybacks and reinvestment
Overblown fears and static sell-side analysis create buying opportunity
Supreme court ruling limited in scope leaving much IP intactnotably MYGN-created cDNA
Reimbursement cut headlines sound draconian, but in reality are likely to be slower and more moderate th
Myriad is a step ahead of competition with recent launches and pipeline
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MYGN: Investment Risks/Concern
Probable end of BRAC Monopoly: Supreme court ruling ended patenta
naturally occurring genes; Synthetic genes created by MYGN remain
they will now have to fight to defend them
New competition: Major labs with scale (Quest/ Bio-Reference) and smhave launched competing product with much lower price points
Radical reimbursement cuts: Medicare rates (10-15% of revenue) hav
proposed 48% cuts; private payers may follow suit; court ruling and com
catalyzed
Extreme short interest: Sometimes the shorts are the smart moneym
bear case seriously
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MYGN: Valuation Metrics
MYGN
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MYGN: Valuation Summary
Our pessimistic DCF valuation suggests a value of: $34/share
Pricing for all tests collapses 30% across entire revenue base over 24 months
Myriad unit growth fades faster due to competition and despite lower pricing and higher quality produc
Net margin drops from 24% to 15%; Operating margin from 37% to 22%; Cost restructuring keeps it fr
Our optimistic DCF valuation suggests a value of: $52/share
Pricing drop for all tests contained to 15% over 24 months
Myriad unit growth continues on prior trajectory--market share losses offset by higher industry unit gro
Net margin drops from 24% to 18.5%; Operating margin from 37% to 28%; Cost restructuring keeps it
Relative valuation metrics (P/E, P/FCF, EV/Sales) look attractive relative to history
potential; P/B looks attractive relative to historical and prospective ROE
No Credit for additional imbedded call options: Crescendo Bioscience, PARP C
Companion Diagnostic JVs; Value accretion from large repurchases of undervalued
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Appendix: MYGN ROIC Component
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Appendix: MYGN Pessimistic Case Sum
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Appendix: MYGN Optimistic Case Sum
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Crestonplc
SmallUKmarketingservicesholdingcompanytradingaround8x
Presented by Christian Olesen
StopsmokingcampaignconductedbyEMO,oneof
Crestonsagencies,fortheUKDept.ofHealth
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Summary
Crestonplc(LSE:CRE,95pasof1/7/14)
Owns~20
small
advertising,
PR
and
other
marketing
agencies,mostlyintheUK
Attractivebusinesswithverylowcapitalrequiremenmostlyvariablecosts (labor) stable,highfreecash
Debtfree balancesheet
Tradesat8.4xadj.trailingearnings
AcquisitionbycompetitorHavas orotherbuyerisa
ibilit b t b l ff
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Agenda
I. BusinessOverview Communications
II. BusinessOverview Health
III. BusinessOverview
Insight
IV. HistoryandManagement
V. MarginDecline
VI. KeyFinancialandValuationData
VII. Peers
VIII. Catalysts
IX. Conclusion
X Q&A
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BusinessOverview Communicat
Crestonisaholdingcompanythatownsseveralsma
agencies,whichareengagedinadvertising,PR,mark
research,andothermarketingservices.
3segments:
Communications
55%ofrevenues,46%ofoperatingincome
11agenciesengagedinadvertising,mediarelations,brandconsultin
marketing,websitecreation,dataplanningandmanagement,crisis
directmarketing,customerrelationshipmanagement(CRM),instore
outdoormarketing,eventmarketing,andmanyotherareas.
AgenciesincludeTullo MarshallWarren,NelsonBostock andEMO
Traditional media, online, mobile.
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BusinessOverview
Heal
Health
28%ofrevenues,33%ofoperatingincome
9agenciesprovidingadvertising,branding,crisismanagement,publigraphicdesign,internalcommunications/salesforceeducation,pati
etc.,primarilytolargehealthcarecompanies
AgenciesincludeCooney/Waters,TheCorkery Group,RedDoorCom
Topclients(yearindicateswhenclientrelationshipwasestablished):
CDC(99),
Amgen
GlaxoSmithKline
JV(11),
Astellas (07),
UCB
(08)
Approx.halfofrevenuesgeneratedinU.S.,therestmostlyUK
2530%operatingmargin
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BusinessOverview
Insig
Insight
17%ofrevenues,21%ofoperatingincome
2agencies(ICMandMarketingSciences)providingvariousmarketreservices,suchasbrandtrackinganddevelopment,categorymanage
panels,politicalpolling,customerchurn/retentionanalysis,etc.
Topclients:Danone Baby(99),Sainsburys(07),Tesco(92),Reckitt
(12),Canon(01)
2030%
operating
margin
Halfofrevenuesfromtop20clients,withavg.tenur
~20differentagencies
Consolidated operating margin 1318% (after ~ 2.5
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Historyand
Management
Formedin2001asreversemergerbyDonElg
BarrieBrien
isCOO
&CFO
Builtthroughseveralacquisitions,20012006
Financedbymixofearnouts,equityanddebt
SoldDLKWin2010atgoodprice,paidbackd 3small,conservativeacquisitions,20102012
Elgie andBrienown~4%total;Ibelieveall
employees and directors own 1215% (mostly
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MarginDecline
Marginshavedeclinedsincetherecession DepartureofkeypeopleatICM
LossofSanofi account
SluggishUKeconomy;poorbusinessconfidence
18.5% 18.3%
20.2%
18.5% 19.2%
17.9%
15.9%
13.9% 13.5%12.8%
10%
15%
20%
25%
ConsolidatedOperatingMargin
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