UAB Green and Gold Fund General Electric (GE) Buy Presentation September 22, 2011
GE Business Profile Provides technology and financial services 100 counties served 5 Business Segments: 1. Energy Infrastructure 2. Technology Aviation, Healthcare, Transportation 3. NBC Universal 51% stake 4. GE Capital Financial services, loans, credit cards 5. Home and Business Solutions Appliances
Business Drivers ENERGY: Acquisitions, HD gas turbines, solar power OIL AND GAS: Subsea CONSUMER: Eco trends, “Green” lighting GE CAPITAL: Lower losses, Real Estate Turnaround TRANSPORTATION: Emerging markets, Hybrid Technology AVIATION: Global Airline Strength HEALTHCARE: Global growth
Business Segment Breakdown Revenues (Past and Expected) 2008 2009 2010 2011 E 2012 E Energy $43, 046 $40, 648 $3 7, 514 $44, 267 $49, 579 Technology $41, 605 Segment $37, 860 $42, 214 $45, 698 NBC U 16, 969 $15, 436 $16, 901 GE Capital $67, 645 $49, 746 $47, 040 $46, 099 Home and Business $10, 117 $8, 443 $8, 648 $8, 821 $9, 262 Ø GE’s Energy Infrastructure is expected to increase 32. 16% over the next two years. ØGE Capital is being scaled back. ØTechnology is expected to increase 20. 70% over the next two years. • 21% increase in Aviation • 15. 54% increase in Healthcare.
Transformation
SWOT Analysis Strengths Weaknesses Broad range of products Pending law suits Wide geographic presence GE Capital? Increasing profitability Opportunities Threats Increased dividend Payout Weak economy Acquisitions Highly regulated Emerging economies Strong competition
Backlog
GE Capital
GE Capital
Stock Price: Buy Low, Sell High
Stock Price
Fundamental Data Detail fundamental data
Valuation Methodology: Target yield / PE Justification: DCF / DDM difficult to apply given significant business changes on the horizon Current Price: $15. 93 Bull case: Reference Spreadsheet Dividend 2012 E Dividend: $0. 71 Target Yield / Price: 3. 0% / $29. 67 P/E Multiple 2012 E EPS: $2. 02 Target Multiple / Price: 14. 0 x / $28. 25 Average PT: $28. 96 (+81%) 2011 Peak Valuation: Dividend Yield: 2. 8% P/E: 15. 8 x
Valuation: Floor Risk/reward is favorable @ 1: 2. 5 Downside should be limited to $12 ~1 x book value ~5% div yield (assuming no increase from GE Cap)
Portfolio Recommendation BUY 200 shares of GE at limit of ~$15 ($3, 000) Total position after purchase: 600 shares / 2. 1% of portfolio Industrials Target Sector Allocation: 7. 3%, Current Sector Allocation: 4. 9% Allocation after purchase: 6. 3%
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