Badger Meter, Inc.  CFA Global Investment Research Challenge 2009 Marquette   University
Recommendation   SELL Target Price $2 5  Per Share Current Price $ 29 Per Share Source: Bloomberg, Team Projections Market...
Presentation Outline <ul><li>Overview  </li></ul><ul><li>Revenue Assumptions </li></ul><ul><li>Margin Analysis </li></ul><...
Company Synopsis Overview <ul><li>Manufactures Fluid Meters And Meter  Reading Technology  </li></ul><ul><li>Primary Custo...
Overview Competitive Dynamics <ul><li>Meter Manufacturing </li></ul><ul><ul><li>∙  High Barriers To Entry </li></ul></ul><...
Utility Segment  -  Market Assessment Revenue Assumptions Source: BMI Data, Team Projections $ In Millions <ul><ul><li>Sig...
Increased Funding Costs Source: Bloomberg Revenue Assumptions AA 5yr Municipal Bonds Over 5yr Treasury Bonds
Utility Segment  -  Meter Sales Revenue Assumptions <ul><li>New Meters (1/3 Sales)  </li></ul><ul><ul><li>Water Shortages ...
Utility Segment  -  AMR/AMI <ul><li>Pricing </li></ul><ul><ul><li>High Price Point vs. Traditional Meters ($150 v. $30) </...
Industrial Segment Revenue Assumptions <ul><li>25% International  </li></ul><ul><li>75% Domestic </li></ul>17% Of Total Re...
Margin Analysis Spot Copper Price Per Metric Ton vs. Company Margins Source: Bloomberg, BMI Data Copper Price Margin As % ...
Discounted Cash Flow Model   Valuation Methodology Valuation $ In Millions Terminal EBITDA Multiple 7.5x Projected EBITDA,...
Conclusion Q&A Reiterate  SELL  Rating For BMI Price Target: $25 Per Share
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Marquette Bmi

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The presentation written and delivered by myself and a team of Marquette AIM Seniors at the America\'s Regional of the CFA Global Investment Research Challange in March, 2009

Published in: Business, Economy & Finance
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  • Marquette Bmi

    1. 1. Badger Meter, Inc. CFA Global Investment Research Challenge 2009 Marquette University
    2. 2. Recommendation SELL Target Price $2 5 Per Share Current Price $ 29 Per Share Source: Bloomberg, Team Projections Market Cap (Mil): $428.17   52 WK H-L: $62.74-17.58   FY Dec 2008A 2009E 2010E Shares Out (Mil): 14.81 Institutional Holdings 72.99% Revenue (Mil) $279.55 $258.19 $259.28 Float (Mil): 13.84 Insider Holdings 5.28% Net Income (Mil) $25.08 $19.18 $19.76 Avg. Daily Volume: 239,884 Return On Equity 24.71% EPS $1.72 $1.32 $1.36 TTM Dividend: $0.40 Debt To Common Equity 22.67% P/E 17x 22x 21x Dividend Yield: 1.38%                
    3. 3. Presentation Outline <ul><li>Overview </li></ul><ul><li>Revenue Assumptions </li></ul><ul><li>Margin Analysis </li></ul><ul><li>Valuation Methodology </li></ul>
    4. 4. Company Synopsis Overview <ul><li>Manufactures Fluid Meters And Meter Reading Technology </li></ul><ul><li>Primary Customers Are Utilities And Industrial Companies </li></ul><ul><li>$5.8 Billion Market </li></ul><ul><li>Oligopolistic Industry </li></ul>
    5. 5. Overview Competitive Dynamics <ul><li>Meter Manufacturing </li></ul><ul><ul><li>∙ High Barriers To Entry </li></ul></ul><ul><ul><li>∙ Commoditized Product </li></ul></ul><ul><li>Meter Reading: AMR/AMI </li></ul><ul><ul><li>∙ Fragmented Market </li></ul></ul><ul><ul><li>∙ High Margin Product </li></ul></ul><ul><ul><li>∙ Opportunity For Differentiation </li></ul></ul>Source: BMI Data
    6. 6. Utility Segment - Market Assessment Revenue Assumptions Source: BMI Data, Team Projections $ In Millions <ul><ul><li>Significant Factors </li></ul></ul><ul><ul><li>Municipal Budget </li></ul></ul><ul><ul><ul><li>2/3 Fall, 1/3 Spring </li></ul></ul></ul><ul><ul><li>Municipal Funding </li></ul></ul><ul><ul><ul><li>American Recovery And Reinvestment Act Of 2009 </li></ul></ul></ul><ul><li>Implication </li></ul><ul><ul><li>Two Year Market Downturn </li></ul></ul>83% Of Total Revenue
    7. 7. Increased Funding Costs Source: Bloomberg Revenue Assumptions AA 5yr Municipal Bonds Over 5yr Treasury Bonds
    8. 8. Utility Segment - Meter Sales Revenue Assumptions <ul><li>New Meters (1/3 Sales) </li></ul><ul><ul><li>Water Shortages In 36 States </li></ul></ul><ul><ul><li>13M Unmetered Residential Units </li></ul></ul><ul><li>Replacement Meters (2/3 Sales) </li></ul><ul><ul><li>Average Cycle Is 15 Years </li></ul></ul><ul><ul><li>Cycle Delays </li></ul></ul>Source: BMI Data
    9. 9. Utility Segment - AMR/AMI <ul><li>Pricing </li></ul><ul><ul><li>High Price Point vs. Traditional Meters ($150 v. $30) </li></ul></ul><ul><ul><li>Delayed Technology Adoption </li></ul></ul>Revenue Assumptions Source: BMI Data, Team Projections
    10. 10. Industrial Segment Revenue Assumptions <ul><li>25% International </li></ul><ul><li>75% Domestic </li></ul>17% Of Total Revenue
    11. 11. Margin Analysis Spot Copper Price Per Metric Ton vs. Company Margins Source: Bloomberg, BMI Data Copper Price Margin As % Of Revenue
    12. 12. Discounted Cash Flow Model Valuation Methodology Valuation $ In Millions Terminal EBITDA Multiple 7.5x Projected EBITDA, 2013 $59,771 Terminal Value $448,279 Discounted Terminal Value $302,702 Sum Of PV FCF $80,902 Net Debt $18,957 Value Of Equity $364,472 Target Price Per Share $24.61
    13. 13. Conclusion Q&A Reiterate SELL Rating For BMI Price Target: $25 Per Share

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