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Monmouth case Finance presentation

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Monmouth case Finance presentation

  1. 1. Monmouth, Inc. – Case Analysis Golden Gate Team 2iT Hui Lin Tan | Sophia Liu | Luca Aldegheri | Alejandro Gaviria | Guillermo Gonzalez | Ricardo Mazzini
  2. 2. Agenda Introduction Valuation Analysis  Multiple Market  Dividend Payout  Discounted FCF Recommendations
  3. 3. Leading Provider of Oil & Gas Industry 1) Achieve growth in EPS over the next 5 years From $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
  4. 4. 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
  5. 5. TO BUY OR NOT TO BUY?
  6. 6. Consultant 1: Multiple Market Analysis Robertson Industry Average Most Similar Companies Comment 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
  7. 7. Consultant 2: Dividend Payout Analysis Value of Robertson’s stock: $13 to $20 per share 13.3 15.8 20.0 Worst case Base case Best casePessimistic Neutral Optimistic Required rate of return 12% 10.1% 8% Dividend per share 1.6 1.6 1.6
  8. 8. 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?
  9. 9. Acquisition Benefits OPPORTUNITIES FOR BUSINESS IMPROVEMENTS Reduction of “COGS” – by accurate market segmentation From 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 earnings 75% Industrial 50% Industrial 25% Consumer 50% Consumer
  10. 10. Monmouth-Robertson’s Merger Value Proposition WACC Pessimistic 11% Neutral 9% Optimistic 7% Growth 0% 30.96 47.02 72.15 2% 41.06 64.56 106.47 3% 48.00 77.73 136.51
  11. 11. Next Steps COMMON STOCK SWAP 2 shares of Monmouth : 1 share of Robertson @ $48/share

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