Construction, Engineering, Building Materials & Products. Summer 2018

Transcription

1 Materials & Products Summer 2018

2 Selected Recent Materials & Products Transactions 2

3 Continued growth in industry spending and costs 3 Private Residential Construction and Public Non- Residential Construction spending increased YoY during March, 2018 by 5.3% and 2.9%, respectively. Private Non-residential Construction spending decreased 2.2%. Construction Costs and Materials Costs continue to increase YOY, by 3.0% and 3.4%, respectively. Near-term confidence driven by tax savings and strong corporate balance sheets are driving projected industry revenue growth rates. Over the next twelve months revenues are expected to grow at rates exceeding longterm historical averages. The recently announced/threatened tariffs on Steel and Aluminum are expected to increase materials costs and negatively impact construction industry companies profitability. Construction Spending: YoY Growth (1) Private Residential Construction Private Non-residential Construction Public Non-Residential Construction Total Construction Materials and Construction Costs: YoY Growth YTD May, 2018 M&A volume is up 21% from the same period in 2017; deal values remain modestly higher in 2018 compared to Increasing purchase price multiples and ready availability of capital have led to larger deals being completed. 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.

4 Construction Firms: Small & Mid-Cap (a) Company Valuations 4 ($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 Quanta Services, Inc. $35.62 $ $30.23 $5,346 $6,134 $9,706 $ % 4.6% 8.1% 31.8% 0.6x 13.8x 0.6x 10.5x EMCOR Group, Inc ,459 4,414 7, % 5.0% 1.8% (0.1%) 0.6x 11.5x 0.6x 11.5x MasTec, Inc ,761 5,154 6, % 5.3% 2.9% 30.5% 0.8x 14.1x 0.7x 10.8x Dycom Industries, Inc ,866 3,559 2, % 2.9% 23.6% NM 1.3x 44.6x 1.0x 14.3x Granite Construction Incorporated ,258 2,041 3, % 4.0% 13.9% 94.1% 0.7x 16.5x 0.6x 8.5x Comfort Systems USA, Inc ,719 1,760 1, % 5.7% 9.7% 22.9% 0.9x 16.6x 0.9x 13.5x Primoris Services Corporation ,354 1,475 2, % 4.2% 10.6% 26.1% 0.6x 15.0x 0.6x 11.9x MYR Group Inc , % 2.6% 7.0% 29.3% 0.5x 18.5x 0.5x 14.3x Matrix Service Company , % 1.0% 10.1% 115.5% 0.4x 41.2x 0.4x 19.1x Sterling Construction Company, Inc , % 2.6% 2.6% 49.6% 0.4x 14.2x 0.4x 9.5x Great Lakes Dredge & Dock Corporation % 1.7% 5.6% NM 1.0x NM 1.0x 20.4x Orion Group Holdings, Inc % 0.6% 9.6% NM 0.5x NM 0.5x 28.9x Median $1,617 $2,097 $ % 3.4% 8.9% 30.5% 0.6x 15.8x 0.6x 12.7x Average $2,257 $3,260 $ % 3.4% 8.8% 44.4% 0.7x 20.6x 0.6x 14.4x (a) Mid-cap defined by market capitalization between $2 billion and $10 billion. Source: S&P Capital IQ as of May 29, 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 $ $ $ $16,817 $19,754 $3,957 $ % 16.5% 11.4% 36.6% 5.0x 30.2x 4.5x 22.1x Martin Marietta Materials, Inc ,832 15,441 3, % 18.1% 22.1% 38.1% 4.2x 23.2x 3.4x 16.8x Boral Limited ,525 7,297 4, % 7.4% 9.1% 77.1% 1.8x 24.1x 1.6x 13.6x Eagle Materials Inc ,168 5,780 1, % 21.5% 10.1% 29.5% 4.2x 19.4x 3.8x 15.0x United States Lime & Minerals, Inc % 15.9% NA NA 2.5x 15.6x NA NA Median $7,297 $3,682 $ % 16.5% 10.7% 37.4% 4.2x 23.2x 3.6x 15.9x Average $9,726 $2,652 $ % 15.9% 13.2% 45.3% 3.5x 22.5x 3.3x 16.9x 5 (a) Mid-cap defined by market capitalization between $2 billion and $10 billion. Source: S&P Capital IQ as of May 29, 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 6 ($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 Masco Corporation $37.55 $ $35.79 $11,659 $14,532 $7,786 $1, % 14.8% 11.6% 16.9% 1.9x 12.6x 1.7x 10.8x Owens Corning ,215 10,885 6, % 11.5% 11.4% 35.7% 1.6x 14.4x 1.5x 10.6x USG Corporation ,768 6,523 3, % 10.5% 7.6% 29.7% 2.0x 19.3x 1.9x 14.9x Trex Company, Inc ,504 3, % 25.1% 12.3% 17.0% 6.1x 24.1x 5.4x 20.6x Armstrong World Industries, Inc ,160 3, % 21.1% 6.7% 56.3% 4.3x 20.4x 4.0x 13.1x Simpson Manufacturing Co., Inc ,948 2,814 1, % 14.8% 8.9% 20.8% 2.8x 19.0x 2.6x 15.7x Universal Forest Products, Inc ,272 2,543 4, % 4.5% 8.1% 13.3% 0.6x 13.8x 0.6x 12.2x Builders FirstSource, Inc ,224 4,154 7, % 4.1% 9.5% 31.7% 0.6x 13.9x 0.5x 10.6x Gibraltar Industries, Inc ,262 1, % 10.0% 4.0% 12.5% 1.3x 12.8x 1.2x 11.4x NCI Building Systems, Inc ,253 1,639 1, % 6.7% 5.3% 25.9% 0.9x 13.6x 0.9x 10.8x Quanex Building Products Corporation % 4.8% 4.1% 26.9% 0.9x 19.4x 0.9x 15.3x Median $3,585 $1,800 $ % 10.5% 8.1% 25.9% 1.6x 14.4x 1.5x 12.2x Average $4,786 $3,186 $ % 11.6% 8.1% 26.1% 2.1x 16.7x 1.9x 13.3x (a) Mid-cap defined by market capitalization between $2 billion and $10 billion. Source: S&P Capital IQ as of May 29, 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 7 ($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 Jacobs Engineering Group Inc. $63.30 $ $49.31 $8,975 $10,746 $11,854 $ % 5.5% 37.8% 57.1% 0.9x 16.6x 0.7x 10.5x Teledyne Technologies Incorporated ,081 8,030 2, % 13.9% 4.5% 3.9% 2.9x 21.2x 2.8x 20.4x Fluor Corporation ,803 6,744 19, % 1.8% (5.5%) 93.4% 0.3x 19.7x 0.4x 10.2x AECOM ,238 8,543 19, % 2.5% 4.8% 75.9% 0.4x 17.5x 0.4x 10.0x CACI International Inc ,049 5,076 4, % 7.7% 2.8% (8.7%) 1.1x 14.8x 1.1x 16.2x McDermott International, Inc ,895 4,046 3, % 11.6% 183.1% 91.7% 1.3x 11.3x 0.5x 5.9x Tetra Tech, Inc ,978 3,254 2, % 9.2% 6.0% 9.9% 1.5x 16.8x 1.5x 15.3x Stantec Inc ,842 3,376 2, % 6.9% 4.8% 27.7% 1.3x 18.4x 1.2x 14.4x KBR, Inc ,478 2,691 4, % 4.7% 15.6% 61.5% 0.7x 14.1x 0.6x 8.7x Tutor Perini Corporation ,011 1,640 4, % 3.0% 14.4% 68.7% 0.4x 11.6x 0.3x 6.9x VSE Corporation % 7.0% NA NA 1.0x 14.0x NA NA Perma-Fix Environmental Services, Inc (2) 21.4% NA NA NA 1.2x NA NA NA Median $3,711 $3,588 $ % 6.9% 5.4% 59.3% 1.1x 16.6x 0.6x 10.4x Average $4,577 $6,254 $ % 6.7% 26.8% 48.1% 1.1x 16.0x 0.9x 11.8x (a) Mid-cap defined by market capitalization between $2 billion and $10 billion. Source: S&P Capital IQ as of May 29, 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 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, Engineering, and Building Products companies have lagged the S&P 500 Index in the YTD 2018 period. Public Market Valuations: EV / Building Materials and, to a lesser extent, Construction and Building Products companies have significantly higher growth expectations over the Next Twelve Months ( ) compared to the S&P 500 Index. Engineering companies continue to project moderate revenue growth rates over the. Next Twelve Months: Estimated Growth 8 Source: S&P Capital IQ as of May 31, Note: figures are based on the median estimate of Wall Street analysts.

9 Selected Small & Mid-Cap M&A Transactions 9 Announced Enterprise Enterprise Value Date Acquirer/Investor Target Target Description Value Multiple 05/10/18 Brannan Sand and Gravel US Concrete & Quarries Business of Company, LLC Boral Limited Manufactures concrete and quarry. $ x DA 04/06/18 Ashford Holding Corp. Project Management LLC Provides comprehensive and cost-effective design, development, and project management services. $ x DA 03/27/18 Primoris Services Corporation Willbros Group, Inc. Operates as a specialty contractor serving the oil, gas, and power industries. $ x Rev 03/07/18 Tyman plc Ashland Products Inc. Manufactures window and door hardware. $ x Rev; 9.0x DA 02/14/18 Granite Construction Incorporated Layne Christensen Company Operates as a water management, services, and drilling company for water, mineral, and energy markets. $ x Rev; 16.5x DA 02/14/18 CEMEX, Inc.; Aalborg Cement 1.9x Rev; 10.6x Lehigh White Cement Company Produces cements for the construction industry. $ Company Inc. DA 01/31/18 Clayton, Dubilier & Rice, Inc. Ply Gem Holdings, Inc Manufactures and sells residential building products. $2, x Rev; 9.9x DA 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 01/05/18 Keller Group plc Moretrench American Corporation Provides geotechnical construction and engineering services. $ x Rev; 5.7x DA 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 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 Highlighted deals in Overview of Selected Transactions on following slides. Source: S&P Capital IQ

10 Overview of Selected Recent Transactions 10 Primoris Services Corporation Acquires Specialty Energy Infrastructure Contractor March 28, 2018 Primoris Services Corporation (NasdaqGS:PRIM) announced an agreement to acquire Willbros Group, Inc. ( Willbros ), a specialty energy contractor serving the Oil & Gas and Power industries. Primoris will pay an Enterprise Value of $138 million, representing an EV/DA multiple of approximately 6.1x projected 2018 DA. Primoris estimates that during the first 12 months after closing, the addition of Willbros will add significant synergies between the two companies, $7 million of which are expected to be realized from annual expense savings. Upon completion of the transaction, Primoris expects the Willbros Utility Transmission and Distribution (UTD) business to become a new operating segment, Primoris UTD. Primoris also plans to incorporate Willbros Lineal and Houston Oil & Gas operations into Primoris Utilities, Infrastructure & Distribution segments. Additionally, Willbros Canadian business will be integrated into Primoris Power, Industrial, and Engineering segment. Keller Group plc Acquires East Coast-based Geotechnical Contracting Company January 5, 2018 Keller Group plc (LSE:KLR) agreed to acquire the entire issued share capital of Moretrench American Corporation ( Moretrench ), a provider of geotechnical construction and engineering services, from its shareholders. The transaction provides for an Enterprise Value of $90 million, or approximately 5.7x 2017 DA. The acquisition is being paid in cash and will be funded using Keller s existing borrowing facilities. Keller Group provides geotechnical solutions in North America, Europe, the Middle East, Africa, and the Asia-Pacific. Keller plans to use this acquisition to strongly position themselves for the expected long term renewal of infrastructure in the region by growing their product range and building strong customer-focused businesses. Note: Middle market M&A includes transactions with EV < $1000mm, and transactions with undisclosed EV. YTD as of May 30, Source: S&P Capital IQ, CH2M press release, Owens Corning press release

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