General body meeting 02 24 11
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General Body Meeting 02.24.11. Agenda. Announcements News Updates Energy Sector Pitch. 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. African Stock Competition.

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General Body Meeting 02.24.11

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General body meeting 02 24 11

General Body Meeting 02.24.11


Agenda

Agenda

  • Announcements

  • News Updates

  • Energy Sector Pitch


Wall st training

Wall St. Training

  • M&A and LBO Modeling on Excel

  • Saturday, 3/6: 12pm-6pmSunday, 3/7: 12pm-8pm

  • No Previous WST experience necessary

    www.wallst-training.com/cornell


African stock competition

African Stock Competition

  • MICC Team

    • Marshall Verdi

    • ShashwatSamudra

    • ShashankSamala

    • Andrew Freiman


Wall st club competition

Wall St. Club Competition

  • Andrew Kugler

    • [email protected]


News updates

News Updates


Global unrest

Global Unrest

  • Bahrain

  • Libya

    • Gold above $1,400

    • Oil above $100

  • Nomura: Oil $220?

  • Impact on global & US inflation outlook


Other news

Other News

  • Home prices at 2002 lows

  • Consumer confidence at highest levels in three years

  • BOE closer to tightening monetary policy

  • Treasuries head higher


Silver ag

Silver (Ag)

Source: marketoracle.co.uk/Article26449.html


General body meeting 02 24 11

SILV


Causes

Causes?

  • Investment

    • Inflationary concerns

  • Increase demand

    • Mature electronic industry

    • New uses

      • Conductive inks

      • Nanotechnology

      • Etc.


Hp q1 2011 earnings

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


Hp q1 2011 earnings1

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


Hp q1 2011 earnings2

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)


Hp q1 2011 earnings3

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


Hp q1 2011 earnings4

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


Hp q1 2011 earnings5

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


Energy sector pitch

Energy Sector Pitch


Overview vestas wind systems

Overview - Vestas Wind Systems

Wind. It Means The World To Us.


Thesis

Thesis

  • Renewable Energy

    • Expected shift in demand from conventional to renewable sources

  • Established Platform

    • Growth potential

    • Price-Pressure preparation

    • Regionalization of production

  • Undervalued Condition


Vestas

Vestas

  • Wind Power Industry

  • Development, Manufacture, Sale, Marketing, & Maintenance of Wind Power Systems

    • Expertise within On-Shore Wind Power Systems


Onshore

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


Offshore

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


Growth potential offshore expertise

Growth Potential – Offshore Expertise


Growth potential offshore expertise1

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


Vestas current operations

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


Vestas financial overview

Vestas – Financial Overview


Financial overview

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


Vestas copenhagen vs adr

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)


Financial overview1

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


Financial overview2

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


Competitive edge

Competitive Edge

  • Management

  • Undervalued Condition

  • Global Presence

  • Regionalized Production

  • Product Differentiation


Management

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


Undervalued condition

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


Global presence

Global Presence


Global presence1

Global Presence


Regionalized production

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


Product differentiation

Product Differentiation

  • 6 MW Turbine

    • Reduce long term cost

      of wind energy

  • Greater electricity

    generating capacity than

    any 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


Product differentiation1

Product Differentiation


Competitors

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


Competitive edge1

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


Potential risks

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


Potential risks1

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


Prospects for growth

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.


Recommendation

Recommendation

  • Buy 70 shares at ~ $ 2266

  • Time Horizon ≥ 2 Years


Questions

Questions?


Thanks for coming by

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?


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