JWC Acquisition (tba)
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Booz Allen & Hamilton (BAH) $252mm IPO
with a market cap of $2.1bb at the price range mid-point of $18
Scheduled for Wednesday November 17, 2010 |
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CONCLUSION |
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BAH is overpriced based on comparing their annualized P/E of 25 with competitors listed in their SEC filing |
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COMPARE & CONTRAST |
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Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
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annualizing Sept 6 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
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Booz Allen&Hmltn BAH |
$2,171 |
0.4 |
25 |
2.6 |
-3.9 |
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CACI Int'l (CACI) |
$1,530 |
0.5 |
13 |
1.3 |
-19.6 |
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L-3 Comm (LLL) |
$8,200 |
0.5 |
9 |
1.2 |
-3.7 |
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ManTech (MANT) |
$1,510 |
0.6 |
12 |
1.6 |
10.6 |
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MINUSES |
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Risky Income statement
. 98% of revenue from the US government, expected to cut federal spending
. Interest charges are double net profit: 3.2% vs 1.6%
. Operating earnings only 6% of revenue for the six months ended September 30, 2010
Crippled balance sheet
. In 2009 paid $612mm in dividends to private equity shareholders resulting in negative tangible net worth of $586mm post-IPO |
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Can’t pay dividends due to restrictive debt covenants |
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PLUS: $11bb backlog, two years of sales |
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BUSINESS |
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. Consulting for the US government
. 98% of revenue in fiscal 2010 from services provided to over 1,300 clients across the U.S. government under more than 4,900 contracts and task orders. |
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DIVIDENDS |
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. In 2009 paid $$612mm in dividends to stockholders |
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. Can’t pay dividends to Class A common stock holders because of "covenants in the credit agreements governing senior credit facilities and mezzanine credit facility" |
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COMPETITION |
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Major competitors include: (i) contractors focused principally on the provision of services to the U.S. government, such as CACI International, Inc., L-3 Communications Holdings, Inc., ManTech International Corp., SRA International, Inc., and TASC Inc.; (ii) large defense contractors which provide both products and services to the U.S. government, such as General Dynamics Corp., Lockheed Martin Corp., Northrop Grumman Corp., and Raytheon Co.; and (iii) diversified service providers, such as Accenture, Computer Sciences Corp., Deloitte Consulting LLP and SAIC, Inc. |
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USE OF PROCEEDS
$230mm |
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Repay debt |
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Booz Allen & Hamilton |
BAH, C+, 6 |
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March 31 fiscal year |
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Post IPO shares: 121mm |
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Consulting |
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McLean VA |
2007 |
2008 |
2009 |
Sept6mos09 |
Sept6mos10 |
IPO Mkt |
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Revenues ($mm) |
$3,625 |
$4,341 |
$5,122 |
$2,509 |
$2,709 |
Cap (mm) |
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Gross profit |
44% |
47% |
48% |
48% |
49% |
$2,171 |
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Operating income % of rev |
4% |
2% |
4% |
4% |
6% |
@$18 |
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Interest |
$2 |
$147 |
$150 |
$73 |
$86 |
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Interest % of Operaing Income |
2% |
221% |
76% |
66% |
53% |
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Interest % of revenue |
0% |
3.4% |
2.9% |
2.9% |
3.2% |
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Net income |
$89 |
-$49 |
$25 |
$19 |
$43 |
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Net income % of rev |
2.5% |
-1.1% |
0.5% |
0.8% |
1.6% |
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Adjusted EBITDA |
$227 |
$277 |
$368 |
$197 |
$223 |
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Adjusted EBITDA % of rev |
6% |
6% |
7% |
8% |
8% |
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Free cash flow |
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$221 |
$95 |
$132 |
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Free cash flow % of rev |
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4.3% |
3.8% |
4.9% |
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Backlog |
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$7,278 |
$9,102 |
$8,351 |
$11,046 |
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Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
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annualizing Sept 6 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
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Booz Allen&Hmltn BAH |
$2,171 |
0.4 |
25 |
2.6 |
-3.9 |
12% |
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SCORECARD |
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Mgt |
Market |
Market Do- |
Proprie- |
Total |
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1-5, 5 is high |
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Growth |
mination |
tary |
rating |
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20 is perfect |
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2 |
1 |
2 |
1 |
6 |
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COMPARE & CONTRAST |
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Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
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annualizing Sept 6 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
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Booz Allen&Hmltn BAH |
$2,171 |
0.4 |
25 |
2.6 |
-3.9 |
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CACI Int'l (CACI) |
$1,530 |
0.5 |
13 |
1.3 |
-19.6 |
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L-3 Comm (LLL) |
$8,200 |
0.5 |
9 |
1.2 |
-3.7 |
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ManTech (MANT) |
$1,510 |
0.6 |
12 |
1.6 |
10.6 |
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