Graham Corporation/ GHM -
They are an industry leader in custom components including ejectors, vacuum pumping systems, condensers for oil refiners, chemical, petchem e.g. ethylene & ammonia, nuclear. Operations consist of corporate HQ/ manufacturing facilities in Batavia NY (250,000 SF), nuclear parts subsidiary Energy Steel in Lapeer MI (60,000 SF leased), sales office in Houston TX, GVHTT sales & engineering office in Suzhou China (5000 SF leased). 2014 sales were ~60% US, 10% Asia, 10% China, 5% Middle East, 5% South America. Refinery customers include both IOCs and NOCs. Founded in 1936 with strong brand and word of mouth reputation. Customers are cyclicals and required lots of handholding for project placement, bid iterations.
Mkt Cap: 212M
Cash/ Cap: 0.25
No debt. Revolver ~30k.
2M in operating leases, pension obligations, etc
PTB: 2.2
ROE: 13%
10-year YoY rev growth: 13%
EV/ EBITDA: 6.3
EBIT margins: 16-17%
SG&A/ Rev: ~14%
EV/ Rev: 1.1
P/ E: 14
GN: $19
Currently trades around $21/ sh.
Last 5Y multiples:
Year 2014 2013 2012 2011 2010
Cash/ Cap 0.29 0.14 0.21 0.19 0.37
Debt/ Equity 0.00 0.00 0.00 0.00 0.00
Price/ Book 2.0 3.8 2.4 3.1 2.9
Price/ Earnings 20.9 32.1 18.8 38.6 32.0
EV/ FCF 15.2 28.4 -246.0 -14.9 4.4
EV/ EBITDA 9.0 17.6 8.2 17.6 11.5
EV/ Rev 1.48 2.91 1.52 2.47 2.07
Rev Growth -2.6% 1.7% 39.0% 19.4% NA
Shares have been crushed since 2H 2014 with slide in crude and 6M in refinery order cancellations/ postponements by large clients. Interesting thing is that US refiners actually benefit from lower crude prices owing to export ban. Seems the large IOCs may be cutting costs across the board in the short term but are likely to resume or even expand profitable lines of business now that sub-$100 but above $60 pricing seems the new norm. Plus Graham's looking to grow it's non-refiner customer base esp Navy nuclear. And with a pristine balance sheet they're looking to acquire in a firesale market to boost sales. Last acquisition was Energy Steel in 2010 after the 2009 crunch. Graham's survived many a past cycle and will do so again. Doubled their dividend in January and announced 18M sh purchase program.
78% institutions with 4 of top 5 increasing or maintaining their holdings during the downturn including Chuck Royce. In addition Nine Ten Funds have acquired a 7% stake in Q4 2014 and grew it to 12% in Q1 2015. With the stock at 52 week lows, a buyback program, 2 large active stakes, and the price near 52 week support, I'm picking up 478 shares. |
