Construction, Engineering, Building Materials & Products. W i n t e r

Transcription

1 Materials & Products W i n t e r

2 Selected Recent Construction, Engineering, Building Materials & Products Transactions 2

3 Continued growth in industry spending and M&A 3 Private Residential Construction and Public Non- Residential Construction spending increased YoY during November 2017 by 7.9% and 1.8%, respectively. Private Non-residential Construction spending decreased 3.8%. Construction Costs and Materials Costs continue to increase YOY, as both categories were up 3.3% in January 2018 on increased demand. President Trump s highly publicized infrastructure plan has reportedly been leaked by Axios news. Although specific dollar amounts are not mentioned, the 6-page document broadly allocates funding accordingly: o 50% towards core infrastructure by providing grants to cover up to 20% of a project s costs o 25% to improve infrastructure in rural areas by incentivizing investment in transportation or utilities o 10% for riskier, exploratory and ground-breaking ideas o 12% reserved for credit programs and a financing fund 2017 M&A volume was down 8% from 2016 M&A volume, while deal values were up slightly in 2017 compared to Increasing purchase price multiples and availability of capital led to larger deals being completed in Source: US Census, Engineering News Record (ENR), Joint Center for Housing Studies at Harvard University, Moss Adams Capital research (1) 60-day moving average used for Construction Spending YoY Growth chart. Construction Spending: YoY Growth (1) 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% Private Residential Construction Private Non-residential Construction Public Non-Residential Construction Total Construction Materials and Construction Costs: YoY Growth 5.5% Construction Cost Index Materials Cost Index 4.5% 3.5% 2.5% 1.5% 0.5% -0.5% -1.5%

4 Construction Firms: Small & Mid-Cap (a) Company Valuations ($U.S. in millions, except per share data) Data Est. Growth EV Multiple Company Name Share Price 52 Week High - Low Market Cap Enterprise Value Gross Margin Margin 4 Quanta Services, Inc. $38.98 $ $30.23 $6,052 $6,726 $9,091 $ % 5.1% 8.5% 10.6% 0.7x 14.4x 0.7x 13.0x EMCOR Group, Inc ,917 4,851 7, % 4.7% 2.7% 2.4% 0.6x 13.5x 0.6x 13.2x MasTec, Inc ,411 5,654 6, % 6.7% 0.6% (5.7%) 0.9x 13.3x 0.9x 14.1x Chicago Bridge & Iron Company N.V ,924 3,807 9,148 (209) 1.8% NA (25.9%) NM 0.4x NA 0.6x 12.3x Dycom Industries, Inc ,667 4,391 3, % 7.7% 5.8% 9.4% 1.5x 18.8x 1.4x 17.2x Granite Construction Incorporated ,696 2,498 2, % 2.5% 11.6% 132.3% 0.9x 34.5x 0.8x 14.8x Comfort Systems USA, Inc ,625 1,677 1, % 5.9% 11.3% 26.9% 1.0x 16.5x 0.9x 13.0x Primoris Services Corporation ,355 1,452 2, % 4.6% 3.4% 2.3% 0.6x 13.1x 0.6x 12.8x MYR Group Inc , % 2.6% 4.3% 28.8% 0.5x 18.6x 0.5x 14.4x Matrix Service Company ,126 (1) 6.9% NA 13.4% NM 0.5x NA 0.4x 14.7x Great Lakes Dredge & Dock Corporation % 1.8% 10.9% 279.7% 1.0x NM 0.9x 15.1x Sterling Construction Company, Inc % 2.0% 15.6% NM 0.5x 25.4x 0.4x 11.5x Orion Group Holdings, Inc (15) 9.1% NA 18.6% NM 0.6x NA 0.5x 16.3x Median $1,677 $2,403 $ % 4.7% 8.5% 10.6% 0.6x 16.5x 0.6x 14.1x Average $2,593 $3,605 $ % 4.4% 6.2% 54.1% 0.7x 18.7x 0.7x 14.0x (a) Mid-cap defined by market capitalization between $2 billion and $10 billion. Source: S&P Capital IQ as of January 22, Note: Not meaningful (NM) if EV/ is greater than 10x or if EV/ is greater than 50x. NA if denominator is 0 or not available. figures are based on the median estimate of Wall Street analysts.

5 Building Materials: Small & Mid-Cap (a) Company Valuations ($U.S. in millions, except per share data) Data Est. Growth EV Multiple Company Name Share Price 52 Week High - Low Market Cap Enterprise Value Gross Margin Margin Vulcan Materials Company $ $ $ $17,862 $19,976 $3,786 $ % 17.3% 8.4% 27.5% 5.3x 30.6x 4.9x 24.0x Martin Marietta Materials, Inc ,268 15,959 3, % 18.3% 10.9% 18.3% 4.3x 23.6x 3.9x 20.0x Eagle Materials Inc ,690 6,316 1, % 22.7% 14.0% 32.9% 4.8x 21.0x 4.2x 15.8x Boral Limited ,099 8,967 3, % 7.9% 41.7% 121.6% 2.7x 34.9x 1.9x 15.7x United States Lime & Minerals, Inc % 16.7% NA NA 2.4x 14.5x NA NA Median $8,967 $3,267 $ % 17.3% 12.5% 30.2% 4.3x 23.6x 4.0x 17.9x Average $10,314 $2,444 $ % 16.6% 18.8% 50.1% 3.9x 24.9x 3.7x 18.9x 5 (a) Mid-cap defined by market capitalization between $2 billion and $10 billion. Source: S&P Capital IQ as of January 22, Note: Not meaningful (NM) if EV/ is greater than 10x or if EV/ is greater than 50x. NA if denominator is 0 or not available. figures are based on the median estimate of Wall Street analysts.

6 Building Products: Small & Mid-Cap (a) Company Valuations ($U.S. in millions, except per share data) Data Est. Growth EV Multiple Company Name Share Price 52 Week High - Low Market Cap Enterprise Value Gross Margin Margin 6 Masco Corporation $45.82 $ $31.29 $14,439 $16,526 $7,529 $1, % 14.9% 5.2% 12.9% 2.2x 14.8x 2.1x 13.1x Owens Corning ,682 13,098 6, % 12.5% 8.7% 26.1% 2.1x 17.0x 2.0x 13.5x USG Corporation ,340 6,009 3, % 10.9% 5.5% 27.9% 1.9x 17.7x 1.8x 13.9x Armstrong World Industries, Inc ,274 4,015 1, % 14.2% (27.6%) 58.8% 3.1x 21.9x 4.3x 13.8x Simpson Manufacturing Co., Inc ,814 2, % 15.1% 8.3% 15.7% 2.8x 18.3x 2.6x 15.8x Trex Company, Inc ,359 3, % 25.8% 17.7% 15.1% 6.2x 24.0x 5.3x 20.9x Universal Forest Products, Inc ,347 2,503 3, % 4.6% 9.0% 18.3% 0.7x 14.3x 0.6x 12.1x Builders FirstSource, Inc ,520 4,362 6, % 4.0% 8.5% 30.1% 0.6x 15.9x 0.6x 12.3x Gibraltar Industries, Inc ,182 1, % 9.7% 3.6% 10.3% 1.2x 12.7x 1.2x 11.6x NCI Building Systems, Inc ,220 1,542 1, % 6.4% 4.5% 26.5% 0.9x 13.6x 0.8x 10.7x Quanex Building Products Corporation % 4.8% 3.3% 16.7% 1.1x 23.9x 1.1x 20.5x Median $3,334 $1,770 $ % 10.9% 5.5% 18.3% 1.9x 17.0x 1.8x 13.5x Average $5,106 $3,074 $ % 11.2% 4.2% 23.5% 2.1x 17.6x 2.0x 14.4x (a) Mid-cap defined by market capitalization between $2 billion and $10 billion. Source: S&P Capital IQ as of January 22, Note: Not meaningful (NM) if EV/ is greater than 10x or if EV/ is greater than 50x. NA if denominator is 0 or not available. figures are based on the median estimate of Wall Street analysts.

7 Engineering Firms: Small & Mid-Cap (a) Company Valuations ($U.S. in millions, except per share data) Data Est. Growth EV Multiple Company Name Share Price 52 Week High - Low Market Cap Enterprise Value Gross Margin Margin 7 Fluor Corporation $61.17 $ $37.04 $8,453 $8,216 $19,483 $ % 2.6% (3.7%) 23.4% 0.4x 16.5x 0.4x 13.4x Jacobs Engineering Group Inc ,883 9,406 10, % 5.1% 38.0% 53.5% 0.9x 18.2x 0.7x 11.9x AECOM ,234 9,494 18, % 3.0% NM 51.1% 0.5x 17.2x 0.5x 11.4x Teledyne Technologies Incorporated ,801 7,915 2, % 14.1% 10.4% 9.9% 3.2x 22.8x 2.9x 20.8x Stantec Inc ,268 3,751 2, % 7.2% 8.9% 41.3% 1.4x 19.0x 1.3x 13.4x CACI International Inc ,435 4,539 4, % 6.8% 2.6% 8.6% 1.0x 15.3x 1.0x 14.1x Tetra Tech, Inc ,778 2,945 2, % 8.7% 3.5% 16.1% 1.4x 16.7x 1.4x 14.4x KBR, Inc ,961 2,953 4, % 1.0% (4.7%) NM 0.7x NM 0.7x 10.9x McDermott International, Inc ,227 2,382 2, % 9.9% 1.3% (39.5%) 0.8x 8.3x 0.8x 13.7x Tutor Perini Corporation ,347 2,014 4, % 3.6% 16.2% 55.6% 0.4x 11.7x 0.4x 7.5x VSE Corporation % 6.8% NA NA 1.0x 14.2x NA NA Perma-Fix Environmental Services, Inc (2) 21.3% NA NA NA 0.9x NA NA NA Median $3,352 $3,638 $ % 6.8% 3.5% 23.4% 0.9x 16.6x 0.8x 13.4x Average $4,535 $6,024 $ % 6.3% 8.0% 24.4% 1.1x 16.0x 1.0x 13.1x (a) Mid-cap defined by market capitalization between $2 billion and $10 billion. Source: S&P Capital IQ as of January 22, Note: Not meaningful (NM) if EV/ is greater than 10x or if EV/ is greater than 50x. NA if denominator is 0 or not available. figures are based on the median estimate of Wall Street analysts.

8 Enterprise Value / Multiple Construction, Engineering, Building Enterprise value multiples are stable but generally lag the S&P Enterprise Value (EV) multiples for publicly-traded Building Materials companies continue to trade significantly above the S&P 500 Index. EV multiples for publicly-traded Construction companies surpassed the S&P 500 Index in early November, while Engineering and Building Products companies continue to trend at a discount. Building Materials and, to a lesser extent, Construction companies have significantly higher growth expectations over the Next Twelve Months ( ) compared to the S&P 500 Index. Engineering and Building Product companies expect moderate revenue growth rates over the. Public Market Valuations: EV / 35.0x 30.0x 14% 12% Next Twelve Months: Estimated Growth 12.5% 25.0x 10% 8.5% x 8% 15.0x 6% 6.3% 5.5% 10.0x 4% 3.5% 5.0x 2% S&P 500 Engineering Construction Building Materials Building Products 0% S&P 500 Engineering Construction Building Materials Building Products Source: S&P Capital IQ as of January 22, Note: figures are based on the median estimate of Wall Street analysts.

9 Selected Small & Mid-Cap M&A Transactions Announced Enterprise Enterprise Value Date Acquirer/Investor Target Target Description Value Multiple 01/19/18 NAPEC Inc. All The Assets Of H.T. Sweeney & Son, Offers excavating and grading, water, sewer, storm utilities, concrete curb and sidewalk, and asphalt Inc. paving services. $ x Rev 12/29/17 The Riverside Company HMI Cardinal Manufacturer and distributor of glass and metal products. Confidential Confidential 12/04/17 Hexatronic Group AB (publ) Blue Diamond Industries, LLC Manufactures and sells high density polyethylene (HDPE) pipe and conduit products. $ x Rev; 5.8x DA 08/07/17 Carr's Group plc NuVision Engineering, Inc. Provides technology and applications engineering services to various domestic and international clients. $ x Rev 9 08/01/17 Jacobs Engineering Group Inc. CH2M HILL Companies, Ltd. Provides engineering, construction, consulting, procurement, program management, and technical services. $3, x Rev 05/15/17 Louisiana-Pacific Canada Ltd. International Barrier Technology Inc. Develops, manufactures, and markets proprietary fire resistant building materials for domestic clients $ x Rev; 26.8x DA 07/06/17 Itinera Usa Corp. Halmar International, LLC Halmar International, LLC provides construction services. $ x Rev 07/06/17 AECOM Shimmick Construction Company, Inc. Provides general construction, construction management, and design-build services to Western U.S. clients. $ x Rev 06/23/17 Thompson Pipe Group Inc. Forterra, Inc., U.S. Concrete and Steel Pressure Pipe Assets Comprises concrete and steel pressure pipe assets of water pipe and products business. $ x Rev 05/15/17 Owens Corning Pittsburgh Corning Corporation Develops, manufactures, and supplies building materials in the United States and Internationally. $ x Rev 05/04/17 Hamat Group Ltd. HOUZER, Inc. HOUZER, Inc. manufactures and markets kitchen sinks in the United States and internationally. $ x Rev 05/01/17 NV5 Global, Inc. Lochrane Engineering, Inc. Lochrane Engineering, Inc. offers civil engineering and surveying services in Florida. $ x Rev 04/28/17 Apogee Enterprises, Inc. EFCO Corporation Manufactures and supplies architectural aluminum window, curtain wall, storefront, and entrance systems. $ x Rev 04/14/17 NV5 Global, Inc. Bock & Clark Corporation Bock & Clark Corporation provides commercial real estate due diligence services in the United States. $ x Rev 04/09/17 T.A.S. Commercial Concrete 0.2x Rev; 3.2x Tony Bagliore Concrete, Inc. Tony Bagliore Concrete, Inc. provides concrete services in Central Texas. $8.00 Construction, LLC DA 03/16/17 Oldcastle Architectural, Inc. Advanced Environmental Recycling 1.2x Rev; 7.2x Develops technologies to recycle waste polyethylene plastics and produces green building products. $ Technologies, Inc. DA 03/09/17 FTE Networks, Inc. Benchmark Builders, Inc. Provides construction and program management services, and other construction-related services. $ x Rev 03/01/17 Tecnoglass Inc. GM&P Consulting and Glazing Contractors, Inc. Designs and installs building enclosure systems, such as curtain and window walls for buildings in the U.S. $ x Rev 02/08/17 Reycon Partners LLC Layne Christensen Company, Heavy Civil Comprises heavy civil construction services. Business $ x Rev 02/06/17 Advanced Drainage Systems, Inc. Plastic Tubing Industries Inc. Manufactures high-density polyethylene (HDPE) corrugated drainage pipes and fittings. $ x Rev Highlighted deals in Overview of Selected Transactions on following slides. Source: S&P Capital IQ

10 Overview of Selected Recent Transactions 10 Napec, Inc. Acquires East Coast-based H.T. Sweeney & Son, Inc. January 19, 2018 NAPEC, Inc. (TSX: NPC) announced an agreement to acquire the assets of H.T. Sweeney & Son, Inc. ( HTS ), a heavy civil construction business headquartered in Delaware County, Pennsylvania. The transaction provides for a total enterprise value of $20.4 million. For the year ended on December 31, 2017, HTS generated revenues of approximately $50 million, which implies a transaction EV/Rev of 0.4x. The transaction will be financed by new and existing credit facilities. With customers in the commercial, industrial, environmental, utility and institutional sectors, HTS offers its services in several east coast states. Approximately 80% of its revenues come from the industrial and utility sectors with the remainder coming from commercial customers. Importantly, the acquisition provides Napec the ability to vertically integrate its heavy civil construction services as oppose to subcontracting to others. Brookfield Business Partners L.P Acquires Leader of Nuclear Industry January 4, 2018 Brookfield Business Partners L.P. (NYSE:BBU) announced an agreement to acquire 100% of Westinghouse Electric Company ( Westinghouse ) a leading global provider of infrastructure services to the power generation industry and subsidiary of Toshiba Corp. The transaction provides for a purchase price of approximately $4.6 billion and is being funded mostly with $1 billion of equity and $3 billion of long-term debt financing. Westinghouse provides sophisticated engineering, maintenance, facilities management and repair services to its global customer base. Number of Announced Transactions Building Products & Materials Construction & Engineering Note: Middle market M&A includes transactions with EV < $1000mm, and transactions with undisclosed EV. YTD as of January 23, Source: S&P Capital IQ, CH2M press release, Owens Corning press release '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '17 YTD '18 YTD

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