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Strategies & Market Trends : Value Investing

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To: Jurgis Bekepuris who wrote (50877)	2/13/2013 9:32:56 AM
From: E_K_S	Read Replies (3) of 78770

Hi Jurgis - Re: LNEGY I have not looked at the gasses services for each company discussed but rather only those for The Linde Group and specifically their Engineering Division. I was interested to see just what their order book looks like and was quite impressed. I do not think any of the other companies design and build these plants and for me, this is where the value opportunity is; IF (1) The Engineering Division % of Total revenues are somewhat significant and growing and (2) margins from this division are good and future "on-going" service contract business can be had from building these new facilities. 2012 Interim Report - January to September When I looked at the 2012 Interim Report for The Linde Group, their Engineering Division accounted for 23% of their total revenues. More importantly, *new orders have increased 25% YoY, so this business is growing quite fast. Gross profit margins from their Engineering Business is around 12.3% Engineering Division Order Intake:* Asia Orders represent 32% of their 2012 Business w/ North America orders growing the fastest by 40% YoY (from 18.1% in 2011 to 25.4% in 2012) - Wow! (Note: pg-7- of link show results from Gasses Division January - September; pg-8- Engineering Division Order Intake) Margins: Gasses operating margins 26.6% Engineering operating margins 12.3% According to Yahoo their trailing PE is 19.6. and I calculate their Forward PE a bit lower. Blended operating margins are 23% Growth: Gasses are growing 12% YoY Engineering is growing 25% YoY Blended growth rate 15.25% Therefore, For 19x earnings (or less), you can buy a business that's growing 15.25% generating a blended operating margin of 23%. Much of the growth from the Engineering Division will result in higher growth in the Gasses Division (in the out years) as follow on service contracts are obtained. ------------------------------------------------------------------- Therefore, The Linde Group business profile (w/ the 25% growth in their Engineering order book) is quite attractive to me. I think the other companies mentioned do not provide this growth & value kicker. LNEGY is 53% larger than APD. APD's annual sales growth is 1.5% and operates w/ a 26.6% margin. Forward PE is somewhat lower at 15.4. Other items of interest: APD does own some nice pipeline assets. EKS

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