Monmouth case Finance presentation
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Monmouth, Inc. – Case Analysis Golden Gate Team 2iT Hui Lin Tan | Sophia Liu | Luca Aldegheri | Alejandro Gaviria | Guillermo Gonzalez | Ricardo Mazzini
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Transcript of Monmouth case Finance presentation
Monmouth, Inc. – Case AnalysisGolden Gate Team 2iTHui Lin Tan | Sophia Liu | Luca Aldegheri | Alejandro Gaviria | Guillermo Gonzalez | Ricardo Mazzini
Agenda
Introduction
Valuation Analysis Multiple Market Dividend Payout Discounted FCF
Recommendations
Leading Provider of Oil & Gas Industry
1) Achieve growth in EPS over the next 5 yearsFrom $2.61 to > $3.56
2) Increase Wall Street’s interest in the stock$24 ~ 4.21M shares outstanding
MANAGEMENT’S OBJECTIVE THROUGH ACQUISITION
“We want to implement a diversification program to reduce vulnerability to
economic conditions.” – Harry Vincent, Executive Vice President
Journey Thus Far
?
Simmons purchased 44,000 Robertson
shares
Simmons’s offer:
$42 per share ($12 premium)
1st Opportunity
for Monmouth
Monmouth retreats
offer
2nd Opportunity
for Monmouth
NDP’s offer:
5:1 common stock swap
Concerned about shares devaluation after NDP-Robertson
merger
2000 March 2003 April 2003
TO BUY OR NOT TO BUY?
Consultant 1: Multiple Market Analysis
Robertson Industry Average
Most Similar
CompaniesComment Suggestion
for Analysis
EBIAT Multiple 16.1 13.3 14 Above average 15
P/E Ratio 13.5 13.5 13 OK 13.5
Value of Robertson’s stock: $26 to $30 per share
NO GO!
Consultant 2: Dividend Payout Analysis
Value of Robertson’s stock: $13 to $20 per share
Worst case Base case Best case
13.315.8
20.0
Pessimistic Neutral OptimisticRequired rate of return 12% 10.1% 8%
Dividend per share 1.6 1.6 1.6
NO GO!
Consultant 3: Discounted FCF Analysis
Value of Robertson’s stock: $34 per share
WACC 8.97%
Growth rate 2%*
Discounted FCF $19.78
Shares outstanding 584,000
Price per share 33.87
*Growth of last 2 years
NO GO?
Acquisition BenefitsOPPORTUNITIES FOR BUSINESS IMPROVEMENTS
Reduction of “COGS” – by accurate market segmentationFrom 69% to 65% of sales
Reduce SG&A expenses – by unifying sales force and advertising From 22% to 19% of sales
Redistribution of market segments to achieve better earnings75% Industrial 50% Industrial25% Consumer 50% Consumer
Monmouth-Robertson’s Merger Value Proposition
WACC
Pessimistic11%
Neutral9%
Optimistic7%
Growth
0% 30.96 47.02 72.15
2% 41.06 64.56 106.47
3% 48.00 77.73 136.51
Next Steps
COMMON STOCK SWAP2 shares of Monmouth : 1 share of
Robertson @ $48/share
