- The market is overly concerned about Allied Motion's exposure to commodity-sensitive markets, which accounts for a small portion of its business.
- Allied is shifting its product mix toward more solutions-oriented, higher-margin sales.
- Refinancing $30M in subordinated notes could add $1.6M to net income annually by lowering interest rates.
- With a changing mix and refinancing, the company could see 60% upside to a fair value of $36 per share.
English - 5 - Strategic benchmarking in the supply chain triangle.Bram Desmet
This article is the fifth and last in a series of articles inspired by the book ‘Supply
Chain Metrics That Matter’. In her latest book Lora Cecere introduces ‘which are
the metrics that matter’, ‘how to ensure strength, balance and resilience’, what
are the ‘evolutions in different sectors’, …
In this fifth article, we investigate who are the product leader, the customer
intimacy players and the operational excellence leaders, in our technology
benchmark. We derive targets for Gross Profit, EBIT and Inventory Turns, and
show how they differ by chosen strategy. We hope you enjoy the reading.
Accenture Strategy’s High Performance Business (HPB) Study aims at understanding which companies are top performers within their industry and what sets them apart from their competition.
Twice a year, Accenture Strategy examines the performance of almost 2000 companies listed on stock
exchanges all over the world. Most of these companies are large multinationals.
The Study identifies which companies are top performers within their industry and what distinguishes them from their
international peers.
English - 5 - Strategic benchmarking in the supply chain triangle.Bram Desmet
This article is the fifth and last in a series of articles inspired by the book ‘Supply
Chain Metrics That Matter’. In her latest book Lora Cecere introduces ‘which are
the metrics that matter’, ‘how to ensure strength, balance and resilience’, what
are the ‘evolutions in different sectors’, …
In this fifth article, we investigate who are the product leader, the customer
intimacy players and the operational excellence leaders, in our technology
benchmark. We derive targets for Gross Profit, EBIT and Inventory Turns, and
show how they differ by chosen strategy. We hope you enjoy the reading.
Accenture Strategy’s High Performance Business (HPB) Study aims at understanding which companies are top performers within their industry and what sets them apart from their competition.
Twice a year, Accenture Strategy examines the performance of almost 2000 companies listed on stock
exchanges all over the world. Most of these companies are large multinationals.
The Study identifies which companies are top performers within their industry and what distinguishes them from their
international peers.
This version includes the key points generated during the workshop, as well as the workshop activity. Check out melsig.shu.ac.uk for further outputs from the MELSIG workshop from the 8th January event at Nottingham Trent University
See the Roland Berger Strategy Consultants (http://www.rolandberger.us/) 2014 study on The Next Challenge Of The US Auto Industry.
http://tinyurl.com/NPAutomotive
http://www.linkedin.com/in/TonyLy
https://www.facebook.com/MechanicalMarketer
Deliverable 6 - Profit Maximizing Quantity and Price Present.docxcargillfilberto
Deliverable 6 - Profit Maximizing Quantity and
Price Presentation
Competency
Understand economic terminology and economic definitions pertaining to
decisions made by managers.
Course Scenario
Oil Company X is a large oil refinery which has been expanding and taking on
new investment projects. Recently, they have considered building a pipeline
that stretches across the United States, from Canada to New Orleans. As an
alternate investment, they are considering increasing production at existing
facilities.
In order to compare these investment opportunities, the head of the Cost
Analysis Department has tasked you with finding the profit maximizing
quantity and price if production continues at existing facilities. You will then
present this to the head of the department in a meeting, along with supporting
documentation such as cost curves, data tables, and equations.
Instructions
As a Cost Analyst at your firm, you are being asked to evaluate the profit
maximizing quantity and price for your product to submit to your manager.
Assume that your firm is a monopoly supplier of oil in your region, due to
extensive trade restrictions.
Another team member in the Cost Analysis Department has compiled the
necessary data in the linked spreadsheet. You will have to complete the
missing columns for ATC, AVC, and MC. If the company is incurring a profit,
include the amount of the profit earned when quantity and price are
maximized. If your company is incurring a loss, prove whether it should shut
down or continue operating at a loss. Use graphs and equations to support
your argument.
You will create a short screen recording with narration arguing your case to
your manager. Create a PowerPoint presentation to support your
https://content.learntoday.info/Competency/ECO3250/Deliverable%206%20Spreadsheet.xlsx
recommendation which can serve as the visuals for your recorded screen
capture.
There are many free screen recording software/Webware options available
(such as Screencast-O-Matic) to use in presenting your PowerPoint. Make
sure that both your voiced narration and the PowerPoint slides are captured
during your screen recording.
Be sure to include a cohesive introduction and conclusion of your findings.
Your body slides should include any relevant curves created in Excel from the
data spreadsheet.
After recording, paste a link to the recording on the last slide of the
PowerPoint presentation. Attach the PowerPoint presentation as well as the
Excel spreadsheet showing how you created the curves and obtained the
profit maximizing quantity and price, as well as the corresponding profit or
loss.
Format your PowerPoint to include a title page, introduction, body slides,
conclusion, and references. Remember to cite your sources using correct
APA format, and also use correct grammar, spelling, and formatting.
Grading Rubric
F F C B A
0 1 2 3 4
Not
Submitted No Pass Competence Proficiency Mastery
N.
I worked in a team and we were asked to evaluate Gap, Inc. and give specific recommendations for future growth and prosperity. This is the report we created based on our research and findings.
· Complete the Assignment, Personal Application Paper· After r.docxLynellBull52
· Complete the Assignment, "Personal Application Paper"
· After reviewing what you have written for the Personal Application Conferences each week and your interaction with your fellow students about this, write a final paper incorporating all of the topics covered weekly in the PA and how what you have learned in this course applies to the organization you work for. It should be more than just a simple cut and paste from your earlier PA postings.
Papers should be approximately 5-7 pages in length. This page limit is forces you to think hard of what are the key points you want to make and avoid generalities.
The following is the past 8 weeks discussion questions in yellow and the answers to help you with the paper.
What kinds of industries tend to be better performers in the medium to long term? Why? What kinds of industries tend to do poorly in the medium to long term? Why?
Can you make the claim that some industries are inherently more profitable than others? Provide arguments and examples to justify your response.
Generally speaking, for companies in the same industry, what factors would explain differences in company performance over the long term?
Your thoughts about the fundamental strategic issues facing the industry in which your organization exists. Compare the performance of your company against the industry within which it operates, for 1 year and 5 years, using the Morningstar database or any other source of information that is appropriate
1. The kind of industries which tend to perform better in the medium to long term include railroad, insurance service providers, and resorts & casinos. This is because of the management practices used in the industries and the pattern of cash flow that the industries have. The revenue flow in the resorts and casinos may be volatile during the short term but when viewed in the medium to long term it is stable. The management practices used in the industries such as the sale of time shares smoothen the volatilities that commonly experienced in the industries. Industries such as savings & cooperative banks and independent power production tend to perform poorly in the medium to long term period. This is because the savings and cooperative banks are affected by both the economy and customer demands hence the varying year returns. Savings and cooperative banks avail various substitutes to customers in the long term. These substitutes determine the competition in the industry. Independent power production industry performs poorly because it is privately owned .
2. Some industries are inherently profitable than others because some of the industries perform better in the medium to long term compared to others. For example the returns in resorts and casinos may be volatile in the short run but stable in the long term while industries such as the coal and gold industries have low returns in the short run because of their nature of getting depleted with time and hence depreciating value. This, there.
STARTtwSAM tw = Strategic Analysis Model that worksTABLE OF CONTEN.docxwhitneyleman54422
STARTtwSAM tw = Strategic Analysis Model that worksTABLE OF CONTENTSPHASE ICompany AnalysisFinancial Analysis--This module is contained in separate files on the SAM tw CD-Rom.SWOT AnalysisTOWS MatrixPHASE IGeneral Company InformationGeneral Internal AnalysisCore Competence AssessmentIndustry and Competitive AnalysisValue AnalysisIndustry AnalysisSPACE Chart / AnalysisCompetitive AnalysisPHASE IIStrategic Analysis & ChoicePorter's Five ForcesStrategic Alternatives and AnalysisStrategic Group MapPHASE IIIRecommendationsGE MatrixRecommendationsMarket AnalysisMission StatementsEnvironmental AnalysisVision Statements
Financial Analysis is contained in separate modules on the SAM-tw CD-Rom. Use the Launch Pad to open them or simply look for them on the CD-Rom. There is a separate file for either 3, 4, or 5 years of financial data.
There is a separate Strategic Group Map for either 4, 5, or 6 groups. Choose the appropriate sheet for your particular industry / company's situation.
Print Cover Page
Go To Input
Print All Industry and Competition
Print Industry
Go To Input
Print Comp
Go To Input
Print Porter
Go To Input
Print GE Matrix
Go To Input
Print Market
Go To Input
Print Environmental
Go To Input
Print All Company Analysis Output
Print SWOT
Go To Input
Print Internal
Go To Input
Print SPACE
Go To Input
Print Strategy
Go To Input
Print Recommendations
Go To Input
Print Mission
Go To Input
Go To Input
Print Value
Print SGM4
Go To
SGM5
Print Mission
Go To Input
Print ALL Strategy Output Worksheets
Go To
SGM4
Go To SGM6
Print All Recommendations Output
Print SGM5
Print SGM6
Print TOWS
Go To Input
Print CC
Go To Input
Strategy ChecklisttwSAM tw = Strategic Analysis Model that worksStrategy Toolbox ChecklistIndicate which tools are appropriate for completing a Strategic Plan for this company. Indicate completion for tools used, and space is allowed to record comments regarding any of the tools.Appropriate?Description of ToolComplete?Comments?PHASE I: Situation AnalysisGeneral Company InformationIndustry and Competitive AnalysisIndustry AnalysisCompetitive AnalysisPorter's Five ForcesStrategic Group MapGE MatrixMarket AnalysisEnvironmental AnalysisCompany AnalysisFinancial AnalysisSWOT AnalysisTOWS MatrixGeneral Internal AnalysisCore Competence AssessmentValue AnalysisSPACE Chart / AnalysisPHASE II: STRATEGIC ANALYSIS AND CHOICEPHASE II: Strategic Analysis & Choice and PHASE III: RecommendationsStrategic Alternatives and AnalysisPHASE III: RECOMMENDATIONSPHASE II: Strategic Analysis & Choice and PHASE III: RecommendationsRecommendationsMission StatementsVision Statements
Gen InfoOnce input is complete for this screen, click here to print Cover Sheet which incorporates the data entered here.Input General Company InformationSporting Goods - RetailName of CompanyYour Company NameSegmentIndustryNumber of EmployeesProducts/ServicesCEO NameCEO StyleNo. Years in BusinessNo. Locations1How Many States/Countries?Headquarters LocationPublic or Privately .
Stock Pitch For Watch Manufacturing Companies PowerPoint Presentation Ppt Sli...SlideTeam
Our Stock Pitch For Watch Manufacturing Companies PowerPoint Presentation Ppt Slide Template is the perfect way to pitch your stock. We have researched thousands of stock pitches and designed the most impactful way to convince your investors to invest in your equity. http://bit.ly/2w64AGL
This version includes the key points generated during the workshop, as well as the workshop activity. Check out melsig.shu.ac.uk for further outputs from the MELSIG workshop from the 8th January event at Nottingham Trent University
See the Roland Berger Strategy Consultants (http://www.rolandberger.us/) 2014 study on The Next Challenge Of The US Auto Industry.
http://tinyurl.com/NPAutomotive
http://www.linkedin.com/in/TonyLy
https://www.facebook.com/MechanicalMarketer
Deliverable 6 - Profit Maximizing Quantity and Price Present.docxcargillfilberto
Deliverable 6 - Profit Maximizing Quantity and
Price Presentation
Competency
Understand economic terminology and economic definitions pertaining to
decisions made by managers.
Course Scenario
Oil Company X is a large oil refinery which has been expanding and taking on
new investment projects. Recently, they have considered building a pipeline
that stretches across the United States, from Canada to New Orleans. As an
alternate investment, they are considering increasing production at existing
facilities.
In order to compare these investment opportunities, the head of the Cost
Analysis Department has tasked you with finding the profit maximizing
quantity and price if production continues at existing facilities. You will then
present this to the head of the department in a meeting, along with supporting
documentation such as cost curves, data tables, and equations.
Instructions
As a Cost Analyst at your firm, you are being asked to evaluate the profit
maximizing quantity and price for your product to submit to your manager.
Assume that your firm is a monopoly supplier of oil in your region, due to
extensive trade restrictions.
Another team member in the Cost Analysis Department has compiled the
necessary data in the linked spreadsheet. You will have to complete the
missing columns for ATC, AVC, and MC. If the company is incurring a profit,
include the amount of the profit earned when quantity and price are
maximized. If your company is incurring a loss, prove whether it should shut
down or continue operating at a loss. Use graphs and equations to support
your argument.
You will create a short screen recording with narration arguing your case to
your manager. Create a PowerPoint presentation to support your
https://content.learntoday.info/Competency/ECO3250/Deliverable%206%20Spreadsheet.xlsx
recommendation which can serve as the visuals for your recorded screen
capture.
There are many free screen recording software/Webware options available
(such as Screencast-O-Matic) to use in presenting your PowerPoint. Make
sure that both your voiced narration and the PowerPoint slides are captured
during your screen recording.
Be sure to include a cohesive introduction and conclusion of your findings.
Your body slides should include any relevant curves created in Excel from the
data spreadsheet.
After recording, paste a link to the recording on the last slide of the
PowerPoint presentation. Attach the PowerPoint presentation as well as the
Excel spreadsheet showing how you created the curves and obtained the
profit maximizing quantity and price, as well as the corresponding profit or
loss.
Format your PowerPoint to include a title page, introduction, body slides,
conclusion, and references. Remember to cite your sources using correct
APA format, and also use correct grammar, spelling, and formatting.
Grading Rubric
F F C B A
0 1 2 3 4
Not
Submitted No Pass Competence Proficiency Mastery
N.
I worked in a team and we were asked to evaluate Gap, Inc. and give specific recommendations for future growth and prosperity. This is the report we created based on our research and findings.
· Complete the Assignment, Personal Application Paper· After r.docxLynellBull52
· Complete the Assignment, "Personal Application Paper"
· After reviewing what you have written for the Personal Application Conferences each week and your interaction with your fellow students about this, write a final paper incorporating all of the topics covered weekly in the PA and how what you have learned in this course applies to the organization you work for. It should be more than just a simple cut and paste from your earlier PA postings.
Papers should be approximately 5-7 pages in length. This page limit is forces you to think hard of what are the key points you want to make and avoid generalities.
The following is the past 8 weeks discussion questions in yellow and the answers to help you with the paper.
What kinds of industries tend to be better performers in the medium to long term? Why? What kinds of industries tend to do poorly in the medium to long term? Why?
Can you make the claim that some industries are inherently more profitable than others? Provide arguments and examples to justify your response.
Generally speaking, for companies in the same industry, what factors would explain differences in company performance over the long term?
Your thoughts about the fundamental strategic issues facing the industry in which your organization exists. Compare the performance of your company against the industry within which it operates, for 1 year and 5 years, using the Morningstar database or any other source of information that is appropriate
1. The kind of industries which tend to perform better in the medium to long term include railroad, insurance service providers, and resorts & casinos. This is because of the management practices used in the industries and the pattern of cash flow that the industries have. The revenue flow in the resorts and casinos may be volatile during the short term but when viewed in the medium to long term it is stable. The management practices used in the industries such as the sale of time shares smoothen the volatilities that commonly experienced in the industries. Industries such as savings & cooperative banks and independent power production tend to perform poorly in the medium to long term period. This is because the savings and cooperative banks are affected by both the economy and customer demands hence the varying year returns. Savings and cooperative banks avail various substitutes to customers in the long term. These substitutes determine the competition in the industry. Independent power production industry performs poorly because it is privately owned .
2. Some industries are inherently profitable than others because some of the industries perform better in the medium to long term compared to others. For example the returns in resorts and casinos may be volatile in the short run but stable in the long term while industries such as the coal and gold industries have low returns in the short run because of their nature of getting depleted with time and hence depreciating value. This, there.
STARTtwSAM tw = Strategic Analysis Model that worksTABLE OF CONTEN.docxwhitneyleman54422
STARTtwSAM tw = Strategic Analysis Model that worksTABLE OF CONTENTSPHASE ICompany AnalysisFinancial Analysis--This module is contained in separate files on the SAM tw CD-Rom.SWOT AnalysisTOWS MatrixPHASE IGeneral Company InformationGeneral Internal AnalysisCore Competence AssessmentIndustry and Competitive AnalysisValue AnalysisIndustry AnalysisSPACE Chart / AnalysisCompetitive AnalysisPHASE IIStrategic Analysis & ChoicePorter's Five ForcesStrategic Alternatives and AnalysisStrategic Group MapPHASE IIIRecommendationsGE MatrixRecommendationsMarket AnalysisMission StatementsEnvironmental AnalysisVision Statements
Financial Analysis is contained in separate modules on the SAM-tw CD-Rom. Use the Launch Pad to open them or simply look for them on the CD-Rom. There is a separate file for either 3, 4, or 5 years of financial data.
There is a separate Strategic Group Map for either 4, 5, or 6 groups. Choose the appropriate sheet for your particular industry / company's situation.
Print Cover Page
Go To Input
Print All Industry and Competition
Print Industry
Go To Input
Print Comp
Go To Input
Print Porter
Go To Input
Print GE Matrix
Go To Input
Print Market
Go To Input
Print Environmental
Go To Input
Print All Company Analysis Output
Print SWOT
Go To Input
Print Internal
Go To Input
Print SPACE
Go To Input
Print Strategy
Go To Input
Print Recommendations
Go To Input
Print Mission
Go To Input
Go To Input
Print Value
Print SGM4
Go To
SGM5
Print Mission
Go To Input
Print ALL Strategy Output Worksheets
Go To
SGM4
Go To SGM6
Print All Recommendations Output
Print SGM5
Print SGM6
Print TOWS
Go To Input
Print CC
Go To Input
Strategy ChecklisttwSAM tw = Strategic Analysis Model that worksStrategy Toolbox ChecklistIndicate which tools are appropriate for completing a Strategic Plan for this company. Indicate completion for tools used, and space is allowed to record comments regarding any of the tools.Appropriate?Description of ToolComplete?Comments?PHASE I: Situation AnalysisGeneral Company InformationIndustry and Competitive AnalysisIndustry AnalysisCompetitive AnalysisPorter's Five ForcesStrategic Group MapGE MatrixMarket AnalysisEnvironmental AnalysisCompany AnalysisFinancial AnalysisSWOT AnalysisTOWS MatrixGeneral Internal AnalysisCore Competence AssessmentValue AnalysisSPACE Chart / AnalysisPHASE II: STRATEGIC ANALYSIS AND CHOICEPHASE II: Strategic Analysis & Choice and PHASE III: RecommendationsStrategic Alternatives and AnalysisPHASE III: RECOMMENDATIONSPHASE II: Strategic Analysis & Choice and PHASE III: RecommendationsRecommendationsMission StatementsVision Statements
Gen InfoOnce input is complete for this screen, click here to print Cover Sheet which incorporates the data entered here.Input General Company InformationSporting Goods - RetailName of CompanyYour Company NameSegmentIndustryNumber of EmployeesProducts/ServicesCEO NameCEO StyleNo. Years in BusinessNo. Locations1How Many States/Countries?Headquarters LocationPublic or Privately .
Stock Pitch For Watch Manufacturing Companies PowerPoint Presentation Ppt Sli...SlideTeam
Our Stock Pitch For Watch Manufacturing Companies PowerPoint Presentation Ppt Slide Template is the perfect way to pitch your stock. We have researched thousands of stock pitches and designed the most impactful way to convince your investors to invest in your equity. http://bit.ly/2w64AGL
Mercer Capital's Value Focus: Auto Dealer Industry | Year-End 2018Mercer Capital
Mercer Capital's Auto Dealer Industry newsletter provides perspective on valuation issues. Each newsletter also includes macroeconomic trends, industry trends, and guideline public company metrics.
General Motors AnalysisGeneral Motors AnalysisTeam 7Li.docxhanneloremccaffery
General Motors Analysis
General Motors Analysis
Team 7
Lisa Shepherd
Ashley Walker
Justin Iranpour
Heather Dobson
Jeremy Hensley
International Management
Kennesaw State University
Spring Semester
2/25/2016
1. Module 1 - Industry Analysis - General Motors
1.1 Which industry does your firm operate in?
According to IBISWorld Industry reports (n.d.), General Motors operates in the car and automobile manufacturing industry.
1.1.1 What is it’s SIC code (with description)?
General Motors SIC Code isSIC-3711 Motor Vehicles & Passenger Car Bodies and 37140000 Motor vehicle parts and accessories. According to Barchart.com (n.d.), the description is, “General Motors Company is engaged in the designing, manufacturing and retailing of vehicles globally including passenger cars, crossover vehicles, and light trucks, sport utility vehicles, vans and other vehicles. Its business is organized into three geographically-based segments- General Motors North America (GMNA), General Motors International Operations (GMIO) and General Motors Europe (GME). General Motors Company is headquartered in Detroit, Michigan, the United States of America.”
1.1.2 Which IBISWorld Industry reports apply to your firm?
Car & Automobile Manufacturing in the US - 33611a
1.1.2.1 What is the IBISWorld definition of your industry?
According to the IBISWorld (n.d), “Companies in this industry manufacture cars and automobile chassis. These operations, which are referred to as automakers, typically produce cars, including electric cars, in assembly plants. The manufacture of light trucks (e.g. vans, pickups and SUVs), heavy trucks and motorcycles is excluded from this industry.”
1.1.2.2 Please summarize your industry structure from the ten items in the table on the industry at a glance page. Additionally please briefly explain the implications of each item for firms in that industry
Life Cycle Stage
This is a mature industry in existence since the late 1800s. The IVA, industry value added, was expected to grow at a rate of 7.6 percent per year from the years 2010 to 2020, despite the industry suffering greatly after the 2008 recession. This rate is three times the growth rate of the GDP, yet the industry is still mature; the elevated IVA shows that the industry is recovering well from the recession. Another sign that the industry is mature is that the number of industry locations decline at an annual rate of 1.2 percent per year over the same time frame. The final reasons that the industry is mature are that production efficiency has been improved and any threat of a real decline has been alleviated by recent performance (Industry Outlook, n.d.).
Revenue Volatility
From the years 2010 to 2015 the industry has seen high revenue volatility levels. In the automobile induernment policy (Operating Conditions, n.d.).
Concentration Levelstry new features and models can influence sales. When innovative features are introduced buyers have a greater incentive to u ...
A perspective devoted to Private Equity firms: to be successful they should adopt an innovative business model and control the richest parts of the value chain
Allied Motion Changing Mix And Refinancing Opportunity Set Up 60% Return Potential
1. Allied Motion: Changing Mix And
Refinancing Opportunity Set Up 60%
Return Potential
|Must Read May 16, 2016 7:30 AM ET
by: Lester Goh
Summary
• The market is overly concerned regarding Allied Motion's exposure to
commodity-sensitive end markets, which is not that large of an issue.
• Allied's product mix is shifting to more solutions-oriented sales, which are
better, stickier, less volatile, and higher margin.
• Refinancing of $30m subordinated notes should add an incremental ~$1.6m
to 2015 net income.
• Fair value of roughly $36, implying ~60% upside.
Allied Motion: Changing Mix And Refinancing Opportunity Set Up 60% Return Potent… Page 1 of 12
http://seekingalpha.com/article/3974928-allied-motion-changing-mix-refinancing-opportun… 1/8/2016
2. Due to its exposure to commodity-sensitive markets, the market is pricing Allied
Motion (NASDAQ:AMOT) ("Allied", "AMOT", or the "Company") as if a shoe is
about to drop any quarter now. I disagree.
The Market Is Overly Concerned About Allied's Exposure To Commodity-
Sensitive Markets
Among the markets Allied serves, electronics and medical are doing fine and have
helped offset lower demand from the vehicle, industrial, aerospace, and defense
markets in 2015.
The reason for the weaker performance from said markets is quite clear. They are
commodity sensitive, and anything commodity sensitive has not done too well in
recent years. As 2015 progressed, management became more cautious regarding
its outlook.
This is also reflected in its quarterly results - the Company barely generated any
sequential growth throughout the first three fiscal quarters. Predictably, shares
declined over the course of the year. The bad news came in fiscal 4Q, where
quarterly revenue declined from ~$62m to ~$51m, or ~18%. Management cited that
this sequential decline was primarily due to orders being pushed out to later dates.
On a full-year basis, revenue fell ~7%. Adjusted for currency fluctuations, this
number falls to ~1%.
Undoubtedly, the concern here is whether another shoe is about to drop any quarter
now. With shares still heavily depressed, the market is clearly worried. In my view,
this concern is not entirely warranted.
I think Allied's product lineup will be sticker following changes to the mix. The
Company does not explicitly disclose mix so investors may not be focusing on this.
However, if one observes management's commentary over the years, he would be
able to discern the shifting mix. Investors seem unaware that this changing mix
would dampen the effect of end-market downturns on Allied's business.
Let's rewind the clocks back to 2009. Allied did ~$86m in sales in the prior year.
Then, the financial crisis hit and sales cratered, falling nearly 30% in 2009. In 2010,
revenue rebounded to ~$81m. But that's not what caught my attention.
Allied Motion: Changing Mix And Refinancing Opportunity Set Up 60% Return Potent… Page 2 of 12
http://seekingalpha.com/article/3974928-allied-motion-changing-mix-refinancing-opportun… 1/8/2016
3. The ~700bps improvement in gross margins peaked my interest. The 2010 10-K
mentioned that the improvement in gross margins was due to the sale of higher-
margin products. Higher-margin products in the context of Allied and its peers refer
to more solutions-oriented sales.
Allied Motion Gross Margins
Year 2011 2012 2013 2014 2015
Gross margins 30.2% 29.1% 29.1% 29.4% 29.6%
Source: Company filings
Since 2010, progress on gross margin expansion has stalled, but that was due to
lower fixed overhead absorption due to lower sales (2011-2012) and less sales on
lower-margin products offsetting greater sales in higher-margin products (2014-
2015). There is reason to believe that current gross margins are not "terminal"
margins.
According to the Allied 10-K, it competes with Ametek's (NYSE:AME) EMG
segment, Danaher Motion (NYSE:DHR) - the automation business (part of the
industrial technologies' division), and Parker Hannifin (NYSE:PH).
From its low-20s gross margins, one can infer Parker Hannifin (NYSE:PH) sells
fairly commodified stuff to countless markets (just look at its 10-K). But Parker can
do well because its massive scale and decentralized operating structure keep costs
down and learning curves stemming from its huge cumulative volume protect
profitability. However, due to the commodity nature of its products, sales are highly
volatile - just look at its numbers.
Ametek's precision motor product line is probably the most similar to AMOT's, but it
is slightly more nichey and thus it does 34-36% gross margins. Now, this is on a
consolidated basis, and EMG does ~20% operating margins while EIG (the other
Ametek segment) clocks ~25%. So EMG's gross margins are probably a bit lower
than the consolidated number, assuming a similar amount allocated to SG&A.
However, while Ametek and Allied attack similar sub-segments, AME goes after
Allied Motion: Changing Mix And Refinancing Opportunity Set Up 60% Return Potent… Page 3 of 12
http://seekingalpha.com/article/3974928-allied-motion-changing-mix-refinancing-opportun… 1/8/2016
4. relatively larger customers - the markets AMOT serves are likely too small to
warrant any significant attention by Ametek. Sales are much less volatile as
compared to PH.
Danaher Motion does the super-nichey stuff in that it offers fully-integrated solutions
instead of individual components, and that is why it can get 50%+ gross margins.
This is also a consolidated number, but its industrial tech segment does ~25%
operating margins, and with nearly ~30% of sales allocated to SG&A, it is not a
stretch to say Danaher Motion has the highest gross margins amongst the bunch.
Sales here are the least volatile. Note that industrial tech has other segments as
well, so it is not a perfect comparison. But it does get the idea across.
The point of this comparison is to illustrate that focusing on solutions is much better,
stickier, less volatile and higher-margin. Allied used to focus a lot on individual
products, but in recent years, it has shifted its strategy to a more solutions-oriented
model, which carries higher margins.
Selling individual components is not really that good - it tends to utilize just one of
the Company's technologies and not only carry lower margins, but are also the stuff
that gets skimped on first when times are rough.
Selling an entire solution which utilizes multiple Allied technologies which is
customized to individual customer requirements - thus less likely to cut during end-
market downturns - is much better, stickier - and the margins reflect that. This is
primarily because such solutions are purchased with a long-term view, and thus
they do not tend to be cut when temporary downturns occur.
So with gross margins approaching 30%, although we cannot know the exact mix of
solutions-oriented sales, we know intuitively that they comprise of a significant
percentage of the total. The Company also mentions that the majority of its new
opportunities are solutions oriented, so we know that that part of the mix will grow
and act as a gross margin tailwind. Its acquisitions also reflect this shifting focus -
the recent Heidrive purchase was done to expand Allied's solutions capability,
according to the CEO. Moreover, the Company now has three solutions centers
which design this stuff - one in China, another in Sweden, and the last in New York.
Allied Motion: Changing Mix And Refinancing Opportunity Set Up 60% Return Potent… Page 4 of 12
http://seekingalpha.com/article/3974928-allied-motion-changing-mix-refinancing-opportun… 1/8/2016
5. How high can gross margins go? Well, Ametek's offerings of precision motors look
pretty similar to Allied, and earlier we discussed that AME's EMG segment probably
does slightly lower gross margins than the consolidated 34-36%, so 32% does not
seem overly optimistic.
Moreover, Allied discloses in its 10-K that most of manufacturing facilities are
operating at less than full capacity. So there is also gross margin leverage that
should help margins expand here. All in all, a gradual expansion to 32% gross
margins seems like a fair assumption.
Now, the market believes that a shoe is about to drop any quarter now - I clearly
have the opposite view. But don't take it just from me. Market research firms such as
Allied Market Research (no relation to AMOT) see the overall market as a ~5% long-
term grower.
Normally, I wouldn't place too much weight on these forecasts, but from Allied
Market's commentary, it seems like most of the growth is driven by replacement
demand, which tends to be more robust. It mentions that newer and more energy-
efficient motors, while more expensive as compared to conventional motors, offer
long-term environmental benefits and cost savings.
So companies are looking to replace old motors with more energy-efficient ones.
Some may certainly argue that with energy prices (oil, natural gas, etc.) at where
they are right now, this argument is less valid. But this is quite beside the point.
Companies are not expecting energy-efficient motors to provide them with short-
term payback, but instead they are looking at medium- to longer-term payback
periods. While Allied's larger peers (Ametek, Danaher, etc.) would likely be a
beneficiary of large contracts, Allied would probably do fine with the relatively
smaller (but still meaningful as Allied is fairly small itself) addressable market.
A similar view is also reiterated by the Company itself. While AMOT does not issue
guidance, its quarterly earnings presentation (specifically 4Q '15) mentions that
"new program wins" will help "drive organic growth in 2016." Management does not
offer such hints often, so it seems likely that it would not state this so explicitly
unless it was very confident about its outlook.
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6. Allied also amended its credit agreement in January this year to up the revolving
credit facility limit from $15m to $30m and the foreign revolving sublimit from $10m
to $25m. As Allied's FCF is solidly positive, it appears that the most likely reason for
this change in credit terms would be to finance future growth.
Getting Into The Numbers: 5% Top-Line Growth + Gross Margin Expansion +
Overhead Leverage = 60% Upside
On to overhead. SG&A has been relatively consistent in absolute terms, adjusted for
acquisitions. As a percentage of sales, the figure has come down from ~17% at the
start of the decade to ~13% at the current time, with ~3.5% allocated to selling and
~9.5% allocated to G&A. This can be largely attributed to the Company's lean
improvement initiative, called Allied Systematic Tools by management. For those
who are unfamiliar, AST is quite analogous to the Danaher/Colfax (NYSE:CFX)
Business System at Danaher/Colfax, the 80/20 management process at ITW, and
so on.
Ametek's SG&A, as a percentage of sales, is ~11%. As for Allied, the Company has
less scale as compared to Ametek, so its SG&A per unit will likely be higher. I
assume it stays at 13% of sales.
As for R&D, this is quite simple to project given that it has hovered around 6% of
sales in recent years, and the Company has guided for it to stay at that range.
So with gross margins expanding to 32%, SG&A staying at 13% of sales, R&D
remaining at 6% of sales, and amortization staying flat (it seems depreciation is
embedded in other line items), Allied should do ~12% operating margins in a couple
of years.
Ametek does ~23% operating margins on a consolidated basis, so the EMG
segment is probably in the high-teens, assuming a similar amount of SG&A
allocated to both segments, so these expectations are not exactly unreasonable.
Below the operating income line, there is room for improvement as well. The
Company has a $30m senior subordinated note outstanding at a 14.5% interest rate
- 13% cash, 1.5% payment-in-kind. Looking at the rate relative to Allied's other
sources of financing, this seems fairly high and could probably be brought down
quite a bit with a refinancing.
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7. The Company issued this note to fund the Globe acquisition in 2013. While this is
clearly expensive financing, it seems well worth it. The acquisition doubled the top
line, gave Allied a global reach, and allowed the combined firm to reap savings
stemming from the consolidation of production facilities and raw material sourcing.
Perhaps most importantly, the acquisition provided Allied with high-margin offerings
such as integrated feedback devices and controls - again, focusing on solutions-
oriented stuff, not individual components.
Anyway, the interesting thing about this note is that the Company has an option to
prepay the principal amount at any time after October 18, 2016. With the fiscal year
ending in December, this date corresponds to 4Q '16. As the Company has just
~$6m in cash on hand as of 1Q '16, it is highly likely that Allied will refinance this
note, instead of paying it off in full.
The question then turns to - what kind of rates can Allied get on the refinancing? I
believe that looking at the rates of the other debt obligations in its capital structure is
instructive. Apart from the sub notes, the Company has a term loan at a 2.2% rate -
the effective rate is actually closer to ~2.7% due to the impact of hedges.
However, I doubt Allied can get a similar rate on its sub note because the term loan
is secured by substantially all of the Company's assets, whereas the sub note is not
- it is instead unconditionally guaranteed by some of the Company's subsidiaries.
Allied also has a China credit facility, which it recently refinanced in 4Q '14 at a 6.4%
rate. As the Company's net debt/EBITDA has not changed meaningfully - at 4Q '14
it was just south of 2x and now it is closer to ~2.1x, including the contribution from
the Heidrive acquisition, which closed in January this year.
(In response to an analyst question, management mentioned on the 4Q '15 call that
the Heidrive acquisition has gross and EBITDA margins comparable to that of the
Company. Heidrive did ~$32m in revenue in 2015. So at comparable EBITDA
margins (~11%), the acquisition should contribute ~$3.5m in incremental EBITDA,
assuming no growth from 2015 levels).
The point I am getting at here is that the Company's financial leverage has not
changed meaningfully since the 4Q '14 refinancing. Hence, it seems fair to assume
that Allied would be able to get a similar rate in the upcoming refinancing of the sub
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8. note. I assume a 7% rate, which reduces interest expense by ~$2.25m pre-tax, and
adds an incremental ~$1.6m to net income at a 28% tax rate ((30*(0.145-0.07)
*.72)).
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9. Source: Company filings, author's estimates/calculations
Key assumptions are: 5% top-line growth, gradual expansion to 32% gross margins,
13% SG&A as a percentage of sales, 6% R&D, flat amortization expense, a
~$2.25m decrease in interest expense due to sub note refinancing, and a 20x P/E
multiple. The rationale for these assumptions - excluding the P/E multiple
assumption - has been articulated in prior paragraphs. Note that of the ~19.5% jump
in revenue growth for 2016P, ~14.5% stems from the Heidrive acquisition. Also note
that Heidrive grew sales by ~8% in 2015, so my 5% rate seems conservative.
The reasoning for the 20x P/E multiple - a three-turn discount from the S&P 500 - is
fairly simple. A firm with a multi-year earnings growth profile in excess of 20%
should command a multiple that at least matches the S&P 500. As S&P 500
earnings will likely grow at 3-5% in the long run, one could plausibly argue for a
multiple at a premium to the market - I do not. Instead, I assign a three-turn discount
to account for customer concentration risks, among other risks.
Furthermore, such a multiple is grounded in reality in that the market has historically
assigned a much greater multiple to the stock when it had a similar net income
growth profile. During the 2014-2015 period, Mr. Market awarded Allied a mid-
twenties P/E multiple when its rolling three-year average annual net income growth
was in excess of 20%.
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10. While in absolute terms the multiple may appear aggressive, the Company has the
advantage of a low starting point (i.e. its current margins are unlikely to be its
"terminal" margins), thus making the multiple expansion story highly plausible.
Bottom line, a 20x P/E multiple seems quite reasonable (and also matches the 2015
P/E multiple, excluding the Heidrive acquisition), and would imply ~60% upside from
current levels. Even with much more modest multiple expansion (i.e. a 15x multiple),
upside is still a decent amount at ~20%.
Source: Company filings, author's estimates/calculations
To summarize: at ~12x 2016P P/E, you get a business that is slowly, but surely,
improving its franchise through its continued focus on higher-margin, better, stickier
offerings, with a long-term growth trajectory that seems fairly certain, as it is largely
grounded in replacement demand, which again tends to be far more robust than
"growth" demand.
Catalysts
• Consecutive quarters of improving financials: Such a scenario should
invalidate the bear case and assuage investor concerns of the Company's
exposure to commodity-sensitive industries.
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11. • Sell-side initiations: The Company is scheduled to present at a Houlihan
Lokey conference just a week from now, which could attract both sell-side
coverage as well as investors. The Company has not presented at a conference
for a number of years.
• Refinancing in 4Q '16: As discussed, if the Company manages to refinance at
rates that are in line with my expectations, this should add ~$1.6m in
incremental net income, or ~$0.17 per share.
• Continued debt pay-down: Note that the Company has been paying off $5m-
7m in debt annually in recent years, reducing interest expense by ~$400k per
annum, and adding ~$300k in net income at a 28% tax rate. Further debt
paydown seems likely given that FCF is solidly positive and would serve as
incremental upside to my earnings estimates.
Risks
• There is always the risk of losing major customer accounts. In my view, this is
heavily mitigated by the increasing sales to larger customers in recent years,
which signify greater commitments by customers. Customer concentration is a
huge risk if the stuff you're selling is mostly discretionary and where the
purchase decision is predicated largely on price and near-term outlooks, but as
discussed, this is not the case for Allied.
• The long thesis depends heavily on the top-line growing and gross margins
expanding due to changing mix and manufacturing leverage, so if there are
persistent declines in sales, a major leg of the long thesis will be materially
impaired.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate
any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving
compensation for it (other than from Seeking Alpha). I have no business relationship
with any company whose stock is mentioned in this article.
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12. Additional disclosure: Disclaimer: The author's reports contain factual statements
and opinions. He derives factual statements from sources which he believes are
accurate, but neither they nor the author represent that the facts presented are
accurate or complete. Opinions are those of the the author and are subject to
change without notice. His reports are for informational purposes only and do not
offer securities or solicit the offer of securities of any company. Mr. Goh ("Lester")
accepts no liability whatsoever for any direct or consequential loss or damage
arising from any use of his reports or their content. Lester advises readers to
conduct their own due diligence before investing in any companies covered by him.
He does not know of each individual's investment objectives, risk appetite, and time
horizon. His reports do not constitute as investment advice and are meant for
general public consumption. Past performance is not indicative of future
performance.
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