general electric (ge) buy presentation september 22, 2011
DESCRIPTION
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 growthTRANSCRIPT
General Electric (GE)
Buy PresentationSeptember 22,
2011
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
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
GE’s Energy Infrastructure is expected to increase 32.16% over the next two years. GE Capital is being scaled back.Technology is expected to increase 20.70% over the next two years.
•21% increase in Aviation•15.54% increase in Healthcare.
Strengths WeaknessesBroad range of products Pending law suitsWide geographic presence GE Capital?Increasing profitability
Opportunities ThreatsIncreased dividend Payout Weak economyAcquisitions Highly regulatedEmerging economies Strong competition
Detail fundamental data
Methodology: Target yield / PEJustification: DCF / DDM difficult to apply given significant business changes on the horizon
Current Price: $15.93
Bull case: Reference Spreadsheet
Dividend2012E Dividend: $0.71Target Yield / Price: 3.0% / $29.67
P/E Multiple2012E EPS: $2.02Target Multiple / Price: 14.0x / $28.25
Average PT: $28.96 (+81%)
2011 Peak Valuation:Dividend Yield: 2.8%P/E: 15.8x
Risk/reward is favorable @ 1:2.5Downside should be limited to $12
~1x book value~5% div yield (assuming no increase from GE
Cap)
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%