Mick McGuire's Presentation on United Rentals: Value Investing Congress ~ market folly

Wednesday, September 18, 2013

Mick McGuire's Presentation on United Rentals: Value Investing Congress

We're posting up notes from the 2013 Value Investing Congress in New York.  Next up is Mick McGuire of Marcato Capital Management and his presentation was entitled "Don't Buy This Recovery."  He pitched United Rentals (URI).

Mick McGuire's Value Investing Congress Presentation


United Rentals (URI)

$5.9M market cap, $13B EV
12.2x P/E
Largest rental co in the world, built as a roll-up.

Fragmented market, they are biggest player but still only 15% of market.  400k unit fleet, original cost is $8B.  Just bought RSC that was 5% of the market, which added to their 10% share.

Pure play on North American Construction and Industrial markets.  NOT exposed to residential construction- that is only 4% of their revenue.  39% is Industrial, 47% is commercial construction.  Have yet to see a robust recovery in commercial construction.

Thesis: cyclical trends are positive, secular trends help, strategic merger creates the industry's only scale player.  Good capital structure, attractive valuation.  6.8% FCF yield, 12.2x P/E.  Says synergies, rides the cycle.  PT implies 72% appreciation.

Risks:  cycle.  How robust the recovery is.  Also, company could lose capital discipline and overspends on growth CAPEX.  They own 4.7% of the company and wield influence on CAPEX.  

MarketFolly note: URI was featured in the equity analysis section of our Hedge Fund Wisdom newsletter last year and is up 39% since then.

On Sotheby's (BID):  How is the board reacting to their proposals?
"We've had a good dialogue so far."  

Be sure to check out the other presentations from the New York VIC here.

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