Joy Global Inc.ppt

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1、Joy Global Inc. (NYSE: JOYG)Tyler HaidaChris TsoukalasAaron CzerkiesFrank DamianAmin RizwanNovember 17, 2011Agenda Company Overview Macro-Economic Outlook Industry Overview Competitors Company Performance Valuation RecommendationJOYG Overview as of 11/16/11 Current Price $88.64 Market Cap. 8.59 Bill

2、on 52-week range $57.48-103.44 1 YTD 13.8% return 2 YTD 22.74% annualised return 5 YTD 15.97% annualised returnSource: Joy Globals BusinessManufactures and services mining equipment for the extraction of:Coal, copper, iron ore, oil sands, and other minerals.Joy Mining Machinery- underground mining e

3、quipment segment which manufactures underground equipment for extraction of coal and bedded minerals, and comprehensive service locations world wideP&H Mining Equipment- Producer of surface mining equipment for the extraction of ores and minerals, and provides operational support for many types of e

4、quipment used in surface mining. Operate in Australia, South Africa, UK, China, and the United States. They operate in 98 locations in 17 countries employing around 14,000 people.The Predecesor Company Harnischfeger Industries Inc. Began over 125 years ago Emerged from chapter 11 in July 12, 2001 as

5、 Joy GlobalJoy Global 2011 10-KLeTourneau Technologies Inc. Acquired on June 21, 2011 for $1.0 billion. Purchased all outstanding capital stock Financed with cash on hand and $500 million through credit. Builds and supports equipment for the mining and oil and gas drilling industries. On August 29,2

6、011 sold 100% of the outstanding shares of the drilling segment for $375 million. Joy Global 2011 3rd Q 10-QPurchase of International Mining MachineryOn July 11,2011 Joy Global purchased 534.8 million shares of IMM for HK$8.5 per shareOn July 28, 2011 they purchased 136.5 million shares of IMM for $

7、140.6 million.On August 16, 2011 the purchased 102 million shares for $105.1 million.Completion of this acquisition is subject to approval by the Anti-monopoly Bureau of The Ministry of commerce of the Peoples Republic of China.If it is approved Joy will have a controlling stake of approximately 59.

8、4% of IMM, and they will be required to make an offer to purchase the remaining shares at a minimum price of HK$8.5 per shareJoy Global 2011 3rd Q 10-QMacroeconomic Outlook They have a general concern about slowing macro growth worldwide. Fundamentals in commodity markets still remain strong Markets

9、 for copper and iron ore continue to be driven by strong demand in China, India, and other emerging markets.Joy Global 2011 3rd Q 10-QIndustry Overview They have general concerns over slowing economic growth and industry fundamentals that remain strong. Because of slowing worldwide macro growth can

10、be reflected in their forecasts for the rest of 2011 and the first half of 2012.Joy Global 2011 3rd Q 10-QCompany Overview Commodity and energy fundamentals remain intact despite slowing industrial production and economic growth. Joy global has NOT experienced any projects being differed, delayed, o

11、r de-prioritized. After market revenue is still seeing strong growth. Due to a few factors such as; higher mine production levels, low ore grades, tougher geological conditions, and a growing work fleet. Joy Global 2011 3rd Q 10-QCompany Overview (continued) Even with strong fundamentals there is a

12、possibility of slowing demand growth. However they do not expect the macro concerns to lead to major market corrections. Joy will use this as an opportunity to “trim up our business”.Joy Global 2011 3rd Q 10-QCompany presentation: Joy Global.Who We Are, May 12, 2011OwnershipHolderCommon Stock Equiva

13、lent Held% Of Common StockT. Rowe Price Associates, Inc.6,348,4856.041%The Vanguard Group Inc. 5,748,1305.469%Capital Research and Management Company4,877,2384.641%BlackRock Fund Advisors 4,839,9204.605% American Century Investment Management, Inc.3,981,7573.789%State Street Global Advisors 3,645,09

14、93.468% Wellington Management Co. LLPas3,520,4663.350%Rainier Investment Management, Inc.2,983,3202.839% Allianz Global Investors AG2,657,1022.528% BNP Paribas Investment Partners2,413,8322.297%Above 10 holders comprise 39.03% of shareholders ownership.Data as of 30th September, Capital IQBloombergJ

15、OYG stock price compared to coal, copper and iron oreProducts and ServicesContinuous miners Electric, self-propelled continuous miners cut material on a horizontal rotating drum. Once cut, the material is gathered onto an internal conveyor and loaded into a haulage vehicle or continuous haulage syst

16、em for transport to the main mine belt.Longwall shearers A longwall shearer moves back and forth on an armored face conveyor parallel to the material face. The shearer cuts 1.2 to 6.5 meters of material on each pass and simultaneously loads the material onto the armored face conveyor for transport t

17、o the main mine belt. Powered roof supports Roof supports perform a jacking-like function that supports the mine roof during longwall mining. The supports advance with the longwall shearer and armored face conveyors, resulting in controlled roof falls behind the supports. A longwall face may range u

18、p to 400 meters in length. Armored face conveyors Armored face conveyors are used in longwall mining to transport material cut by the shearer away from the longwall face. Shuttle cars Shuttle cars, a type of rubber-tired haulage vehicle, are electric-powered with umbilical cable. They are used to tr

19、ansport material from continuous miners to the main mine belt where self-contained chain conveyors in the shuttle cars unload the material onto the belt. Some models of Joy shuttle cars can carry up to 22 metric tons of coal. Flexible conveyor trains (FCT) FCTs are electric-powered, self-propelled c

20、onveyor systems that provide continuous haulage of material from a continuous miner to the main mine belt. The FCT uses a rubber belt similar to a standard fixed conveyor. The FCTs conveyor belt operates independently from the track chain propulsion system, allowing the FCT to move and convey materi

21、al simultaneously. Available in lengths of up to 570 feet, the FCT is able to negotiate multiple 90-degree turns in an underground mine infrastructure. Roof bolters Roof bolters are roof drills used to bore holes in the mine roof and to insert long metal bolts into the holes to reinforce the mine ro

22、of. Battery haulers Battery haulers perform a similar function to shuttle cars. Shuttle cars are powered through cables and battery haulers are powered by portable rechargeable batteries. Continuous haulage systems The continuous haulage system provides a similar function as the FCT in that it trans

23、ports material from the continuous miner to the main mine belts on a continuous basis versus the batch process used by shuttle cars and battery haulers, but it does so with different technology. It is made up of a series of connected bridge structures that utilize chain conveyors that transport the

24、coal from one bridge structure to the next bridge structure and ultimately to the main mine belts. Feeder breakers Feeder breakers are a form of crusher that use rotating drums with carbide-tipped bits to break down the size of the mined material for loading onto conveyor systems or feeding into pro

25、cessing facilities.Coal Industry OutlookRevenue is expected to grow 2.7% annually to $48.0 billion in the five years to 2016. Metallurgical coal will still be a sought after product as emerging economies address infrastructure concerns rapidly by creating steel. Price increases Coal prices will cont

26、inue rising as the global economy recovers. Metallurgical coal prices will grow as emerging economies expand rapidly and invest in their infrastructure. The Appalachian Basin has some of the highest grade metallurgical coal in the world and will be sought after by emerging countries. Competition fro

27、m abroad is expected to intensify for the attractive coal-growth segments in emerging economies. For example, as production picks up in Australia, Australian producers will be able to better serve China, since the country is expected to be a hot spot for imported coal. This trend will place negative

28、 pressure on US coal prices.Coal Industry Outlook (continued)Greenhouse gas concerns Environmental concerns will also significantly affect the industry. Threat to coal from natural gas, on the back of environmental concerns and historically low prices.In the face of environmental concerns, coal-base

29、d generation will still be a large part of the US energy infrastructure and is anticipated to be cost effective enough to meet a major portion of domestic energy demand.Attractiveness of low-sulfur coal. Low-sulfur coal from the western part of the United States will likely continue gaining market s

30、hare at the expense of higher sulfur coal from the eastern states as they are usually cheaper and more environmentally friendly. With greater interest in this region, increased investment to expand production will follow. M&A to continue Further consolidation is expected as firms continue their sear

31、ch for metallurgical coal. As demand rises from emerging economiesThis environment will favor larger companies, since small coal producers are less likely to have the financial resources required. Industry consolidation will occur as larger companies buy out smaller firms to strengthen their balance

32、 sheets. IBIS World report: Coal Mining in the USCompetitorsAstec Industries, Inc.Designs, engineers, and manufactures equipment and components for road building, utility, and construction activitiesTheir aggregate and mining group segment is similar to Joy Gobals surface mining segmentCaterpillar I

33、nc.Manufactures and sells construction and mining equipment, diesel and gas engines, industrial gas turbines, and diesel-electric locomotives worldwide The Machinery business operates underground mining equipment, tunnel boring equipment and related parts, which directly competes with Joys undergrou

34、nd mining businessKennametal Inc.Manufactures and supplies tooling, engineered components, and advanced materials consumed in production processes worldwideThe infrastructure segment serves customers in many areas including underground mining and surface and hard rock mining Terex Corp. Manufactures

35、 and markets machinery products, equipment, and related replacement parts and components for construction, quarrying, mining, shipping, transportation, refining, energy, and utility industriesTerexs construction segment offers many different machines, equipment and services that compete with Joy Glo

36、bals surface mining segmentPublic Comparables AnalysisSource: Capital IQ, Company Filings, I/B/E/S24Terex Corp is trading at much higher premium relative to the other firms High growth expectedCAT trades on the lower end comparativelyMost likely because its a more mature company with less comparativ

37、e growth opportunitiesJoy Global is trading in the middle of its peers for most multiplesP/S premium of 1.7x 2012E versus a mean of 0.7xPublic Comparables Analysis Joy has a relative value ranging from $42.42 to 78.99 a share Revenue multiples account for the lower valuation Currently, Joy trades at

38、 revenue premiums due to expected growth and increased margins Based on fully dilutive shares25Source: Capital IQ, Company Filings, I/B/E/SDuPont Analysis For the past two years, Joys ROE ranks substantially higher 34% versus the next highest of 24%26Source: Capital IQ, Company Filings, I/B/E/SLiqui

39、dity Analysis27Joy has a strong cash and liquidity position Days cash is the number of days between when a firm disburses cash to when it collects cashJoy Global has the highest days cash with 47Source: Capital IQ, Company Filings, I/B/E/S(a) SG&A and COGS expense excluding D&A, stock based compensa

40、tion, and one-time charges.(b) Includes marketable securities where disclosed.(c) Days Cash = Cash/(Cash COGS+Cash SG&A)/365(d) Days Liquidity = (Cash + Availability)/(Cash COGS + Cash SG&A)/365.Stock Price Analysis The stock market as a whole, including these firms, has increased since the low of t

41、he US downgrade Joy has outperformed its competitors over the last three month period28Source: Capital IQ, Company Filings, I/B/E/SRecommendation The DCF value is roughly $70.83 Public Comparables ranged from $42.42 to $78.99 Low range due to Joys premium P/S Expect high growth and increased margins Higher margins equals higher value PEG ratio is at 0.77 Less than 1 means inexpensive29