TGI-May2016
- 1. Triumph Group(TGI $35.44) – Buy May 10, 2016
Market cap $1.75 Bil
Dividendyield 0%
Analystratings: Buys8, Holds 5, Sells1
Short interest: 8%
Aircraftsupplier–aerostructuresandsystems
EPS: P/E
FY Mar’16 (A) $5.34 6.6x
FY Mar’17 $6.00 5.9x
BUY – Target $48 (8x FY’17 eps),(+37%) – I think stock could reach 8-10x epsover nextcouple years, so as
high as $60+ (but $48 nearer term),as confidence inrestructuringplan builds.
Positives:
1. New CEO,who hasheldleadershippositionsatRTN and LMT
2. Last week,announcednewtransformational restructuringplan –closingfacilities,layoffs,cost
savings,leaningoutsupplychain,focusonworkingcapital,gainmarketshare atlarge customers
(BoeingandAirbus),(probablytakes2-3yearsto fullyplayout,andprobablybumpyalongthe way,
but hopefullysmoothesoutovertwo-yearhorizon)
3. Strongpositiononsome growthplatforms: 767/Tanker,787, 737, A320, A350, some Gulfstream
aircraft
4. Recentlycapturedshare atAirbusA320 and Boeing777
5. ValuationextremelycheapatP/Eof 6x FY’17 eps (tradedat10x inJune 2015)
6. ImprovingFCF
Risks:
1. Revenuescurrentlyindecline: FY’16revs -10% organic (butQ4 only -3% organic). FY’17 revs
guided -5-7%
2. On some programswithdecreasingproductionordelays: some Gulfstreamaircraft,777 (near
term), 747, Bombardier,V-22
3. Debtlevel high: current NetDebt/Cap60%. Leverage ratioat 3.0x, withtarget2-3x
Doug Sokolower
917-494-2030
dsokolower@yahoo.com