The Economic Data calendar for the week of the 17th of March through the 21st is full of critical releases and events. Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.
Takeaway: To Adidas' credit, it does a very good job of launching a new technology (and explaining to consumers what the technical merits are.)
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Okay, so it's not exactly the best winter to be introducing something called Climachill. But, to Adidas' credit, it does a very good job of launching a new technology and then explaining to consumers what the technical merits are.
While it might seem like an obvious marketing strategy, this is the exact area where Nike has struggled for the better part of 30 years. Did you ever notice that the tags on a Nike product hanging on the rack are identical? Seriously. Whether it is a thermal jacket, or bathing suit for a 6-year old.
We might admit that Nike has the better product, but this is where it could learn a thing or two from Adidas.
There is little doubt that GLPI’s split from PENN created tremendous shareholder value. So, why can’t other gaming companies like BYD, ISLE, LVS, MGM, PNK, or WYNN pursue similar value-creating transactions?
There is growing speculation that BYD could be next to follow the PENN route, now that an activist and real estate focused investor has taken a big stake in the stock.
We’re delighted to tackle this issue head on next Tuesday, March 18 at 11am, with Ed Glazer, Partner at Goodwin Procter, who has extensive experience with REITs and currently represents the only casino REIT – Gaming and Leisure Properties (GLPI).
We will tackle pertinent issues on our call including:
Ed Glazer is a partner in the firm's Tax Practice and its nationally recognized Real Estate, REITs & Real Estate Capital Markets Group. He focuses principally on structuring and implementing tax-oriented commercial transactions of all types, including real estate and venture capital transactions, mergers and acquisitions, pension investments in real estate involving issues of unrelated business taxable income, leveraged financings, and workout and debt restructurings. Mr. Glazer regularly advises clients in structuring collective investment vehicles, in structuring real estate securitizations, in forming and operating public and private REITs and in forming real estate funds.
Construction activity remains cyclically depressed, but has likely begun the long process of recovery. A large multi-year rebound in construction should provide a tailwind to OC shares that the market appears to be underestimating. Both residential and nonresidential construction in the U.S. would need to roughly double to reach post-war demographic norms. As credit returns to the market and government funded construction begins to rebound, construction markets should make steady gains in coming years, quarterly weather aside, supporting OC’s revenue and capacity utilization.
OC’s markets have improved structurally over the past decade. Both OC and many of its competitors filed for bankruptcy in the late 1990s/early 2000s to free themselves from asbestos liabilities. With those matters resolved, many areas of the building products industries have emerged into more consolidated industries with fairly rational competitors. Regulations, such as building codes, should also support demand for many of OC’s products.
A significant, multi-year rebound in OC’s end-markets combined with structural improvement should allow the shares to be rerated by the market.
INTERMEDIATE TERM (TREND) (the next 3 months or more)
We estimate that more than half of OC sales are to supply new construction projects, so a gradual trend of rebounding construction activity should provide a tailwind. While there may be volatility in 1Q construction activity, bad weather can also increase demand for certain OC roofing products. We also expect to see continued improvement in OC’s insulation margins in 1H 2014, a segment where returns have the most rebound potential.
LONG-TERM (TAIL) (the next 3 years or less)
Our base-case valuation range for OC is $60-$70/share, which is attractive relative to the alternatives in the Industrials sector. We expect the residential and nonresidential new construction recoveries to be reasonably simultaneous in coming years, driving higher capacity utilization and pricing for OC and other building products companies.
OC is not a member of an S&P Index, which it was prior to 2000, and recently restarted a dividend. Both are potential positives. After roughly six years in asbestos-related bankruptcy and having its end-markets evaporate in the financial crisis, we think OC has a lot more earnings and cash generation potential in coming years than the current valuation reflects.
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