Cal-Maine Foods, Inc. ppt宝藏_www. pptbz. com_提供下载 Analyst: Xue Jun (June) Feng Jack Lindblad Jiayue (Lydia) Li October 17, 2017
Outlines: • Stock Market Prospect • Macroeconomic Factors • Industrial Analysis • Company Overview • Financial Analysis • Valuation • Recommendation
Stock Market Prospect ppt宝藏_www. pptbz. com_提供下载
Stock Market Prospect Historical Stock Price Bot 100 @ $47. 68 on 12 -16 -15 Portfolio Weight by Cost Source: Capital IQ Portfolio Weight by Market Value
Stock Market Prospect Current price Annualized Return 52 Week Range Market Cap PE Ratio (TTM) EPS (TTM) Projected PE $ 42. 4 -5% 46. 2/ 33. 4 2. 1 B N/A -1. 5 29. 63 Ownership Top Holders Adams Jr. , Fred R. 32. 43 T. Rowe Price Group, Inc. 8. 04 Black. Rock, Inc. 7. 58 The Vanguard Group, Inc. Source: CALM 2017 10 K Yahoo Finance https: //finance. yahoo. com/quote/calm? p=calm Capital IQ % of Total Shares Outstanding 5. 52 Janus Henderson Group plc 4. 07
Macroeconomic Factors ppt宝藏_www. pptbz. com_提供下载
Macroeconomic Factors Revenue vs. Egg Price - Highly Volatile COGS vs. Feed Cost-volatile as well Source: IBIS World http: //clients 1. ibisworld. com/reports/us/bed/default. aspx? bedid=1995; http: //clients 1. ibisworld. com/reports/us/bed/default. aspx? bedid=745 CALM Investor Presentation
Macroeconomic Factors US. Population Growth Total Egg Production Egg Consumption Per Capita Monthly Hen Inventory Source: U. S. Census Bureau, Population Division IBIS World http: //clients 1. ibisworld. com/reports/us/bed/default. aspx? bedid=33; http: //clients 1. ibisworld. com/reports/us/bed/default. aspx? bedid=4664 Rabobank https: //twitter. com/_inprovo/status/910614662147911680
Industrial Analysis ppt宝藏_www. pptbz. com_提供下载
Industrial Analysis Fragmented Shell Egg Industry, with growing concentration 1990: 56 producers with one million or more layers owned 64% of the 232 million total layers. 2000: 63 producers with one million or more layers owned 79% of the 273 million total layers. Major players (All Private except for Cal-Maine) Cal-Maine Foods Founded in 1957. The largest producer and marketer of shell eggs in the US, with 36 million layers. Rose Acre Farms, Inc. Rembrandt Enterprises Hillandale Farms Founded in 1939. The second-largest egg producer in the US with 24. 8 million layers. Founded in 2000. Egg and egg product producers with 14. 5 million layers. Founded in 1958. Shell eggs producer with 9. 0 million layers. Source: IBIS World http: //clients 1. ibisworld. com/reports/us/industry/majorcompanies. aspx? entid=54 CALM 10 K 2017 2016: 56 producers with one million or more layers owned 97% of the 319 million total layers. Porter’s Five Forces
Industrial Segments & Trend Egg Product Revenue Segment (Total revenue: $14. 1 billion ) Ø Cage/battery eggs are produced by hens housed in small cages inside a housing facility; Ø Barn or cage-free eggs come from hens raised outside cages but not necessarily outdoors; Ø Free-range (organic) eggs are from hens that are cage-free and have access to the outdoors. Ø Hatching eggs are used by egg producers to replace and grow the egg-laying flock and may be sold to other industry operators for egglaying or meat-production purposes. Important Industrial Trend: Shifting to Cage-Free • Fact: 160+ major companies have announced it will switch to all cage-free eggs by 2025, including Walmart and its Sam’s Club warehouse chain. (Two biggest customers for Cal-Maine. ) • Why: Animal welfare concerns. • Uncertainty: No clear definition of “cage-free”. Higher price of cage-free eggs. • Meanings to egg producers: More than 70% of all eggs produced in the U. S. would have to come from cage-free housing by 2026. Huge investment: For the equipment alone, it costs about $15 per bird in a conventional caged egg produced house. On a cage-free farm, it’s between $30 and $35 per bird. Source: IBIS World http: //clients 1. ibisworld. com/reports/us/industry/productsandmarkets. aspx? entid=54#PS CALM 10 K 2017
Company Overview ppt宝藏_www. pptbz. com_提供下载
Company Overview • • Was founded in 1957 in Jackson, MS. Primarily engaged in the production, grading, packaging, marketing and distribution of fresh shell eggs. The largest producer and marketer of shell eggs in the US. Counts for approximately 20% of domestic shell egg consumption. Largest total flock of layers, pullets and breeders in the U. S. • • Customers • • National and regional grocery store chains, club stores, foodservice distributors and egg product consumers. Top ten customers accounted for 70% of net sales in 2017. 29% 11% Source: CALM Investor Presentation CALM 2017 10 K 9%
How Does CALM make $? Non Specialty Eggs (51%) Process, Grade, and Package Eggs with “in-line” facilities Specialty Eggs (46%) Egg Products (2%) 43 Laying operations Commercial Sources Hatchery 36. 1 M Layers, and 9. 5 M Breeders and Pullets Manufacture to create feed for chickens Source: CALM Investor Presentation CALM 2017 10 K Purchase Corn/Soybean
Proven Management Team Fred Adams - Chairman Emeritus Fred R. Adams, Jr. served as Chairman of the Board of Directors from 1982 to July 2012. Mr. Adams served as our Chief Executive Officer from the formation of the Company in 1969 until October, 2010, when his son-in-law, Adolphus B. Baker became Chief Executive Officer. Mr. Adams has served as the chairman of National Egg Company, United Egg Producers, Mississippi Poultry Association, U. S. Egg Marketers, Inc. , and Egg Clearinghouse, Inc. Adolphus B. Baker - President, Chief Executive and Chairman of the Board of Directors Adolphus B. Baker has served as President and Chief Executive Officer since October 2010. Mr. Baker is the past Chairman of the American Egg Board, past Chairman of Mississippi Poultry Association, and a past chairman of Egg Clearinghouse, Inc. Mr. Baker is currently a member of the Executive Committee of the United Egg Producers and is a director of Trustmark National Bank of Jackson, Mississippi. Sherman Miller - Vice President, Chief Operations Officer and Director Sherman Miller was named Chief Operations Officer in May 2011 and elected to the Board of Directors in July 2012. He is a member of the board of the U. S. Poultry and Egg Association. Source: CALM Investor Presentation CALM 2017 10 K Timothy A. Dawson - Vice President, Chief Financial Officer, Treasurer, Secretary and Director Timothy A. Dawson was elected as Vice President and Chief Financial Officer on August 1, 2005. He was elected as a director in October, 2005.
Business Growth Strategy Expand Capacity • • • Cal-Maine focused on the acquisition of existing shell egg production and processing facilities, as well as the construction of new and more efficient facilities. Since the beginning of fiscal 1989, Cal-Maine has completed 20 acquisitions. Last Five Acquisitions Fiscal 2013 Ø Maxim Production Co. , Inc. Commercial egg assets for $65 million. 60 million in cash and $5 million in stock. 3. 5 million layers. Ø Pilgrim’s Pride Corporation Commercial egg assets for $16. 3 million in cash. 1. 4 million layers. Fiscal 2014 Ø Delta Egg Farm, LLC. Acquired the remaining 50% stake for 17 million in cash. Delta Egg Farm has 1. 6 million layers. Improve Product Structure-More Specialty Eggs • • Prices of value added specialty eggs are less volatile and higher. Customers’ preference for cage-free eggs. Source: CALM 10 K Fiscal 2017 Ø Foodonics International, Inc. $69 million of cash and $3 million of deferred purchase price. 1. 6 million layers. Ø Happy Hen Egg Farms, Inc. For $17. 2 million in cash. 350, 000 layers.
SWOT Analysis Strengths • • Market share leader Efficient, state-of-the-art operations Solid customer base Vertically integrated/ low cost producer Opportunities • • Industry trend – shifting to Cage free eggs Further consolidation through acquisitions Weaknesses • • High concentration of sales Cyclical industry – prices & costs Threats • • Unexpected disease break out Continue depressed egg prices Antitrust lawsuit preventing further M&A Government regulation-USDA, FDA etc.
Moat Analysis Intangible Assets Switching Costs Efficient Network Cost Advantage Scale Effects Intangible Asset: • Cal-Maine is a member of the Egg. Land’s Best, Inc. (“EB”) and has exclusive license agreements to sell eggs using Egg-Land’s Best ® and Land O’ Lakes ®. Cost Advantage: • Cal-Maine’s operation process is automated, efficient, state-of-art and vertically integrated. • Cal-Maine has largest market share, which brings economy of scale. Efficient Scale: • Cal-Maine is the largest player in the relatively small shell egg market. Source: CALM 2017 10 K Statista https: //www-statista-com. proxy 2. library. illinois. edu/statistics/190497/top-fresh-egg-brands-in-the-united-states/
Financial Analysis ppt宝藏_www. pptbz. com_提供下载
Financial Analysis – Cal-Maine Foods
Financial Analysis Gross Margin Profit Margin CY 2013 - CY 2016 Asset Turnover CY 2013 - CY 2016 Source: Capital IQ Debt to Value CY 2013 - CY 2016
Financial Analysis EBIT Growth Return on Equity (ROE) CY 2013 - CY 2016 EBIT/Enterprise Value CY 2013 - CY 2016 Source: Capital IQ EBIT/Tangible Value CY 2013 - CY 2016
Valuation ppt宝藏_www. pptbz. com_提供下载
Comparable Valuation Source: Capital IQ
Recommendation ppt宝藏_www. pptbz. com_提供下载
Recommendation Takeaway 2 • Bottom of earnings cycle, well positioned for recovery Takeaway 1 • Intrinsic Valuation: $40 • Bull: $59 • Bear: $28 Takeaway 3 Strong Competitive Positioning, high business risk Takeaway 4 Uncertainty with regards to future egg prices
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