Construction, Engineering, and Building Materials & Products

Transcription

1 Construction, Engineering, and Building Market Monitor I Summer 2016 MOSS ADAMS CAPITAL LLC

2 Moss Adams Capital - Selected Construction Transactions 2 MOSS ADAMS CAPITAL LLC

3 Commercial Construction Continues Bullish Trend; Input Prices Fall Total aggregate spending on construction continues to increase, although the growth rate in spending has decreased significantly during Q to 8.7%, from 18.2% in Q Private Residential Construction spending is up nearly 21%, as compared to the same period in Overall the level of business confidence among construction industry executives has continued to decline from its highs in early Most owners and managers believe the construction market will contract moderately in % 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% Construction Spending Y/Y Growth (1) (1) Public Residential immaterial. Residential includes single and multi-family housing. 60 day moving average used. Materials and Construction Costs Y/Y Growth Private Residential Construction 21.2% Total Construction 7.0% Private Non-residential Construction 1.0% Public Non-residential Construction (2.7%) Transportation and Environmental-related construction projects remain strong sectors for contractors and engineers. The Industrial, Manufacturing and Energyrelated construction sectors remain challenging. Raw material component prices have shown some recovery in recent months due to stronger steel & lumber prices; growing labor costs have contributed to increased construction costs. Sources: US Census, Engineering News Record (ENR) and Moss Adams Capital. 3 MOSS ADAMS CAPITAL LLC

4 Small/Mid-Cap Public Company Valuations: Construction Firms Construction Firm Index NTM Est. ($US in millions, except where noted and per share amounts) TTM Data Growth EV Multiple 7/6/16 52 week Market Enterprise EBIT TTM TTM Company Name Sh. Price High/Low Cap Value Sales EBIT Margin Sales Sales EBIT Quanta Services, Inc $23.46 $28.98 / $16.77 $3,679 $3,935 $7,425 $ % 3.8% 0.5x 15.2x Chicago Bridge & Iron / ,826 5,803 12,471 $1, % (8.0%) 0.5x 5.8x EMCOR Group Inc / ,091 3,013 6,875 $ % 7.8% 0.4x 10.4x MasTec, Inc / ,991 3,004 4,179 $66 1.6% 20.6% 0.7x 45.3x Primoris Services Corp / ,005 1,170 1,967 $73 3.7% 13.7% 0.6x 16.0x Granite Construction Inc / ,880 1,684 2,390 $91 3.8% 9.0% 0.7x 18.5x Dycom Industries Inc / ,977 3,691 2,462 $ % 20.4% 1.5x 16.7x Matrix Service Company / ,317 $51 3.9% 3.4% 0.3x 7.4x Comfort Systems USA Inc / ,243 1,255 1,597 $93 5.9% 8.8% 0.8x 13.4x MYR Group, Inc / ,071 $36 3.4% 3.6% 0.4x 11.8x Great Lakes Dredge & Dock / $25 3.0% 6.0% 0.7x 25.2x Orion Marine Group, Inc / ($8) NA 26.7% 0.5x NM Sterling Construction Co. Inc / ($3) NA 16.9% 0.2x NM Median $73 3.8% 8.8% 0.5x 15.2x Average $ % 10.2% 0.6x 16.9x Note: Not meaningful (NM) if EV/Sales is greater than 10x, or EV/EBIT is greater than 50x. NA if denominator is 0 or not available. NTM figures are based on the median estimate of Wall St. analysts. Source: S&P Capital IQ 4 MOSS ADAMS CAPITAL LLC

5 Small/Mid-Cap Public Company Valuations: Building Materials Building Materials Firm Index NTM Est. ($US in millions, except where noted and per share amounts) TTM Data Growth EV Multiple 7/6/16 52 week Market Enterprise EBIT TTM TTM Company Name Sh. Price High/Low Cap Value Sales EBIT Margin Sales Sales EBIT Vulcan Materials Company $ $ / $78.83 $16,463 $18,253 $3,546 $ % 12.3% 5.1x 29.4x Martin Marietta Materials Inc $ / $ ,496 14,224 3,370 $ % 21.8% 4.2x 25.4x Eagle Materials Inc $87.04 / $ ,870 4,372 1,143 $ % 8.3% 3.8x 18.9x Headwaters Incorporated $21.76 / $ ,385 1, $ % 12.2% 2.0x 17.0x US Lime & Minerals $60.94 / $ $ % NM 2.0x 13.0x Median $ % 12.3% 3.8x 18.9x Average $ % 13.7% 3.5x 20.7x Note: Not meaningful (NM) if EV/Sales is greater than 10x, or EV/EBIT is greater than 50x. NA if denominator is 0 or not available. NTM figures are based on the median estimate of Wall St. analysts. Source: S&P Capital IQ 5 MOSS ADAMS CAPITAL LLC

6 Small/Mid-Cap Public Company Valuations: Building Products Building Products Index NTM Est. ($US in millions, except where noted and per share amounts) TTM Data Growth EV Multiple 7/6/16 52 week Market Enterprise EBIT TTM TTM Company Name Sh. Price High/Low Cap Value Sales EBIT Margin Sales Sales EBIT Masco Corporation $30.92 $32.92 / $22.52 $10,721 $12,845 $7,203 $ % 4.6% 1.8x 12.9x Owens Corning / ,209 8,147 5,378 $ % 5.4% 1.5x 13.5x USG Corporation / ,122 5,683 3,837 $ % 5.2% 1.5x 13.2x Armstrong World Industries / ,181 3,012 2,440 $ % (48.2%) 1.2x 17.9x Simpson Manufacturing / ,956 1, $ % 6.4% 2.1x 13.8x NCI Building Systems Inc / ,197 1,545 1,623 $90 5.6% 6.7% 1.0x 17.1x Trex Co. Inc / ,445 1, $ % 7.0% 3.5x 18.1x Universal Forest Products / ,007 2,055 2,936 $ % 7.9% 0.7x 13.7x Builders FirstSource, Inc / ,359 3,282 4,591 $ % 45.4% 0.7x 24.5x Quanex Building Products / $35 4.3% 21.3% 1.2x 27.7x Gibraltar Industries / ,037 1,164 1,074 $73 6.8% (1.9%) 1.1x 16.0x Median $ % 6.4% 1.2x 16.0x Average $ % 5.4% 1.5x 17.1x Note: Not meaningful (NM) if EV/Sales is greater than 10x, or EV/EBIT is greater than 50x. NA if denominator is 0 or not available. NTM figures are based on the median estimate of Wall St. analysts. Source: S&P Capital IQ 6 MOSS ADAMS CAPITAL LLC

7 Small/Mid-Cap Public Company Valuations: Engineering Firms Engineering Firms Index NTM Est. ($US in millions, except where noted and per share amounts) TTM Data Growth EV Multiple 7/6/16 52 week Market Enterprise EBIT TTM TTM Company Name Sh. Price High/Low Cap Value Sales EBIT Margin Sales Sales EBIT Fluor Corporation $49.50 $55.69 / $39.48 $7,180 $7,139 $17,989 $ % 4.1% 0.4x 8.1x Jacobs Engineering / ,249 6,285 11, % (2.9%) 0.5x 11.5x Teledyne Technologies / ,502 4,138 2, % 0.7% 1.8x 15.0x KBR, Inc / ,940 1,159 4, % (15.3%) 0.2x 6.7x AECOM / ,038 9,047 17, % 1.5% 0.5x 17.6x Stantec Inc / ,758 4,033 1, % NM 2.2x 24.2x McDermott International / ,195 1,399 3, % (18.0%) 0.4x 6.1x Tetra Tech Inc / ,802 2,051 1, % 13.9% 1.2x 13.7x CACI International Inc / ,234 3,701 3, % 19.5% 1.1x 13.9x Tutor Perini Corporation / ,193 1,928 4, % 8.1% 0.4x 15.4x VSE Corp / % (10.3%) 1.1x 11.4x Perma-Fix Environmental / (1) NA NA 1.2x NA Median $ % 1.1% 0.8x 13.7x Average $ % 0.1% 0.9x 13.0x Note: Not meaningful (NM) if EV/Sales is greater than 10x, or EV/EBIT is greater than 50x. NA if denominator is 0 or not available. NTM figures are based on the median estimate of Wall St. analysts. Source: S&P Capital IQ 7 MOSS ADAMS CAPITAL LLC

8 Market Performance Public Building Material Valuations Normalizing Publicly-traded Building Material Company Enterprise Value (EV) multiples continue to trade above the S&P 500 Index, and are currently trading in the 20-21x EBIT range. Publicly-traded Engineering and Construction EV multiples are holding steady, in the 10-11x EBIT range, significantly below the overall S&P 500 Index. Public Market Valuations: EV / EBIT Publicly-traded Engineering companies are expected to experience moderate revenue growth, approximately 1.1%, during the next 12 months. This estimate is down from earlier industry expectations (as reported in our Q report) of 2.9% revenue growth over the coming year. Building companies are expected to experience increased growth through the remainder of 2016, perhaps leading to an increase in their trading multiples. Next 12 Months: Estimated Sales Growth 40.00x 35.00x 30.00x 25.00x 20.00x 15.00x 10.00x 5.00x Building Materials 20.9x S&P x Building Products 13.6x Construction 11.1x Engineering 10.9x 0.00x Note: The Products & Materials indices are market cap-weighted indices comprised of the public companies included on pages 5-7. Source: S&P Capital IQ 8 MOSS ADAMS CAPITAL LLC

9 Select Small/Mid-Cap M&A Transactions $ in millions Announced Transaction Date Acquirer/Investor Target Target Description Value Metric 06/14/2016 Amesbury Group Inc. The Bilco Company The Bilco Company designs/manufactures specialty access solutions for construction trades. $ x Rev; 10.4x EBIT 04/25/2016 EDF Renewable Energy, Inc. Global Resource Options, Inc. Global Resource Options, Inc. provides engineering and construction for solar photovoltaic projects $ /13/2016 Ritchie Bros. Auctioneers (Ameriac), Inc. Sheehan Pipe Line Construction Company Sheehan Pipe operates as a pipeline construction company. $ /01/2016 Hennessy Capital Acquisition Corp. II USI Senior Holdings, Inc. USI Senior Holdings provides installation services of residential and commercial products. $ /29/2016 Stantec Inc. (TSX:STN) MWH Global, Inc. MWH Global provides construction and engineering services for water and hydropower projects. $ x Rev; 11.9x EBITA 2/26/2016 Wildan Energy Solutions, Inc. Genesys Engineering, P.C. Genesys Engineering, P.C. is a power engineering company for facilities and building complexes. $ x Rev 1/8/2016 Zhejiang Hailiang Co., Ltd. JMF Company JMF Company manufactures rough plumbing and HVAC products. $ /07/2016 Communications Sales & Leasing, Inc. PEG Bandwidth, LLC PEG Bandwidth, LLC provides infrastructure solutions for wireless operators and enterprises. $ /03/2015 Wood Group, Inc. The Infinity Group. The Infinity Group is an industrial construction and maintenance contractor. $ x EBITA 11/11/2015 Salini Impregilo S.p.A. Lane Industries Incorporated Lane Industries Incorporated offers general contractor services in the United States. $ /01/2015 Team, Inc. Furmanite Corporation Furmanite Corporation, together with its subsidiaries, provides specialized technical services. $ x Rev; 14.8x EBIT 10/27/2015 Westinghouse Electric CB&I Stone & Webster, Inc. CB&I provides engineering, design, procurement, construction management and other services. $ /14/2015 Intertek Group plc Professional Service Industries PSI provides consulting engineering and testing services. $ x Rev; 11.4x EBIT 10/12/2015 USD Partners LP Casper Crude to Rail, LLC Casper Crude to Rail develops, constructs, and operates crude oil rail infrastructure. $ x Rev; 9.4x EBIT 8/30/2015 Quanex Building Products WII Components Inc. WII manufactures and sells hardwood cabinet doors, components, and wood products. $ x EBIT 8/27/2015 Oldcastle BuildingEnvelope C.R. Laurence Co., Inc. C.R. Laurence designs, engineers, manufactures, and supplies architectural hardware. $1, /11/2015 Ductmate Industries, Inc. Lindab Inc. Lindab develops, manufactures, and markets sheet metal products for the HVAC industry. $ x Rev 8/7/2015 Dycom Industries Inc. TelCom Construction Inc. TelCom Construction Inc. provides utility contractor services in the United States. $ /5/2015 Orion Marine Group, Inc T.A.S. Commercial Concrete TAS provides concrete contracting services. $ x Rev; 6.1x EBIT 8/5/2015 Revolution Lighting Tech Energy Source Partners, LLC ESP engages in the design, installation, maintenance, and support of solar energy systems. $ x Rev Deal Revenue EBIT(A) YTD Size Multiple Multiple Highlighted deals in Overview of Selected Transactions on page 14. Source: S&P Capital IQ Transactions Represented High $1, x 16.2x Median $ x 10.9x Mean $ x 10.9x Low $ x 6.1x 9 MOSS ADAMS CAPITAL LLC

10 Number of Announced Transactions Overview of Select Recent Transactions Amesbury Group, Inc. (Amesbury, MA) acquires The Bilco Company (West Haven, CT) July 1 st, 2016 Amesbury Group, Inc. ( Amesbury ) a subsidiary of Tyman plc (LSE:TYMN) announced the acquisition of The Bilco Company ( Bilco ) for $71 million (10.4x TTM EBIT; 1.2x TTM Revenue). The acquisition was financed with cash and debt. Serving the building industry since 1926, Bilco is a producer of commercial and residential doors, vents, and hatches. Owned and managed by the founding family since its inception, Bilco has been a pioneer in the development and design of horizontal doors. The purchase of Bilco s product lines and facilities will help Amesbury further penetrate the commercial construction industry. Jeff Graby, Amesbury s President and CEO had the following to say concerning the deal: Bilco is a very good fit for our business. The products play a critical role in providing solutions for building openings in both the commercial and residential segments enabling Amesbury to play a greater role in providing a total solutions package. Stantec, Inc. (TSX:STN, Edmonton, AB) acquires MWH Global, Inc. (Broomfield, CO) May 6 th, 2016 Stantec, Inc. ( Stantec ) acquired MWH Global, Inc. ( MWH ), on May 6, 2016 for $793 million (11.9x TTM EBITA; 0.7x TTM Revenue). The transaction was financed with equity and a new credit facility. Colorado-based MWH is a 6,800-person engineering, consulting, and construction management firm focused on water and natural resources projects, primarily in the general environmental and existing infrastructure industry sectors. With 187 offices across 26 countries, the acquisition of MWH supports Stantec s position as a global leader in water resources infrastructure while gaining presence in key, new markets including: the UK, Australia, and New Zealand. MWH shareholders voted overwhelmingly in favor of the acquisition, with 99.7% in favor of accepting the acquisition. Sources: S&P Capital IQ, company press releases, MAC Analysis, Reuters Announced Middle Market M&A Transactions Note: Middle market M&A includes transactions with EV < $1000mm, and transactions with undisclosed EV. YTD as of July 06, MOSS ADAMS CAPITAL LLC Building Products & Materials Construction & Engineering YTD

11 Moss Adams at a Glance: Leadership through Experience and Results Moss Adams Capital LLC Full-service investment banking and strategic advisor services Dedicated industry specialists Focus on privately owned and family-held companies Mergers and acquisitions Private debt & equity placements Mezzanine capital Due Diligence preparation & advisory Moss Adams LLP 100+ years old Founded in 1913 Largest accounting firm headquartered in the western U.S. 2,400 employees in 28 offices Fully integrated accounting, tax, and business advisory firm Middle-market specialists The Moss Adams Advantage: Discrete, highly leverageable transaction resources and services International Presence Major market affiliates throughout the U.S. and more than 100 countries around world 11 MOSS ADAMS CAPITAL LLC

12 Moss Adams Capital Overview Full Service Middle Market Investment Bank Corporate Finance Comprehensive Industry Coverage Merger and acquisition advisory Private placement of debt Private placement of equity Management buy-outs Aerospace, Defense & Government Services Automotive & Dealer Services Business & Marketing Services Strategic planning and advisory Strategic alternatives assessment Recapitalizations Fairness opinions Consumer, Retail & Apparel Food, Beverage & Agriculture Healthcare Services & Products Restructuring and special situations advisory Highlights and Accomplishments Industrials / Niche Manufacturing Infrastructure & Construction Paper, Plastics, & Packaging Completed more than 250 transactions Access to key decision-makers among institutional investor universe Coverage of relevant strategic partners Average of 20 years of investment banking experience among senior partners Real Estate, Lodging & Leisure Technology, Communications, & Media Transportation & Logistics 12 MOSS ADAMS CAPITAL LLC

13 Global M&A Reach Through Local Relationships Local, National and Global Reach Our affiliation with CFxB consists of 150+ Corporate Finance Professionals across the U.S. and in over 25 countries. more than 25 countries MNP Corporate Finance 10 offices MNP LLP 70 offices Mazars Canada 1 office Mazars Europe 140 offices CH Reynolds CF Mazars M&A 20 offices 1 office Mazars Asia 25 offices Moss Adams Capital 3 offices Moss Adams LLP 28 offices BKD Corporate Finance 4 offices BKD LLP 33 offices Weiser Mazars 6 offices Mazars Middle East 15 offices William Buck CAA 6 offices Mazars South America 20 offices Mazars Africa 40 offices 13 MOSS ADAMS CAPITAL LLC

14 Contact Us Contributing Authors Wiley Kitchell Managing Director (206) James Rothenberger Vice President (206) Daniel Seubert Analyst (206) Moss Adams Capital LLC rd Avenue Suite 2800 Seattle, WA Main Street Suite 900 Irvine, CA Rich Anderson Managing Director (949) rich.anderson@mossadams.com Wiley Kitchell Managing Director (206) wiley.kitchell@mossadams.com Harman Jet Wales Managing Director (206) jet.wales@mossadams.com 14 MOSS ADAMS CAPITAL LLC