Runit Kumar. Alexander Hu

Transcription

1 Runit Kumar Chase Mathew Alexander Hu

2 Agenda Investment Thesis Company/Segment Overview Financial Overview Risks Valuation Q & A

3 Investment Thesis Undervalued and unjustly punished by recent market movements Diversified ifi company holdings Strong international presence High cash flow generation Over $60 billion in backlog orders Strong revenue generation from products and aftermarket services ACE Program increases margins and efficiency

4 Company Overview Eight Business Units Otis Sikorsky Carrier Pratt & Whitney Hamilton Sundstrand UTC Power UTC Fire & Safety UTRC (Research Center)

5 Otis Approximately 2 million Otis elevators and 140, escalators in more than 200 countries Grew service portfolio to 1.6 million elevators/escalators More than 135,000 elevators/escalators sold annually Otis elevators/escalators can be found in: Empire State Building New York, NY Eiffel Tower Paris, France Sydney Opera House Sydney, Australia CN Tower Toronto, Canada Burj Dubai Dubai, UAE (Future world s largest building) Beijing Olympics $100 million in projects Gen2 Elevator - fastest selling product Revenues increased 16% in 2007

6 Sikorsky Had record sales and delivered 174 large aircraft in 2007 U.S. Navy Fleet will be all-sikorsky by 2010 U.S. Government will purchase $7.4 billion worth of H-60 Hawk helicopters during next 5 years (potential to reach $11.6 billion) Average Growth: 23% per year Year-end end Backlog of $11+ Billion Makers of the Blackhawk helicopters X2 Technology faster, more efficient helicopters Revenues increased 48% in 2007

7 Carrier Industry leader w/ 41% Market Share Create innovative new products Growth Potential Kuwait India Europe and Asia 75% revenue growth since 2000 Revenues increased 9% in 2007

8 Pratt & Whitney Aircraft Engines 30+% of commercial planes $4.8B contract from US Gov t for F35 engines Space Propulsion 1.2B contract from NASA for J-2X engine Future Prospects Geared Turbofan Hypersonic propulsion p Revenues increased 9% in 2007

9 Hamilton Sundstrand Their systems can be found in 90% of the world s aircraft Long-term support agreements w/ 23 of top 25 airlines Prime contractor for NASA s space suit/life support system Revenues increased 13% in 2007 Double-digit growth for 5 th year in the row

10 UTC Power PureCell fuel cell convert up to 90% of consumed resources into reusable energy compared to 33% of electric grids PureCycle geothermal power system recognized as top 100 most technologically significant The Clinton Climate Initiative chose UTC Power as an official supplier partner for fuel cell buses

11 UTC Fire & Safety More than 1 million global customers Monitor centers handle more than 400,000 lines Acquisition strategy: Chubb Securities in July 2003 Kidde in April 2005 Rentokil Initial s Electronic Security Group in April 2007 Marioff in September 2007 FireX in January 2008 Revenues increased 21% in 2007

12 UTRC (Research Center) $3.6 b invested by UTC Improve po ecurrent tpoducts products PrimeLINE has 30% less costs compared to competators Integrate acquired technologies and research Utilizing cold chain visibility from Sensitech Focus on sustainability Award winning PureCycle system created a new market for renewable resources

13 ACE Program Increase operating margins Decrease costs and increase efficiency Train employees at all levels Bronze, Silver, Gold Ratings Post Implementation Results 169% sales improvement in Singapore 45.5% increase in sales per employee from % increase in the number of employees trained

14 Environmental Progress UTC uses 20% less absolute energy and 46% less water than in 1997 UTC aims to reduce greenhouse gas emissions and water consumption by 12% and 10% by 2010 Otis Gen2 elevators use up to 75% less energy Carrier s Vector 1800MT trailer refrigeration unit is 20% more fuel efficient Hamilton Sundstrand s systems will allow Boeing 787 to save up to 200,000 gallons of fuel a year Pratt & Whitney s Geared Turbofan engine will reduce noise by 50%, fuel consumption & emissions by 12%, and operating costs by 10%

15 Future Developments 10-year aftermarket service agreement w/ Singapore Airlines for Hamilton Sundstrand $3 b contract w/ US Marines for CH-53K heavy lift helicopters for 2015 for Sikorsky Contract for 2010 World Expo and tower contracts in Abu Dhabi, Brisbane, Calgary, Chicago, Paris, and the Philippines for Otis Contract w/ Spanish shipbuilder Navantia, S.A. to supply a 300-kilowatt fuel cell power module for the Spanish Navy for UTC Power

16 Revenue Breakdown Hamilton Sundstrand $5.6 b 10% UTC Fire & Safety $5.8 b 11% Sikorsky $4.8 b 9% Otis $11.9 b 22% Carrier $14.6 b 27% Pratt & Whitney $12.1 b 22%

17 Revenue Breakdown By Business Type Commercial Aftermarket t Aerospace 40% 21% Military Aerospace & Space 16% Commercial & Industrial 63% Original Equipment Manufacturing 60%

18 Revenue Breakdown Other 14% Asia Pacific 19% United States 38% Europe 29%

19 Financial Overview 8.75% ROA vs GE s 2.07% ROA 22.05% ROE vs GE s 18.71% ROE 10x Interest Expense Coverage Low Debt to Equity Ratio of.33 Cash Cow $4.1 billion 2007 in free cash flow and $1.6 billion in just Q3

20 Q Financials EPS increased 10% from Q Net income increased 6% from Q Cash flow from operations $1.8 billion Cash flow less Cap Ex was 123% of net income for the quarter

21 Risks Currency risk due to international exposure Cyclicality of the construction and aerospace business segments Dependency on securing contracts Eroded value of pension assets due to market turmoil

22 Conclusion