Tredegar: Plastic Surgery
It\'s Richmond in Va. -
Companies headquartered in two main business areas: plastics for consumer goods and aluminum extrusion for the construction and automotive industries.
P & G has seriously shaken the company (NYSE:PG)
It was decided to diversify the source of sanitary plastic film mainly for sanitary products such as diapers.
Tredegar predicts that net sales of personal hygiene-related plastics businesses could fall by $5 million to $10 million a year in the coming years.
Shares plunged to $14.
From July, 65
A record high of $30 per share on 2013.
TG recently rebounded to $17.
Unfortunately, my analysis shows that Tredegar is fairly valuable in the event of limited increases.
My p/e is valued at less than $15.
Tredegar has a market capitalization of $0. 56 billion and a debt balance of $0. 187 billion.
Revenue fell from $0. 961 billion in 2013 to $0. 83 billion in 2016.
In the second quarter, the results showed that the income of the plastic sector was stable. after the growth of the aluminum extrusion business, the enthusiasm for TG resumed.
Note: the balance sheet for June 2017 was adjusted by capitalizing R & D investment and operating leases.
There are plenty of places to enjoy in Tredegar.
After the client defected in 2015, family owner Bill and John goldwald returned to the leadership position of the company.
They have 22% ownership and have a clear desire to restore growth.
They recognized the urgent need for transformation.
The plastics business is integrating redundant facilities and investing heavily in capital improvement and R & D.
Aluminum extrusion business, Bonnell aluminum, is more promising.
With the increase in demand for light materials, the production of special products and components in the construction and automotive industries has increased.
The recent acquisition of future Industries will grow with earnings in 2017.
However, it was disappointing to read the letter from John goldwald\'s 2016 CEO.
The CEO acknowledged that he fought for a clear vision for the company.
Is this humble frankness or shell
Shocked owners grasp the future in a family business that is believed to be transitioning to a new generation of leadership?
As of December 2016, Tredegar\'s revenue has declined over the past three years.
Gross profit peaked at $0. 187 billion in 2012, but fell to $0. 162 billion in 2016.
Operating income reached $32 million last year, down more than half from 2012.
Earnings per share were 2016 cents, 75 cents. At $16.
£ 75 per share and £ 22 P/E.
The dividend is 11 cents and the yield is 2. 6%.
$29 for Zhuo Dejia.
5 million leaves 2016 in cash and $95 million in credit.
Better news came in the second quarter of 2017.
Revenue increased by $90 million over the previous period in 2016.
Operating income increased by $50 million.
Unfortunately, revenue growth of $38 million is due
Does not recognize the increase in the equity value of subsidiaries.
The value of professional pharmaceutical company Kaleo has increased by about $25 million.
Valuations are popular, which raises the question of why Tredegar owns part of a pharmaceutical company.
Kaleo\'s results appear to justify value growth, as revenue from the business increased by $75 million in the first six months of 2017. Another one-
Over time, the $11 million hosting adjustment associated with the acquisition of Terphane in 2011 gave a boost.
The rest of the revenue growth is indeed a sign of Tredegar growth.
Acquisition of future industries, Utah-
Headquartered at the aluminum extrusion company closed on February.
Futura has generated $53 million in revenue and $6 in revenue since February.
Operating profit as at June 30 was 6 million.
Unfortunately, growth is not free.
Due to the $95 million acquisition of Futura, debt increased from $0. 187 billion in the first half of 2017 to $92 million.
Although the return on capital has been in the medium term
TG has been working on R & D for many years, which may boost sales in the future.
R & D spending increased from $16 million in 2015 to $19 million in 2016.
R & D is expected to remain the same in 2017.
Capital expenditures for factory closures and upgrades are welcome, but these have forced TG into negative free cash flow in recent quarters.
Dividends may be at risk.
Unfortunately, it is also worth noting that Tredegar\'s pension liability is over $90 million.
It is difficult to evaluate Tredegar without in-
Deep knowledge of thin
Plastic film market and aluminum extrusion industry.
The authors lack this kind of education and are therefore limited to the analysis of numbers and corporate risk factors.
I compiled a valuation of profitability using the methodology advocated by Bruce Greenwald.
The results are as follows.
Think of this article as the \"first time\" of Tredegar \".
If the appeal exceeds the figures provided, further investigation is made.
Your comments are welcome and I would be happy to revise my analysis if there is any better information.
Of course, there is potential in the world of film plastics.
Food safety is a great opportunity as people around the world choose more convenient packaging options.
But there seems to be fierce competition in the industry.
P & G\'s losses suggest that as brand profits are under increasing pressure, work is going smoothly to find cost-effective suppliers.
Investment in technology can help, but can they drive growth or just extend the business that faces long-term disadvantages?
Aluminum Extrusion has great potential, but the dependence on highly cyclical enterprises has aroused serious concern.
Economic expansion is already very late, and there is also a headwind in the automobile manufacturing industry.
Tredega is still watching for me.
At this time, the stock seems to be fully valued.
The sustainable growth trajectory of the plastics industry needs to emerge before I consider investing.
Valuation records for Kaleo and Terphane adjustments are excluded from revenue.
However, the value of Kaleo (10-referenceQ)
Added to the net worth calculation.
Beta has been used to calculate the cost of equity.
Many would think that the use of beta is distorting the typical Greenwald approach.
However, the author believes that the cost of weighted capital is 10.
68% is reasonable. Due to one-time tax write-
The effective tax rate of 2017 is only 9. 9% vs. 29. 8% in 2016.
For the purposes of the valuation, the tax rate is assumed to be 30%.
R & D as an adjusted balance sheet item, its expenses reflect reimbursement for current expenses, less amortization allowance for four expendituresyear period.
Disclosure: I/we have no positions in any of the stocks mentioned and no plans to start any positions in the next 72 hours.
This article was written by myself and expressed my views.
I was not compensated.
I have no business relationship with any stock company mentioned in this article.
Supplementary disclosure: As always, the author has put forward his own views and analysis.
You should do your own due diligence before investing.
I welcome feedback and discussion and I am happy to correct any errors or add any relevant information to the article.