Escolar Documentos
Profissional Documentos
Cultura Documentos
Rpt. 27513415
20-Nov-2015
6 - 13
Rpt. 27480517
17-Nov-2015
14 - 14
Rpt. 27471998
16-Nov-2015
15 - 21
Rpt. 27421224
11-Nov-2015
22 - 32
Rpt. 27420414
11-Nov-2015
33 - 35
Rpt. 27416084
10-Nov-2015
36 - 51
Rpt. 27412688
10-Nov-2015
52 - 65
Rpt. 27416442
10-Nov-2015
66 - 80
Rpt. 27412953
10-Nov-2015
81 - 84
Rpt. 27387187
09-Nov-2015
85 - 94
www.thomsonreuters.com
Table of Contents
Rpt. 27382788
09-Nov-2015
95 - 111
Rpt. 27396447
09-Nov-2015
112 - 121
Rpt. 27380711
08-Nov-2015
122 - 124
Rpt. 27389328
06-Nov-2015
125 - 133
Rpt. 27350306
05-Nov-2015
134 - 137
Rpt. 27340282
04-Nov-2015
138 - 142
Rpt. 27341063
04-Nov-2015
143 - 152
Rpt. 27225049
23-Oct-2015
153 - 156
Rpt. 27173066
16-Oct-2015
157 - 161
Rpt. 27173630
16-Oct-2015
162 - 177
www.thomsonreuters.com
Table of Contents
Rpt. 27175078
16-Oct-2015
178 - 185
Rpt. 27167024
15-Oct-2015
186 - 194
Rpt. 27078715
30-Sep-2015
195 - 213
Rpt. 27012158
20-Sep-2015
214 - 224
Rpt. 27025470
18-Sep-2015
225 - 230
Rpt. 26724333
10-Aug-2015
231 - 247
Rpt. 26730768
10-Aug-2015
248 - 260
Rpt. 26722648
09-Aug-2015
261 - 263
Rpt. 26716769
07-Aug-2015
264 - 267
Rpt. 26715345
07-Aug-2015
268 - 272
www.thomsonreuters.com
Table of Contents
Rpt. 26712903
07-Aug-2015
273 - 286
Rpt. 26588693
23-Jul-2015
287 - 300
Rpt. 26538855
20-Jul-2015
301 - 317
Rpt. 26511889
16-Jul-2015
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Rpt. 26515137
16-Jul-2015
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Rpt. 26511212
16-Jul-2015
327 - 331
Rpt. 26505185
15-Jul-2015
332 - 341
Rpt. 26377506
30-Jun-2015
342 - 345
Rpt. 26269963
15-Jun-2015
346 - 353
Rpt. 26041709
11-May-2015
354 - 370
www.thomsonreuters.com
Table of Contents
Rpt. 26029265
08-May-2015
371 - 379
Rpt. 26014635
07-May-2015
380 - 382
Rpt. 26017870
07-May-2015
383 - 388
Rpt. 26025626
07-May-2015
389 - 399
Rpt. 26008105
30-Apr-2015
400 - 410
Rpt. 25821445
15-Apr-2015
411 - 415
Rpt. 25821512
15-Apr-2015
416 - 420
Rpt. 25822884
15-Apr-2015
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Rpt. 25817200
14-Apr-2015
438 - 447
Rpt. 25746318
02-Apr-2015
448 - 455
www.thomsonreuters.com
COMPANY UPDATE
NFI | TSX
$26.07
Rating: Outperform
One Year Target: C$35.00
Total Return: 36.9%
Yield: 2.6%
November 20, 2015
C$26.30 / C$12.05
2.6%
Dividend Yield:
Shares Outstanding ($mm):
55.5 (basic)
C$1446.0
55.5 (fd)
39.7
151.0
$651.9
$1744.9
2016e
2014
Revenue ($mm)
2015e
EBITDA ($mm)
FD EPS
EBITDA ($m m )
Q1
2014
$19.7
$107.4
$144.8
$243.6
$0.65
$0.99
$1.65
Q2
Q3
Q4
$27.0
$25.7
$35.0
2015
$31.4
$39.2
$36.3
$37.9e
2016
$51.9e
$52.8e
$69.0e
$69.8e
Q2
Q3
Q4
Adjusted FD EPS
Q1
2014
$0.10
$0.16
$0.15
$0.24
2015
$0.20
$0.30
$0.26
$0.23e
2016
$0.29e
$0.31e
$0.52e
$0.53e
$30
$25
1200
Last Sale Price
1000
$20
800
$15
600
$10
400
$5
200
0
$0
Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15
I NSTITUTIONAL
EQUITY
R ESEARCH:
DIVERSIFIED
INDUSTRIES
INITIATING
COVERAGE
: DIVERSIFIED
INDUSTRIES
$26.07
EV/EBITDA
2014
2015
2016
Peer Average
New Flyer Industries Inc.
10.4x
12.5x
9.0x
9.3x
7.3x
7.2x
Income Statement
2014
2015e
2016e
2014
2015
2016
Peer Average
New Flyer Industries Inc.
14.7x
30.0x
13.7x
19.9x
12.4x
11.9x
2014
2015e
2016e
2017e
Revenues
Bus Manufacturing
1,132,066 1,231,170 2,016,079 2,075,781
Aftermarket
319,034 320,916 434,615 455,938
Revenue
1,451,100 1,552,086 2,450,693 2,531,719
Aftermarket % of Total
22.0%
20.7%
17.7%
18.0%
EBITDA - Bus Manufacturing
57,374
82,262 145,663 153,647
5.1%
6.7%
7.2%
7.4%
Margin - Bus Manufacturing
EBITDA - Aftermarket Ops.
49,991
62,531
87,897
92,888
15.7%
19.5%
20.2%
20.4%
Margin - Aftermarket Ops.
Total EBITDA incl. Other/ Synergies
86,457 136,232 243,560 274,816
6.0%
8.8%
9.9%
10.9%
Margin
Adjusted EBITDA
107,365 144,793 243,560 274,816
7.4%
9.3%
9.9%
10.9%
Margin
Amortization
35,837
42,564
60,691
59,052
Operating Earnings
50,620
93,669 182,869 215,763
EBT
37,568
76,452 145,217 190,679
177,337
16,023
193,360
(2,004)
(36,908)
154,448
Taxes
Net Income
10,849
26,719
23,890
52,562
53,730
91,487
70,551
120,128
Reported FD EPS
Adjusted FD EPS
$0.48
$0.65
$0.95
$0.99
$1.65
$1.65
$2.16
$2.16
2015e
2016e
2017e
Growth
2014
Revenue
Weeks of Production
Bus Manufacturing
Aftermarket
52
15.0%
48.4%
21.0%
13.4%
Adjusted EBITDA
52
8.8%
0.6%
7.0%
34.9%
53
63.8%
35.4%
57.9%
68.2%
2017e
Price/Earnings
52
3.0%
4.9%
3.3%
12.8%
Adjusted FD EPS
2.7%
51.0%
66.8%
31.3%
FX Assumptions
2014
2015e
2016e
2017e
0.9057
0.9050
0.7834
0.7463
0.7526
0.7634
0.7783
0.7937
Trend
Trend Leverage
Net Debt (EOP)
Net Debt to Trailing EBITDA
Net Debt to Total Capitalization
2014
2015e
2016e
2017e
32,457
35.0%
33,931
32.4%
38,854
22.3%
38,854
19.6%
$0.585
2.2%
$0.611
2.3%
$0.700
2.7%
$0.700
2.7%
2014
2015e
2016e
2017e
2,437
464.5
23.5
49.2
48.5
0.9x
20.7%
2,503
491.9
32.9
49.1
48.0
1.1x
5.0%
4,065
496.0
35.8
78.2
77.1
1.0x
18.4%
4,170
497.8
36.8
81.8
80.7
1.0x
19.9%
2014
2015e
2016e
2017e
Trend
Trend
Trend
Option
2020, 12%
2015, 8%
$4.0
2016, 16%
$3.0
2019, 28%
$2.0
$1.0
2017, 10%
$0.0
Q109 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15 Q3/15
2018, 26%
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
Management indicated that lenders were being very supportive with the new credit
facility to support the transaction. Management indicated the $482mm term loan
represents the MCI cash purchase price of $455mm as well as $27mm of transaction and
refinancing costs. The company expects to see proforma leverage at a net debt to
EBITDA ex-convertible debentures at 3.0x on transaction close and expects with the
strong cash flows to be at ~2.0x levered within two years. The corresponding covenant in
the new credit facility limits leverage to 4.0x in the first year, dropping to 3.75x at the
first anniversary and 3.5x at the second anniversary. With internally generated cash flows
adequate to support the acquisition, there is no intention to issue equity to fund the MCI
transaction.
The transaction is expected to close before year-end. There are some accounting
adjustments required due to the differences in standards and functional currencies
between NFI and MCI, which could impact the opening balance sheet, but that were
described as not overly material. Managements early expectation is that a $10mm
working capital adjustment payment is likely at close, with recovery in H1/16.
Management did note that MCI is less working capital intensive than NFI as for
approximately 60% of the business (70% private less two major customers) 100% of the
purchase price of coaches is received prior to shipment although seasonality can play a
factor into inter-period draws.
New Flyer management had approached KPS, the seller of MCI about the acquisition,
which took approximately a 10-month process as opposed to an auction process.
Management believe that NFI was the natural buyer of MCI given the proximity of
operations, and other strategic synergies to be gained.
The sales and service agreement with Daimler has seen sales of 40 to 50 coaches per
year. With the agreement NFI also gets a technology sharing relationship to support the
product.
3
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
Most unionised labour contracts at MCI are in place for several years with the exception
of a smaller group of service employees in Illinois whose contract expires in January
2016. The manufacturing operation in Winnipeg represented by IAMAW ratified a threeyear agreement in July 2015. We believe the companys experience with labour relations
as well as intentions to bring plant conditions up to NFI standards with MCI should
mitigate any risk of labour issues.
The majority of management at MCI is expected to stay except the current CEO, who
will be replaced by Mr. Soubry. The intent is to run MCI as a separate organization in
2016 based on its current business plan supplemented by a senior VP from NFI
supporting integration efforts.
MCI carries approximately 325 used buses in inventory. With a process started by
KPS/MCI management to manage refurbishment costs, NFI management believes the fair
market value relative to carrying value of the inventory is appropriate.
The New Jersey Transit Authority for 772 45-foot coaches plus 375 options contract won
in July 2015 is expected to drive incremental growth in sales for MCI. There is an
additional contract MCI is expected to bid for 350 additional 40-foot coaches with
deliveries likely to occur later this decade. We believe cost synergies are likely to be the
primary driver of value creation as opposed to revenue growth.
We continue to expect the trend in underlying margin per equivalent unit to continue to
improve in 2016 and 2017. At Q3/15 EBITDA margin per EU on a trailing basis stood at
$33.2k/EU, which marks a high point since early 2011. We believe the synergies derived
from NABI, estimated at $18mm could add ~$6.5k/EU to 2016 and 2017 run rates, which
would bias our estimates higher. Management continues to be conservative in any
guidance, also cautioning there can be significant period to period variation, however
during meeting did acknowledge the trend toward improved pricing in backlog has begun
to materialize as competition normalizes indicating that the average margin in backlog
expected to be produced in 2016 and 2017 is better than what was experienced through
2014 and 2015.
EBITDA Per EU
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
Q1/09 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15 Q3/15
Figure 1 Bus Manufacturing EBITDA per EU Quarterly and Trailing Basis
Source: Bloomberg, AltaCorp Capital Inc.
Based on our discussions with management, we believe the MCI acquisition has significant
potential to improve the earnings and cash flow profile of the company. We see a number of
opportunities to increase returns with higher synergies, while we continue to see improving
fundamentals in core bus manufacturing operations and the aftermarket segment. We maintain
our Outperform rating and our 12-month price target of C$35.00. Our target price is based on
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
a blend of a 14.0x earnings and 7.5x EBITDA multiple of the four quarters ending Q3/17
reflecting our 12-month forward valuation period as well as an exchange rate of C$1.32/$US.
Key risks to failing to achieve our price target include, but are not limited to changes in raw
material and component costs, foreign exchange risks, competition risk, changes in public
sector transportation spending, and failure by management to execute on disclosed strategies.
10
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
Rating &
Target
Trading Local
Market
Currency Price Cap ($mm)
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
26.07
2.43
16.21
29.75
9.98
34.18
42.59
3.65
12.88
55.55
21.55
13.30
5.60
10.47
44.60
1,447.4
2,096.7
323.9
427.8
1,402.9
972.9
3,186.1
125.1
856.5
2,915.4
581.5
1,084.2
540.4
218.6
1,199.0
Net
Debt
EV
($mm)
2014
EPS
2015e
249.8
1,305.5
167.5
323.6
927.2
204.4
896.3
(15.7)
135.8
(176.3)
(70.2)
4,511.0
274.2
188.1
(43.0)
1,342.6
3,436.1
491.5
751.4
2,330.1
1,308.0
4,082.4
109.3
992.3
2,739.1
511.2
5,605.2
910.0
456.7
1,156.2
0.65
0.25
2.46
0.31
0.45
4.62
3.49
0.03
0.88
3.55
1.61
(5.07)
0.03
0.00
2.47
0.99
0.16
1.62
1.97
0.58
6.66
2.68
(0.05)
1.39
3.93
1.54
(0.07)
0.04
0.76
2.44
P/E
2016e 2014 2015e 2016e
1.65
0.22
1.68
2.67
0.89
5.62
3.52
0.10
1.38
4.51
1.74
2.30
0.04
1.15
2.79
30.0x
7.3x
6.6x
NM
22.1x
7.4x
12.2x
NM
14.7x
15.7x
13.4x
NM
NM
NM
18.0x
14.7x
19.9x 11.9x
11.4x 8.2x
10.0x 9.6x
15.1x 11.2x
17.3x 11.2x
5.1x
6.1x
15.9x 12.1x
NM
38.4x
9.2x
9.4x
14.1x 12.3x
14.0x 12.4x
NM
5.8x
NM
NM
13.7x 9.1x
18.3x 16.0x
13.7x 12.4x
2014
EBITDA
2015e
2016e
2014
EV/EBITDA
2015e
2016e
Price
to BV
ROIC
ROE
107.4
268.8
82.4
63.4
282.4
257.4
591.2
9.4
160.7
298.8
65.8
331.0
69.0
25.9
119.3
144.8
206.1
77.5
72.0
279.0
496.1
494.8
8.1
214.5
333.5
66.1
563.5
70.3
75.5
120.6
243.6
337.1
80.6
91.5
348.1
411.3
589.1
10.9
206.8
390.8
75.3
742.0
86.9
81.7
132.3
12.5x
12.8x
6.0x
11.8x
8.3x
5.1x
6.9x
11.6x
6.2x
9.2x
7.8x
16.9x
13.2x
17.6x
9.7x
10.4x
9.3x
16.7x
6.3x
10.4x
8.4x
2.6x
8.3x
13.5x
4.6x
8.2x
7.7x
9.9x
12.9x
6.1x
9.6x
9.0x
7.2x
10.2x
6.1x
8.2x
6.7x
3.2x
6.9x
10.0x
4.8x
7.0x
6.8x
7.6x
10.5x
5.6x
8.7x
7.3x
2.3x
1.2x
1.0x
1.7x
2.3x
1.3x
1.7x
0.8x
2.0x
2.7x
2.6x
NM
2.2x
NM
1.6x
1.8x
7.0%
2.3%
7.9%
4.1%
6.0%
21.5%
8.7%
0.8%
13.7%
17.7%
18.1%
9.7%
2.5%
4.5%
5.8%
8.7%
10.2%
8.2%
11.7%
(9.6%)
7.2%
36.9%
11.8%
(4.7%)
22.6%
19.8%
19.9%
NM
1.8%
NM
4.6%
10.8%
11
Disclosure Requirements
C$26.07
Rating:
Outperform
12 Month Target:
C$35.00
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
Does any director, officer, employee of AltaCorp Capital or member of their household serve as a director or
officer or advisory capacity of the issuer? If yes, state name:
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
12 Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
13 Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
59%
26%
Sector Perform
25%
12%
Underperform
2%
0%
Speculative Buy
2%
0%
Restricted
3%
25%
Not Rated
5%
0%
Tender
3%
0%
100%
19%
Total
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied
upon, by any other person.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts
responsibility for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital
(USA) Inc. at 403-539-8600.
12
Direct
@altacorpcapital.com
__________________________________________________________________________________________________________
porourke
ysiddiqi
nlupick
sbernhardsdottir
tmatthews
cerana
Energy Infrastructure
Dirk Lever, CA, Senior Analyst
Ward Hallett, CA, Associate
dlever
whallett
Oilfield Services
Dana Benner, CFA, Senior Analyst
Karim Merali, Associate
Mark Westby, Analyst
dbenner
kmerali
mwestby
Dave Mowat
Diversified Industries
Chris Murray, P.Eng., CFA, Senior Analyst
Samarth Modwal, Associate
cmurray
smodwal
Agriculture
Peter Prattas, CPA, CA, CFA, Analyst
Stuart Pattillo, Associate
pprattas
spattillo
Ian Wild
All Sectors
Victoria Hoa, Research Assistant
vhoa
George FJ Gosbee
Chairman & CEO
403 539 8601
ggosbee@altacorpcapital.com
ATB Financial
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
khilton
Toronto
Paul Sarachman, CFA, FCSI
Adam Carlson
Jamie Riff
Tim Miller
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Institutional Trading
Calgary
Tate Pinder
Shane Dungey
tpinder
sdungey
Toronto
Mervin Kopeck
Jon Varley
Michael Capobianco
mkopeck
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
410, 585 8 Avenue SW
Calgary AB Canada T2P 1G1
403 539 8600 Main
403 539 8575 Fax
TORONTO
66 Wellington Street West, Suite 3530
Toronto, ON Canada M5K 1A1
647 776 8230 Main
647 776 8248 Fax
www.altacorpcapital.com
George Gosbee
ggosbee
jcaldarelli
ggill
mreynolds
Oilfield Services
Jesse Hardage
jhardage
jfallows
All Sectors
Patrick Stables
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
pstables
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
David Lush, Head of Private Wealth
Vojtech Krb, Investment Advisor
Tomasz Okuszko, Investment Advisor
Michelle Hennebery, Client & Marketing Coordinator
dlush
vkrb
tokuszko
mhennebery
13
Y
Y
Fundamentals
Market Cap:
Year
End:
P/E:
Dividend Yield:
Listing Date:
Listings
$1,055 million
31 - Dec
Common Shares
NFI CA
EPIC:
ISIN:
Shares In Issue:
Current Price:
39.58
2.38
19-Aug-2011
Canada
CA64438T4019
55.52 million
C$25.32
CA
Traded In:
Y
Y
Trade Bulletin
Maximum Significance: 82
$99,480
Y
Y
Share Performance Since
18-Nov-2013
Price
28
24
20
Results Dates
12
Q1
INTERIM
Q3
FINAL
/2
01
/2
01
Y
Y
The Board & Their Holdings
Other Directors
Mcleod, Wayne
Smith, Paul
Marinucci, Giovanni
Jacobsen, Patricia
Directors: 2,F
Y
Y
Financial Results
2014
2013
2012
USD
USD
USD
1,451
1,199
873
www.directorsdeals.com
Aug-13
z Last traded
7
0
0
8
0
2
0
6
Mar-14
Sep-11
Jun-14
Mar-13
Sep-11
z Last traded
0
Nov-15
# = Adjusted, F = Former, P = Person Dispencing Managerial Responsibility, SP-X = Sale Post Exercise
Year
2015
Next
6-May-16
6-Aug-16
4-Nov-16
18-Mar-16
Y
Y
History
Last
6-May-15
6-Aug-15
4-Nov-15
18-Mar-15
/1
1
10
/2
01
/1
0
19
/2
01
/0
9
24
/2
01
/0
9
01
/2
01
/0
8
10
/2
01
/0
7
16
/2
01
/0
6
23
/2
01
/0
6
01
/2
01
/0
5
07
/2
01
/0
4
15
/2
01
/0
3
23
/2
01
/0
2
27
/2
01
/0
2
04
/2
01
/0
1
13
/2
01
/1
2
17
/2
01
/1
1
25
/2
01
/1
1
03
/2
01
/1
0
09
/2
01
/0
9
17
/2
01
/0
8
25
/2
01
/0
7
31
/2
01
/0
7
09
/2
01
/0
6
16
/2
01
/0
5
23
/2
01
/0
4
30
/2
01
/0
4
07
/2
01
/0
3
14
/2
01
/0
2
20
/2
01
28
/0
1
/2
01
/0
1
/2
01
/1
2
06
/1
1
10
18
SELL
SP-X
Multiple
Close Period
16
BUY
Subscribe
86.0
74.0
25.9
Dividends
EPS
48.0c
51.0c
22.0c
Q1
15c(27-Mar)
Interim
15c(26-Jun)
15c(27-Mar)
15c(26-Mar)
22c(28-Mar)
15c(26-Jun)
15c(26-Jun)
22c(27-Jun)
27-Aug-14
20-Aug-14
27-Jun-14
14-May-14
27-Mar-14
15c
15c
15c
17c
BUY
SELL
SELL
BUY
BUY
Q3
(28-Sep)
(26-Sep)
(26-Sep)
(26-Sep)
1,500
7,300
8,035
4,500
12,060
@
@
@
@
@
Final
15c (29-Dec)
15c (29-Dec)
15c (27-Dec)
15c (27-Dec)
=
=
=
=
C$13.73
C$13.85
C$12.25
C$11.71
C$11.16
Annual
60c
59c
59c
74c
14
COMPANY UPDATE
NFI | TSX
$24.36
Rating: Outperform
One Year Target: C$35.00
Total Return: 46.5%
Yield: 2.8%
November 16, 2015
C$25.52 / C$12.05
2.8%
Dividend Yield:
Shares Outstanding ($mm):
55.5 (basic)
C$1351.2
55.5 (fd)
39.7
145.3
$651.9
$1665.6
2016e
2014
Revenue ($mm)
2015e
EBITDA ($mm)
FD EPS
EBITDA ($m m )
Q1
2014
$19.7
$107.4
$144.8
$243.6
$0.65
$0.99
$1.65
Q2
Q3
Q4
$27.0
$25.7
$35.0
2015
$31.4
$39.2
$36.3
$37.9e
2016
$51.9e
$52.8e
$69.0e
$69.8e
Adjusted FD EPS
2014
Q1
$0.10
Q2
Q3
Q4
$0.16
$0.15
$0.24
2015
$0.20
$0.30
$0.26
$0.23e
2016
$0.29e
$0.31e
$0.52e
$0.53e
$25
1000
Last Sale Price
$20
800
$15
600
$10
400
$5
200
$0
0
Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15
Index Inclusion Could Provide the Next Catalyst: With the recent move in New
Flyer Industries share prices and increase in market capitalization, we believe the
company is increasingly eligible for inclusion in the S&P/TSX Composite Index, which
we believe could provide a catalyst for share prices. The next rebalance announcement is
expected after market close on December 11, with implementation scheduled for
December 18 after market close.
Major Criteria for Inclusion: The major criteria to be included in the S&P/TSX
Composite include a float adjusted market cap greater than 0.05% of the index float
weighted market cap after including the weight of the companys own addition, a
volume test that calls for a float turnover of greater than 0.5x of the trailing 12-month
period volume and a predominate domicile in Canada.
Early Signs Point to Meeting Thresholds: We estimate NFI shares would have to
trade above $21.75 during the measurement period in order to be eligible for inclusion.
We also estimate the companys trailing float turnover at 1.09x.
Previous Inclusions Indicate Positive Impact: We believe the discussion around
New Flyers possible inclusion in the S&P/TSX Composite Index could create a nearterm catalyst for share prices. We have reviewed share price behaviour of other
companies added to this index since 2012, looking at performance at various intervals
relative to the announcement date of their inclusion. Generally, we have seen strong
returns across sectors leading into the announcement date as we believe investors take
positions in advance of the announcement in anticipation of inclusion. We believe the
inclusion on a company in such a key index increases the breadth of potential
institutional investors and enhances trading liquidity. Within the industrial subgroup, our
data set showed a return of 9.4% 30 days prior to the announcement date. While
individual stock fundamentals are important to consider, we believe this trend is
instructive for New Flyer holders.
Maintain Outperform and $35.00 Target: While we remain positively biased on
our fundamental outlook for New Flyer shares, we believe investors should consider the
impact of the near-term tactical allocation of a positon given the historical performance
of shares considered for addition to major indices. We caution however that this can be a
double edged sword should NFI fail to be included we would expect a sharp reversal
in share prices. We maintain our Outperform rating and our 12-month price target of
C$35.00. Our target price is based on a blend of a 14.0x earnings and 7.5x EBITDA
multiple of the four quarters ending Q3/17 reflecting our 12-month forward valuation
period as well as an exchange rate of C$1.32/$US.
15
I NSTITUTIONAL
EQUITY
R ESEARCH:
DIVERSIFIED
INDUSTRIES
INITIATING
COVERAGE
: DIVERSIFIED
INDUSTRIES
$24.36
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
10.2x
8.8x
7.2x
Peer Average
14.3x
13.3x
12.0x
11.8x
8.7x
6.8x
27.9x
18.5x
11.1x
2014
2015e
2016e
2015e
2016e
2017e
Trend
Bus Manufacturing
Aftermarket
Revenue
2014
Revenues
1,132,066 1,231,170 2,016,079 2,075,781
319,034
320,916
434,615
455,938
45,823
2017e
35,255
81,078
(1,766)
(1,908)
9,367
62,883
(2,004)
16,023
(2,004)
Aftermarket % of Total
22.0%
20.7%
17.7%
18.0%
57,374
82,262
145,663
153,647
5.1%
6.7%
7.2%
7.4%
49,991
62,531
87,897
92,888
15.7%
19.5%
20.2%
20.4%
83,667
86,457
136,232
243,560
274,816
6.0%
8.8%
9.9%
10.9%
107,365
144,793
243,560
274,816
per Share
7.4%
9.3%
9.9%
10.9%
FCF Yield
Amortization
35,837
42,564
60,691
59,052
Operating Earnings
50,620
93,669
182,869
215,763
EBT
37,568
76,452
145,217
190,679
Taxes
10,849
23,890
53,730
70,551
Net Income
26,719
52,562
91,487
120,128
Reported FD EPS
$0.48
$0.95
$1.65
$2.16
Adjusted FD EPS
$0.65
$0.99
$1.65
$2.16
2015e
2016e
2017e
Grow th
2014
Revenue
7,766
(154)
(961)
$1.67
Trend
$1.88
$3.13
$3.57
6.9%
7.7%
12.9%
14.7%
82.8%
12.6%
66.3%
14.0%
2014
2015e
2016e
2017e
32,457
33,931
38,854
38,854
35.0%
$0.585
32.4%
$0.611
22.3%
$0.700
19.6%
Cash Yield
2.4%
2.5%
2.9%
2.9%
2014
2015e
2016e
2017e
2,437
2,503
4,065
4,170
52
52
53
52
464.5
491.9
496.0
497.8
15.0%
8.8%
63.8%
3.0%
23.5
32.9
35.8
36.8
Aftermarket
48.4%
0.6%
35.4%
4.9%
49.2
49.1
78.2
81.8
Adjusted EBITDA
21.0%
13.4%
7.0%
34.9%
57.9%
68.2%
3.3%
12.8%
48.5
0.9x
48.0
1.1x
77.1
1.0x
80.7
1.0x
Adjusted FD EPS
2.7%
51.0%
66.8%
31.3%
2014
0.9057
2015e
0.7834
2016e
0.7526
2017e
0.7783
0.9050
0.7463
0.7634
0.7937
FX Assum ptions
Leverage
Net Debt (EOP)
Trend
$0.700
Bus Manufacturing
Weeks of Production
Trend
20.7%
5.0%
18.4%
19.9%
2014
2015e
2016e
2017e
Trend
Trend
2.1x
4.5x
2.5x
1.8x
33.6%
57.6%
53.0%
44.2%
Option
2020, 12%
2015, 8%
$4.0
2016, 16%
$3.0
2019, 28%
$2.0
2017, 10%
$1.0
$0.0
Q109 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15 Q3/15
2018, 26%
16
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
13,075.42
1,629,664,500
815,240
$24.36
1.09x
TRUE
Market Cap
55.520
0.6751
$21.75
In replicating these criteria based on Fridays closing prices, we estimate NFI shares would
have to trade above $21.75 during the measurement period in order to be eligible for
inclusion. In our calculations, we have used the float adjustment factor provided by
Bloomberg of 0.6751, which reflects the large blocks held by Marcopolo S.A. as well as
Coliseum Capital along with insider holdings as reported through SEDI. We also estimate the
companys trailing float turnover at 1.09x. With its headquarters in Winnipeg and operations
across Canada, reinforced with the addition of MCI we do not see an issue with domicile. We
note NFI shares and debentures currently have their primary listing on the TSX, which is an
additional criteria for consideration.
17
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
We believe the discussion around New Flyers possible inclusion in the S&P/TSX Composite
Index could create a near-term catalyst for share prices. We have reviewed share price
behaviour of other companies added to this index since 2012, looking at performance at
various intervals relative to the announcement date of their inclusion. Generally, we have seen
strong returns across sectors leading into the announcement date as we believe investors take
positions in advance of the announcement in anticipation of inclusion. We believe the
inclusion on a company in such a key index increases the breadth of potential institutional
investors and enhances trading liquidity. Within the industrial subgroup, our data set showed a
return of 9.4% 30 days prior to the announcement date. While individual stock fundamentals
are important to consider, we believe this trend is instructive for New Flyer holders.
Impact of Index Additions on Share Prices
While we remain positively biased on our fundamental outlook for New Flyer shares, we
believe investors should consider the impact of the near-term tactical allocation of a positon
given the historical performance of shares considered for addition to major indices. We
caution however that this can be a double edged sword should NFI fail to be included we
would expect a sharp reversal in share prices. We maintain our Outperform rating and our 12month price target of C$35.00. Our target price is based on a blend of a 14.0x earnings and
7.5x EBITDA multiple of the four quarters ending Q3/17 reflecting our 12-month forward
valuation period as well as an exchange rate of C$1.32/$US.
Key risks to failing to achieve our price target include, but are not limited to changes in raw
material and component costs, foreign exchange risks, competition risk, changes in public
sector transportation spending, and failure by management to execute on disclosed strategies.
18
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
Rating &
Target
TSX:NFI
OP (C$35.00)
BOVESPA:POMO4
NR
TSX: WJX
NR
TSX: AFN
NR
TSX: SPB
NR
GBX
NR
OSK
NR
SPAR
NR
WNC
NR
THO
NR
WGO
NR
NAV
NR
TSX: STB
NR
BLBD
NR
CUB
NR
Trading
Local
Currency Price
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
24.36
2.34
17.36
30.61
9.98
31.95
40.96
3.70
12.67
53.55
20.40
12.16
5.46
10.75
43.42
Market
Cap ($m m )
1,352.5
2,054.1
346.9
439.7
1,402.9
909.4
3,251.8
126.8
842.5
2,810.4
550.4
991.3
526.9
224.4
1,167.3
P/E
EV
EV/EBITDA
Net
Debt
($m m )
2014
2015e
2016e
2014
2015e
2016e
Price
to BV
ROIC
ROE
249.8
1,305.5
167.5
323.6
927.2
204.4
896.3
(15.7)
135.8
(176.3)
(70.2)
4,511.0
274.2
188.1
(43.0)
1,263.5
3,393.4
514.4
768.3
2,330.1
1,244.5
4,147.4
111.0
978.3
2,634.1
480.2
5,512.3
896.5
462.5
1,124.5
27.9x
7.0x
7.1x
NM
22.1x
6.9x
11.7x
NM
14.4x
15.1x
12.7x
NM
NM
NM
17.6x
14.3x
18.5x
10.5x
10.7x
14.3x
17.3x
4.8x
15.3x
NM
9.1x
13.6x
13.3x
NM
NM
14.1x
17.8x
13.3x
11.1x
7.8x
10.3x
9.3x
10.7x
5.7x
11.6x
38.9x
9.2x
11.9x
11.7x
4.8x
NM
9.3x
15.6x
12.0x
11.8x
12.6x
6.2x
12.1x
8.3x
4.8x
7.0x
11.8x
6.1x
8.8x
7.3x
16.7x
13.0x
17.8x
9.4x
10.2x
8.7x
16.2x
6.6x
10.2x
8.3x
2.5x
8.4x
13.7x
4.6x
7.9x
7.3x
9.8x
12.8x
6.1x
9.3x
8.8x
6.8x
9.9x
6.4x
7.5x
6.8x
3.0x
7.0x
10.2x
4.7x
6.7x
6.4x
7.3x
10.3x
5.7x
8.5x
7.2x
2.1x
1.1x
1.1x
1.7x
2.3x
1.3x
1.6x
0.8x
2.0x
2.6x
2.5x
NM
2.2x
NM
1.5x
1.8x
7.0%
2.3%
7.9%
4.1%
6.0%
21.5%
8.7%
0.8%
13.7%
17.7%
18.1%
9.7%
2.5%
4.5%
5.8%
8.7%
10.2%
8.2%
11.7%
(9.6%)
7.2%
36.9%
11.8%
(4.7%)
22.6%
19.8%
19.9%
NM
1.8%
NM
4.6%
10.8%
19
Disclosure Requirements
C$24.36
Rating:
Outperform
12 Month Target:
C$35.00
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
Does any director, officer, employee of AltaCorp Capital or member of their household serve as a director or
officer or advisory capacity of the issuer? If yes, state name:
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
12 Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
13 Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
59%
25%
Sector Perform
25%
9%
Underperform
2%
0%
Speculative Buy
2%
0%
Restricted
4%
20%
Not Rated
5%
0%
Tender
3%
0%
100%
18%
Total
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied
upon, by any other person.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts
responsibility for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital
(USA) Inc. at 403-539-8600.
20
Direct
@altacorpcapital.com
__________________________________________________________________________________________________________
porourke
ysiddiqi
nlupick
sbernhardsdottir
tmatthews
cerana
Energy Infrastructure
Dirk Lever, CA, Senior Analyst
Ward Hallett, CA, Associate
dlever
whallett
Oilfield Services
Dana Benner, CFA, Senior Analyst
Karim Merali, Associate
Mark Westby, Analyst
dbenner
kmerali
mwestby
Dave Mowat
Diversified Industries
Chris Murray, P.Eng., CFA, Senior Analyst
Samarth Modwal, Associate
cmurray
smodwal
Agriculture
Peter Prattas, CPA, CA, CFA, Analyst
Stuart Pattillo, Associate
pprattas
spattillo
Ian Wild
All Sectors
Victoria Hoa, Research Assistant
vhoa
George FJ Gosbee
Chairman & CEO
403 539 8601
ggosbee@altacorpcapital.com
ATB Financial
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
khilton
Toronto
Paul Sarachman, CFA, FCSI
Adam Carlson
Jamie Riff
Tim Miller
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Institutional Trading
Calgary
Tate Pinder
Shane Dungey
tpinder
sdungey
Toronto
Mervin Kopeck
Jon Varley
Michael Capobianco
mkopeck
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
410, 585 8 Avenue SW
Calgary AB Canada T2P 1G1
403 539 8600 Main
403 539 8575 Fax
TORONTO
66 Wellington Street West, Suite 3530
Toronto, ON Canada M5K 1A1
647 776 8230 Main
647 776 8248 Fax
www.altacorpcapital.com
George Gosbee
ggosbee
jcaldarelli
ggill
mreynolds
Oilfield Services
Jesse Hardage
jhardage
jfallows
All Sectors
Patrick Stables
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
pstables
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
David Lush, Head of Private Wealth
Vojtech Krb, Investment Advisor
Tomasz Okuszko, Investment Advisor
Michelle Hennebery, Client & Marketing Coordinator
dlush
vkrb
tokuszko
mhennebery
21
COMPANY UPDATE
NFI | TSX
$23.90
Rating: Outperform
One Year Target: C$35.00
(previously $26.00)
Total Return: 49.3%
Yield: 2.8%
November 11, 2015
C$24.40 / C$12.05
2.8%
Dividend Yield:
Shares Outstanding ($mm):
55.5 (basic)
C$1325.7
Buying MCI: New Flyer announced that the company has entered into a definitive
agreement to acquire Motor Coach Industries International Inc. (MCI) from an affiliate
of KPS Capital L.P. and Daimler. The cash purchase price of $455mm represents an
implied multiple of 6.0x 2015e EBITDA although we note there are likely a number of
other minor working capital and pension adjustments to be reconciled. Management
expects the transaction to close by the end of 2015 subject to customary closing
conditions including clearing competition regulators.
55.5 (fd)
39.7
133.7
$651.9
$1652.0
2016e
2014
Revenue ($mm)
2015e
EBITDA ($mm)
FD EPS
EBITDA ($m m )
Q1
$107.4
$144.8
$243.6
$0.65
$0.99
$1.65
Q2
Q3
Q4
2014
$19.7
$27.0
$25.7
$35.0
2015
$31.4
$39.2
$36.3e
$37.9e
2016
$51.9e
$52.8e
$69.0e
$69.8e
Q2
Q3
Q4
$0.16
$0.15
$0.24
Adjusted FD EPS
2014
Q1
$0.10
2015
$0.20
$0.30
$0.26e
$0.23e
2016
$0.29e
$0.31e
$0.52e
$0.53e
$25
1000
Last Sale Price
$20
800
$15
600
$10
400
$5
200
$0
0
Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15
About MCI: MCI is a leading motor coach manufacturer and parts and service supplier
in North America with an installed base of ~28,000 units and a 42% motor coach market
share. The company is ~2x the size of its nearest competitor and the leading coach
provider both in the public and private sectors. For the nine months ended September 30,
2015, MCI delivered 576 new coaches (EU), representing ~$315mm in revenue with
aftermarket parts and service business contributing ~$128mm.
Highly Accretive to Estimates: We update our estimates to reflect the effect of the
acquisition and respective additional debt. Our 2016e EBITDA increases to $243.6mm
from $157.7mm with no material change in our 2015 estimate. Our 2017e estimate for
Adjusted EBITDA increases to $274.8mm from $168.6mm, which includes $22mm in
synergies. We also believe it important to mention the considerable increase in free cash
flow despite our expectations for additional capital spending at MCI. We forecast a
33.1% and 45.6% increase in free cash flow on an absolute and per share basis with
2016 free cash flow at $174.0mm and 2017 at $198.3mm, up from $104.6mm in 2015.
Maintain Outperform; Increasing Target to C$35.00: The acquisition of MCI
fulfills the long-held promise of the benefits of operational excellence as well as
building the next phase of the story. We expect the combination should lead to improved
margins, cash flows, returns on capital deployed and ultimately on share prices. We also
expect the move to a higher market cap as well as the possible inclusion in a number of
indices including the S&P/TSX Composite with a threshold on float weight at
approximately $22 during the December / January rebalance should be constructive for
share prices. Despite a number of positive trading biases however, the companys
fundamental outlook greatly improved in our opinion with the announcement of the MCI
transaction and we continue to recommend investors evaluate a position at current
levels. We maintain our Outperform rating and are increasing our 12-month price target
to C$35.00 from C$26.00, previously. Our target price is based on a blend of a 14.0x
earnings and 7.5x EBITDA multiple of the four quarters ending Q3/17 reflecting our 12month forward valuation period as well as an exchange rate of C$1.32/$US.
647.776.8245
smodwal@altacorpcapital.com
Regulatory Disclosures and policy on the dissemination of research: last page or at www.altacorpcapital.com
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$23.90
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
10.3x
8.8x
7.2x
Peer Average
14.6x
13.8x
12.3x
11.7x
8.6x
6.8x
27.5x
18.2x
10.9x
2014
2015e
2016e
2015e
2016e
2017e
Trend
Bus Manufacturing
Aftermarket
Revenue
2014
Revenues
1,132,066 1,231,170 2,016,079 2,075,781
319,034
320,916
434,615
455,938
45,823
2017e
35,255
81,078
(1,766)
(1,908)
9,367
62,883
(2,004)
16,023
(2,004)
Aftermarket % of Total
22.0%
20.7%
17.7%
18.0%
57,374
82,262
145,663
153,647
5.1%
6.7%
7.2%
7.4%
49,991
62,531
87,897
92,888
15.7%
19.5%
20.2%
20.4%
83,667
86,457
136,232
243,560
274,816
6.0%
8.8%
9.9%
10.9%
107,365
144,793
243,560
274,816
per Share
7.4%
9.3%
9.9%
10.9%
FCF Yield
Amortization
35,837
42,564
60,691
59,052
Operating Earnings
50,620
93,669
182,869
215,763
EBT
37,568
76,452
145,217
190,679
Taxes
10,849
23,890
53,730
70,551
Net Income
26,719
52,562
91,487
120,128
Reported FD EPS
$0.48
$0.95
$1.65
$2.16
Adjusted FD EPS
$0.65
$0.99
$1.65
$2.16
2015e
2016e
2017e
Grow th
2014
Revenue
7,766
(154)
(961)
$1.67
Trend
$1.88
$3.13
$3.57
7.0%
7.9%
13.1%
14.9%
82.8%
12.6%
66.3%
14.0%
2014
2015e
2016e
2017e
32,457
33,931
38,854
38,854
35.0%
$0.585
32.4%
$0.611
22.3%
$0.700
19.6%
Cash Yield
2.4%
2.6%
2.9%
2.9%
2014
2015e
2016e
2017e
2,437
2,503
4,065
4,170
52
52
53
52
464.5
491.9
496.0
497.8
15.0%
8.8%
63.8%
3.0%
23.5
32.9
35.8
36.8
Aftermarket
48.4%
0.6%
35.4%
4.9%
49.2
49.1
78.2
81.8
Adjusted EBITDA
21.0%
13.4%
7.0%
34.9%
57.9%
68.2%
3.3%
12.8%
48.5
0.9x
48.0
1.1x
77.1
1.0x
80.7
1.0x
Adjusted FD EPS
2.7%
51.0%
66.8%
31.3%
2014
0.9057
2015e
0.7834
2016e
0.7526
2017e
0.7783
0.9050
0.7463
0.7634
0.7937
FX Assum ptions
Leverage
Net Debt (EOP)
Trend
$0.700
Bus Manufacturing
Weeks of Production
Trend
20.7%
5.0%
18.4%
19.9%
2014
2015e
2016e
2017e
Trend
Trend
2.1x
4.5x
2.5x
1.8x
33.6%
57.6%
53.0%
44.2%
Option
2020, 12%
2015, 8%
$4.0
2016, 16%
$3.0
2019, 28%
$2.0
2017, 10%
$1.0
$0.0
Q109 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15 Q3/15
2018, 26%
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MCIs revenue streams are split into three main segments, New Coach (public and private),
Pre-Owned Coach and Aftermarket. Within the New Coach segment, MCI targets the
mid-range to luxury segments for private and the mid-range for public clients, including
transit authorities, universities, Federal Government and Correctional Facilities. The PreOwned segment caters to value customers within the private market as well as small private
fleet operations. Coaches are refurbished at MCIs service centres and a trade-in option is also
available. The Aftermarket segment provides support to an installed coach fleet of 28,000
buses with a North American footprint which includes six service centres, three distribution
facilities and over 3,000 emergency response partners.
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MCI has long-standing relationships with major transit authorities in North America, some of
whom are also long-time New Flyer customers. There is limited concentration in the market
with the 10 largest operators in North America accounting for ~44% of new coach volume in
2014. Of particular importance is the recent $395mm award for 722 coaches ($512k/unit)
over a five-year period by the New Jersey Transit Authority (NJTA) to replace the majority of
the existing fleet. MCIs relationship dates back to 1982 with the company having been
awarded the largest public transit award in North American history for 1,400 coaches in 2000.
We believe MCI remains ideally positioned for new contract wins from NJTA as well as other
transit authorities. In addition, the contract calls for an average of 75 buses per year over the
five-year term.
Within the private market, the company has strong relationships with key fleet operators
including Coach USA and Greyhound. While private coach orders have limited visibility,
NFIs management highlighted the historical consistent growth within the segment.
MCIs Customer Base
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MCIs revenues have grown consistently over the last four years with robust growth in both
pricing and volumes. Revenue per EU has increased to $446K YTD, highlighting the higher
margins in the private market segment. We note the NJTA contract is expected to contribute
to 2016 volume and beyond.
MCI Historical Financial Performance
Figure 3 Canada and US Motor Coach Industry Annual Deliveries of New Coaches
Source: New Flyer Industries Inc.
The acquisition of MCI diversifies NFIs product offering by not only providing significant
exposure to the private coach industry but also materially expanding NFIs aftermarket parts
and service business. The transaction is expected to be highly accretive to EPS and free cash
flow per share before synergies. The combined entity will employ~4,800 people and support
an installed base of over 42,000 transit buses and 28,000 motor coaches across North
America.
The acquisition of MCI will allow New Flyer access to the private market while building on a
significant aftermarket segment. MCI will introduce new capabilities, including preventative
maintenance, spare parts and accident repair. MCI has over 3,000 approved independent
service locations to support their fleet. The company is also the North American distributor of
Daimlers Setra coaches, considered a premium product positioned above the MCI brands
and also provides exclusive sales and service support for the fleet in Canada and the U.S.
Management expects the present relationship to continue noting that any anti-trust issues are
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unlikely given that Setra is a differentiated offering, outside of MCIs target mid-range
coaches.
There remains a complementary geographic footprint of the two companies noting that MCIs
manufacturing locations are closely aligned with NFIs in both US and Canada. With the
expected completion of the acquisition, the combined entity will have manufacturing facilities
in North Dakota, Alabama, Minnesota and Manitoba.
Combined Manufacturing, Parts & Service Footprint
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surrounding New Flyer remains our previous experience of the financial gains of the
implementation of lean principles in a manufacturing operation, reinforced only by the higher
level of standard production of the MCI product portfolio. Ultimately, we believe the
synergies from this transaction, with the core competencies demonstrated by the management
team at NFI to be able to integrate discreet manufacturing operations are likely to be multiples
of the initial base. We believe it important to note that this does not imply material head count
changes rather this is very much is a Demingesqe shift in the ability of management to
radically improve the operating system. We expect a combination of process improvements,
internalization of work where accretive, purchasing synergies, efficiencies garnered from
information systems and employee engagement offer a host of margin enhancement
opportunities; all we expect which drive margin expansion.
Forecast and Outlook
Management noted that there is considerable seasonality in MCIs revenues, particularly on
the private side with ~70% of total sales in H2. We estimate 2015e revenue from MCI to be
~$661mm assuming that 65% of the companys bus manufacturing revenues and 75% of
aftermarket revenues were realized by Q3/15. Using a 6.0x EBITDA multiple of the purchase
price, we estimate 2015e MCI EBITDA of $75.8mm, implying an ~11.5% EBITDA margin.
Although no backlog or production rate details were provided for MCI, we assume the
company remains on track to deliver ~1,174 EU in 2015. In our 2016 estimates, the most
important impact stems from the New Jersey contract, which likely represents the majority of
y/y improvement stemming from an average sell price of $512k/unit as well as our forecast
for the shipment of 1,356 units which represents the base and options order from the NJT
contract. We expect further growth in 2017, with production rates normalising with 1,435
units delivered.
With the closing of the acquisition, New Flyer intends to increase dividends by 12.9% from
C$0.62 to C$0.70 per share. The company has also moved from a monthly to a quarterly
payment schedule, consistent with other large mid-cap companies.
We update our estimates to reflect the effect of the acquisition and additional debt on the
balance sheet. Our 2016e EBITDA increases to $243.6mm from $157.7mm with no material
change in our 2015 estimate. Our 2017e estimate for Adjusted EBITDA increases to
$274.8mm from $168.6mm, which includes $22mm in synergies. We also believe it important
to mention the considerable increase in free cash flow despite our expectations for additional
capital spending at MCI. We forecast a 33.1% and 45.6% increase in free cash flow on an
absolute and per share basis with 2016 free cash flow at $174.0mm and 2017 at $198.3mm,
up from $104.6mm in 2015. A summary of our key changes to estimates is provided in the
figure below.
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2015e
Change
2016e
2017e
0.0%
0.0%
0.0%
0 bps
44.1%
45.5%
44.4%
15 bps
46.2%
45.0%
46.0%
(13) bps
EBITDA
EBITDA - Bus Manufacturing
Margin - Bus Manufacturing
EBITDA - Aftermarket Ops.
Margin - Aftermarket Ops.
Total EBITDA incl. Other/ Synergies
Margin
82,262
6.7%
62,531
19.5%
136,232
8.8%
93,528
6.7%
64,199
21.5%
157,726
9.3%
99,373
7.0%
69,190
22.0%
168,562
9.7%
82,262
6.7%
62,531
19.5%
136,232
8.8%
145,663
7.2%
87,897
20.2%
243,560
9.9%
153,647
7.4%
92,888
20.4%
274,816
10.9%
0.0%
55.7%
54.6%
0 bps
54 bps
40 bps
0.0%
36.9%
34.3%
0 bps (127) bps (163) bps
0.0%
54.4%
63.0%
0 bps
65 bps 113 bps
Adjusted EBITDA
Margin
144,793
9.3%
157,726
9.3%
168,562
9.7%
144,793
9.3%
243,560
9.9%
274,816
10.9%
0.0%
0 bps
54.4%
65 bps
63.0%
113 bps
Operating Earnings
EBT
96,873
80,931
118,318
106,633
130,053
118,749
93,669
76,452
182,869
145,217
215,763
190,679
(3.3%)
(5.5%)
54.6%
36.2%
65.9%
60.6%
Net Incom e
Reported FD EPS
Adjusted FD EPS
55,383
$1.00
$1.04
67,179
$1.21
$1.21
74,812
$1.35
$1.35
52,562
$0.95
$0.99
91,487
$1.65
$1.65
120,128
$2.16
$2.16
(5.1%)
(5.1%)
(4.9%)
36.2%
36.2%
36.2%
60.6%
60.6%
60.6%
80,121
89,487
(12,502)
81,882
126,851
114,933
(14,556)
98,373
111,492
122,178
(14,070)
106,104
80,172
89,538
(12,502)
81,933
100,496
163,379
(30,278)
131,098
177,337
193,360
(36,908)
154,448
0.1%
0.1%
0.0%
0.1%
(20.8%)
42.2%
108.0%
33.3%
59.1%
58.3%
162.3%
45.6%
104,547
$1.88
9.4%
130,702
$2.35
11.8%
136,341
$2.46
12.3%
104,615
$1.88
8.9%
173,985
$3.13
14.8%
198,313
$3.57
16.8%
0.1%
0.1%
(54) bps
33.1%
33.1%
299 bps
45.5%
45.5%
455 bps
33,931
32.5%
$0.61
34,413
26.3%
$0.62
34,413
25.2%
$0.62
33,931
32.4%
$0.61
38,854
22.3%
$0.70
38,854
19.6%
$0.70
196,942
1.4x
29.0%
110,547
0.7x
17.4%
39,908
0.2x
6.5%
651,891
4.5x
57.6%
610,915
2.5x
53.0%
500,725
1.8x
44.2%
231.0%
231.0%
98.8%
452.6%
257.9%
204.2%
1154.7%
669.6%
578.1%
2,503
491.9
32.9
48.0
1.1x
5.0%
2,709
516.5
34.5
50.7
1.0x
18.4%
2,735
519.1
36.3
51.6
1.0x
19.9%
2,503
491.9
32.9
48.0
1.1x
5.0%
4,065
496.0
35.8
77.1
1.0x
18.4%
4,170
497.8
36.8
80.7
1.0x
19.9%
0.0%
0.0%
0.0%
0.0%
0.0%
0 bps
50.1%
(4.0%)
3.8%
52.1%
0.0%
0 bps
52.5%
(4.1%)
1.4%
56.4%
0.0%
0 bps
0.0%
12.9%
12.9%
(2) bps (400) bps (565) bps
0.0%
12.9%
12.9%
The acquisition of MCI fulfills the long-held promise of the benefits of operational excellence
as well as building the next phase of the story. We expect the combination should lead to
improved margins, cash flows, returns on capital deployed and ultimately on share prices. We
also expect the move to a higher market cap as well as the possible inclusion in a number of
indices including the S&P/TSX Composite with a threshold on float weight at approximately
$22 during the December / January rebalance should be constructive for share prices. Despite
a number of positive trading biases however, the companys fundamental outlook greatly
improved in our opinion with the announcement of the MCI transaction and we continue to
recommend investors evaluate a position at current levels.
We maintain our Outperform rating and are increasing our 12-month price target to C$35.00
from C$26.00, previously. Our target price is based on a blend of a 14.0x earnings and 7.5x
EBITDA multiple of the four quarters ending Q3/17 reflecting our 12-month forward
valuation period as well as an exchange rate of C$1.32/$US.
Key risks to failing to achieve our price target include, but are not limited to changes in raw
material and component costs, foreign exchange risks, competition risk, changes in public
sector transportation spending, and failure by management to execute on disclosed strategies.
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Rating &
Target
TSX:NFI
OP (C$35.00)
BOVESPA:POMO4
NR
TSX: WJX
NR
TSX: AFN
NR
TSX: SPB
NR
GBX
NR
OSK
NR
SPAR
NR
WNC
NR
THO
NR
WGO
NR
NAV
NR
TSX: STB
NR
BLBD
NR
CUB
NR
Trading
Local
Currency Price
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
23.90
2.32
17.72
30.56
10.53
35.30
41.98
3.87
12.70
56.25
21.08
12.77
5.54
10.68
44.39
P/E
Market
EV/EBITDA
27.5x
7.0x
7.2x
NM
23.4x
7.6x
12.0x
NM
14.5x
15.8x
13.1x
NM
NM
NM
18.0x
14.6x
18.2x
13.2x
10.9x
14.3x
18.2x
5.3x
15.7x
NM
9.1x
14.3x
13.7x
NM
NM
14.0x
18.2x
13.8x
10.9x
7.8x
10.5x
9.3x
11.3x
6.3x
11.9x
40.7x
9.2x
12.5x
12.1x
5.1x
NM
9.3x
15.9x
12.3x
2014
2015e
2016e
Price
to BV
ROIC
ROE
11.7x
12.1x
6.3x
12.1x
8.5x
5.2x
7.1x
12.4x
6.1x
9.3x
7.6x
16.8x
11.6x
17.8x
9.6x
10.3x
8.6x
14.7x
6.7x
10.2x
8.6x
2.7x
8.5x
14.4x
4.6x
8.3x
7.5x
9.9x
11.4x
6.1x
9.5x
8.8x
6.8x
9.5x
6.5x
7.5x
7.1x
3.3x
7.1x
10.7x
4.7x
7.1x
6.6x
7.4x
9.0x
5.6x
8.7x
7.2x
2.1x
1.1x
1.1x
1.7x
2.4x
1.4x
1.7x
0.8x
2.0x
2.8x
2.6x
NM
2.0x
NM
1.5x
1.8x
7.0%
2.3%
7.9%
6.1%
6.0%
21.5%
8.7%
0.8%
13.7%
17.7%
18.1%
9.7%
2.6%
4.5%
5.8%
8.8%
10.2%
8.2%
11.7%
(2.5%)
7.2%
36.9%
11.8%
(4.7%)
22.6%
19.8%
19.9%
NM
NA
NM
4.6%
12.1%
30
Disclosure Requirements
C$23.90
Rating:
Outperform
12 Month Target:
C$35.00
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
Does any director, officer, employee of AltaCorp Capital or member of their household serve as a director or
officer or advisory capacity of the issuer? If yes, state name:
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
12 Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
13 Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
60%
26%
Sector Perform
24%
10%
Underperform
2%
0%
Speculative Buy
2%
0%
Restricted
4%
20%
Not Rated
5%
0%
Tender
3%
0%
100%
19%
Total
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
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U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital
(USA) Inc. at 403-539-8600.
10
31
Direct
@altacorpcapital.com
__________________________________________________________________________________________________________
porourke
ysiddiqi
nlupick
sbernhardsdottir
tmatthews
cerana
Energy Infrastructure
Dirk Lever, CA, Senior Analyst
Ward Hallett, CA, Associate
dlever
whallett
Oilfield Services
Dana Benner, CFA, Senior Analyst
Karim Merali, Associate
Mark Westby, Analyst
dbenner
kmerali
mwestby
Dave Mowat
Diversified Industries
Chris Murray, P.Eng., CFA, Senior Analyst
Samarth Modwal, Associate
cmurray
smodwal
Agriculture
Peter Prattas, CPA, CA, CFA, Analyst
Stuart Pattillo, Associate
pprattas
spattillo
Ian Wild
All Sectors
Victoria Hoa, Research Assistant
vhoa
George FJ Gosbee
Chairman & CEO
403 539 8601
ggosbee@altacorpcapital.com
ATB Financial
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
khilton
Toronto
Paul Sarachman, CFA, FCSI
Adam Carlson
Jamie Riff
Tim Miller
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Institutional Trading
Calgary
Tate Pinder
Shane Dungey
tpinder
sdungey
Toronto
Mervin Kopeck
Jon Varley
Michael Capobianco
mkopeck
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
410, 585 8 Avenue SW
Calgary AB Canada T2P 1G1
403 539 8600 Main
403 539 8575 Fax
TORONTO
66 Wellington Street West, Suite 3530
Toronto, ON Canada M5K 1A1
647 776 8230 Main
647 776 8248 Fax
www.altacorpcapital.com
George Gosbee
ggosbee
jcaldarelli
ggill
mreynolds
Oilfield Services
Jesse Hardage
jhardage
jfallows
All Sectors
Patrick Stables
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
pstables
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
David Lush, Head of Private Wealth
Vojtech Krb, Investment Advisor
Tomasz Okuszko, Investment Advisor
Michelle Hennebery, Client & Marketing Coordinator
dlush
vkrb
tokuszko
mhennebery
32
Price: Cdn$17.88
StockRating: Outperform
TargetPrice: Cdn$20.00
Headline: XX
NFI (T)
Outperform
Stock Rating:
Cdn$29.00
Target:
(Was Cdn$24.00)
Average
Risk Rating:
(Unchanged)
24.2%
Stock Data:
Cash Yield
2.9%
21.3%
$24.40-$12.05
Bloomberg/Reuters:
Forecasts: DEC YE
Revenue (USmln)
Company Update
(Unchanged)
2014a
2015e
$86.5
$129.8
Transformative acquisition
NFI is acquiring Motor Coach Industries International, Inc. (MCI) North Americas leading manufacturer of motor coaches and an
extensive provider of aftermarket parts and repair services - from KPS
Capital Partners L.P. The purchase price is ~US$455 million,
representing ~6x estimated 2015 Adjusted EBITDA and financed
entirely with debt via a new credit facility totaling US$825 mln.
2016e
EBITDA (USmln)
HIGHLIGHTS
$218.0
DCPS ($US)
$1.06
$1.19
$2.01
Dividend
$0.58
$0.60
$0.70
Payout Ratio
49%
39%
27%
DC Yield
4.9%
6.4%
10.9%
EV/EBITDA
14.5x
10.4x
8.3x
P/DCPS
20.2x
15.6x
9.1x
55.5
$1,326.9
Cash
Net Debt
$3.7
$702.5
35%
3.2x
20.00
18.00
16.00
14.00
Associates:
Endri Leno - (416) 869-8047
endri.leno@nbc.ca
Kyle Stanley - (416) 507-8108
kyle.stanley@nbc.ca
Alex Bauer - (416) 869-7535
alex.bauer@nbc.ca
600,000
300,000
0
02 17 02 16
Q1 2015
01 16 01 19 01 16 02 16
Q2 2015
04 17 01 16 01 16 02 16
Q3 2015
Q4 2015
33
Page 2
Investment Summary
We will provide additional commentary after this weeks Q3 reporting wraps up, but at this
stage have enough conviction regarding the value creation from NFI acquiring MCI to
increase our target price to $29 (was $24) and reiterate an Outperform rating. Our early
estimates suggest the transaction is more than 35% accretive to DCPS, and this does not yet
account for the full benefits of MCIs recent large New Jersey win and any potential operating
synergies. Including these factors could result in 50%+ accretion for NFI, a function of the
relatively inexpensive purchase price multiple and ability to finance with 100% debt. NFI
trades at 8.3x 2016e EV/EBITDA and 9.1x P/CF, a 2-3x discount to TSX diversified yield
peers and 1-1.5x discount to its recent trading range before the MCI announcement, both
suggesting additional upside. We use a 9.5x forward EV/EBITDA multiple (was ~10x) to
arrive at a $29 target (was $24), the more conservative valuation due to the risks associated
with the transaction and NFI entering a new (albeit complementary) vertical.
34
Page 3
DISCLOSURES:
Ratings And What They Mean: PRIMARY STOCK RATING: NBF has a three-tiered rating system that is relative to the coverage universe of the particular analyst. Here is a brief
description of each: Outperform The stock is expected to outperform the analysts coverage universe over the next 12 months; Sector Perform The stock is projected to perform in
line with the sector over the next 12 months; Underperform The stock is expected to underperform the sector over the next 12 months. SECONDARY STOCK RATING: Under
Review Our analyst has withdrawn the rating because of insufficient information and is awaiting more information and/or clarification; Tender Our analyst is recommending that
investors tender to a specific offering for the companys stock; Restricted Because of ongoing investment banking transactions or because of other circumstances, NBF policy and/or
laws or regulations preclude our analyst from rating a companys stock. INDUSTRY RATING: NBF has an Industry Weighting system that reflects the view of our Economics & Strategy
Group, using its sector rotation strategy. The three-tiered system rates industries as Overweight, Market Weight and Underweight, depending on the sectors projected performance
against broader market averages over the next 12 months. RISK RATING: NBF utilizes a four-tiered risk rating system, Below Average, Average, Above Average and Speculative.
The system attempts to evaluate risk against the overall market. In addition to sector-specific criteria, analysts also utilize quantitative and qualitative criteria in choosing a rating. The
criteria include predictability of financial results, share price volatility, credit ratings, share liquidity and balance sheet quality.
General National Bank Financial (NBF) is an indirect wholly owned subsidiary of National Bank of Canada. National Bank of Canada is a public company listed on Canadian stock
exchanges.
The particulars contained herein were obtained from sources which we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed are based
upon our analysis and interpretation of these particulars and are not to be construed as a solicitation or offer to buy or sell the securities mentioned herein.
Research Analysts The Research Analyst(s) who prepare these reports certify that their respective report accurately reflects his or her personal opinion and that no part of his/her
compensation was, is, or will be directly or indirectly related to the specific recommendations or views as to the securities or companies.
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should contact their NBF professional representative. To effect any transaction, Canadian residents should contact their NBF Investment advisor.
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Authority (FINRA) and a member of the Securities Investor Protection Corporation (SIPC). This report has been prepared in whole or in part by, research analysts employed by non-US
affiliates of NBCFI that are not registered as broker/dealers in the US. These non-US research analysts are not registered as associated persons of NBCFI and are not licensed or
qualified as research analysts with FINRA or any other US regulatory authority and, accordingly, may not be subject (among other things) to FINRA restrictions regarding communications
by a research analyst with the subject company, public appearances by research analysts and trading securities held a research analyst account.
All of the views expressed in this research report accurately reflect the research analysts personal views regarding any and all of the subject securities or issuers. No part of the analysts
compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. The analyst responsible for the production of
this report certifies that the views expressed herein reflect his or her accurate personal and technical judgment at the moment of publication. Because the views of analysts may differ,
members of the National Bank Financial Group may have or may in the future issue reports that are inconsistent with this report, or that reach conclusions different from those in this
report. To make further inquiry related to this report, United States residents should contact their NBCFI registered representative.
UK Residents In respect of the distribution of this report to UK residents, National Bank Financial Inc. has approved the contents (including, where necessary, for the purposes of
Section 21(1) of the Financial Services and Markets Act 2000). National Bank Financial Inc. and/or its parent and/or any companies within or affiliates of the National Bank of Canada
group and/or any of their directors, officers and employees may have or may have had interests or long or short positions in, and may at any time make purchases and/or sales as
principal or agent, or may act or may have acted as market maker in the relevant securities or related financial instruments discussed in this report, or may act or have acted as
investment and/or commercial banker with respect thereto. The value of investments can go down as well as up. Past performance will not necessarily be repeated in the future. The
investments contained in this report are not available to retail customers. This report does not constitute or form part of any offer for sale or subscription of or solicitation of any offer to
buy or subscribe for the securities described herein nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever.
This information is only for distribution to Eligible Counterparties and Professional Clients in the United Kingdom within the meaning of the rules of the Financial Conduct Authority.
National Bank Financial Inc. is authorised and regulated by the Financial Conduct Authority and has its registered office at 71 Fenchurch Street, London, EC3M 4HD.. National Bank
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Copyright This report may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or
conclusions contained in it be referred to without in each case the prior express written consent of National Bank Financial.
NBF is a member of the Canadian Investor Protection Fund.
NBF quarterly ratings summary and the total ratings by month can be found on our website under Research and Analysis/Equities/About NBF Research/Quarterly Ratings Summary (link
attached) http://www.nbcn.ca/cmst/site/index.jhtml?navid=803&templateID=249
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Click on the following link to see the company specific disclosures http://www.nbcn.ca/contactus/disclosures.html
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If a company specific disclosure is not found herein for a listed company, NBF at this time does not provide research coverage or stock rating for the company in question.
Additional company related disclosures for New Flyer Industries Inc. (6,7)
6 National Bank Financial Inc. or an affiliate has a non-investment banking services related relationship during the past 12 months.
7 The issuer is a client, or was a client, of National Bank Financial Inc. or an affiliate within the past 12 months.
35
BUY
unchanged
PRICE TARGET
from C$22.00
Price (10-Nov)
Ticker
C$26.00
C$23.90
NFI-TSX
2014A
2015E
2016E
2017E
1.18
1.18
0.5
1.55
1.54
0.4
2.73
1.81
0.3
3.03
1.90
0.2
12.05 - 24.40
0.05
1,327
0.68
2.9
62.0
11.6
247.7
www.newflyer.com
1,451
1,451
6
Quarterly FCF /
Shr
2014A
2015E
2016E
2017E
Q1
Q2
Q3
Q4
0.19
0.22A
0.71
0.78
0.29
0.48A
0.63
0.71
0.32
0.40A
0.68
0.75
0.38
0.45
0.71
0.78
22
20
18
16
14
12
Oct-15
Nov-15
Sep-15
Jul-15
Aug-15
Jun-15
Apr-15
May-15
Mar-15
Jan-15
Feb-15
Dec-14
10
NFI
Source:FactSet
Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX | CF. : LSE)
The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all
the companies and securities that are the subject of this report discussed herein.
For important information, please see the Important Disclosures beginning on page 13 of this document.
36
The deal is large, with the acquired enterprise value being $455 million (excluding
$25 million of net pension liabilities), which is about 40% of NFIs pre-deal
enterprise value. This means the accretion is on a meaningful base,
MCI diversifies NFIs business into a new area (on-highway buses), which may
provide new growth opportunities and broadens NFIs exposure to another end
market than the government-dominated city bus market (which is subject to
political and government finance risks),
MCI comes with a significant amount of growth from a recently-won New Jersey
Transit contract. This contract has a firm component that anticipates delivery of
772 buses over 5 years, with an option to add another 75 buses per year. NFI
expects this program to ramp up in late 2016, and
The deal significantly enhances NFIs shareholder value, EBITDA and FCFPS
according to our calculations. Our new one-year target was increased C$4.00 to
C$26.00 due to the addition of MCI, while our two-year target increases an even
larger C$7.00 to C$30.00 due to the ramp-up of the MCI New Jersey contract.
There may be other potential benefits including greater than target synergies and
benefits from a supply link with Daimler AG (Daimler supplies a high-end bus to MCI).
On the risk side, we think there is a risk that MCI will increase NFIs cyclicality, as we
believe MCIs customers may prove more cyclical than NFIs city bus customers. MCIs
customers are ultimately exposed to consumer discretionary spending, which is
probably more discretionary than consumer spending on city bus travel.
Auto Components 2
37
Auto Components 3
38
Figure 1: Revised Canaccord Genuity forecast for New Flyer: limited changes
Yrs E n ded D ec . 31 ( $M )
Dividend/share (C$)
% change
Free cash flow/share (C$)
% change
2015E
N ew
Old
Fc s t
Fc s t
0.608 0.608
4%
4%
2016E
N ew
Old
Fc s t
Fc s t
0.700 0.620
15%
2%
2017E
N ew
Old
Fc s t
Fc s t
0.700 0.620
0%
0%
2018E
N ew
Old
Fc s t
Fc s t
0.700 0.620
0%
0%
2019E
N ew
Old
Fc s t
Fc s t
0.700 0.620
0%
0%
2014
0.59
n.m.
Q 3/15
0.16
6%
1.18
#N/A
0.40
24%
0.45
19%
0.45
17%
1.55
31%
1.54
31%
2.73
76%
1.81
17%
3.03
11%
1.90
5%
3.24
7%
1.96
3%
3.37
4%
2.03
4%
0.71
0.23
1.21
1.19
1.53
1.51
2.04
1.49
2.13
1.63
2.54
1.68
3.11
1.74
Payout ratio
Revenue
% change
Q 4/15E
N ew
Old
Fc s t
Fc s t
0.155 0.155
6%
6%
50%
39%
34%
35%
39%
39%
26%
34%
23%
33%
22%
32%
21%
31%
1,451
21%
365
1%
393
-6%
393
-6%
1,513
4%
1,513
4%
2,117
40%
1,472
-3%
2,259
7%
1,515
3%
2,329
3%
1,552
2%
2,406
3%
1,601
3%
91
6.3%
35
9.6%
37
9.5%
37
9.5%
136
9.0%
136
9.0%
225
10.6%
146
9.9%
243
10.8%
153
10.1%
257
11.1%
156
10.1%
266
11.0%
161
10.1%
(35)
(34)
17
18
33
20
41
17
31
17
17
EBITDA
EBITDA margin
Investment in NCWC & capital assets 3
46
2,437
465
24
50
625
469
35
15
685
469
33
15
685
469
33
15
2,476
481
33
63
2,476
481
33
63
2,485
472
34
61
2,485
472
34
61
2,535
475
35
64
2,535
475
35
64
2,571
478
35
66
2,571
478
35
66
2,629
481
35
69
2,629
481
35
69
2,263
2,102
466
1,880
620
1,815
620
1,815
2,342
1,815
2,342
1,815
2,485
1,815
2,485
1,815
2,535
1,815
2,535
1,815
2,571
1,815
2,571
1,815
2,629
1,815
2,629
1,815
10.0%
10.1%
11.2%
11.1%
12.1%
11.7%
12.7%
12.4%
1.300
1.300
1.300
1.300
1.300
1.300
1.300
1.300
Return on capital
5.2%
NFI definition
1.104
8.9%
1.300
7.3%
1.300
10.0%
1.300
6.7%
1.300
9.0%
1.300
NCWC means non-cash working capital. Positive number means NCWC generates cash.
Auto Components 4
39
VALUATION
NFIs yields continue to decline (Figure 3), but NFIs EV/EBITDA valuation (Figure 4)
appears to be settling into a new range. We think the companys dividend yield will
bottom out around 3% range (about 1-2% over the 10-year Canada bond yield) and
EV/EBITDA will be stable in the 6-8x NTM EBITDA range. We note near-term
EV/EBITDA data is modestly distorted by the MCI acquisition.
Figure 2: NFI distribution/dividend yields settling into the 3% range, or roughly 2.5% above the 10-year Canada bond yield
NFIs dividend yield also appears to have converged with other high-yield industrial
names (Figure 5).
Auto Components 5
40
Figure 4: We think a valuation multiple in-line with other industrial high yield companies is reasonable
Mar k et
Ne w F l y e r I nd ustr i e s
Cur .
Eq ui ty Pr i ce :
Cur .
Year
No v. 7, 2015
Di v.
2015
$20. 00
$0. 61
Co nse nsus A ve r a ge
Di v.
EB I TDA
Cur .
Pa y o ut
Ca p .
Cur .
Y i e l d F CF PS
r a ti o
($M )
EPS
3. 0%
$1. 54
4. 9%
De b t/
P/E
Gr o wth
Ca p ('15- '17)
16. 0 39. 4%
6. 1%
10. 4%
Chorus Aviation
2015
$5.51
$0.48
8.7%
$0.88
54.7%
$673 $0.80
6.9
89.6%
12.9%
Davis + Henderson
2015
$34.95
$1.28
3.7%
$2.09
61.2%
$3,690 $2.49
14.1
41.2%
15.8%
Westshore Terminals
2015
$22.36
$1.32
5.9%
$1.27
103.9%
$1,660 $1.68
13.3
0.0%
3.3%
Cineplex Galaxy
2015
$50.07
$1.54
3.1%
$1.68
91.7%
$3,159 $2.02
24.8
32.1%
14.1%
Note that the New Flyer dividend is the new sustainable dividend level
Source: Company reports, Bloomberg, Canaccord Genuity Research estimates
We have maintained our valuation multiple at 7.5x EV/NTM EBITDA (or 7.5x Q3/16E
EV / Q4/16E - Q3/17E EBITDA), given that the stock has traded in this range for some
time (average of 7.7x over the past 60 months). We think our target multiple is well
supported by NFIs solid 2.9% dividend yield. We think the dividend upside potential
from forecasted stronger future free cash further strengthens the dividend yield
support argument (as was demonstrated by NFIs dividend increase announced with
the MCI deal).
Our target multiple generates a target dividend yield of 2.7% and a FCFPS yield of
11.3%, both of which seem reasonable relative to comparable companies and
appropriately better than in the past, reflecting NFIs improved risk profile.
Our valuation also translates into a reasonable to attractive 1.0% dividend yield and
9.6% FCFPS spreads over Government of Canada bond rates, which reflects the much
higher risk of NFI versus government bonds.
Auto Components 6
41
1-year
t arget
238.5
2-year
t arget
253.6
7.5
1,788.5
(544.8)
1,243.7
7.5
1,901.7
(464.2)
1,437.5
62.0
20.05
26.00
62.0
23.18
30.00
0.68
26.68
1.38
31.38
11.4%
30.7%
2.7%
11.3%
2.3%
10.6%
1.0%
9.6%
FCFPS C$
2.95
3.18
Our target was increased C$4.00 to C$26.00 due to our stronger forecast from the
MCI deal. We note that the 2-year target is materially stronger (up C$7.00 to C$30.00)
due to the benefit of the deal and the launch of MCIs New Jersey Transit contract.
We have maintained our rating at BUY, given the more attractive implied one-year and
especially two-year investment returns.
Auto Components 7
42
Figure 6: Canaccord Genuity Researchs forecast for New Flyer Industries Dividend payout analysis
Y ears ended Dec. 3 1 ($ m illions)
F ree cash
Cash from operations
Change in working capital
Interest paid
Interest expense
Income taxes paid
Current income tax expense
Principal portion of capital lease payments
Capital expenditures
Proceeds from sale of redundant assets
Business acquisition cost
Costs associated with strategic initiatives
Defined benefit funding
Defined benefit expense
Realized investment tax credits
Foreign exchange impact on cash
Free cash flow
Exchange rate
Free cash flow (CAD)
Declared dividends (CAD)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
Q2 /1 5
5.5
24.0
17.1
(14.6)
6.5
(12.8)
(2.4)
(4.0)
0.7
7.3
(1.8)
2.2
27.8
0.001
27.8
33.1
30.0
23.0
10.9
(11.6)
19.0
(23.8)
(2.0)
(13.8)
1.2
6.0
8.7
(2.8)
(1.5)
0.2
43.4
1.039
45.1
30.7
17.5
(7.9)
3.8
(3.1)
4.4
(3.4)
(0.4)
(3.3)
0.4
2.1
(0.7)
0.0
9.5
1.109
10.6
8.1
1.1
18.9
3.8
(3.4)
4.4
(8.2)
(0.3)
(1.5)
0.2
0.1
(0.7)
0.4
14.7
1.085
15.9
8.1
0.5
21.8
1.8
(2.9)
1.6
(4.1)
(0.5)
(1.9)
0.0
0.2
0.8
(0.7)
(0.4)
16.3
1.097
17.9
8.1
26.9
2.5
2.2
(3.0)
1.5
(11.2)
(0.6)
(1.7)
2.8
0.5
(0.6)
(0.6)
(0.1)
18.6
1.136
21.1
8.1
45.8
35.3
11.6
(12.4)
12.0
(26.8)
(1.8)
(8.4)
0.6
3.1
3.5
(2.6)
(0.6)
(0.2)
59.1
1.104
65.5
32.5
28.7
(4.6)
4.0
(3.1)
2.1
(13.7)
(0.5)
(4.3)
1.3
0.8
(0.7)
(0.2)
9.8
1.252
12.3
8.1
(22.8)
42.3
1.8
(2.8)
16.4
(12.5)
(0.5)
(1.9)
1.6
0.8
(0.8)
(0.1)
21.5
1.226
26.4
8.4
11.6
6.5
3.8
(2.8)
14.1
(14.4)
(0.5)
(1.8)
1.0
0.8
(0.8)
(0.7)
16.8
1.317
22.1
8.6
44.4
51.9
55.5
55.5
55.5
55.5
55.5
55.5
55.5
0.63
0.75
0.87
0.58
0.19
0.15
0.29
0.15
0.32
0.15
0.38
0.15
1.18
0.59
0.22
0.15
0.48
0.15
Q3 /1 5 Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
59.5
(36.7)
3.0
(3.0)
11.0
(11.0)
(0.7)
(2.0)
0.8
(0.8)
(0.7)
19.4
1.300
25.2
8.6
77.1
7.4
12.6
(11.6)
43.6
(51.6)
(2.1)
(10.0)
3.9
3.2
(3.2)
(1.7)
67.6
1.300
86.1
33.8
114.2
16.2
31.3
(31.3)
60.7
(60.7)
(2.6)
(8.0)
3.2
(3.3)
(3.0)
116.7
1.300
151.7
38.9
118.8
24.1
28.6
(28.6)
69.6
(69.6)
(2.6)
(8.0)
3.2
(3.3)
(3.0)
129.3
1.300
168.0
38.9
138.6
13.5
27.1
(27.1)
76.0
(76.0)
(2.6)
(8.0)
3.2
(3.3)
(3.0)
138.4
1.300
179.9
38.9
165.7
(8.2)
26.1
(26.1)
79.9
(79.9)
(2.6)
(8.0)
3.2
(3.3)
(3.0)
143.8
1.300
186.9
38.9
55.5
55.5
55.5
55.5
55.5
55.5
55.5
0.40
0.16
0.45
0.16
1.55
0.61
2.73
0.70
3.03
0.70
3.24
0.70
3.37
0.70
Auto Components 8
43
Figure 7: Canaccord Genuity Researchs forecast for New Flyer Industries Income statement
Y ears ended Dec. 3 1 ($ m illions)
Incom e statem ent
Revenues
Cost of sales and SG&A
Foreign exchange gain (loss)
EBITDA
Depreciation & amortization
Unrealized FX gain (loss)
Fair value adjustments
Other
Operating profit (EBIT)
Interest expense on long-term debt
Other interest and bank charges
Fair value adjustment on int rate swaps
Other expenses
Distributions on B and C shares
Pre-tax income
Income taxes
Net Income (loss)
Div. per share/Dist. per unit (C$)
FCFPS (CFO - capex)
FCFPS (NFI definition)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
Q2 /1 5
Q3 /1 5 Q4 /1 5 E
865.3 1,199.4
(810.2) (1,120.2)
2.8
(0.1)
57.8
79.1
(24.3)
(28.0)
(1.4)
(2.1)
(1.4)
0.0
(5.5)
0.0
25.2
49.0
(11.9)
(8.7)
(2.7)
(2.9)
0.8
(0.5)
(2.8)
(2.2)
0.0
0.0
10.0
34.6
(0.7)
(7.9)
9.3
26.8
323.9
(305.0)
(0.8)
18.1
(7.7)
(0.4)
0.0
0.0
10.0
(2.3)
(0.8)
0.3
(0.5)
0.0
6.7
(1.2)
5.5
346.5
(322.3)
(0.4)
23.8
(8.1)
1.0
0.0
(3.9)
12.8
(2.3)
(1.2)
(0.4)
(0.5)
0.0
8.4
(4.8)
3.6
360.8
(337.6)
(0.2)
22.9
(10.0)
(0.1)
0.0
0.0
12.8
(2.2)
(0.7)
0.8
(0.6)
0.0
10.1
0.2
10.2
420.0 1,451.1
(393.4) (1,358.3)
(0.1)
(1.5)
26.5
91.3
(10.0)
(35.8)
0.3
0.8
0.0
0.0
(0.9)
(4.8)
15.9
51.4
(2.2)
(8.9)
(0.8)
(3.5)
0.1
0.8
(0.6)
(2.2)
0.0
0.0
12.4
37.6
(5.0)
(10.8)
7.4
26.7
380.3
(352.1)
1.5
29.7
(9.5)
(1.9)
0.0
0.0
18.2
(2.3)
(0.7)
(0.5)
(0.6)
0.0
14.1
(3.3)
10.9
375.0
(340.7)
(0.7)
33.7
(9.8)
0.8
0.0
0.0
24.6
(2.2)
(0.6)
0.3
(0.6)
0.0
21.6
(9.2)
12.4
364.7
(329.1)
(0.6)
35.0
(10.0)
(1.0)
0.0
0.0
24.0
(2.2)
(0.6)
(0.1)
(0.6)
0.0
20.5
(4.0)
16.6
2015E
2016E
2017E
2018E
2019E
0.75
(0.10)
0.63
0.58
0.26
0.87
0.15
0.28
0.19
0.15
(0.01)
0.29
0.15
(0.04)
0.32
0.15
0.49
0.38
0.59
0.71
1.18
0.15
0.55
0.22
0.15
(0.54)
0.48
0.16
0.23
0.40
0.16
1.21
0.45
0.61
1.53
1.55
0.70
2.04
2.73
0.70
2.13
3.03
0.70
2.54
3.24
0.70
3.11
3.37
52.3
58.9
55.5
55.6
55.7
55.7
55.6
55.8
55.9
56.1
62.0
57.4
62.0
62.0
62.0
62.0
-6.6%
-0.4%
-30.6%
6.7%
38.6%
38.4%
-21.5%
6.6%
32.1%
26.8%
0.0%
5.6%
30.0%
56.0%
0.0%
6.9%
16.8%
36.0%
0.0%
6.4%
10.9%
34.4%
0.0%
6.3%
21.0%
36.0%
0.0%
6.3%
17.4%
16.6%
0.0%
7.8%
8.2%
65.6%
4.0%
9.0%
1.1%
23.7%
6.0%
9.6%
-6.4%
19.3%
6.0%
9.5%
4.3%
31.4%
4.0%
9.0%
39.9%
76.2%
15.1%
10.6%
6.7%
10.8%
0.0%
10.8%
3.1%
7.1%
0.0%
11.1%
3.3%
3.9%
0.0%
11.0%
3.9%
5.3%
3.9%
5.9%
4.8%
6.1%
5.2%
7.6%
8.8%
8.9%
7.3%
6.7%
10.0%
11.2%
12.1%
12.7%
Bus revenues
Bus EBITDA (excl. FX gains/losses)
Bus sales growth
Bus EBITDA % (excl. FX gains/losses)
Deliveries
Revenue/unit
EBITDA/unit
LTM EBITDA/unit
753.9
42.0
-7.0%
5.6%
1,656
455
25
25
984.4
63.6
30.6%
6.5%
2,191
449
29
29
250.9
7.8
20.7%
3.1%
554
453
14
27
265.8
13.9
23.5%
5.2%
582
457
24
28
278.7
12.6
11.2%
4.5%
621
449
20
26
336.6
23.2
7.5%
6.9%
680
495
34
24
1132.1
57.4
15.0%
5.1%
2,437
465
24
24
290.7
14.7
15.9%
5.1%
572
508
26
26
285.8
22.4
7.5%
7.8%
594
481
38
30
293.0
21.6
5.1%
7.4%
625
469
35
33
321.1
22.6
-4.6%
7.0%
685
469
33
33
1190.6
81.4
5.2%
6.8%
2,476
481
33
33
1172.3
84.5
-1.5%
7.2%
2,485
472
34
34
1203.5
88.7
2.7%
7.4%
2,535
475
35
35
1228.3
90.0
2.1%
7.3%
2,571
478
35
35
1263.9
92.0
2.9%
7.3%
2,629
481
35
35
Aftermarket revenues
Aftermarket EBITDA (excl. FX)
Aftermarket sales growth
Aftermarket EBITDA % (excl. FX)
119.1
19.6
2.6%
16.4%
215.0
31.0
80.6%
14.4%
73.0
11.9
95.4%
16.3%
80.7
13.1
57.1%
16.2%
82.0
13.1
40.7%
16.0%
83.4
11.9
22.6%
14.2%
319.0
50.0
48.4%
15.7%
89.6
16.7
22.8%
18.6%
89.2
16.8
10.6%
18.8%
71.7
14.7
-12.6%
20.5%
72.0
14.8
-13.6%
20.5%
322.5
62.9
1.1%
19.5%
299.6
61.4
-7.1%
20.5%
311.6
63.9
4.0%
20.5%
324.0
66.4
4.0%
20.5%
336.8
69.0
4.0%
20.5%
Auto Components 9
44
Figure 8: Canaccord Genuity Researchs forecast for New Flyer Industries Balance sheet
Y ears ended Dec. 3 1 ($ m illio ns)
Balance sheet
Cash
Accounts receivable
Inventories
Prepaid expenses and deposits
Derivative financial instruments
Future income tax assets
Other
Total current assets
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
Q2 /1 5
11.2
113.5
124.7
4.7
0.0
0.0
0.0
254.1
11.9
230.3
183.3
7.7
0.0
0.0
0.0
433.2
14.2
201.0
207.7
6.6
0.0
1.6
0.0
431.1
4.3
146.3
246.4
5.7
0.0
3.2
0.0
406.0
8.7
164.1
267.4
4.6
0.1
3.4
0.0
448.2
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
7.6
186.9
232.0
3.5
0.1
0.0
0.0
430.0
8.8
189.2
242.3
3.9
0.2
0.0
0.0
444.4
6.5
217.7
240.4
3.7
0.0
0.0
0.0
468.3
Capital assets
Deferred charges
Intangible assets
Future income tax assets
Derivative financial instruments
Accrued benefit asset
Total assets
42.0
0.0
528.5
72.6
0.0
0.0
897.2
64.8
0.0
568.9
68.9
0.0
0.0
1,135.9
65.5
0.0
564.1
67.6
0.0
1.1
1,129.4
65.4
0.0
556.1
65.7
0.0
0.5
1,093.7
65.2
0.0
550.7
65.0
0.0
0.0
1,129.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
64.3
0.0
539.1
67.9
0.0
0.0
1,101.4
64.3
0.0
533.9
68.6
0.0
0.0
1,111.2
63.5
0.0
528.5
74.9
0.0
0.0
1,135.2
Bank indebtedness
Accounts payable & accrued liabs
Due to parent company
Deferred revenue
Provision for warranty costs
Current portion of capital leases
Current portion of LTD
Other current liabilities
Total current liabilities
0.0
150.8
0.0
19.2
20.1
1.9
40.0
6.8
238.8
0.0
212.9
0.0
57.6
26.1
1.3
35.0
1.5
334.4
0.0
225.5
0.0
55.4
25.1
1.1
30.0
0.5
337.6
0.0
204.5
0.0
47.7
25.1
1.3
30.0
1.8
310.3
0.0
227.1
0.0
36.8
28.7
1.7
45.0
3.9
343.2
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
226.5
0.0
23.0
35.0
1.6
13.0
18.6
317.6
0.0
201.8
0.0
18.3
39.7
1.7
48.0
10.4
319.8
0.0
203.0
0.0
22.0
42.1
1.6
44.0
12.7
325.5
0.0
285.0
0.0
29.8
56.9
1.6
135.0
11.9
520.1
0.0
285.0
0.0
29.8
56.9
1.6
135.0
11.9
520.1
0.0
291.2
0.0
29.8
56.9
1.6
65.0
9.8
454.2
0.0
310.4
0.0
29.8
56.9
1.6
0.0
8.8
407.5
0.0
319.3
0.0
29.8
56.9
1.6
0.0
7.8
415.3
0.0
311.9
0.0
29.8
56.9
1.6
0.0
6.8
407.0
9.0
2.3
122.2
177.7
2.0
1.2
0.2
1.8
114.8
198.6
2.5
28.3
0.0
1.6
113.2
199.1
2.2
22.1
0.0
2.7
112.2
199.6
2.6
16.5
0.6
3.4
110.5
200.0
1.8
17.4
1.0
3.2
108.5
200.5
1.7
14.7
1.0
3.2
108.5
200.5
1.7
14.7
0.9
2.9
105.5
201.0
2.2
13.9
4.1
5.0
102.5
201.6
1.9
12.7
3.8
6.5
100.0
202.2
2.0
21.1
3.8
6.5
98.0
543.0
2.0
21.1
3.8
6.5
98.0
543.0
2.0
21.1
3.8
6.5
90.0
543.0
2.0
21.1
3.8
6.5
82.1
543.0
2.0
21.1
3.8
6.5
74.1
543.0
2.0
21.1
3.8
6.5
66.2
543.0
2.0
21.1
0.0
480.8
(136.8)
0.0
593.3
(138.2)
0.0
593.6
(140.0)
0.0
593.8
(143.9)
0.0
594.1
(141.8)
0.0
594.5
(141.8)
0.0
594.5
(141.8)
0.0
594.7
(137.5)
0.0
595.2
(131.6)
Q3 /1 5 Q4 /1 5 E
0.0
595.7
(121.6)
34.3
268.3
329.9
5.4
0.0
0.0
0.0
637.9
2015E
2016E
2017E
2018E
2019E
34.3
268.3
329.9
5.4
0.0
0.0
0.0
637.9
31.6
278.0
338.4
7.6
0.0
0.0
0.0
655.5
38.4
296.8
361.3
8.1
0.0
0.0
0.0
704.6
129.9
306.3
372.9
8.4
0.0
0.0
0.0
817.4
248.4
298.9
363.9
8.2
0.0
0.0
0.0
919.3
90.1
90.1
82.5
76.9
72.8
69.8
0.0
0.0
0.0
0.0
0.0
0.0
523.1
523.1
501.7
480.2
458.8
437.3
74.9
74.9
74.9
74.9
74.9
74.9
0.0
0.0
0.0
0.0
0.0
0.0
(0.0)
(0.0)
(0.1)
(0.3)
(0.4)
(0.5)
1,675.9 1,675.9 1,664.4 1,686.4 1,773.5 1,850.8
0.0
595.7
(114.3)
0.0
595.7
(114.3)
0.0
595.7
(52.0)
0.0
0.0
0.0
595.7
24.7
595.7
111.9
595.7
205.5
897.2
1,135.9
1,129.4
1,093.7
1,129.1
1,136.1
1,136.1
1,101.4
1,111.2
1,135.2
1,675.9
1,675.9
1,664.4
1,686.4
1,773.5
1,850.8
10.8
46.0
15.4
123.2
3.5
110.5
1.8
122.7
2.5
143.1
2.8
135.7
10.7
135.7
4.3
119.4
1.9
165.5
1.8
181.8
2.0
220.1
10.0
220.1
17.0
236.3
17.1
260.4
17.2
273.8
17.3
265.6
210.7
3.6x
7.75
21.8x
224.7
2.8x
8.77
22.4x
217.6
1.4x
8.18
19.9x
229.3
1.5x
8.11
21.2x
241.5
2.5x
8.15
22.1x
227.8
2.5x
8.15
26.0x
227.8
2.5x
8.16
22.6x
210.9
2.1x
8.24
23.8x
247.5
2.2x
8.35
23.3x
247.7
2.0x
8.54
22.8x
651.8
4.8x
8.67
20.5x
651.8
4.8x
8.67
19.7x
584.5
2.6x
9.79
24.5x
512.7
2.1x
11.17
28.3x
421.2
1.6x
12.75
31.1x
302.7
1.1x
14.43
33.7x
Auto Components 10
45
Figure 9: Canaccord Genuity Researchs forecast for New Flyer Industries Cash flow statement
Y ears ended Dec. 3 1 ($ m illio ns)
C ash flo w statem ent
Net income
Amortization of fixed assets
Amortization of intangibles
Amortization of deferred charges
Loss on disposition of PP&E
Future income taxes (recovery)
Unrealized gain on int rate swap
Unrealized FX gain (loss)
Fair value adjustments
Defined benefit expense
Defined benefit funding
Items not affecting cash
Other
Cash from operations before WC
Change in working capital
Cash from operations after WC
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
Q2 /1 5
9.8
8.3
16.0
0.0
0.0
1.5
0.0
1.4
1.4
3.6
(7.3)
(2.2)
(2.9)
29.5
(24.0)
5.5
26.8
9.6
18.4
0.0
0.0
17.5
0.0
2.1
0.0
2.8
(8.7)
0.1
(15.6)
53.0
(23.0)
30.0
5.5
2.9
4.8
0.0
0.0
2.2
0.0
0.4
0.0
0.7
(2.1)
3.3
(8.0)
9.6
7.9
17.5
3.6
3.3
4.8
0.0
0.0
4.8
0.0
(1.0)
0.0
0.7
0.0
4.4
(0.6)
19.9
(18.9)
1.1
10.2
4.6
5.4
0.0
0.0
2.4
0.0
0.1
0.0
0.7
(0.8)
(3.4)
3.1
22.3
(21.8)
0.5
7.4
4.6
5.4
0.0
0.0
14.9
0.0
(0.3)
0.0
0.6
(0.5)
(3.4)
0.7
29.3
(2.5)
26.8
26.7
15.4
20.5
0.0
0.0
24.3
0.0
(0.8)
0.0
2.6
(3.5)
0.8
(4.9)
81.1
(35.3)
45.8
10.9
4.2
5.3
0.0
0.0
3.4
0.0
1.9
0.0
0.7
(0.8)
0.4
(2.0)
24.1
4.6
28.7
12.4
4.5
5.4
0.0
0.0
9.2
0.0
(0.8)
0.0
4.5
(0.8)
0.3
(15.1)
19.5
(42.3)
(22.8)
16.6
4.7
5.4
0.0
0.0
4.0
0.0
1.0
0.0
0.8
(0.8)
1.0
(14.5)
18.1
(6.5)
11.6
Investing
Additions to capital assets
Net funds used in investing
(10.8)
(11.0)
(15.4)
(122.5)
(3.5)
(3.6)
(1.8)
(1.8)
(2.5)
(2.6)
(2.8)
(2.9)
(10.7)
(10.9)
(4.3)
(4.3)
(1.9)
(1.9)
Financing
Bank indebtness, net
Proceeds from issue of long-term debt
Redemption of class B and C shares
Repayment of long-term debt
Repayment of capital leases
Deferred debt financing costs
Due to parent company
Share issuance
Dividends
Net funds from financing
0.0
103.2
0.0
(62.4)
(2.4)
0.0
0.0
0.0
(34.0)
4.3
0.0
12.6
0.0
0.0
(2.0)
0.0
0.0
111.7
(29.3)
93.0
0.0
(3.9)
0.0
0.0
(0.4)
0.0
0.0
0.0
(7.4)
(11.6)
0.0
(1.7)
0.0
0.0
(0.3)
0.0
0.0
0.0
(7.4)
(9.4)
0.0
15.0
0.0
0.0
(0.6)
0.0
0.0
0.0
(7.5)
6.9
0.0
(7.4)
0.0
0.0
(0.5)
0.0
0.0
0.0
(7.2)
(15.1)
0.0
2.1
0.0
0.0
(1.8)
0.0
0.0
0.0
(29.5)
(29.2)
0.0
(27.0)
0.0
0.0
(0.5)
0.0
0.0
0.0
(6.7)
(34.1)
Q3 /1 5 Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
13.9
5.5
5.4
0.0
0.0
(2.0)
0.0
0.0
0.0
0.8
(0.8)
0.0
0.0
22.8
36.7
59.5
53.7
18.8
21.4
0.0
0.0
14.6
0.0
2.1
0.0
6.9
(3.2)
1.8
(31.5)
84.5
(7.4)
77.1
92.2
24.5
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
3.3
(3.2)
0.0
0.0
130.3
(16.2)
114.2
106.6
22.7
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
3.3
(3.2)
0.0
0.0
142.9
(24.1)
118.8
117.1
21.3
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
3.3
(3.2)
0.0
0.0
152.1
(13.5)
138.6
123.5
20.3
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
3.3
(3.2)
0.0
0.0
157.4
8.2
165.7
(1.8)
(1.9)
(2.0)
(457.0)
(10.0)
(465.1)
(17.0)
(17.0)
(17.1)
(17.1)
(17.2)
(17.2)
(17.3)
(17.3)
0.0
33.1
0.0
0.0
(0.5)
0.0
0.0
0.0
(6.6)
26.0
0.0
(4.0)
0.0
0.0
(0.5)
0.0
0.0
0.0
(6.8)
(11.3)
0.0
431.9
0.0
0.0
0.0
0.0
0.0
0.0
(6.6)
425.2
0.0
433.9
0.0
0.0
(1.4)
0.0
0.0
0.0
(26.7)
405.8
0.0
(70.0)
0.0
0.0
0.0
0.0
0.0
0.0
(29.9)
(99.9)
0.0
(65.0)
0.0
0.0
0.0
0.0
0.0
0.0
(29.9)
(94.9)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(29.9)
(29.9)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(29.9)
(29.9)
2.2
0.2
0.0
0.4
0.0
(0.5)
(0.2)
(0.2)
(0.1)
(0.7)
0.0
(1.0)
0.0
0.0
0.0
0.0
1.0
10.1
11.2
0.7
11.2
11.9
2.3
11.9
14.2
(9.9)
14.2
4.3
4.7
4.3
9.1
8.4
9.1
17.5
5.6
11.9
17.5
(9.9)
17.5
7.6
1.3
7.6
8.8
(2.3)
8.8
6.5
27.8
6.5
34.3
16.8
17.5
34.3
(2.7)
34.3
31.6
6.8
31.6
38.4
91.5
38.4
129.9
118.5
129.9
248.4
(5.4)
(92.5)
13.9
(0.8)
(2.1)
24.0
34.9
24.4
(24.7)
9.8
(397.5)
(388.0)
97.2
101.7
121.4
148.4
Auto Components 11
46
Investment risks
Potential risks to our investment thesis and target price valuation methodology
include, but are not limited to, availability of government funding and company
execution of contracts.
Auto Components 12
47
Coverage Universe
IB Clients
#
%
%
Buy
600
61.48%
31.67%
Hold
290
29.71%
12.41%
Sell
27
2.77%
3.70%
Speculative Buy
59
6.05%
57.63%
976*
100.0%
*Total includes stocks that are Under Review
Canaccord Genuity Ratings System
BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.
HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.
SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.
NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.
Risk-adjusted return refers to the expected return in relation to the amount of risk associated with the designated investment or the
relevant issuer.
Risk Qualier
SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the
stock may result in material loss.
Canaccord Genuity Company-Specific Disclosures (as of date of this publication)
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Corporate Finance/
Investment Banking services from New Flyer Industries Inc. in the next six months.
Auto Components 13
48
H:C$8.75
01/11/13
H:C$9.25
01/29/13
Jan 2013
Apr 2013
H:C$9.75
02/06/13
H:C$10.00
03/25/13
H:C$10.25
04/18/13
B:C$11.25
06/24/13
H:C$11.75
08/07/13
H:C$11.25
11/07/13
B:C$12.00
01/15/14
B:C$12.50
03/23/14
H:C$11.50
05/11/14
H:C$11.75
06/24/14
25
20
15
10
5
H:C$12.00
07/16/14
B:C$14.00
08/06/14
Jul 2013
H:C$14.00
11/09/14
B:C$12.50
12/12/14
Oct 2013
H:C$14.00
01/12/15
Jan 2014
Apr 2014
B:C$15.00
03/19/15
B:C$16.00
05/11/15
Closing Price
Jul 2014
Oct 2014
B:C$17.00
07/20/15
B:C$21.00
08/10/15
Jan 2015
H:C$20.00
10/16/15
Apr 2015
Jul 2015
Oct 2015
B:C$22.00
11/09/15
Target Price
Buy (B); Speculative Buy (SB); Sell (S); Hold (H); Suspended (SU); Under Review (UR); Restricted (RE); Not Rated (NR)
Online Disclosures
Up-to-date disclosures may be obtained at the following website (provided as a hyperlink if this report is being read electronically)
http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx; or by sending a request to Canaccord Genuity Corp. Research, Attn:
Disclosures, P.O. Box 10337 Pacific Centre, 2200-609 Granville Street, Vancouver, BC, Canada V7Y 1H2; or by sending a request
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regarding the dissemination of research by following the steps outlined above.
General Disclosures
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Canaccord Genuity Inc., Canaccord Genuity Limited, Canaccord Genuity Corp., and Canaccord Genuity (Australia) Limited, an affiliated
company that is 50%-owned by Canaccord Genuity Group Inc.
The authoring analysts who are responsible for the preparation of this research are employed by Canaccord Genuity Corp. a Canadian
broker-dealer with principal offices located in Vancouver, Calgary, Toronto, Montreal, or Canaccord Genuity Inc., a US broker-dealer
with principal offices located in New York, Boston, San Francisco and Houston, or Canaccord Genuity Limited., a UK broker-dealer with
principal offices located in London (UK) and Dublin (Ireland), or Canaccord Genuity (Australia) Limited, an Australian broker-dealer with
principal offices located in Sydney and Melbourne.
The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon
(among other factors) the Corporate Finance/Investment Banking revenues and general profits of Canaccord Genuity. However, such
authoring analysts have not received, and will not receive, compensation that is directly based upon or linked to one or more specific
Corporate Finance/Investment Banking activities, or to recommendations contained in the research.
Canaccord Genuity and its affiliated companies may have a Corporate Finance/Investment Banking or other relationship with the issuer
that is the subject of this research and may trade in any of the designated investments mentioned herein either for their own account
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Some regulators require that a firm must establish, implement and make available a policy for managing conflicts of interest arising as
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The information contained in this research has been compiled by Canaccord Genuity from sources believed to be reliable, but (with the
exception of the information about Canaccord Genuity) no representation or warranty, express or implied, is made by Canaccord Genuity,
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provided in good faith but without legal responsibility or liability.
Canaccord Genuitys salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies
to our clients and our proprietary trading desk that reflect opinions that are contrary to the opinions expressed in this research.
Auto Components 14
49
Canaccord Genuitys affiliates, principal trading desk, and investing businesses may make investment decisions that are inconsistent
with the recommendations or views expressed in this research.
This research is provided for information purposes only and does not constitute an offer or solicitation to buy or sell any designated
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Buy unchanged Target Price C$26.00 from C$22.00 | 10 November 2015
Auto Components 15
50
Auto Components 16
51
C$22.00
C$21.23
NFI-TSX
PRICE TARGET
Price (9-Nov)
Ticker
52-Week Range (C$):
Avg Daily Vol (000s) :
Shares Out. (M) :
Market Cap (C$M):
Dividend /Shr (C$):
Dividend Yield (%) :
12.05 - 21.32
134.30
55.5
1,178.7
0.62
3.1
22
20
18
16
14
12
Oct-15
Nov-15
Sep-15
Jul-15
Aug-15
Jun-15
Apr-15
May-15
Mar-15
Jan-15
Feb-15
Dec-14
10
NFI
Source:FactSet
Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX | CF. : LSE)
The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all
the companies and securities that are the subject of this report discussed herein.
For important information, please see the Important Disclosures beginning on page 11 of this document.
52
1-year
t arget
2-year
t arget
EBITDA
Multiplier
237.0
7.5
241.0
7.5
1,777.5
1,807.5
EV
Debt (excludes unit debt)
Enterprise value to shareholders
Units/Shares - fully diluted
(617.0)
(617.0)
1,160.5
62.0
1,190.5
62.0
18.71
19.20
24.00
25.00
0.62
1.24
24.62
26.24
Auto Components 2
53
VALUATION
NFIs yields continue to decline (Figure 2), but NFIs EV/EBITDA valuation (Figure 3)
appears to be settling into a new range. We think the companys dividend yield will
bottom out around 3% range (about 1-2% over the 10-year Canada bond yield) and
EV/EBITDA will be stable in the 6-8x NTM EBITDA range.
Figure 2: NFI distribution/dividend yields settling into the 3% range, or roughly 2.5% above the 10-year Canada bond yield
NFIs dividend yield also appears to have converged with other high-yield industrial
names (Figure 4).
Auto Components 3
54
Figure 4: We think a valuation multiple in-line with other industrial high yield companies is reasonable
Mar k et
Cur .
Ne w F l y e r I nd ustr i e s
Eq ui ty Pr i ce :
Cur .
Y e a r No v. 10, 2015
Di v.
2015
$21. 23
$0. 61
Co nse nsus A ve r a ge
Di v.
EB I TDA
Cur .
Pa y o ut
Ca p .
Cur .
Y i e l d F CF PS
r a ti o
($M )
EPS
2. 9%
$1. 54
4. 8%
De b t/
P/E
Gr o wth
Ca p ('15- '17)
6. 1%
69. 6%
8. 6%
16. 3 39. 4%
Chorus Aviation
2015
$5.45
$0.48
8.8%
$0.88
54.7%
$666 $0.80
6.8
89.6%
12.9%
Davis + Henderson
2015
$35.33
$1.28
3.6%
$1.99
64.5%
$3,730 $2.49
14.2
41.2%
12.8%
Westshore Terminals
2015
$22.21
$1.24
5.6%
$1.28
97.1%
$1,649 $1.68
13.2
0.0%
-3.0%
Cineplex Galaxy
2015
$50.05
$1.54
3.1%
$1.67
92.5%
$3,157 $2.02
24.8
32.1%
14.1%
Note that the New Flyer dividend is the new sustainable dividend level
Source: Company reports, Bloomberg, Canaccord Genuity Research estimates
Our valuation multiple is 7.5x EV/NTM EBITDA (or 7.5x Q3/16E EV / Q4/16E - Q3/17E
EBITDA), which is consistent with NFIs trading range for some time (average of 7.7x
over the past 60 months). We think our target multiple is supported by NFIs solid
2.9% dividend yield (3.3% dividend yield post the intended dividend increase). We
think the dividend upside potential from forecasted stronger future free cash further
strengthens the dividend yield support argument.
Our target multiple generates a target dividend yield of 2.8% and a FCFPS yield of
8.5%, both of which seem reasonable relative to comparable companies and
appropriately better than in the past, reflecting NFIs improved risk profile.
Our valuation also translates into a reasonable to attractive 1.1% dividend yield and
6.8% FCFPS spreads over Government of Canada bond rates, which reflects the much
higher risk of NFI versus government bonds.
Auto Components 4
55
1-year
t arget
151.0
2-year
t arget
155.3
7.5
1,132.3
(95.2)
1,037.1
7.5
1,165.1
(44.9)
1,120.2
62.0
16.72
22.00
62.0
18.06
23.00
0.62
22.62
1.24
24.24
13.1%
21.2%
2.8%
8.5%
2.7%
8.4%
1.1%
6.8%
FCFPS C$
1.88
1.94
Auto Components 5
56
Figure 6: Canaccord Genuity Researchs forecast for New Flyer Industries Dividend payout analysis
Y ears ended Dec. 3 1 ($ m illions)
F ree cash
Cash from operations
Change in working capital
Interest paid
Interest expense
Income taxes paid
Current income tax expense
Principal portion of capital lease payments
Capital expenditures
Proceeds from sale of redundant assets
Business acquisition cost
Costs associated with strategic initiatives
Defined benefit funding
Defined benefit expense
Realized investment tax credits
Foreign exchange impact on cash
Free cash flow
Exchange rate
Free cash flow (CAD)
Declared dividends (CAD)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
Q2 /1 5
5.5
24.0
17.1
(14.6)
6.5
(12.8)
(2.4)
(4.0)
0.7
7.3
(1.8)
2.2
27.8
0.001
27.8
33.1
30.0
23.0
10.9
(11.6)
19.0
(23.8)
(2.0)
(13.8)
1.2
6.0
8.7
(2.8)
(1.5)
0.2
43.4
1.039
45.1
30.7
17.5
(7.9)
3.8
(3.1)
4.4
(3.4)
(0.4)
(3.3)
0.4
2.1
(0.7)
0.0
9.5
1.109
10.6
8.1
1.1
18.9
3.8
(3.4)
4.4
(8.2)
(0.3)
(1.5)
0.2
0.1
(0.7)
0.4
14.7
1.085
15.9
8.1
0.5
21.8
1.8
(2.9)
1.6
(4.1)
(0.5)
(1.9)
0.0
0.2
0.8
(0.7)
(0.4)
16.3
1.097
17.9
8.1
26.9
2.5
2.2
(3.0)
1.5
(11.2)
(0.6)
(1.7)
2.8
0.5
(0.6)
(0.6)
(0.1)
18.6
1.136
21.1
8.1
45.8
35.3
11.6
(12.4)
12.0
(26.8)
(1.8)
(8.4)
0.6
3.1
3.5
(2.6)
(0.6)
(0.2)
59.1
1.104
65.5
32.5
28.7
(4.6)
4.0
(3.1)
2.1
(13.7)
(0.5)
(4.3)
1.3
0.8
(0.7)
(0.2)
9.8
1.252
12.3
8.1
(22.8)
42.3
1.8
(2.8)
16.4
(12.5)
(0.5)
(1.9)
1.6
0.8
(0.8)
(0.1)
21.5
1.226
26.4
8.4
11.6
6.5
3.8
(2.8)
14.1
(14.4)
(0.5)
(1.8)
1.0
0.8
(0.8)
(0.7)
16.8
1.317
22.1
8.6
44.4
51.9
55.5
55.5
55.5
55.5
55.5
55.5
55.5
0.63
0.75
0.87
0.58
0.19
0.15
0.29
0.15
0.32
0.15
0.38
0.15
1.18
0.59
0.22
0.15
0.48
0.15
Q3 /1 5 Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
58.8
(36.3)
3.0
(3.0)
11.4
(11.4)
(0.7)
(2.0)
0.8
(0.8)
(0.7)
19.0
1.300
24.7
8.6
76.3
7.8
12.6
(11.6)
44.0
(52.0)
(2.1)
(10.0)
3.9
3.2
(3.2)
(1.7)
67.2
1.300
85.6
33.8
83.0
7.8
11.5
(11.5)
41.3
(41.3)
(2.6)
(8.0)
3.2
(3.3)
(3.0)
77.2
1.300
100.3
34.4
89.7
5.2
11.0
(11.0)
44.5
(44.5)
(2.6)
(8.0)
3.2
(3.3)
(3.0)
81.2
1.300
105.5
34.4
92.4
4.8
10.4
(10.4)
46.5
(46.5)
(2.6)
(8.0)
3.2
(3.3)
(3.0)
83.6
1.300
108.6
34.4
95.4
4.8
9.9
(9.9)
48.7
(48.7)
(2.6)
(8.0)
3.2
(3.3)
(3.0)
86.5
1.300
112.5
34.4
55.5
55.5
55.5
55.5
55.5
55.5
55.5
0.40
0.16
0.45
0.16
1.54
0.61
1.81
0.62
1.90
0.62
1.96
0.62
2.03
0.62
Auto Components 6
57
Figure 7: Canaccord Genuity Researchs forecast for New Flyer Industries Income statement
Y ears ended Dec. 3 1 ($ m illions)
Incom e statem ent
Revenues
Cost of sales and SG&A
Foreign exchange gain (loss)
EBITDA
Depreciation & amortization
Unrealized FX gain (loss)
Fair value adjustments
Other
Operating profit (EBIT)
Interest expense on long-term debt
Other interest and bank charges
Fair value adjustment on int rate swaps
Other expenses
Distributions on B and C shares
Pre-tax income
Income taxes
Net Income (loss)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
Q2 /1 5
Q3 /1 5 Q4 /1 5 E
865.3 1,199.4
(810.2) (1,120.2)
2.8
(0.1)
57.8
79.1
(24.3)
(28.0)
(1.4)
(2.1)
(1.4)
0.0
(5.5)
0.0
25.2
49.0
(11.9)
(8.7)
(2.7)
(2.9)
0.8
(0.5)
(2.8)
(2.2)
0.0
0.0
10.0
34.6
(0.7)
(7.9)
9.3
26.8
323.9
(305.0)
(0.8)
18.1
(7.7)
(0.4)
0.0
0.0
10.0
(2.3)
(0.8)
0.3
(0.5)
0.0
6.7
(1.2)
5.5
346.5
(322.3)
(0.4)
23.8
(8.1)
1.0
0.0
(3.9)
12.8
(2.3)
(1.2)
(0.4)
(0.5)
0.0
8.4
(4.8)
3.6
360.8
(337.6)
(0.2)
22.9
(10.0)
(0.1)
0.0
0.0
12.8
(2.2)
(0.7)
0.8
(0.6)
0.0
10.1
0.2
10.2
420.0 1,451.1
(393.4) (1,358.3)
(0.1)
(1.5)
26.5
91.3
(10.0)
(35.8)
0.3
0.8
0.0
0.0
(0.9)
(4.8)
15.9
51.4
(2.2)
(8.9)
(0.8)
(3.5)
0.1
0.8
(0.6)
(2.2)
0.0
0.0
12.4
37.6
(5.0)
(10.8)
7.4
26.7
380.3
(352.1)
1.5
29.7
(9.5)
(1.9)
0.0
0.0
18.2
(2.3)
(0.7)
(0.5)
(0.6)
0.0
14.1
(3.3)
10.9
375.0
(340.7)
(0.7)
33.7
(9.8)
0.8
0.0
0.0
24.6
(2.2)
(0.6)
0.3
(0.6)
0.0
21.6
(9.2)
12.4
364.7
(329.1)
(0.6)
35.0
(10.0)
(1.0)
0.0
0.0
24.0
(2.2)
(0.6)
(0.1)
(0.6)
0.0
20.5
(4.0)
16.6
2015E
2016E
2017E
2018E
2019E
0.75
0.63
0.63
0.58
0.87
0.87
0.15
0.19
0.19
0.15
0.29
0.29
0.15
0.32
0.32
0.15
0.38
0.38
0.59
1.18
1.18
0.15
0.22
0.22
0.15
0.48
0.48
0.16
0.40
0.40
0.16
0.45
0.45
0.61
1.54
1.54
0.62
1.81
1.81
0.62
1.90
1.90
0.62
1.96
1.96
0.62
2.03
2.03
52.3
58.9
55.5
55.6
55.7
55.7
55.6
55.8
55.9
56.1
62.0
57.4
62.0
62.0
62.0
62.0
-6.6%
-0.4%
-30.6%
6.7%
38.6%
38.4%
-21.5%
6.6%
32.1%
26.8%
0.0%
5.6%
30.0%
56.0%
0.0%
6.9%
16.8%
36.0%
0.0%
6.4%
10.9%
34.4%
0.0%
6.3%
21.0%
36.0%
0.0%
6.3%
17.4%
16.6%
0.0%
7.8%
8.2%
65.6%
4.0%
9.0%
1.1%
23.7%
6.0%
9.6%
-6.4%
17.0%
6.0%
9.5%
4.3%
30.6%
4.0%
9.0%
-2.7%
17.2%
1.9%
9.9%
2.9%
5.2%
0.0%
10.1%
2.5%
2.9%
0.0%
10.1%
3.1%
3.6%
0.0%
10.1%
3.9%
5.3%
3.9%
5.9%
4.8%
6.1%
5.2%
7.6%
8.8%
8.9%
10.0%
9.0%
10.1%
11.1%
11.7%
12.4%
Bus revenues
Bus EBITDA (excl. FX gains/losses)
Bus sales growth
Bus EBITDA % (excl. FX gains/losses)
Deliveries
Revenue/unit
EBITDA/unit
LTM EBITDA/unit
753.9
42.0
-7.0%
5.6%
1,656
455
25
25
984.4
63.6
30.6%
6.5%
2,191
449
29
29
250.9
7.8
20.7%
3.1%
554
453
14
27
265.8
13.9
23.5%
5.2%
582
457
24
28
278.7
12.6
11.2%
4.5%
621
449
20
26
336.6
23.2
7.5%
6.9%
680
495
34
24
1132.1
57.4
15.0%
5.1%
2,437
465
24
24
290.7
14.7
15.9%
5.1%
572
508
26
26
285.8
22.4
7.5%
7.8%
594
481
38
30
293.0
21.6
5.1%
7.4%
625
469
35
33
321.1
22.6
-4.6%
7.0%
685
469
33
33
1190.6
81.4
5.2%
6.8%
2,476
481
33
33
1172.3
84.5
-1.5%
7.2%
2,485
472
34
34
1203.5
88.7
2.7%
7.4%
2,535
475
35
35
1228.3
90.0
2.1%
7.3%
2,571
478
35
35
1263.9
92.0
2.9%
7.3%
2,629
481
35
35
Aftermarket revenues
Aftermarket EBITDA (excl. FX)
Aftermarket sales growth
Aftermarket EBITDA % (excl. FX)
119.1
19.6
2.6%
16.4%
215.0
31.0
80.6%
14.4%
73.0
11.9
95.4%
16.3%
80.7
13.1
57.1%
16.2%
82.0
13.1
40.7%
16.0%
83.4
11.9
22.6%
14.2%
319.0
50.0
48.4%
15.7%
89.6
16.7
22.8%
18.6%
89.2
16.8
10.6%
18.8%
71.7
14.7
-12.6%
20.5%
72.0
14.8
-13.6%
20.5%
322.5
62.9
1.1%
19.5%
299.6
61.4
-7.1%
20.5%
311.6
63.9
4.0%
20.5%
324.0
66.4
4.0%
20.5%
336.8
69.0
4.0%
20.5%
Auto Components 7
58
Figure 8: Canaccord Genuity Researchs forecast for New Flyer Industries Balance sheet
Y ears ended Dec. 3 1 ($ m illions)
Balance sheet
Cash
Accounts receivable
Inventories
Prepaid expenses and deposits
Derivative financial instruments
Future income tax assets
Other
Total current assets
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
Q2 /1 5
11.2
113.5
124.7
4.7
0.0
0.0
0.0
254.1
11.9
230.3
183.3
7.7
0.0
0.0
0.0
433.2
14.2
201.0
207.7
6.6
0.0
1.6
0.0
431.1
4.3
146.3
246.4
5.7
0.0
3.2
0.0
406.0
8.7
164.1
267.4
4.6
0.1
3.4
0.0
448.2
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
7.6
186.9
232.0
3.5
0.1
0.0
0.0
430.0
8.8
189.2
242.3
3.9
0.2
0.0
0.0
444.4
6.5
217.7
240.4
3.7
0.0
0.0
0.0
468.3
Capital assets
Deferred charges
Intangible assets
Future income tax assets
Derivative financial instruments
Accrued benefit asset
Total assets
42.0
0.0
528.5
72.6
0.0
0.0
897.2
64.8
0.0
568.9
68.9
0.0
0.0
1,135.9
65.5
0.0
564.1
67.6
0.0
1.1
1,129.4
65.4
0.0
556.1
65.7
0.0
0.5
1,093.7
65.2
0.0
550.7
65.0
0.0
0.0
1,129.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
64.3
0.0
539.1
67.9
0.0
0.0
1,101.4
64.3
0.0
533.9
68.6
0.0
0.0
1,111.2
63.5
0.0
528.5
74.9
0.0
0.0
1,135.2
Bank indebtedness
Accounts payable & accrued liabs
Due to parent company
Deferred revenue
Provision for warranty costs
Current portion of capital leases
Current portion of LTD
Other current liabilities
Total current liabilities
0.0
150.8
0.0
19.2
20.1
1.9
40.0
6.8
238.8
0.0
212.9
0.0
57.6
26.1
1.3
35.0
1.5
334.4
0.0
225.5
0.0
55.4
25.1
1.1
30.0
0.5
337.6
0.0
204.5
0.0
47.7
25.1
1.3
30.0
1.8
310.3
0.0
227.1
0.0
36.8
28.7
1.7
45.0
3.9
343.2
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
226.5
0.0
23.0
35.0
1.6
13.0
18.6
317.6
0.0
201.8
0.0
18.3
39.7
1.7
48.0
10.4
319.8
0.0
203.0
0.0
22.0
42.1
1.6
44.0
12.7
325.5
0.0
211.1
0.0
22.0
42.1
1.6
44.0
12.0
332.8
0.0
211.1
0.0
22.0
42.1
1.6
44.0
12.0
332.8
0.0
191.2
0.0
22.0
42.1
1.6
44.0
9.9
310.9
0.0
196.5
0.0
22.0
42.1
1.6
44.0
8.9
315.1
0.0
202.2
0.0
22.0
42.1
1.6
44.0
7.9
319.8
0.0
208.0
0.0
22.0
42.1
1.6
44.0
6.9
324.6
9.0
2.3
122.2
177.7
2.0
1.2
0.2
1.8
114.8
198.6
2.5
28.3
0.0
1.6
113.2
199.1
2.2
22.1
0.0
2.7
112.2
199.6
2.6
16.5
0.6
3.4
110.5
200.0
1.8
17.4
1.0
3.2
108.5
200.5
1.7
14.7
1.0
3.2
108.5
200.5
1.7
14.7
0.9
2.9
105.5
201.0
2.2
13.9
4.1
5.0
102.5
201.6
1.9
12.7
3.8
6.5
100.0
202.2
2.0
21.1
3.8
6.5
98.0
202.2
2.0
21.1
3.8
6.5
98.0
202.2
2.0
21.1
3.8
6.5
90.0
202.2
2.0
21.1
3.8
6.5
82.1
202.2
2.0
21.1
3.8
6.5
74.1
202.2
2.0
21.1
3.8
6.5
66.2
202.2
2.0
21.1
0.0
480.8
(136.8)
0.0
593.3
(138.2)
0.0
593.6
(140.0)
0.0
593.8
(143.9)
0.0
594.1
(141.8)
0.0
594.5
(141.8)
0.0
594.5
(141.8)
0.0
594.7
(137.5)
0.0
595.2
(131.6)
Q3 /1 5 Q4 /1 5 E
0.0
595.7
(121.6)
56.7
198.7
230.0
4.0
0.0
0.0
0.0
489.4
2015E
2016E
2017E
2018E
2019E
56.7
198.7
230.0
4.0
0.0
0.0
0.0
489.4
101.2
180.9
234.0
3.7
0.0
0.0
0.0
519.8
152.3
186.2
238.0
3.8
0.0
0.0
0.0
580.3
206.1
191.6
242.0
3.9
0.0
0.0
0.0
643.6
262.7
197.1
246.0
4.0
0.0
0.0
0.0
709.8
61.1
61.1
56.4
52.9
50.4
48.6
0.0
0.0
0.0
0.0
0.0
0.0
523.1
523.1
501.7
480.2
458.8
437.3
74.9
74.9
74.9
74.9
74.9
74.9
0.0
0.0
0.0
0.0
0.0
0.0
(0.0)
(0.0)
(0.1)
(0.3)
(0.4)
(0.5)
1,148.5 1,148.5 1,152.6 1,188.1 1,227.3 1,270.1
0.0
595.7
(113.6)
0.0
595.7
(113.6)
0.0
595.7
(79.6)
0.0
595.7
(40.4)
0.0
0.0
595.7
2.0
595.7
48.0
897.2
1,135.9
1,129.4
1,093.7
1,129.1
1,136.1
1,136.1
1,101.4
1,111.2
1,135.2
1,148.5
1,148.5
1,152.6
1,188.1
1,227.3
1,270.1
10.8
46.0
15.4
123.2
3.5
110.5
1.8
122.7
2.5
143.1
2.8
135.7
10.7
135.7
4.3
119.4
1.9
165.5
1.8
181.8
2.0
145.5
10.0
145.5
12.0
153.3
12.1
158.5
12.2
163.3
12.3
168.1
210.7
3.6x
7.75
21.8x
224.7
2.8x
8.77
22.4x
217.6
1.4x
8.18
19.9x
229.3
1.5x
8.11
21.2x
241.5
2.5x
8.15
22.1x
227.8
2.5x
8.15
26.0x
227.8
2.5x
8.16
22.6x
210.9
2.1x
8.24
23.8x
247.5
2.2x
8.35
23.3x
247.7
2.0x
8.54
22.8x
197.6
1.5x
8.68
25.2x
197.6
1.5x
8.68
24.2x
153.0
1.0x
9.30
25.1x
101.9
0.7x
10.00
27.7x
48.2
0.3x
10.77
30.0x
(8.5)
0.0x
11.59
32.3x
Auto Components 8
59
Figure 9: Canaccord Genuity Researchs forecast for New Flyer Industries Cash flow statement
Y ears ended Dec. 3 1 ($ m illio ns)
C ash flo w statem ent
Net income
Amortization of fixed assets
Amortization of intangibles
Amortization of deferred charges
Loss on disposition of PP&E
Future income taxes (recovery)
Unrealized gain on int rate swap
Unrealized FX gain (loss)
Fair value adjustments
Defined benefit expense
Defined benefit funding
Items not affecting cash
Other
Cash from operations before WC
Change in working capital
Cash from operations after WC
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
Q2 /1 5
9.8
8.3
16.0
0.0
0.0
1.5
0.0
1.4
1.4
3.6
(7.3)
(2.2)
(2.9)
29.5
(24.0)
5.5
26.8
9.6
18.4
0.0
0.0
17.5
0.0
2.1
0.0
2.8
(8.7)
0.1
(15.6)
53.0
(23.0)
30.0
5.5
2.9
4.8
0.0
0.0
2.2
0.0
0.4
0.0
0.7
(2.1)
3.3
(8.0)
9.6
7.9
17.5
3.6
3.3
4.8
0.0
0.0
4.8
0.0
(1.0)
0.0
0.7
0.0
4.4
(0.6)
19.9
(18.9)
1.1
10.2
4.6
5.4
0.0
0.0
2.4
0.0
0.1
0.0
0.7
(0.8)
(3.4)
3.1
22.3
(21.8)
0.5
7.4
4.6
5.4
0.0
0.0
14.9
0.0
(0.3)
0.0
0.6
(0.5)
(3.4)
0.7
29.3
(2.5)
26.8
26.7
15.4
20.5
0.0
0.0
24.3
0.0
(0.8)
0.0
2.6
(3.5)
0.8
(4.9)
81.1
(35.3)
45.8
10.9
4.2
5.3
0.0
0.0
3.4
0.0
1.9
0.0
0.7
(0.8)
0.4
(2.0)
24.1
4.6
28.7
12.4
4.5
5.4
0.0
0.0
9.2
0.0
(0.8)
0.0
4.5
(0.8)
0.3
(15.1)
19.5
(42.3)
(22.8)
16.6
4.7
5.4
0.0
0.0
4.0
0.0
1.0
0.0
0.8
(0.8)
1.0
(14.5)
18.1
(6.5)
11.6
Investing
Additions to capital assets
Net funds used in investing
(10.8)
(11.0)
(15.4)
(122.5)
(3.5)
(3.6)
(1.8)
(1.8)
(2.5)
(2.6)
(2.8)
(2.9)
(10.7)
(10.9)
(4.3)
(4.3)
(1.9)
(1.9)
Financing
Bank indebtness, net
Proceeds from issue of long-term debt
Redemption of class B and C shares
Repayment of long-term debt
Repayment of capital leases
Deferred debt financing costs
Due to parent company
Share issuance
Dividends
Net funds from financing
0.0
103.2
0.0
(62.4)
(2.4)
0.0
0.0
0.0
(34.0)
4.3
0.0
12.6
0.0
0.0
(2.0)
0.0
0.0
111.7
(29.3)
93.0
0.0
(3.9)
0.0
0.0
(0.4)
0.0
0.0
0.0
(7.4)
(11.6)
0.0
(1.7)
0.0
0.0
(0.3)
0.0
0.0
0.0
(7.4)
(9.4)
0.0
15.0
0.0
0.0
(0.6)
0.0
0.0
0.0
(7.5)
6.9
0.0
(7.4)
0.0
0.0
(0.5)
0.0
0.0
0.0
(7.2)
(15.1)
0.0
2.1
0.0
0.0
(1.8)
0.0
0.0
0.0
(29.5)
(29.2)
0.0
(27.0)
0.0
0.0
(0.5)
0.0
0.0
0.0
(6.7)
(34.1)
Q3 /1 5 Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
14.6
4.4
5.4
0.0
0.0
(2.0)
0.0
0.0
0.0
0.8
(0.8)
0.0
0.0
22.4
36.3
58.8
54.4
17.8
21.4
0.0
0.0
14.6
0.0
2.1
0.0
6.9
(3.2)
1.8
(31.5)
84.2
(7.8)
76.3
60.5
16.7
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
3.3
(3.2)
0.0
0.0
90.8
(7.8)
83.0
65.7
15.6
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
3.3
(3.2)
0.0
0.0
94.9
(5.2)
89.7
68.9
14.7
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
3.3
(3.2)
0.0
0.0
97.2
(4.8)
92.4
72.5
14.1
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
3.3
(3.2)
0.0
0.0
100.2
(4.8)
95.4
(1.8)
(1.9)
(2.0)
(2.0)
(10.0)
(10.1)
(12.0)
(12.0)
(12.1)
(12.1)
(12.2)
(12.2)
(12.3)
(12.3)
0.0
33.1
0.0
0.0
(0.5)
0.0
0.0
0.0
(6.6)
26.0
0.0
(4.0)
0.0
0.0
(0.5)
0.0
0.0
0.0
(6.8)
(11.3)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(6.6)
(6.6)
0.0
2.1
0.0
0.0
(1.4)
0.0
0.0
0.0
(26.7)
(26.0)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
2.2
0.2
0.0
0.4
0.0
(0.5)
(0.2)
(0.2)
(0.1)
(0.7)
0.0
(1.0)
0.0
0.0
0.0
0.0
1.0
10.1
11.2
0.7
11.2
11.9
2.3
11.9
14.2
(9.9)
14.2
4.3
4.7
4.3
9.1
8.4
9.1
17.5
5.6
11.9
17.5
(9.9)
17.5
7.6
1.3
7.6
8.8
(2.3)
8.8
6.5
50.1
6.5
56.7
39.2
17.5
56.7
44.5
56.7
101.2
51.1
101.2
152.3
53.7
152.3
206.1
56.6
206.1
262.7
(5.4)
(92.5)
13.9
(0.8)
(2.1)
24.0
34.9
24.4
(24.7)
9.8
56.8
66.2
71.0
77.6
80.2
83.1
Auto Components 9
60
Investment risks
Potential risks to our investment thesis and target price valuation methodology
include, but are not limited to, availability of government funding and company
execution of contracts.
Auto Components 10
61
Coverage Universe
IB Clients
#
%
%
Buy
600
61.48%
31.67%
Hold
290
29.71%
12.41%
Sell
27
2.77%
3.70%
Speculative Buy
59
6.05%
57.63%
976*
100.0%
*Total includes stocks that are Under Review
Canaccord Genuity Ratings System
BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.
HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.
SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.
NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.
Risk-adjusted return refers to the expected return in relation to the amount of risk associated with the designated investment or the
relevant issuer.
Risk Qualier
SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the
stock may result in material loss.
Canaccord Genuity Company-Specific Disclosures (as of date of this publication)
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Corporate Finance/
Investment Banking services from New Flyer Industries Inc. in the next six months.
Auto Components 11
62
H:C$8.75
01/11/13
H:C$9.25
01/29/13
Jan 2013
Apr 2013
H:C$9.75
02/06/13
H:C$10.00
03/25/13
H:C$10.25
04/18/13
B:C$11.25
06/24/13
H:C$11.75
08/07/13
H:C$11.25
11/07/13
B:C$12.00
01/15/14
B:C$12.50
03/23/14
H:C$11.50
05/11/14
H:C$11.75
06/24/14
25
20
15
10
5
H:C$12.00
07/16/14
B:C$14.00
08/06/14
Jul 2013
H:C$14.00
11/09/14
Oct 2013
B:C$12.50
12/12/14
H:C$14.00
01/12/15
Jan 2014
B:C$15.00
03/19/15
Apr 2014
B:C$16.00
05/11/15
Closing Price
Jul 2014
Oct 2014
B:C$17.00
07/20/15
B:C$21.00
08/10/15
Jan 2015
H:C$20.00
10/16/15
Apr 2015
Jul 2015
Oct 2015
B:C$22.00
11/09/15
Target Price
Buy (B); Speculative Buy (SB); Sell (S); Hold (H); Suspended (SU); Under Review (UR); Restricted (RE); Not Rated (NR)
Online Disclosures
Up-to-date disclosures may be obtained at the following website (provided as a hyperlink if this report is being read electronically)
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The authoring analysts who are responsible for the preparation of this research are employed by Canaccord Genuity Corp. a Canadian
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The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon
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Auto Components 12
63
Canaccord Genuitys affiliates, principal trading desk, and investing businesses may make investment decisions that are inconsistent
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Tel: +65 6854 6150) in respect of any matters arising from, or in connection with, the research.
Buy Target Price C$22.00 | 10 November 2015
Auto Components 13
64
Auto Components 14
65
Khaled Omar
1 (416) 956-6807
Kevin.Chiang@cibc.com
Khaled.Omar@cibc.com
EARNINGS UPDATE
j
SECTOR OUTPERFORMER
MARKET WEIGHT
C$28.50
C$23.90
Key Indices:
3-5-Yr. EPS
Gr. Rate (E)
52-week
Range
Shares Outstanding
Float
Avg. Daily Trading Vol.
Market Capitalization
Dividend/Div Yield
Fiscal Year Ends
Book Value
2015 ROE (E)
LT Debt
Net AssetEquity
Value
Common
Convertible Available
EBITDA ($mln)
Current
Prior
Estimates (Dec.
(Dec. 31)
31)
Valuation
EV/EBITDA-Curr
EV/EBITDA-Prior
Toronto
NM
C$12.05-C$23.90
55.5M
44.0M Shrs
38,000
C$1,054.5M
C$0.70 / 3.3%
December
$11.90 per Shr
13.0%
$141.0M
$474.1M
Yes
2013
$94.7A
2014
$107.4A
2015
$143.1E
2016
$225.7E
$147.5E
17.9X
15.8X
11.8X
7.5X
11.5X
Company Description
New Flyer Industries Inc. is the largest North American manufacturer of
heavy-duty transit buses supplying transit authorities in Canada and the U.S.
www.newflyer.com
15-139086 2015
CIBC World Markets Corp., the U.S. broker-dealer, and CIBC World Markets Inc., the Canadian broker-dealer (collectively,
CIBC World Markets Corp./Inc.) do and seek to do business with companies covered in its research reports. As a result,
investors should be aware that CIBC World Markets Corp./Inc. may have a conflict of interest that could affect the
objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
For required regulatory disclosures please refer to "Important Disclosures" beginning on page 11. Please see
"Price Target Calculations" and "Key Risks to Price Target" information on page(s) 8.
Find CIBC research on Bloomberg, Reuters, firstcall.com
and ResearchCentral.cibcwm.com
CIBC World Markets Inc., P.O. Box 500, 161 Bay Street, Brookfield Place, Toronto, Canada M5J 2S8 (416) 594-7000
CIBC World Markets Corp., 425 Lexington Avenue, New York, NY 10017 (212)-856-4000
66
1 +1 = 3 ... Acquisition Of MCI Checks All The Boxes - November 10, 2015
Sector Outperformer
NFI-TSX
11/10/15
12- To 18- Month Price Target:
Capital Equipment
Sector Weighting:
All figures in US$ millions, except per share data.
EV/EBITDA Multiples
Consensus estimates except New Flyer
New Flyer Industries
High-Yielding Industrials
Commercial Vehicle & Parts
Manufacturers
P/E Multiples 1
C$23.90
C$28.50
Market Weight
2014A
2015E
2016E
Company Profile
15.8x
9.6x
9.7x
11.8x
8.6x
9.3x
7.5x
7.3x
8.2x
2014A
2015E
2016E
Investment Thesis
New Flyer Industries Inc. is the largest North American manufacturer of heavy-duty transit buses
supplying transit authorities in Canada and the U.S. with approximately one-third the market.
21.7x
16.1x
16.2x
15.8x
15.1x
14.4x
11.4x
14.4x
12.5x
Fundamentals for bus demand are improving due to rising U.S. state/municipal tax revenue, growing bus
ridership numbers (reflecting the cost advantage of taking bus transit versus driving and modestly
declining unemployment rate), and public transit being a more green option.
2014A
2015E
2016E
New Flyer is well positioned to take advantage of the improving heavy duty bus fundamentals given its
leading market share in both bus manufacturing and aftermarket services.
EBITDA Margin
Current Ratio
Debt/Equity
Debt/Total Capital
Income Statement
7.9%
1.1x
51.3%
33.9%
2013A
7.4%
1.1x
53.1%
34.7%
2014A
9.4%
1.3x
374.5%
78.9%
2015E
10.1%
1.3x
301.9%
75.1%
2016E
$991.2
$215.0
$1,199.4
$1,078.7
$120.8
$94.7
$49.0
$34.6
$26.8
$1,132.1
$319.0
$1,451.1
$1,312.8
$138.3
$107.4
$51.4
$37.6
$26.7
$1,200.7
$324.3
$1,525.0
$1,341.2
$183.7
$143.1
$93.2
$78.9
$54.6
$1,794.2
$449.0
$2,243.2
$1,961.4
$281.8
$225.7
$163.2
$135.9
$87.6
Q3/15A
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Shareholders' Equity
468
1,135
326
661
474
New Flyer is guiding towards 2015 production line rate of ~50 EUs/week, we view its C$0.70/share
annual dividend as safe.
Canada
16%
$1,000,000
2,500
$300
$800,000
2,000
$250
$600,000
1,500
$200
$400,000
1,000
$200,000
500
$0
0
2009
2010
Revenues ($ Millions)
2011
2012
2013
Deliveries(EUs)
2014
$ Millions
$1,200,000
$350
2008
United States
84%
Bus Operations
78%
2007
$319
$215
$150
$100
$83
$96
$108
$106
$116
$119
2009
2010
2011
2012
$50
$0
2007
2008
2013
2014
67
1 +1 = 3 ... Acquisition Of MCI Checks All The Boxes - November 10, 2015
Acquiring MCI 1 + 1 = 3
New Flyer announced that it has entered a definitive agreement to acquire MCI
(Motor Coach Industries) from an affiliate of KPS Capital Partners for cash
consideration of $455 million with the deal expected to close by the end of 2015.
455
6.0x
76
While the deal metrics on a standalone basis already suggest a fair multiple
being paid by New Flyer, when considering potential synergies and the ramp up
of the recently awarded New Jersey Transit Authority (NJTA) contract, the
acquisition multiple potentially contracts to sub-5x. In July 2015, MCI was
awarded a $395 million contract to deliver 772 coaches over a five year period
starting in 2016. This order will replace the majority of NJTAs existing fleet and
there is an option for an additional 75 coaches a year.
68
1 +1 = 3 ... Acquisition Of MCI Checks All The Boxes - November 10, 2015
Exhibit 2. Acquisition Multiple Adjusted For Potential Synergies And New Jersey Contract
NJ Contract EBITDA Potential
Contract Size ($ 000)
$MM
Comment
Firm Orders
772
76
2015E EBITDA
512
10
155
NJ Contract
$395MM contract for 772 coaches for 5 years with option for additional 75 per year
Total EBITDA
94
79,307
7%
5,551
75
38,374
455
4.8x
7%
2,686
Total EBITDA
8,238
In addition, this deal looks highly accretive from an ROIC perspective. Assuming
$76 million of annualized EBITDA and ~$6-$7 million in capex would infer an
ROIC of ~15% based on the cash purchase price (and this is pre-synergies).
New Flyers ROIC at the end of Q3 was 11.5%.
Exhibit 3.
Inferred ROIC ($ MM Unless Noted)
Annual EBITDA Acquired
76
Capex
Annual Return
70
Acquisition Price
Inferred ROIC
455
15.4%
69
1 +1 = 3 ... Acquisition Of MCI Checks All The Boxes - November 10, 2015
70
1 +1 = 3 ... Acquisition Of MCI Checks All The Boxes - November 10, 2015
New Coach Public: MCI targets the mid-range segment of this market and is
Buy America compliant. The D Model is the number one selling coach in North
America. Customers in this market include transit authorities, universities, U.S.
Federal Government, and correctional facilities.
Pre-Owned Coach: MCI provides trade-in options to support new coach sales.
Coaches are refurbished at MCIs service centers and re-sold in the pre-owned
market. Customers in this segment include value customers in the private
market, and small private fleets.
Aftermarket: MCI has a significant aftermarket footprint in North America, with
six service centers, three distribution facilities, and over 3,000 emergency
response partners. This segment supports its installed fleet of 28,000 Coaches.
Customers in this segment include all public and private coach fleets.
Exhibit 5. MCI Business Overview
Year Founded
1933 in Winnipeg, MB
Product Models
Manufacturing Facilities
763 units
330 private
246 public
186 units
$443M
Employees
1,500 employees
As of December 31, 2014, MCI had the largest installed base of motor coaches
in North America with ~28,000 units (~2x nearest competitor) with a 50% share
of the total installed base in North America. Additionally MCI has a 42% market
share in the Motor Coach market based on unit deliveries.
Exhibit 6. Leading Industry Player In The Motor Coach Market
Motor Coach Market Share (Total: ~1,920 units)
Temsa
9%
MCI
42%
Vanhool
24%
Prevost
25%
Prevost
26%
MCI
50%
Vanhool
23%
71
1 +1 = 3 ... Acquisition Of MCI Checks All The Boxes - November 10, 2015
Daimler owns a 10% minority equity position in the company (will sunset upon
transaction close) in exchange for exclusive distribution rights for Daimlers
Setra motor coaches and aftermarket parts in North America. In terms of
customer concentration, 10 of its largest customers account for ~44% of new
coach volumes in FY2014, with the largest customer contributing less than 12%.
Exhibit 7. Diverse Installed Customer Base
Public
Private
Key Customers
Installed Base
NJ Transit
1982
1,500
GO (Toronto)
1995
450
Metro (Houston)
2000
300
RTD (Denver)
1991
100
2009
95
Coach USA
1960s
2,200
A Academy
1970s
700
Peter Pan
1950s
250
Roberts Hawaii
1980s
200
Martz Trailways
1950s
197
In terms of its financial profile, for the nine months ended on September 30
2015, MCI delivered 576 new coaches resulting in new coach revenue of
~US$315MM and also generated pre-owned coach and aftermarket parts and
service combined revenue of ~US$128MM. Total revenue for this period was
~US$443MM. Below we provide additional details on its financial profile.
Exhibit 8. Improving Financial Profile
Segmented Revenue (US$M)
1200
1000
800
600
400
200
926
345
281
240
1,146
207
763
187
349
324
246
614
362
452
330
0
2012
2013
Private
Public
2014
YTD
Pre-Owned Coach
$700
$600
$500
$400
$300
$200
$100
$0
$607
$580
$508
$39
$42
$43
$130
$134
$349
$409
$430
2012
2013
2014
$120
Private
Public
$443
$26
$102
$315
YTD
Pre-Owned Coach
72
1 +1 = 3 ... Acquisition Of MCI Checks All The Boxes - November 10, 2015
2,048
1,862
1,747
1,431
1,772
1,681
1,439
1,302
1,769
1,920
2,096 2,070
1,430
1,142
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E
Source: Company reports and CIBC World Markets Inc.
Q1/F14
Q2/F14
Q3/F14
Q4/F14
F2014
Q1/F15
Q2/F15
Q3/F15
Q4/F15E
F2015E
F2016E
Revenue
$1,199,424
$323,865
$346,484
$360,762
$419,989
$1,451,100
$380,301
$375,012
$364,683
$404,970
$1,524,966
$2,243,160
Cost of Sales
$1,078,657
$293,851
$309,256
$326,482
$383,228
$1,312,817
$340,674
$326,581
$315,349
$358,639
$1,341,243
$1,961,374
Gross Profit
$120,767
$30,014
$37,228
$34,280
$36,761
$138,283
$39,627
$48,431
$49,334
$46,331
$183,723
$281,785
SGA
$26,082
$10,348
$10,262
$8,583
$1,725
$30,918
$8,213
$9,240
$13,057
$10,124
$40,634
$56,079
EBITDA
$94,685
$19,666
$26,966
$25,697
$35,036
$107,365
$31,414
$39,191
$36,277
$36,207
$143,089
$225,706
Amortization
$28,001
$7,718
$8,131
$10,012
$9,976
$35,837
$9,507
$9,845
$10,021
$9,913
$39,286
$62,519
FX loss (gain)
$118
$802
$387
$226
$132
$0
($1,455)
$688
$628
$0
($139)
$0
Operating Earnings
$66,566
$11,146
$18,448
$15,459
$24,928
$69,981
$23,362
$28,658
$25,628
$26,294
$103,942
$163,187
Unrealized FX Loss
$2,146
$380
($1,000)
$117
($317)
$0
$1,914
($829)
$984
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$15,457
$762
$6,685
$2,561
$9,353
$19,361
$3,209
$4,846
$645
$0
$8,700
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
EBIT
$48,963
$10,004
$12,763
$12,781
$15,892
$51,440
$18,239
$24,641
$23,999
$26,294
$93,173
$163,187
$8,749
$2,257
$2,257
$2,203
$2,180
$8,897
$2,334
$2,200
$2,161
$2,396
$9,635
$12,890
$2,208
$540
$549
$565
$575
$2,229
$584
$598
$609
$609
$2,400
$2,436
$2,857
$823
$1,190
$713
$795
$3,521
$726
$602
$590
$600
$2,518
$2,400
$532
($314)
$377
($785)
($53)
($775)
$487
($310)
$128
$0
$0
$0
Interest Expense
$14,346
$3,306
$4,373
$2,696
$3,497
$13,872
$4,131
$3,090
$3,488
$3,605
$14,314
$27,259
EBT
$34,617
$6,698
$8,390
$10,085
$12,395
$37,568
$14,108
$21,551
$20,511
$22,689
$78,859
$135,929
$7,856
$1,214
$4,827
($160)
$4,968
$10,849
$3,253
$9,181
$3,952
$7,838
$24,224
$48,362
Net Income
$26,761
$5,484
$3,563
$10,245
$7,427
$26,719
$10,855
$12,370
$16,559
$14,851
$54,635
$87,567
$0.81
$0.11
$0.18
$0.18
$0.30
$0.83
$0.24
$0.29
$0.31
$0.27
$1.14
$1.58
FD EPS (ex-unusuals)
73
1 +1 = 3 ... Acquisition Of MCI Checks All The Boxes - November 10, 2015
74
1 +1 = 3 ... Acquisition Of MCI Checks All The Boxes - November 10, 2015
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2013 Current
$15.4A
$18.1A
$24.4A
$36.8A
$94.7A
2014 Current
$19.7A
$27.0A
$25.7A
$35.0A
$107.4A
2015 Current
$31.4A
$39.2A
$36.3A
$36.2E
$143.1E
2016 Prior
--
--
--
--
$147.5E
2016 Current
--
--
--
--
$225.7E
10
75
1 +1 = 3 ... Acquisition Of MCI Checks All The Boxes - November 10, 2015
IMPORTANT DISCLOSURES:
Analyst Certification: Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research
report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions
expressed herein accurately reflect such research analyst's personal views about the company and securities that are the
subject of this report and all other companies and securities mentioned in this report that are covered by such research
analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the
specific recommendations or views expressed by such research analyst in this report.
Analysts employed outside the U.S. are not registered as research analysts with FINRA. These analysts may not be
associated persons of CIBC World Markets Corp. and therefore may not be subject to FINRA Rule 2241 restrictions on
communications with a subject company, public appearances and trading securities held by a research analyst account.
Potential Conflicts of Interest: Equity research analysts employed by CIBC World Markets Corp./Inc. are
compensated from revenues generated by various CIBC World Markets Corp./Inc. businesses, including the CIBC World
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In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report,
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set forth below, may at times give rise to potential conflicts of interest.
11
76
1 +1 = 3 ... Acquisition Of MCI Checks All The Boxes - November 10, 2015
Rating
Description
SO
Sector Outperformer
Stock is expected to outperform the sector during the next 12-18 months.
SP
Sector Performer
Stock is expected to perform in line with the sector during the next 12-18 months.
SU
Sector Underperformer
Stock is expected to underperform the sector during the next 12-18 months.
NR
Not Rated
CIBC World Markets does not maintain an investment recommendation on the stock.
Restricted
CIBC World Markets is restricted (due to potential conflict of interest) from rating the stock.
Stock Ratings
Sector Weightings (note: Broader market averages refer to S&P 500 in the U.S. and S&P/TSX Composite in Canada.)
O
Overweight
Market Weight
Underweight
NA
None
"Speculative" indicates that an investment in this security involves a high amount of risk due to volatility and/or liquidity issues.
Count
Percent
151
42.2%
161
45.0%
38
10.6%
2.0%
Count
Percent
146
96.7%
154
95.7%
Restricted
33
86.8%
100.0%
Count
Percent
100.0%
Restricted
Count
Percent
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Restricted
0.0%
Important disclosures required by applicable rules can be obtained by visiting CIBC World Markets on the web at
http://researchcentral.cibcwm.com. Important disclosures for each issuer can be found using the "Coverage" tab on the
top left of the Research Central home page. Access to the system for rating investment opportunities and our
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Disclosures Request.
12
77
1 +1 = 3 ... Acquisition Of MCI Checks All The Boxes - November 10, 2015
HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS CORP./INC. RECOMMENDATIONS FOR NEW FLYER
INDUSTRIES INC. (NFI)
Date
12/13/2012
01/10/2013
01/25/2013
02/05/2013
03/01/2013
05/10/2013
06/21/2013
07/15/2013
08/07/2013
10/15/2013
11/08/2013
04/15/2014
05/11/2014
07/16/2014
08/06/2014
03/19/2015
05/08/2015
07/15/2015
08/07/2015
09/20/2015
11/04/2015
Change Type
Closing Price
8.38
8.80
9.95
9.72
10.30
9.86
10.30
11.13
11.54
11.07
10.94
11.20
11.82
12.85
13.17
13.92
14.69
15.77
17.88
18.85
20.32
Rating
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SO
SO
SO
Price Target
8.50
8.75
10.00
10.50
11.00
10.00
11.00
11.50
12.00
12.50
12.00
12.25
12.50
13.00
14.00
15.00
15.75
16.50
19.50
22.00
24.00
Coverage
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
The chart above reflects the combined historical recommendations of CIBC World Markets Corp. and CIBC World Markets
Inc.
13
78
1 +1 = 3 ... Acquisition Of MCI Checks All The Boxes - November 10, 2015
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14
79
1 +1 = 3 ... Acquisition Of MCI Checks All The Boxes - November 10, 2015
15
80
RESEARCH ALERT
NFI | TSX
$21.23
Rating: Outperform
Acquisition of MCI: New Flyer announced that the company has entered into a
definitive agreement to acquire Motor Coach Industries International Inc. (MCI)
from an affiliate of KPS Capital L.P. The purchase price of $455mm represents an
implied multiple of 6.0x 2015e EBITDA. Management expects the transaction to
close by the end of 2015 subject to customary closing conditions. Based on YTD
revenues to Q3/15 for MCI of $443mm, we estimate the combined business
operates at a ~13% EBITDA margin.
About MCI: MCI is a leading motor coach manufacturer and parts and service
supplier in North America with an installed base of ~28,000 units and a 42% motor
coach market share. For the nine months ended September 30, 2015, MCI delivered
576 new coaches (EU), representing ~$315mm in revenue with aftermarket parts
and service business contributing ~$128mm.
Rationale: The acquisition of MCI diversifies NFIs product offering by not only
providing significant exposure to the private coach industry but also materially
expanding NFIs aftermarket parts and service business. The transaction is expected
to be highly accretive to EPS and free cash flow per share before synergies. The
combined entity will employ~$4,800 people and support an installed base of over
42,000 transit buses and 28,000 motor coaches across North America. The company
is targeting annual synergies of ~$10mm expected to be realized through
operational initiatives and rationalization of corporate costs. We note MCIs
manufacturing locations are closely aligned with NFIs in both US and Canada with
the company having over 3,000 approved independent service locations to support
their fleet. MCI also provides exclusive sales and service support for Daimlers
Setra coaches in Canada and the US.
Announces Increase in Dividend: With the closing of the acquisition, New Flyer
intends to increase dividends by 12.9% from C$0.62 to C$0.70 per share. The
company has also moved from a monthly to a quarterly payment schedule.
Regulatory Disclosures and policy on the dissemination of research: last page or at www.altacorpcapital.com
81
MCI Overview
82
Disclosure Requirements
C$21.23
Rating:
Outperform
12 Month Target:
C$26.00
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
Does any director, officer, employee of AltaCorp Capital or member of their household serve as a director or
officer or advisory capacity of the issuer? If yes, state name:
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
12 Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
13 Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
62%
25%
Sector Perform
24%
10%
Underperform
2%
0%
Speculative Buy
3%
0%
Restricted
2%
50%
Not Rated
5%
0%
Tender
3%
0%
100%
19%
Total
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied
upon, by any other person.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts
responsibility for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital
(USA) Inc. at 403-539-8600.
83
Direct
@altacorpcapital.com
__________________________________________________________________________________________________________
porourke
ysiddiqi
nlupick
sbernhardsdottir
tmatthews
cerana
Energy Infrastructure
Dirk Lever, CA, Senior Analyst
Ward Hallett, CA, Associate
dlever
whallett
Oilfield Services
Dana Benner, CFA, Senior Analyst
Karim Merali, Associate
Mark Westby, Analyst
dbenner
kmerali
mwestby
Dave Mowat
Diversified Industries
Chris Murray, P.Eng., CFA, Senior Analyst
Samarth Modwal, Associate
cmurray
smodwal
Agriculture
Peter Prattas, CPA, CA, CFA, Analyst
Stuart Pattillo, Associate
pprattas
spattillo
Ian Wild
All Sectors
Victoria Hoa, Research Assistant
vhoa
George FJ Gosbee
Chairman & CEO
403 539 8601
ggosbee@altacorpcapital.com
ATB Financial
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
khilton
Toronto
Paul Sarachman, CFA, FCSI
Adam Carlson
Jamie Riff
Tim Miller
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Institutional Trading
Calgary
Tate Pinder
Shane Dungey
tpinder
sdungey
Toronto
Mervin Kopeck
Jon Varley
Michael Capobianco
mkopeck
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
410, 585 8 Avenue SW
Calgary AB Canada T2P 1G1
403 539 8600 Main
403 539 8575 Fax
TORONTO
66 Wellington Street West, Suite 3530
Toronto, ON Canada M5K 1A1
647 776 8230 Main
647 776 8248 Fax
www.altacorpcapital.com
George Gosbee
ggosbee
jcaldarelli
ggill
mreynolds
Oilfield Services
Jesse Hardage
jhardage
jfallows
All Sectors
Patrick Stables
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
pstables
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
David Lush, Head of Private Wealth
Vojtech Krb, Investment Advisor
Tomasz Okuszko, Investment Advisor
Michelle Hennebery, Client & Marketing Coordinator
dlush
vkrb
tokuszko
mhennebery
84
November 9, 2015
(NFI-TSX)
Rating:
Target Price:
Price (6-Nov):
Market Perform
$22.00 Total Return: 13%
$20.00
Adel Kanso
BMO Nesbitt Burns Inc.
adel.kanso@bmo.com
416-359-6193
Earnings/Share
20
Event
New Flyer (NFI) reported Q3/15 EPS of $0.29, above our expectations and the
mean estimate of $0.22. Revenue was up 1% y/y to $365 million, below our
expectations and the mean estimate of $373 million. Adj. EBITDA margin was up
280bps y/y to 9.9%, above our expectations of 8.5% and the mean estimate of 8.0%.
0.5
10
0.0
-0.5
-1.0
Volume (mln)
Annual CFPS
2015E $1.58 to $1.57
2016E $1.59 to $1.74
Quarterly EPS
Q4/15E $0.24 to $0.28
1.5
1.0
15
Changes
416-359-5301
0
NFI Relative to S&P/TSX Comp
400
400
200
0
200
2012
2013
2014
2015
(FY-Dec.)
EPS
P/E
CFPS
P/CFPS
Rev. ($mm)
EV ($mm)
EBITDA ($mm)
EV/EBITDA
2014A
$0.48
2015E
$1.00
20.0x
2016E
$1.07
18.7x
2017E
$1.22
16.4x
$1.46
$1.57
12.7x
$1.74
11.5x
$1.88
10.6x
$1,451
$1,000
$91
10.9x
$1,538
$1,058
$136
7.8x
$1,579
$1,022
$140
7.4x
Q3
$0.18
$0.30a
$0.28
$1,605
$960
$148
6.5x
Quarterly EPS
2014A
2015E
2016E
Q1
$0.10
$0.20a
$0.24
Q2
$0.06
$0.22a
$0.26
Q4
$0.13
$0.28
$0.29
Dividend
Book Value
Shares O/S (mm)
Float O/S (mm)
Wkly Vol (000s)
Net Debt ($mm)
$0.62
$8.54
55.5
43.9
456
$247
Yield
3.1%
Price/Book
1.8x
Mkt. Cap (mm)
$1,110
Float Cap (mm)
$878
Wkly $ Vol (mm)
$7.3
Next Rep. Date February (E)
Notes: Share price, target & capitalization in C$, all others US$
Major Shareholders: Marcopolo S.A. (20.0%), Coliseum Capital
(11.1%), Mawer (7.1%), QV Investors (6.5%)
First Call Mean Estimates: NEW FLYER INDUSTRIES INC (US$)
2015E: $0.84; 2016E: $1.10; 2017E: $1.25
Target
$19.00 to $22.00
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s) under
FINRA rules. For disclosure statements, including the Analyst's Certification, please refer to pages 8 to 10.
85
New Flyer (NFI) reported Q3/15 EPS of $0.29, above our expectations and the mean estimate
of $0.22. So far in 2015 it appears that the product rationalization plans and industry
fundamentals have enabled NFI to beat expectations and improve the margins.
Total revenue was up 1% y/y to $365 million, below our expectations and the mean estimate
of $373 million. Bus deliveries were up 1% y/y to 625 equivalent units (EUs), while the
average EU selling price was up 4% y/y to $469k.
Adj. EBITDA margin was up 280bps y/y to 9.9%, above our expectations of 8.5% and the
mean estimate of 8.0%. Adj. EBITDA per EU was ~$35k this quarter, up from ~$20k per EU
same period last year.) This is the second quarter in a row were NFI has booked higher-thananticipated EBITDA per EU. The increase was mainly driven by the sales mix and
operational improvement initiatives. The aftermarket segment EBITDA margin has also
improved by 450bps y/y to 20.5% mainly due to improved market fundamentals and product
mix.
NFI expects its core aftermarket parts revenue to grow by 5% in 2015. The company is also
looking to identify cost-cutting initiatives in this business to improve the margin.
Management has said that margins should be higher in 2015 after working through some
lower-margin backlog and cost initiatives. Management continues to expect its operational
improvements to more than offset the benefits of the ITCs that were included in EBITDA last
year.
86
Variance Analysis
Estimate
Q3/15
Actual
Q3/15
Variance
Actual
Q2/15
Actual
Q3/14
Q/Q
% Chg
Y/Y
% Chg
Bus Manufacturing
Aftermark et Operations
300.0
73.2
293.0
71.7
(7.0)
(1.5)
285.8
89.2
278.7
82.0
2.5%
-19.6%
5.1%
-12.6%
Revenues
373.2
364.7
(8.5)
375.0
360.8
-2.8%
1.1%
Cost of Sales
% of revenues
321.7
86.2%
305.3
83.7%
(16.4)
-2.5%
316.7
84.5%
316.5
87.7%
Gross Profit
% of revenues
51.5
13.8%
59.4
16.3%
7.9
2.5%
58.3
15.5%
44.3
12.3%
1.9%
70 bps
34.0%
400 bps
19.8
5.3%
0.0
23.7
6.5%
0.6
3.9
1.2%
0.6
23.9
6.4%
0.7
21.2
5.9%
0.2
EBITDA
% of revenues
31.7
8.5%
35.0
9.6%
3.3
1.1%
33.7
9.0%
22.9
6.4%
4.0%
60 bps
52.8%
320 bps
ITCs
Other
Adjusted EBITDA
% of revenues
$0.0
$0.0
31.7
8.5%
$0.0
$1.3
36.3
9.9%
0.0
1.3
4.6
1.5%
$0.0
$1.8
35.5
9.5%
$2.4
$0.4
25.7
7.1%
2.2%
50 bps
41.2%
280 bps
4.5
1.2%
5.0
1.3%
0.0
4.7
1.3%
5.4
1.5%
1.0
0.1
0.1%
0.4
0.1%
1.0
4.5
1.2%
5.4
1.4%
(0.8)
4.6
1.3%
5.4
1.5%
0.1
EBIT
% of revenues
Net Interest Expense
Other Expense
22.2
6.0%
3.4
0.0
24.0
6.6%
3.5
0.0
1.8
0.6%
0.1
0.0
24.6
6.6%
3.1
0.0
12.8
3.5%
3.5
(0.8)
-2.6%
0 bps
87.8%
300 bps
18.8
5.0%
6.2
33.0%
20.5
5.6%
4.0
19.3%
1.7
0.6%
(2.2)
-13.7%
21.6
5.7%
9.2
42.6%
10.1
2.8%
(0.2)
-1.6%
-4.8%
-10 bps
103.4%
280 bps
Net Income
% of revenues
12.6
3.4%
16.6
4.5%
4.0
1.2%
12.4
3.3%
10.2
2.8%
33.9%
120 bps
61.6%
170 bps
$0.23
$0.22
$0.30
$0.29
$0.07
$0.07
$0.22
$0.21
$0.18
$0.19
33.8%
37.3%
61.5%
56.5%
55.9
55.5
(0.4)
55.9
55.5
18.9
6.3%
12.8
17.5%
31.7
8.5%
21.6
7.4%
14.7
20.5%
36.3
9.9%
2.7
1.1%
1.9
3.0%
4.6
1.5%
22.4
7.8%
16.8
18.8%
39.2
10.5%
12.6
4.5%
13.1
16.0%
25.7
7.1%
-3.6%
-50 bps
-12.6%
170 bps
-7.4%
-50 bps
72.1%
290 bps
11.7%
440 bps
41.2%
280 bps
$0.22
$0.29
$0.07
$0.21
$0.19
37.3%
56.5%
EBT
% of revenues
Income Taxes
Tax Rate as % of EBT
87
Revised Estimates
BMO CM Estimates
Current
Mean
Previous
(US$ millions,
except per share data)
2015
2016
2017
2015
2016
Bus Manufacturing
Current
2015
2016
2017
$1,213
$1,266
$1,276
$1,182
$1,217
y/y%
7.1%
4.4%
0.8%
4.4%
3.0%
Aftermarket Operations
$325
$313
$329
$326
$315
y/y%
Total Revenue
y/y%
1.8%
$1,538
6.0%
-3.7%
$1,579
2.7%
5.0%
$1,605
1.6%
2.3%
$1,509
4.0%
-3.6%
$1,532
1.6%
$1,531
5.5%
$1,584
3.4%
$1,646
3.9%
Bus Manufacturing
y/y%
Aftermarket Operations
y/y%
Other
Total EBITDA
% of revenue
$82
6.7%
$63
19.4%
-$8.6
$136
8.9%
$76
6.0%
$63
20.2%
$0.0
$140
8.9%
$79
6.2%
$69
21.0%
$0.0
$148
9.2%
$75
6.4%
$59
18.2%
-$7.3
$127
8.4%
$75
6.2%
$55
17.5%
$0.0
$130
8.5%
$134
8.7%
$140
8.8%
$151
9.2%
EBIT
% of revenue
$95
6.2%
$102
6.5%
$111
6.9%
$88
5.8%
$100
6.5%
$84
5.5%
$109
6.9%
$104
6.3%
EBT
% of revenue
$81
5.2%
$89
5.6%
$101
6.3%
$74
4.9%
$87
5.7%
Net Income
% of revenue
$56
3.7%
$60
3.8%
$68
4.2%
$49
3.2%
$59
3.8%
EPS - Basic
$1.01
$1.08
$1.22
$0.88
$1.05
$0.84
$1.11
$1.25
Up/Down Scenario
Downside
$16.00
-17%
Current
Price
Target
Price
Upside
$20.00
$22.00
+13%
$27.00
+38%
88
Downside
Base Case
Upside
Share Price
$17.00
$22.00
$27.00
Total Return
-12%
13%
38%
EV/EBITDA multiple
6.5x
7.0x
7.5x
$1.32
0.0%
$1.32
0.0%
$1.32
0.0%
Deliveries (EUs)
y/y % growth
Avg. Revenue Per EU (000s)
y/y % growth
Bus Manufacturing
y/y % growth
2,481
-3.0%
$480.0
-3.0%
$1,191
-5.9%
2,552
-0.2%
$500
1.0%
$1,276
0.8%
$2,609.0
2.0%
$510.0
3.0%
$1,331
5.1%
Aftermarket Operations
y/y % growth
Total Revenues
y/y % growth
$319.3
2.0%
$1,510
-4.4%
$328.7
5.0%
$1,605
1.6%
$334.9
7.0%
$1,665
5.5%
$66
5.6%
$61
19.0%
$127
8.4%
$26.7
$79
6.2%
$69
21.0%
$148
9.2%
$31.0
$91
6.9%
$74
22.0%
$165
9.9%
$35.0
EBIT
% of revenues
$90
6.0%
$111
6.9%
$128
7.7%
Net income
% of revenues
$54
3.6%
$68
4.2%
$79
4.8%
55.5
55.5
55.5
EPS - Reported
$0.97
$1.22
$1.43
$90
-$10
$80
$35
$163
$105
-$10
$95
$49
$163
$116
-$10
$106
$60
$163
NFI:TSX
Daily close : $20.0
89
2013
2014
US$/CA$ FX rate
y/y%
$1.04
3.5%
$1.10
6.3%
Deliveries (EUs)
y/y%
Avg. revenue per EU (000s)
y/y%
2,191
32.3%
$447
-1.1%
Bus Manufacturing
y/y%
Aftermarket Operations
y/y%
Revenues
y/y%
Cost of Sales
% of revenues
Gross profit
% of revenues
Sales, general and admin. expenses
% of revenues
Foreign exchange losses (gains)
% of net revenues
Adj. EBITDA - Bus Manufacturing
Q1
Q2
Q3
2016E
2017E
Q4E
2015E
Q1E
Q2E
Q3E
Q4E
2016E
Q1E
Q2E
Q3E
Q4E
2017E
$1.32
15.7%
$1.27
15.8%
$1.32
5.1%
$1.32
7.0%
$1.32
1.6%
$1.32
0.0%
$1.32
3.4%
$1.32
0.0%
$1.32
0.0%
$1.32
0.0%
$1.32
0.0%
$1.32
0.0%
2,437
11.2%
$463
3.7%
572
3.2%
$508
12.2%
594
2.1%
$481
5.3%
625
0.6%
$469
4.4%
693
2.0%
$495
0.0%
2,484
1.9%
$488
5.4%
616
7.6%
$495
-2.6%
618
4.0%
$495
2.9%
642
682
2.8% -1.6%
$495 $495
5.6% 0.0%
2,558
3.0%
$495
1.4%
593
-3.6%
$500
1.0%
633
2.5%
$500
1.0%
650
676
1.2% -0.9%
$500 $500
1.0% 1.0%
2,552
-0.2%
$500
1.0%
984.4 1,132.1
31.8% 15.0%
215.0
319.0
81.7% 48.4%
1,199.4 1,451.1
38.6% 21.0%
1,078.7 1,312.8
89.9% 90.5%
120.8
138.3
10.1%
9.5%
69.5
81.3
5.8%
5.6%
0.1
1.5
0.0%
0.1%
63.6
57.4
290.7
15.9%
89.6
22.8%
380.3
17.4%
340.7
89.6%
39.6
10.4%
20.9
5.5%
(1.5)
-0.4%
14.7
285.8
7.5%
89.2
10.6%
375.0
8.2%
326.6
87.1%
48.4
12.9%
23.9
6.4%
0.7
0.2%
22.4
293.0
5.1%
71.7
-12.6%
364.7
1.1%
315.3
86.5%
49.3
13.5%
23.7
6.5%
0.6
0.2%
21.6
318.0
8.5%
75.3
5.0%
393.3
7.8%
341.6
86.9%
51.7
13.1%
25.2
6.4%
0.0
0.0%
20.4
337.6 1,266.1
-1.6%
4.4%
78.1
313.0
5.0%
-3.7%
415.8 1,579.1
-0.4%
2.7%
364.0 1,382.1
87.5% 87.5%
51.8
197.0
12.5% 12.5%
24.1
94.7
5.8%
6.0%
0.0
0.0
0.0%
0.0%
20.9
76.4
296.6
-2.7%
84.0
5.0%
380.6
-1.1%
333.6
87.7%
47.0
12.3%
22.1
5.8%
0.0
0.0%
16.6
316.4
3.5%
83.6
5.0%
400.0
3.8%
347.9
87.0%
52.1
13.0%
24.0
6.0%
0.0
0.0%
19.8
324.9
2.2%
79.1
5.0%
404.0
2.7%
349.5
86.5%
54.5
13.5%
25.9
6.4%
0.0
0.0%
21.1
338.0 1,276.0
0.1%
0.8%
82.0
328.7
5.0%
5.0%
420.0 1,604.6
1.0%
1.6%
365.8 1,396.8
87.1% 87.1%
54.2
207.8
12.9% 12.9%
24.4
96.3
5.8%
6.0%
0.0
0.0
0.0%
0.0%
21.6
79.1
7.8%
16.8
6.4%
15.4
6.5%
16.6
6.5%
31.0
5.1%
50.0
5.1%
16.7
7.4%
14.7
6.7%
14.9
6.7%
63.0
5.5%
16.0
6.0%
15.9
6.2%
16.0
6.0%
63.4
5.6%
17.6
6.3%
17.6
6.4%
17.2
6.2%
69.0
% of aftermarket revenue
One time items (expenses)
14.4%
(15.6)
15.7%
(16.1)
20.0%
0.0
19.4%
(8.6)
20.0%
(0.0)
20.2%
(0.0)
21.0%
0.0
21.0%
0.0
EBITDA
% of revenues
EBITDA Per EU (000s)
79.1
6.6%
29.1
91.3
6.3%
23.5
29.7
7.8%
25.8
33.7
9.0%
37.7
35.0
9.6%
34.6
37.9
9.1%
33.2
136.2
8.9%
32.9
32.8
8.5%
27.2
34.3
8.9%
29.7
35.8
9.1%
31.7
36.9
8.9%
30.7
139.8
8.9%
29.9
34.2
9.0%
28.0
37.3
9.3%
31.3
37.7
9.3%
32.5
38.9
9.3%
32.0
148.2
9.2%
31.0
9.6
0.8%
18.4
1.5%
2.1
49.0
4.1%
14.3
1.2%
34.6
2.9%
7.9
23%
26.8
2.2%
$0.52
$0.49
15.4
1.1%
20.5
1.4%
4.0
51.4
3.5%
13.9
1.0%
37.6
2.6%
10.8
29%
26.7
1.8%
$0.48
$0.48
4.2
1.1%
5.3
1.4%
1.9
18.2
4.8%
4.1
1.1%
14.1
3.7%
3.3
23%
10.9
2.9%
$0.20
$0.19
4.5
1.2%
5.4
1.4%
(0.8)
24.6
6.6%
3.1
0.8%
21.6
5.7%
9.2
43%
12.4
3.3%
$0.22
$0.21
4.7
1.3%
5.4
1.5%
1.0
24.0
6.6%
3.5
1.0%
20.5
5.6%
4.0
19%
16.6
4.5%
$0.30
$0.29
4.6
1.1%
5.4
1.3%
0.0
27.9
6.7%
3.4
0.8%
24.5
5.9%
8.1
33%
16.4
3.9%
$0.30
$0.28
17.9
1.2%
21.4
1.4%
2.1
94.8
6.2%
14.2
0.9%
80.7
5.2%
24.5
30%
56.2
3.7%
$1.01
$0.98
4.3
1.1%
5.3
1.4%
0.0
23.2
6.0%
3.4
0.9%
19.9
5.2%
6.6
33%
13.3
3.5%
$0.24
$0.23
4.1
1.1%
5.3
1.4%
0.0
24.9
6.5%
3.3
0.9%
21.6
5.6%
7.1
33%
14.4
3.7%
$0.26
$0.25
4.0
1.0%
5.3
1.3%
0.0
26.5
6.7%
3.3
0.8%
23.2
5.9%
7.7
33%
15.6
4.0%
$0.28
$0.27
4.0
1.0%
5.3
1.3%
0.0
27.7
6.7%
3.2
0.8%
24.5
5.9%
8.1
33%
16.4
3.9%
$0.30
$0.28
16.5
1.0%
21.0
1.3%
0.0
102.3
6.5%
13.2
0.8%
89.1
5.6%
29.4
33%
59.7
3.8%
$1.08
$1.04
4.1
1.1%
5.3
1.4%
0.0
24.9
6.5%
3.2
0.8%
21.7
5.7%
7.2
33%
14.6
3.8%
$0.26
$0.25
4.0
1.0%
5.3
1.3%
0.0
28.1
7.0%
2.7
0.7%
25.5
6.4%
8.4
33%
17.1
4.3%
$0.31
$0.30
3.9
1.0%
5.3
1.3%
0.0
28.6
7.1%
2.2
0.5%
26.5
6.6%
8.7
33%
17.7
4.4%
$0.32
$0.32
3.8
0.9%
5.3
1.2%
0.0
29.9
7.1%
2.2
0.5%
27.7
6.6%
9.1
33%
18.6
4.4%
$0.33
$0.33
15.7
1.0%
21.0
1.3%
0.0
111.5
6.9%
10.1
0.6%
101.4
6.3%
33.4
33%
67.9
4.2%
$1.22
$1.20
55.5
62.3
55.5
61.1
55.5
61.4
55.9
61.3
55.5
59.9
55.5
60.0
55.5
60.5
55.5
60.0
55.5
60.0
55.5
60.0
55.5
60.0
55.5
60.0
55.5
60.0
55.5
60.0
55.5
55.5
55.5
55.5
55.5
57.6
$71.0
5.9%
$25.3
3.0%
$139.8
8.9%
$29.9
-9.0%
$34.2
9.0%
$28.0
2.8%
$37.3
9.3%
$31.3
5.2%
$37.7
9.3%
$32.5
2.6%
$38.9
9.3%
$32.0
4.3%
$148.2
9.2%
$31.0
3.8%
$79.6
$29.5
5.5%
7.8%
$18.7
$25.5
-26.1% 108.6%
$136.0
8.8%
$32.8
75.3%
$32.8 $34.3
8.5%
8.9%
$27.2 $29.7
6.9% -21.3%
$35.8 $36.9
9.1% 8.9%
$31.7 $30.7
-8.4% -7.5%
90
In millions of US$
2016E
2013
2014
Q1
Q2
Q3
Q4E
2015E
2016E
Q1E
Q2E
Q3E
Q4E
2016E
Q1E
Q2E
Q3E
Q4E
2017E
Operating activities
Net income
Items not affecting cash
Depreciation & amortization
Deferred income taxes
Other
Cash Provided From Operations
Changes in non-cash w orking capital items
Cash Provided From Operations
27
27
11
12
17
16
56
13
14
16
16
60
15
17
18
19
68
28
(11)
9
53
(23)
30
36
(1)
20
81
(35)
46
10
1
3
24
5
29
10
(7)
5
20
(42)
(23)
10
(10)
2
18
(6)
12
10
0
0
26
16
43
39
(35)
9
70
(28)
42
10
0
0
23
22
45
9
0
0
24
14
38
9
0
0
25
(10)
15
9
0
0
26
(49)
(24)
37
0
0
97
(24)
74
9
0
0
24
48
72
9
0
0
26
4
30
9
0
0
27
(8)
19
9
0
0
28
(46)
(19)
37
0
0
105
(3)
102
Financing activities
Long-term debt (net of repayments)
Issue (repayment) of capital lease
Proceeds from share issue
Dividends on common shares
Share repurchases
Other
Cash Provided From Financing
13
(2)
114
(29)
0
(2)
93
5
(2)
0
(30)
0
(3)
(29)
(27)
(0)
0
(7)
0
0
(34)
35
(0)
0
(7)
0
(2)
26
(4)
(1)
0
(7)
0
0
(11)
(5)
(1)
0
(7)
0
0
(12)
(1)
(2)
0
(27)
0
(2)
(31)
(5)
(1)
0
(7)
0
0
(12)
(5)
(1)
0
(7)
0
0
(12)
(5)
(1)
0
(7)
0
0
(13)
(5)
(1)
0
(7)
0
0
(13)
(20)
(2)
0
(27)
0
0
(49)
0
(1)
0
(7)
0
0
(8)
(61)
(1)
0
(7)
0
0
(69)
0
(1)
0
(8)
0
0
(8)
0
(1)
0
(8)
0
0
(8)
(61)
(2)
0
(30)
0
0
(93)
(15)
(102)
0
(6)
(123)
0
1
11
12
(11)
0
0
(0)
(11)
(0)
6
12
17
(4)
0
0
(0)
(4)
(0)
(10)
17
8
(2)
0
0
(0)
(2)
(0)
1
8
9
(2)
(0)
0
0
(2)
(1)
(2)
9
7
(2)
0
0
0
(2)
0
29
7
35
(10)
(0)
0
(0)
(10)
(1)
(1)
17
17
(3)
0
0
0
(3)
0
30
35
65
(3)
0
0
0
(3)
0
23
65
89
(3)
0
0
0
(3)
0
(0)
89
88
(3)
0
0
0
(3)
0
(39)
88
49
(10)
0
0
0
(10)
0
14
35
49
(3)
0
0
0
(3)
0
61
49
111
(3)
0
0
0
(3)
0
(41)
111
70
(3)
0
0
0
(3)
0
8
70
78
(3)
0
0
0
(3)
0
(29)
78
49
(10)
0
0
0
(10)
0
(1)
49
49
2013
2014
Q1
Q2
Q3
Q4E
2015E
Q1E
Q2E
Q3E
Q4E
2016E
Q1E
Q2E
Q3E
Q4E
2017E
Cash
Accounts receivable
Inventories
Other
Total Current Assets
12
230
183
8
433
17
212
230
6
465
8
187
232
4
430
9
189
242
4
444
7
218
240
4
468
35
239
221
4
498
35
239
221
4
498
65
211
232
4
512
89
178
233
4
503
88
194
238
4
525
49
242
240
4
535
49
242
240
4
535
111
209
227
4
551
70
185
241
4
499
78
200
244
4
525
49
245
241
4
538
49
245
241
4
538
Fixed assets
Intangible assets
Unused ITC
Goodw ill
Future income tax assets
Other
Total Assets
65
357
212
55
14
1,136
64
332
0
213
62
0
1,136
64
326
0
213
68
0
1,101
64
321
0
213
69
0
1,111
64
316
0
213
75
0
1,135
61
310
0
213
75
0
1,157
59
305
0
213
75
0
1,164
58
300
0
213
75
0
1,148
56
295
0
213
75
0
1,163
54
289
0
213
75
0
1,167
53
284
0
213
75
0
1,176
51
279
0
213
75
0
1,117
50
274
0
213
75
0
1,137
49
268
0
213
75
0
1,143
213
58
26
35
3
334
233
41
32
40
8
354
226
23
35
13
20
318
202
18
40
48
12
320
203
22
42
44
14
326
221
22
42
44
14
343
221
22
42
44
14
343
226
22
42
44
14
349
208
22
42
44
14
330
220
22
42
44
14
342
220
22
42
44
14
342
220
22
42
44
14
342
222
22
42
44
14
344
215
22
42
44
14
337
225
22
42
44
14
348
221
22
42
44
14
344
221
22
42
44
14
344
0
115
225
0
6
681
1
108
207
0
13
683
1
106
208
0
12
644
4
103
202
0
20
648
4
100
202
0
30
661
4
100
197
0
29
673
4
100
197
0
29
673
4
100
192
0
29
673
4
100
187
0
28
650
4
100
182
0
28
656
4
100
177
0
27
651
4
100
177
0
27
651
4
100
177
0
27
652
4
100
116
0
26
583
4
100
116
0
26
593
4
100
116
0
25
589
4
100
116
0
25
589
589
(126)
1,111
590
(116)
1,135
590
(106)
1,157
590
(91)
1,148
590
(83)
1,163
590
(74)
1,167
590
(56)
1,117
590
(46)
1,137
590
(35)
1,143
590
(35)
1,143
Investing activities
Purchase of property, plant and equipment
Business acquisitions
Dispositions of property, plant and equipment
Other
Cash Used for Investing
Effect of FX translation on cash
Change in Cash
Beginning Cash Balance (Deficit)
Ending Cash Balance (Deficit)
Source: BMO Capital Markets Estimates, Company Reports
BALANCE SHEET
2015E
In millions of US$
Share capital
Retained earnings
Total Liabilities & Shareholders' Equity
Source: BMO Capital Markets Estimates, Company Reports
588
(133)
1,136
588
589
(136) (131)
1,136 1,101
2016E
61
310
0
213
75
0
1,157
590
590
(106) (99)
1,157 1,164
2017E
54
289
0
213
75
0
1,167
590
590
(74) (66)
1,167 1,176
49
268
0
213
75
0
1,143
91
Quarterly Price
25
20
20
18
18
16
16
14
14
12
12
10
10
25
20
20
15
15
10
10
2) Mkt
1) NR
5
NFI Relative to S&P/TSX Comp.
NFI Relative to Machinery
600
600
500
500
400
400
300
300
200
200
100
2000
2005
2010
400
200
200
1.0
200
600
400
2015
Revenue / Share
Price / Revenue
300
600
100
1995
2013
2014
2015
200
200
0.5
100
-200
2013
0.0
EPS (4 Qtr Trailing)
Price / Earnings
2014
2015
-200
400
200
0
1995
FYE
(Dec.)
EPS
$
2011
2012
2013
2014
0.81
0.22
0.49
0.48
Range*:
Current*
2000
2005
P/E
Hi - Lo
9.5
40.5
24.2
29.4
6.4
23.6
15.9
21.6
40.5
6.4
0.73
25.8
2010
2015
DPS
$
Yield%
Hi - Lo
Payout
%
BV
$
P/B
Hi - Lo
0.86
0.59
0.59
0.59
16.5 11.2
11.3 6.6
7.5 4.9
5.7 4.2
>100
>100
>100
>100
8.2
7.7
8.1
8.1
0.9
1.2
1.5
1.7
0.6
0.7
1.0
1.3
1.7
0.6
84
10.8
16.5
0.62
4.2
3.3
1.8
ROE
%
3
6
6
1
2
Date
20-Feb-13
3-Jul-13
Rating Change
R to NR
NR to Mkt
Share Price
$9.94
$11.14
92
IMPORTANT DISCLOSURES
Analyst's Certification
I, Bert Powell, CFA, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I
also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this
report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their
affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating
new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA (exceptions:
Alex Arfaei and Brodie Woods). These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the
NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a
research analyst account.
Company Specific Disclosure
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the
past 12 months.
Disclosure 6: This issuer is a client (or was a client) of BMO NB, BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12 months:
Non-Securities Related Services.
Disclosure 13: A partner, director, officer, employee or agent of BMO Capital Markets is an officer, director, employee of, or serves in an advisory
capacity to, this issuer: Brian Tobin (Member of Board of Directors)
Methodology and Risks to Price Target/Valuation
Methodology: Our $22.00 target is based on 7.0x our 2017E EBITDA.
Risks: A significant portion of new transit bus purchases are funded from government sources. As long as federal, state/provincial and municipal
budgets remain under pressure, funding for new bus purchases could be reduced or eliminated. Other risks include: price volatility of raw materials,
warranty costs could be material, labour disruptions from its predominantly unionized workforce and customer contract issues (early termination,
deferral, non-renewal).
Distribution of Ratings (September 30, 2015)
Rating
BMOCM US
BMOCM US
BMOCM US
BMOCM
BMOCM
Starmine
Category
BMO Rating
Universe*
IB Clients**
IB Clients***
Universe****
IB Clients*****
Universe
Buy
Outperform
42.2%
18.6%
54.7%
44.3%
56.9%
56.3%
Hold
Market Perform
54.3%
11.3%
42.7%
51.8%
40.9%
38.7%
Sell
Underperform
3.5%
11.1%
2.7%
3.9%
2.2%
5.0%
*
Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.
**
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as
percentage within ratings category.
***
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking
services as percentage of Investment Banking clients.
**** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.
***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as
percentage of Investment Banking clients.
Rating and Sector Key (as of April 5, 2013):
We use the following ratings system definitions:
OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis
Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis
Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis
(S) = speculative investment;
NR = No rating at this time;
R = Restricted Dissemination of research is currently restricted.
BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US
Large Cap, US Small cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating).
Prior BMO Capital Markets Ratings System (January 4, 2010April 4, 2013):
http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf
Other Important Disclosures
For
Other
Important
Disclosures
on
the
stocks
discussed
in
this
report,
please
go
to
http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3
Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3.
93
Dissemination of Research
BMO
Capital
Markets
Equity
Research
is
available
via
our
website
https://researchca.bmocapitalmarkets.com/Public/Secure/Login.aspx?ReturnUrl=/Member/Home/ResearchHome.aspx. Institutional clients may also receive our
research via Thomson Reuters, Bloomberg, FactSet, and Capital IQ. Research reports and other commentary are required to be simultaneously
disseminated internally and externally to our clients.
General Disclaimer
BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its
subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Limited in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc.,
BMO Capital Markets Limited and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has
lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and
projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO
Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information
and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect
thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or
reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The
information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not
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Financial Group
94
Raising Recommendation
BUY
from HOLD
PRICE TARGET
from C$20.00
Price (6-Nov)
Ticker
C$22.00
C$20.00
NFI-TSX
12.05 - 20.86
0.05
1,110
0.62
3.1
62.0
13.1
247.7
www.newflyer.com
2014A
2015E
2016E
2017E
1.18
1.18
0.5
1.54
1.51
0.4
1.81
1.80
0.3
1.90
1.89
0.3
Sales (US$M)
Previous
ROIC (%)
Quarterly FCF /
Shr
2014A
2015E
2016E
2017E
Q1
Q2
Q3
Q4
0.19
0.22A
0.50
0.53
0.29
0.48A
0.45
0.47
0.32
0.40A
0.43
0.45
0.38
0.45
0.42
0.44
22
20
18
16
14
12
Oct-15
Nov-15
Sep-15
Aug-15
Jul-15
Jun-15
Apr-15
May-15
Feb-15
Mar-15
Jan-15
Dec-14
10
NFI
Source:FactSet
Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX | CF. : LSE)
The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all
the companies and securities that are the subject of this report discussed herein.
For important information, please see the Important Disclosures beginning on page 14 of this document.
95
Q 3/15
0.16
EPS (C$)
Free cash flow per share (C$)
0.29
0.40
CG es t . Con s en s u s
0.16
0.19
0.39
0.20
Q 3/14
0.15
Q 2/15
0.18
0.32
0.22
0.15
0.48
Payout ratio
39%
40%
45%
32%
293
301
279
286
Aftermarket revenue
Revenue
72
365
71
371
372
82
361
375
EBITDA
EBITDA margin
36.3
9.9%
31.6
8.5%
31.4
8.4%
25.7
7.1%
10.5%
(24)
(44)
(8)
89
39.2
625
625
621
594
469
35
14.7
481
28
14.1
449
20
13.1
481
16.8
466
1,880
313
1,880
416
2,023
2,192
38
864
Return on capital
8.9%
7.8%
4.8%
8.8%
1.30
1.30
1.09
1.23
Buy from Hold Target Price C$22.00 from C$20.00 | 9 November 2015
Auto Components 2
96
While market conditions have improved, NFIs firm order run rate is still not sufficient
to drive production increases. However, firm order rates have increased significantly
and are near production rates, possibly implying further additional firm order strength
could drive production increases. So far, NFI has maintained guidance of line entry
rates (roughly production) of 50 EUs/week through the end of 2016. We project stepups of 1 EU/week in each of 2017 and 2018.
Buy from Hold Target Price C$22.00 from C$20.00 | 9 November 2015
Auto Components 3
97
Buy from Hold Target Price C$22.00 from C$20.00 | 9 November 2015
Auto Components 4
98
Figure 2: Revised Canaccord Genuity forecast for New Flyer: limited changes
Yrs E n ded D ec . 31 ( $M )
Dividend/share (C$)
% change
Free cash flow/share (C$) 1
% change
EBITDA
EBITDA margin
2015E
New
Old
Fc s t
Fc s t
0.608 0.608
4%
4%
2016E
New
Old
Fc s t
Fc s t
0.620 0.620
2%
2%
2017E
New
Old
Fc s t
Fc s t
0.620 0.620
0%
0%
2018E
New
Old
Fc s t
Fc s t
0.620 0.620
0%
0%
2019E
New
Old
Fc s t
Fc s t
0.620 0.620
0%
0%
2014
0.59
n.m.
Q 3/15
0.16
6%
1.18
#N/A
0.40
24%
0.45
17%
0.42
10%
1.54
31%
1.51
28%
1.81
17%
1.80
19%
1.90
5%
1.89
5%
1.96
3%
1.97
5%
2.03
4%
2.04
3%
50%
39%
35%
37%
39%
40%
34%
34%
33%
33%
32%
31%
31%
30%
1,451
21%
365
1%
393
-6%
400
-5%
1,513
4%
1,527
5%
1,472
-3%
1,496
-2%
1,515
3%
1,540
3%
1,552
2%
1,577
2%
1,601
3%
1,626
3%
91
6.3%
35
9.6%
37
9.5%
33
8.3%
136
9.0%
128
8.4%
146
9.9%
136
9.1%
153
10.1%
142
9.2%
156
10.1%
148
9.4%
161
10.1%
153
9.4%
(34)
(13)
18
23
20
20
17
17
17
17
17
17
Payout ratio
Revenue
% change
Q 4/15E
New
Old
Fc s t
Fc s t
0.155 0.155
6%
6%
46
2,437
465
24
50
625
469
35
15
685
469
33
15
685
481
28
14
2,476
481
33
63
2,476
487
30
62
2,485
472
34
61
2,485
484
31
59
2,535
475
35
64
2,535
487
32
61
2,571
478
35
66
2,571
490
33
63
2,629
481
35
69
2,629
493
33
66
2,263
2,102
466
1,880
620
1,815
907
2,102
2,342
1,815
2,476
2,102
2,485
1,815
2,485
2,102
2,535
1,815
2,535
2,102
2,571
1,815
2,571
2,102
2,629
1,815
2,629
2,102
11.1%
10.5%
11.7%
11.8%
12.4%
12.9%
1.300
1.300
1.300
1.300
1.300
1.300
Return on capital
CAD / USD (period average)
1
5.2%
1.104
8.9%
1.300
10.0%
1.300
8.6%
1.300
9.0%
1.300
8.4%
1.300
10.1%
1.300
9.3%
1.300
NCWC means non-cash working capital. Positive number means NCWC generates cash.
Buy from Hold Target Price C$22.00 from C$20.00 | 9 November 2015
Auto Components 5
99
VALUATION
NFIs yields continue to decline (Figure 3), but NFIs EV/EBITDA valuation (Figure 4)
appears to be settling into a new range. We think the companys dividend yield will
bottom out around the 3% range (about 1-2% over the 10-year Canada bond yield)
and EV/EBITDA will be stable in the 6-8x NTM EBITDA range.
Figure 3: NFI distribution/dividend yields settling into the 3% range, or roughly 2.5% above the 10-year Canada bond yield
NFIs dividend yield also appears to have converged with other high-yield industrial
names (Figure 5).
Buy from Hold Target Price C$22.00 from C$20.00 | 9 November 2015
Auto Components 6
100
Figure 5: We think a valuation multiple in-line with other industrial high yield companies is reasonable
Mar k et
Ne w F l y e r I nd ustr i e s
Cur .
Eq ui ty Pr i ce :
Cur .
Year
No v. 7, 2015
Di v.
2015
$20. 00
$0. 61
Co nse nsus A ve r a ge
Di v.
EB I TDA
Cur .
Pa y o ut
Ca p .
Cur .
Y i e l d F CF PS
r a ti o
($M )
EPS
3. 0%
$1. 54
4. 9%
De b t/
P/E
Gr o wth
Ca p ('15- '17)
16. 0 39. 4%
6. 1%
10. 4%
Chorus Aviation
2015
$5.51
$0.48
8.7%
$0.88
54.7%
$673 $0.80
6.9
89.6%
12.9%
Davis + Henderson
2015
$34.95
$1.28
3.7%
$2.09
61.2%
$3,690 $2.49
14.1
41.2%
15.8%
Westshore Terminals
2015
$22.36
$1.32
5.9%
$1.27
103.9%
$1,660 $1.68
13.3
0.0%
3.3%
Cineplex Galaxy
2015
$50.07
$1.54
3.1%
$1.68
91.7%
$3,159 $2.02
24.8
32.1%
14.1%
Note that the New Flyer dividend is the new sustainable dividend level
Source: Company reports, Bloomberg, Canaccord Genuity Research estimates
We have maintained our valuation multiple at 7.5x EV/NTM EBITDA (or 7.5x Q3/16E
EV / Q4/16E - Q3/17E EBITDA), given that the stock has traded in this range for some
time (average of 7.7x over the past 60 months). We think our target multiple is well
supported by NFIs solid 3.1% dividend yield. We think the dividend upside potential
from forecasted stronger future free cash further strengthens the dividend yield
support argument.
Our target multiple generates a target dividend yield of 2.8% and a FCFPS yield of
8.5%, both of which seem reasonable relative to comparable companies and
appropriately better than in the past, reflecting NFIs improved risk profile.
Our valuation also translates into a reasonable to attractive 1.1% dividend yield and
6.8% FCFPS spreads over Government of Canada bond rates, which reflects the much
higher risk of NFI versus government bonds.
Buy from Hold Target Price C$22.00 from C$20.00 | 9 November 2015
Auto Components 7
101
1-year
t arget
151.0
2-year
t arget
155.3
7.5
1,132.3
(95.2)
1,037.1
7.5
1,165.1
(44.9)
1,120.2
62.0
16.72
22.00
62.0
18.06
23.00
0.62
22.62
1.24
24.24
13.1%
21.2%
2.8%
8.5%
2.7%
8.4%
1.1%
6.8%
FCFPS C$
1.88
1.94
Our target was increased C$2.00 to C$22.00 due to our stronger forecast and our
usual one quarter valuation period roll forward.
We have boosted our rating at BUY from Hold, given the more attractive implied one
year investment return. Our current target and estimated dividend currently produces
a 13.1% one-year implied investment return (including a 3.1% dividend yield).
Buy from Hold Target Price C$22.00 from C$20.00 | 9 November 2015
Auto Components 8
102
Figure 7: Canaccord Genuity Researchs forecast for New Flyer Industries Dividend payout analysis
Y ears ended Dec. 3 1 ($ m illions)
F ree cash
Cash from operations
Change in working capital
Interest paid
Interest expense
Income taxes paid
Current income tax expense
Principal portion of capital lease payments
Capital expenditures
Proceeds from sale of redundant assets
Business acquisition cost
Costs associated with strategic initiatives
Defined benefit funding
Defined benefit expense
Realized investment tax credits
Foreign exchange impact on cash
Free cash flow
Exchange rate
Free cash flow (CAD)
Declared dividends (CAD)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
Q2 /1 5
Q3 /1 5 Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
5.5
24.0
17.1
(14.6)
6.5
(12.8)
(2.4)
(4.0)
0.7
7.3
(1.8)
2.2
27.8
0.001
27.8
33.1
30.0
23.0
10.9
(11.6)
19.0
(23.8)
(2.0)
(13.8)
1.2
6.0
8.7
(2.8)
(1.5)
0.2
43.4
1.039
45.1
30.7
17.5
(7.9)
3.8
(3.1)
4.4
(3.4)
(0.4)
(3.3)
0.4
2.1
(0.7)
0.0
9.5
1.109
10.6
8.1
1.1
18.9
3.8
(3.4)
4.4
(8.2)
(0.3)
(1.5)
0.2
0.1
(0.7)
0.4
14.7
1.085
15.9
8.1
0.5
21.8
1.8
(2.9)
1.6
(4.1)
(0.5)
(1.9)
0.0
0.2
0.8
(0.7)
(0.4)
16.3
1.097
17.9
8.1
26.9
2.5
2.2
(3.0)
1.5
(11.2)
(0.6)
(1.7)
2.8
0.5
(0.6)
(0.6)
(0.1)
18.6
1.136
21.1
8.1
45.8
35.3
11.6
(12.4)
12.0
(26.8)
(1.8)
(8.4)
0.6
3.1
3.5
(2.6)
(0.6)
(0.2)
59.1
1.104
65.5
32.5
28.7
(4.6)
4.0
(3.1)
2.1
(13.7)
(0.5)
(4.3)
1.3
0.8
(0.7)
(0.2)
9.8
1.252
12.3
8.1
(22.8)
42.3
1.8
(2.8)
16.4
(12.5)
(0.5)
(1.9)
1.6
0.8
(0.8)
(0.1)
21.5
1.226
26.4
8.4
11.6
6.5
3.8
(2.8)
14.1
(14.4)
(0.5)
(1.8)
1.0
0.8
(0.8)
(0.7)
16.8
1.317
22.1
8.6
58.8
(36.3)
3.0
(3.0)
11.4
(11.4)
(0.7)
(2.0)
0.8
(0.8)
(0.7)
19.0
1.300
24.7
8.6
76.3
7.8
12.6
(11.6)
44.0
(52.0)
(2.1)
(10.0)
3.9
3.2
(3.2)
(1.7)
67.2
1.300
85.6
33.8
83.0
7.8
11.5
(11.5)
41.3
(41.3)
(2.6)
(8.0)
3.2
(3.3)
(3.0)
77.2
1.300
100.3
34.4
89.7
5.2
11.0
(11.0)
44.5
(44.5)
(2.6)
(8.0)
3.2
(3.3)
(3.0)
81.2
1.300
105.5
34.4
92.4
4.8
10.4
(10.4)
46.5
(46.5)
(2.6)
(8.0)
3.2
(3.3)
(3.0)
83.6
1.300
108.6
34.4
95.4
4.8
9.9
(9.9)
48.7
(48.7)
(2.6)
(8.0)
3.2
(3.3)
(3.0)
86.5
1.300
112.5
34.4
44.4
51.9
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
0.63
0.75
0.87
0.58
0.19
0.15
0.29
0.15
0.32
0.15
0.38
0.15
1.18
0.59
0.22
0.15
0.48
0.15
0.40
0.16
0.45
0.16
1.54
0.61
1.81
0.62
1.90
0.62
1.96
0.62
2.03
0.62
Buy from Hold Target Price C$22.00 from C$20.00 | 9 November 2015
Auto Components 9
103
Figure 8: Canaccord Genuity Researchs forecast for New Flyer Industries Income statement
Y ears ended Dec. 3 1 ($ m illions)
Incom e statem ent
Revenues
Cost of sales and SG&A
Foreign exchange gain (loss)
EBITDA
Depreciation & amortization
Unrealized FX gain (loss)
Fair value adjustments
Other
Operating profit (EBIT)
Interest expense on long-term debt
Other interest and bank charges
Fair value adjustment on int rate swaps
Other expenses
Distributions on B and C shares
Pre-tax income
Income taxes
Net Income (loss)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
Q2 /1 5
Q3 /1 5 Q4 /1 5 E
865.3 1,199.4
(810.2) (1,120.2)
2.8
(0.1)
57.8
79.1
(24.3)
(28.0)
(1.4)
(2.1)
(1.4)
0.0
(5.5)
0.0
25.2
49.0
(11.9)
(8.7)
(2.7)
(2.9)
0.8
(0.5)
(2.8)
(2.2)
0.0
0.0
10.0
34.6
(0.7)
(7.9)
9.3
26.8
323.9
(305.0)
(0.8)
18.1
(7.7)
(0.4)
0.0
0.0
10.0
(2.3)
(0.8)
0.3
(0.5)
0.0
6.7
(1.2)
5.5
346.5
(322.3)
(0.4)
23.8
(8.1)
1.0
0.0
(3.9)
12.8
(2.3)
(1.2)
(0.4)
(0.5)
0.0
8.4
(4.8)
3.6
360.8
(337.6)
(0.2)
22.9
(10.0)
(0.1)
0.0
0.0
12.8
(2.2)
(0.7)
0.8
(0.6)
0.0
10.1
0.2
10.2
420.0 1,451.1
(393.4) (1,358.3)
(0.1)
(1.5)
26.5
91.3
(10.0)
(35.8)
0.3
0.8
0.0
0.0
(0.9)
(4.8)
15.9
51.4
(2.2)
(8.9)
(0.8)
(3.5)
0.1
0.8
(0.6)
(2.2)
0.0
0.0
12.4
37.6
(5.0)
(10.8)
7.4
26.7
380.3
(352.1)
1.5
29.7
(9.5)
(1.9)
0.0
0.0
18.2
(2.3)
(0.7)
(0.5)
(0.6)
0.0
14.1
(3.3)
10.9
375.0
(340.7)
(0.7)
33.7
(9.8)
0.8
0.0
0.0
24.6
(2.2)
(0.6)
0.3
(0.6)
0.0
21.6
(9.2)
12.4
364.7
(329.1)
(0.6)
35.0
(10.0)
(1.0)
0.0
0.0
24.0
(2.2)
(0.6)
(0.1)
(0.6)
0.0
20.5
(4.0)
16.6
2015E
2016E
2017E
2018E
2019E
0.75
0.63
0.63
0.58
0.87
0.87
0.15
0.19
0.19
0.15
0.29
0.29
0.15
0.32
0.32
0.15
0.38
0.38
0.59
1.18
1.18
0.15
0.22
0.22
0.15
0.48
0.48
0.16
0.40
0.40
0.16
0.45
0.45
0.61
1.54
1.54
0.62
1.81
1.81
0.62
1.90
1.90
0.62
1.96
1.96
0.62
2.03
2.03
52.3
58.9
55.5
55.6
55.7
55.7
55.6
55.8
55.9
56.1
62.0
57.4
62.0
62.0
62.0
62.0
-6.6%
-0.4%
-30.6%
6.7%
38.6%
38.4%
-21.5%
6.6%
32.1%
26.8%
0.0%
5.6%
30.0%
56.0%
0.0%
6.9%
16.8%
36.0%
0.0%
6.4%
10.9%
34.4%
0.0%
6.3%
21.0%
36.0%
0.0%
6.3%
17.4%
16.6%
0.0%
7.8%
8.2%
65.6%
4.0%
9.0%
1.1%
23.7%
6.0%
9.6%
-6.4%
17.0%
6.0%
9.5%
4.3%
30.6%
4.0%
9.0%
-2.7%
17.2%
1.9%
9.9%
2.9%
5.2%
0.0%
10.1%
2.5%
2.9%
0.0%
10.1%
3.1%
3.6%
0.0%
10.1%
3.9%
5.3%
3.9%
5.9%
4.8%
6.1%
5.2%
7.6%
8.8%
8.9%
10.0%
9.0%
10.1%
11.1%
11.7%
12.4%
Bus revenues
Bus EBITDA (excl. FX gains/losses)
Bus sales growth
Bus EBITDA % (excl. FX gains/losses)
Deliveries
Revenue/unit
EBITDA/unit
LTM EBITDA/unit
753.9
42.0
-7.0%
5.6%
1,656
455
25
25
984.4
63.6
30.6%
6.5%
2,191
449
29
29
250.9
7.8
20.7%
3.1%
554
453
14
27
265.8
13.9
23.5%
5.2%
582
457
24
28
278.7
12.6
11.2%
4.5%
621
449
20
26
336.6
23.2
7.5%
6.9%
680
495
34
24
1132.1
57.4
15.0%
5.1%
2,437
465
24
24
290.7
14.7
15.9%
5.1%
572
508
26
26
285.8
22.4
7.5%
7.8%
594
481
38
30
293.0
21.6
5.1%
7.4%
625
469
35
33
321.1
22.6
-4.6%
7.0%
685
469
33
33
1190.6
81.4
5.2%
6.8%
2,476
481
33
33
1172.3
84.5
-1.5%
7.2%
2,485
472
34
34
1203.5
88.7
2.7%
7.4%
2,535
475
35
35
1228.3
90.0
2.1%
7.3%
2,571
478
35
35
1263.9
92.0
2.9%
7.3%
2,629
481
35
35
Aftermarket revenues
Aftermarket EBITDA (excl. FX)
Aftermarket sales growth
Aftermarket EBITDA % (excl. FX)
119.1
19.6
2.6%
16.4%
215.0
31.0
80.6%
14.4%
73.0
11.9
95.4%
16.3%
80.7
13.1
57.1%
16.2%
82.0
13.1
40.7%
16.0%
83.4
11.9
22.6%
14.2%
319.0
50.0
48.4%
15.7%
89.6
16.7
22.8%
18.6%
89.2
16.8
10.6%
18.8%
71.7
14.7
-12.6%
20.5%
72.0
14.8
-13.6%
20.5%
322.5
62.9
1.1%
19.5%
299.6
61.4
-7.1%
20.5%
311.6
63.9
4.0%
20.5%
324.0
66.4
4.0%
20.5%
336.8
69.0
4.0%
20.5%
Buy from Hold Target Price C$22.00 from C$20.00 | 9 November 2015
Auto Components 10
104
Figure 9: Canaccord Genuity Researchs forecast for New Flyer Industries Balance sheet
Y ears ended Dec. 3 1 ($ m illio ns)
Balance sheet
Cash
Accounts receivable
Inventories
Prepaid expenses and deposits
Derivative financial instruments
Future income tax assets
Other
Total current assets
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
Q2 /1 5
11.2
113.5
124.7
4.7
0.0
0.0
0.0
254.1
11.9
230.3
183.3
7.7
0.0
0.0
0.0
433.2
14.2
201.0
207.7
6.6
0.0
1.6
0.0
431.1
4.3
146.3
246.4
5.7
0.0
3.2
0.0
406.0
8.7
164.1
267.4
4.6
0.1
3.4
0.0
448.2
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
7.6
186.9
232.0
3.5
0.1
0.0
0.0
430.0
8.8
189.2
242.3
3.9
0.2
0.0
0.0
444.4
6.5
217.7
240.4
3.7
0.0
0.0
0.0
468.3
Capital assets
Deferred charges
Intangible assets
Future income tax assets
Derivative financial instruments
Accrued benefit asset
Total assets
42.0
0.0
528.5
72.6
0.0
0.0
897.2
64.8
0.0
568.9
68.9
0.0
0.0
1,135.9
65.5
0.0
564.1
67.6
0.0
1.1
1,129.4
65.4
0.0
556.1
65.7
0.0
0.5
1,093.7
65.2
0.0
550.7
65.0
0.0
0.0
1,129.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
64.3
0.0
539.1
67.9
0.0
0.0
1,101.4
64.3
0.0
533.9
68.6
0.0
0.0
1,111.2
63.5
0.0
528.5
74.9
0.0
0.0
1,135.2
Bank indebtedness
Accounts payable & accrued liabs
Due to parent company
Deferred revenue
Provision for warranty costs
Current portion of capital leases
Current portion of LTD
Other current liabilities
Total current liabilities
0.0
150.8
0.0
19.2
20.1
1.9
40.0
6.8
238.8
0.0
212.9
0.0
57.6
26.1
1.3
35.0
1.5
334.4
0.0
225.5
0.0
55.4
25.1
1.1
30.0
0.5
337.6
0.0
204.5
0.0
47.7
25.1
1.3
30.0
1.8
310.3
0.0
227.1
0.0
36.8
28.7
1.7
45.0
3.9
343.2
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
226.5
0.0
23.0
35.0
1.6
13.0
18.6
317.6
0.0
201.8
0.0
18.3
39.7
1.7
48.0
10.4
319.8
0.0
203.0
0.0
22.0
42.1
1.6
44.0
12.7
325.5
0.0
211.1
0.0
22.0
42.1
1.6
44.0
12.0
332.8
0.0
211.1
0.0
22.0
42.1
1.6
44.0
12.0
332.8
0.0
191.2
0.0
22.0
42.1
1.6
44.0
9.9
310.9
0.0
196.5
0.0
22.0
42.1
1.6
44.0
8.9
315.1
0.0
202.2
0.0
22.0
42.1
1.6
44.0
7.9
319.8
0.0
208.0
0.0
22.0
42.1
1.6
44.0
6.9
324.6
9.0
2.3
122.2
177.7
2.0
1.2
0.2
1.8
114.8
198.6
2.5
28.3
0.0
1.6
113.2
199.1
2.2
22.1
0.0
2.7
112.2
199.6
2.6
16.5
0.6
3.4
110.5
200.0
1.8
17.4
1.0
3.2
108.5
200.5
1.7
14.7
1.0
3.2
108.5
200.5
1.7
14.7
0.9
2.9
105.5
201.0
2.2
13.9
4.1
5.0
102.5
201.6
1.9
12.7
3.8
6.5
100.0
202.2
2.0
21.1
3.8
6.5
98.0
202.2
2.0
21.1
3.8
6.5
98.0
202.2
2.0
21.1
3.8
6.5
90.0
202.2
2.0
21.1
3.8
6.5
82.1
202.2
2.0
21.1
3.8
6.5
74.1
202.2
2.0
21.1
3.8
6.5
66.2
202.2
2.0
21.1
0.0
480.8
(136.8)
0.0
593.3
(138.2)
0.0
593.6
(140.0)
0.0
593.8
(143.9)
0.0
594.1
(141.8)
0.0
594.5
(141.8)
0.0
594.5
(141.8)
0.0
594.7
(137.5)
0.0
595.2
(131.6)
Q3 /1 5 Q4 /1 5 E
0.0
595.7
(121.6)
56.7
198.7
230.0
4.0
0.0
0.0
0.0
489.4
2015E
2016E
2017E
2018E
2019E
56.7
198.7
230.0
4.0
0.0
0.0
0.0
489.4
101.2
180.9
234.0
3.7
0.0
0.0
0.0
519.8
152.3
186.2
238.0
3.8
0.0
0.0
0.0
580.3
206.1
191.6
242.0
3.9
0.0
0.0
0.0
643.6
262.7
197.1
246.0
4.0
0.0
0.0
0.0
709.8
61.1
61.1
56.4
52.9
50.4
48.6
0.0
0.0
0.0
0.0
0.0
0.0
523.1
523.1
501.7
480.2
458.8
437.3
74.9
74.9
74.9
74.9
74.9
74.9
0.0
0.0
0.0
0.0
0.0
0.0
(0.0)
(0.0)
(0.1)
(0.3)
(0.4)
(0.5)
1,148.5 1,148.5 1,152.6 1,188.1 1,227.3 1,270.1
0.0
595.7
(113.6)
0.0
595.7
(113.6)
0.0
595.7
(79.6)
0.0
595.7
(40.4)
0.0
0.0
595.7
2.0
595.7
48.0
897.2
1,135.9
1,129.4
1,093.7
1,129.1
1,136.1
1,136.1
1,101.4
1,111.2
1,135.2
1,148.5
1,148.5
1,152.6
1,188.1
1,227.3
1,270.1
10.8
46.0
15.4
123.2
3.5
110.5
1.8
122.7
2.5
143.1
2.8
135.7
10.7
135.7
4.3
119.4
1.9
165.5
1.8
181.8
2.0
145.5
10.0
145.5
12.0
153.3
12.1
158.5
12.2
163.3
12.3
168.1
210.7
3.6x
7.75
21.8x
224.7
2.8x
8.77
22.4x
217.6
1.4x
8.18
19.9x
229.3
1.5x
8.11
21.2x
241.5
2.5x
8.15
22.1x
227.8
2.5x
8.15
26.0x
227.8
2.5x
8.16
22.6x
210.9
2.1x
8.24
23.8x
247.5
2.2x
8.35
23.3x
247.7
2.0x
8.54
22.8x
197.6
1.5x
8.68
25.2x
197.6
1.5x
8.68
24.2x
153.0
1.0x
9.30
25.1x
101.9
0.7x
10.00
27.7x
48.2
0.3x
10.77
30.0x
(8.5)
0.0x
11.59
32.3x
Buy from Hold Target Price C$22.00 from C$20.00 | 9 November 2015
Auto Components 11
105
Figure 10: Canaccord Genuity Researchs forecast for New Flyer Industries Cash flow statement
Y ears ended Dec. 3 1 ($ m illio ns)
C ash flo w statem ent
Net income
Amortization of fixed assets
Amortization of intangibles
Amortization of deferred charges
Loss on disposition of PP&E
Future income taxes (recovery)
Unrealized gain on int rate swap
Unrealized FX gain (loss)
Fair value adjustments
Defined benefit expense
Defined benefit funding
Items not affecting cash
Other
Cash from operations before WC
Change in working capital
Cash from operations after WC
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
Q2 /1 5
9.8
8.3
16.0
0.0
0.0
1.5
0.0
1.4
1.4
3.6
(7.3)
(2.2)
(2.9)
29.5
(24.0)
5.5
26.8
9.6
18.4
0.0
0.0
17.5
0.0
2.1
0.0
2.8
(8.7)
0.1
(15.6)
53.0
(23.0)
30.0
5.5
2.9
4.8
0.0
0.0
2.2
0.0
0.4
0.0
0.7
(2.1)
3.3
(8.0)
9.6
7.9
17.5
3.6
3.3
4.8
0.0
0.0
4.8
0.0
(1.0)
0.0
0.7
0.0
4.4
(0.6)
19.9
(18.9)
1.1
10.2
4.6
5.4
0.0
0.0
2.4
0.0
0.1
0.0
0.7
(0.8)
(3.4)
3.1
22.3
(21.8)
0.5
7.4
4.6
5.4
0.0
0.0
14.9
0.0
(0.3)
0.0
0.6
(0.5)
(3.4)
0.7
29.3
(2.5)
26.8
26.7
15.4
20.5
0.0
0.0
24.3
0.0
(0.8)
0.0
2.6
(3.5)
0.8
(4.9)
81.1
(35.3)
45.8
10.9
4.2
5.3
0.0
0.0
3.4
0.0
1.9
0.0
0.7
(0.8)
0.4
(2.0)
24.1
4.6
28.7
12.4
4.5
5.4
0.0
0.0
9.2
0.0
(0.8)
0.0
4.5
(0.8)
0.3
(15.1)
19.5
(42.3)
(22.8)
16.6
4.7
5.4
0.0
0.0
4.0
0.0
1.0
0.0
0.8
(0.8)
1.0
(14.5)
18.1
(6.5)
11.6
Investing
Additions to capital assets
Net funds used in investing
(10.8)
(11.0)
(15.4)
(122.5)
(3.5)
(3.6)
(1.8)
(1.8)
(2.5)
(2.6)
(2.8)
(2.9)
(10.7)
(10.9)
(4.3)
(4.3)
(1.9)
(1.9)
Financing
Bank indebtness, net
Proceeds from issue of long-term debt
Redemption of class B and C shares
Repayment of long-term debt
Repayment of capital leases
Deferred debt financing costs
Due to parent company
Share issuance
Dividends
Net funds from financing
0.0
103.2
0.0
(62.4)
(2.4)
0.0
0.0
0.0
(34.0)
4.3
0.0
12.6
0.0
0.0
(2.0)
0.0
0.0
111.7
(29.3)
93.0
0.0
(3.9)
0.0
0.0
(0.4)
0.0
0.0
0.0
(7.4)
(11.6)
0.0
(1.7)
0.0
0.0
(0.3)
0.0
0.0
0.0
(7.4)
(9.4)
0.0
15.0
0.0
0.0
(0.6)
0.0
0.0
0.0
(7.5)
6.9
0.0
(7.4)
0.0
0.0
(0.5)
0.0
0.0
0.0
(7.2)
(15.1)
0.0
2.1
0.0
0.0
(1.8)
0.0
0.0
0.0
(29.5)
(29.2)
0.0
(27.0)
0.0
0.0
(0.5)
0.0
0.0
0.0
(6.7)
(34.1)
Q3 /1 5 Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
14.6
4.4
5.4
0.0
0.0
(2.0)
0.0
0.0
0.0
0.8
(0.8)
0.0
0.0
22.4
36.3
58.8
54.4
17.8
21.4
0.0
0.0
14.6
0.0
2.1
0.0
6.9
(3.2)
1.8
(31.5)
84.2
(7.8)
76.3
60.5
16.7
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
3.3
(3.2)
0.0
0.0
90.8
(7.8)
83.0
65.7
15.6
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
3.3
(3.2)
0.0
0.0
94.9
(5.2)
89.7
68.9
14.7
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
3.3
(3.2)
0.0
0.0
97.2
(4.8)
92.4
72.5
14.1
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
3.3
(3.2)
0.0
0.0
100.2
(4.8)
95.4
(1.8)
(1.9)
(2.0)
(2.0)
(10.0)
(10.1)
(12.0)
(12.0)
(12.1)
(12.1)
(12.2)
(12.2)
(12.3)
(12.3)
0.0
33.1
0.0
0.0
(0.5)
0.0
0.0
0.0
(6.6)
26.0
0.0
(4.0)
0.0
0.0
(0.5)
0.0
0.0
0.0
(6.8)
(11.3)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(6.6)
(6.6)
0.0
2.1
0.0
0.0
(1.4)
0.0
0.0
0.0
(26.7)
(26.0)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
2.2
0.2
0.0
0.4
0.0
(0.5)
(0.2)
(0.2)
(0.1)
(0.7)
0.0
(1.0)
0.0
0.0
0.0
0.0
1.0
10.1
11.2
0.7
11.2
11.9
2.3
11.9
14.2
(9.9)
14.2
4.3
4.7
4.3
9.1
8.4
9.1
17.5
5.6
11.9
17.5
(9.9)
17.5
7.6
1.3
7.6
8.8
(2.3)
8.8
6.5
50.1
6.5
56.7
39.2
17.5
56.7
44.5
56.7
101.2
51.1
101.2
152.3
53.7
152.3
206.1
56.6
206.1
262.7
(5.4)
(92.5)
13.9
(0.8)
(2.1)
24.0
34.9
24.4
(24.7)
9.8
56.8
66.2
71.0
77.6
80.2
83.1
Buy from Hold Target Price C$22.00 from C$20.00 | 9 November 2015
Auto Components 12
106
Investment risks
Potential risks to our investment thesis and target price valuation methodology
include, but are not limited to, availability of government funding and company
execution of contracts.
Buy from Hold Target Price C$22.00 from C$20.00 | 9 November 2015
Auto Components 13
107
Coverage Universe
IB Clients
#
%
%
Buy
602
61.49%
31.56%
Hold
292
29.83%
12.67%
Sell
27
2.76%
3.70%
Speculative Buy
58
5.92%
56.90%
979*
100.0%
*Total includes stocks that are Under Review
Canaccord Genuity Ratings System
BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.
HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.
SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.
NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.
Risk-adjusted return refers to the expected return in relation to the amount of risk associated with the designated investment or the
relevant issuer.
Risk Qualier
SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the
stock may result in material loss.
Canaccord Genuity Company-Specific Disclosures (as of date of this publication)
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Corporate Finance/
Investment Banking services from New Flyer Industries Inc. in the next six months.
Buy from Hold Target Price C$22.00 from C$20.00 | 9 November 2015
Auto Components 14
108
22
20
18
16
14
12
10
8
6
H:C$12.00
07/16/14
H:C$8.75
01/11/13
H:C$9.25
01/29/13
H:C$9.75
02/06/13
Jan 2013
Apr 2013
Jul 2013
B:C$14.00
08/06/14
H:C$14.00
11/09/14
B:C$12.50
12/12/14
H:C$10.00
03/25/13
Oct 2013
H:C$14.00
01/12/15
H:C$10.25
04/18/13
Jan 2014
B:C$15.00
03/19/15
B:C$11.25
06/24/13
Apr 2014
B:C$16.00
05/11/15
Closing Price
H:C$11.75
08/07/13
Jul 2014
H:C$11.25
11/07/13
Oct 2014
B:C$17.00
07/20/15
B:C$21.00
08/10/15
B:C$12.00
01/15/14
Jan 2015
B:C$12.50
03/23/14
Apr 2015
H:C$11.50
05/11/14
Jul 2015
H:C$11.75
06/24/14
Oct 2015
H:C$20.00
10/16/15
Target Price
Buy (B); Speculative Buy (SB); Sell (S); Hold (H); Suspended (SU); Under Review (UR); Restricted (RE); Not Rated (NR)
Online Disclosures
Up-to-date disclosures may be obtained at the following website (provided as a hyperlink if this report is being read electronically)
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The authoring analysts who are responsible for the preparation of this research are employed by Canaccord Genuity Corp. a Canadian
broker-dealer with principal offices located in Vancouver, Calgary, Toronto, Montreal, or Canaccord Genuity Inc., a US broker-dealer
with principal offices located in New York, Boston, San Francisco and Houston, or Canaccord Genuity Limited., a UK broker-dealer with
principal offices located in London (UK) and Dublin (Ireland), or Canaccord Genuity (Australia) Limited, an Australian broker-dealer with
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The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon
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Canaccord Genuity and its affiliated companies may have a Corporate Finance/Investment Banking or other relationship with the issuer
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Auto Components 15
109
Canaccord Genuitys affiliates, principal trading desk, and investing businesses may make investment decisions that are inconsistent
with the recommendations or views expressed in this research.
This research is provided for information purposes only and does not constitute an offer or solicitation to buy or sell any designated
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To the fullest extent permitted by law, none of Canaccord Genuity, its affiliated companies or any other person accepts any liability
whatsoever for any direct or consequential loss arising from or relating to any use of the information contained in this research.
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This research has been approved by Canaccord Genuity Corp., which accepts sole responsibility for this research and its dissemination
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This research is sent to you by Canaccord Genuity Wealth (International) Limited (CGWI) for information purposes and is not to be
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This research is distributed in Australia by Canaccord Genuity (Australia) Limited ABN 19 075 071 466 holder of AFS Licence No
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Buy from Hold Target Price C$22.00 from C$20.00 | 9 November 2015
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Buy from Hold Target Price C$22.00 from C$20.00 | 9 November 2015
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111
COMPANY UPDATE
NFI | TSX
$20.00
Rating: Outperform
One Year Target: C$26.00
(previously $23.00)
Total Return: 33.1%
Yield: 3.1%
November 9, 2015
C$20.86 / C$12.05
3.1%
Dividend Yield:
55.5 (basic)
55.5 (fd)
C$1109.3
39.7
135.0
$248.6
$1083.2
2014
Revenue ($mm)
2015e
2016e
FD EPS
EBITDA ($m m )
Q1
2014
$19.7
$107.4
$144.8
$157.7
$0.65
$1.04
$1.21
Q2
Q3
Q4
$27.0
$25.7
$35.0
2015
$31.4
$39.2
$36.3e
$37.9e
2016
$39.5e
$38.4e
$39.5e
$40.3e
Q2
Q3
Q4
$0.16
$0.15
$0.24
Adjusted FD EPS
Q1
$0.10
2015
$0.20
$0.30
$0.26e
$0.28e
2016
$0.30e
$0.29e
$0.30e
$0.31e
$25
EBITDA ($mm)
2014
Strong Q3/15 Results: New Flyer announced Q3/15 results reporting revenue,
Adjusted EBITDA and Adjusted FD EPS of $364.7mm, $36.3mm and $0.26 as
compared to our estimates of $387.8mm, $32.1mm and $0.22, respectively. Consensus
expectations for revenue, Adjusted EBITDA and Adjus ted FD EPS were $371.8mm,
$31.4mm and $0.23.
1000
Last Sale Price
$20
800
$15
600
$10
400
$5
200
$0
0
Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15
Regulatory Disclosures and policy on the dissemination of research: last page or at www.altacorpcapital.com
112
INITIATING
COVERAGE
: DIVERSIFIED
INDUSTRIES
I NSTITUTIONAL
EQUITY
R ESEARCH:
DIVERSIFIED
INDUSTRIES
$20.00
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
10.3x
9.2x
7.3x
Peer Average
14.3x
13.4x
10.4x
10.1x
7.5x
6.9x
23.0x
14.5x
12.4x
2014
2015e
2016e
2015e
2016e
2017e
Trend
Revenues
Bus Manufacturing
Aftermarket
Revenue
320,916
298,615
314,498
2014
45,823
35,255
81,078
(1,766)
(1,908)
Aftermarket % of Total
22.0%
20.7%
17.6%
18.1%
57,374
82,262
93,528
99,373
5.1%
6.7%
6.7%
7.0%
49,991
62,531
64,199
69,190
15.7%
19.5%
21.5%
22.0%
86,457
136,232
157,726
168,562
6.0%
8.8%
9.3%
9.7%
107,365
144,793
157,726
168,562
per Share
7.4%
9.3%
9.3%
9.7%
FCF Yield
Amortization
35,837
39,360
39,408
38,509
Operating Earnings
50,620
96,873
118,318
130,053
EBT
37,568
80,931
106,633
118,749
Taxes
10,849
25,547
39,454
43,937
Net Income
26,719
55,383
67,179
74,812
Reported FD EPS
$0.48
$1.00
$1.21
$1.35
Adjusted FD EPS
$0.65
$1.04
$1.21
$1.35
2015e
2016e
2017e
Grow th
2014
9,367 (11,918)
(2,004)
10,686
(2,004)
7,766
(154)
(961)
83,667
81,882
Revenue
$1.88
98,373 106,104
$2.35
$2.46
8.4%
9.4%
11.8%
12.3%
82.8%
12.6%
25.0%
4.3%
2014
2015e
2016e
2017e
32,457
33,931
34,413
34,413
35.0%
$0.585
32.5%
$0.611
26.3%
$0.620
25.2%
Cash Yield
2.9%
3.1%
3.1%
3.1%
2014
2015e
2016e
2017e
2,437
2,503
2,709
2,735
52
52
53
52
464.5
491.9
516.5
519.1
15.0%
8.8%
13.6%
1.5%
23.5
32.9
34.5
36.3
Aftermarket
48.4%
0.6%
(6.9%)
5.3%
49.2
50.1
53.1
54.7
Adjusted EBITDA
21.0%
13.4%
7.0%
34.9%
9.4%
8.9%
2.1%
6.9%
48.5
0.9x
48.0
1.1x
50.7
1.0x
51.6
1.0x
Adjusted FD EPS
2.7%
58.7%
16.5%
11.4%
20.7%
5.0%
18.4%
19.9%
2015e
0.7834
2016e
0.7526
2017e
0.7783
2014
2015e
2016e
2017e
2014
0.9057
39,908
0.9050
0.7463
0.7634
0.7937
FX Assum ptions
Leverage
Net Debt (EOP)
Net Debt to Trailing EBITDA
Net Debt to Total Capitalization
Trend
$0.620
Bus Manufacturing
Weeks of Production
Trend
Trend
2017e
2.1x
1.4x
0.7x
0.2x
33.6%
29.0%
17.4%
6.5%
Trend
Trend
Firm
Option
2020, 12%
2015, 8%
$4.0
2016, 16%
$3.0
2019, 28%
$2.0
2017, 10%
$1.0
$0.0
Q109 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15
2018, 26%
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]
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R ESEARCH:
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INDUSTRIES
Q3/15
Q3/14
y/y
Grow th
Q2/15 y/y
Grow th
625.0
468.8
34.6
3,590.0
621.0
448.8
20.2
3,069.5
0.6%
4.4%
71.0%
17.0%
2.1%
5.3%
58.1%
(1.5%)
Operating Segments
Bus Manufacturing
Revenue
EBITDA
EBITDA Margin Reported
EBITDA Margin Normalized
292,970
21,606
7.4%
7.4%
278,713
12,557
4.5%
4.9%
5.1%
72.1%
2.9%
2.4%
7.5%
65.1%
2.6%
2.4%
71,713
14,671
20.5%
82,049
13,140
16.0%
(12.6%)
11.7%
4.4%
10.6%
28.3%
2.6%
364,683
36,277
16,559
360,762
25,697
10,245
1.1%
41.2%
61.6%
8.2%
45.3%
247.2%
$0.30
$0.26
$0.18
$0.15
61.5%
75.2%
246.9%
81.4%
Aftermarket
Revenue
EBITDA
EBITDA Margin
Total
Revenue
Adjusted EBITDA
Reported Net Income
Fully Diluted Earnings Per Share
Reported
Adjusted
Figure 1 Q3/15 Highlights
Source: Company reports, AltaCorp Capital Inc.
Items of Note
During the quarter, revenues increased by 1.1% y/y while Adjusted EBITDA increased by
41.2%. The company attributes the growth to a favorable produ ct mix as well as several
initiatives aimed at improving operational efficiencies which are starting to positively impact
margins.
Bus manufacturing revenues grew 5.1% y/y with a 0.6% increase in deliveries and a 4.5%
increase in average selling price per EU to $468.8K. Adjusted EBITDA increased by 72.1%
y/y representing a margin expansion of 290bps attributable to a favorable sales mix as well as
increased efficiencies and cost savings achieved from the transition to the Xcelsior platform.
Management indicated in the report that savings from the transition are now estimated at
$16.5mm, up from $14mm previously. EBITDA per EU increased to $34.6K from $20.2K in
Q3/14 and well above our estimate for $29.2K.
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While aftermarket revenues declined expectedly as a result of the completion of the Chicago
Transit Authority mid-life overhaul program, EBITDA increased by 11.7% y/y to $14.7mm
representing a margin of 20.5%. The increase is attributable to a broader portfolio of products
and services in an improved market.
Production outlook remains relatively strong with management noting that the number of
filled production slots is up by ~20% y/y. The company currently has no plans to increase
production instead focusing its efforts on improving program management, optimizing the
supply chain and enhancing financial performance. We note that with the conversion to
Oracle R12 application, the entire bus segment is running on a common platform. Within the
aftermarkets segment, the legacy parts business and Orion are already running on Oracle R12
application with the NABI parts business expected to complete the transition by mid-2016
under Project Convergence. The company expects the synchronization to drive further
efficiencies in the supply chain, including in parts sourcing, project bidding, reporting and
delivery. We expect the completion of Project Convergence to be incrementally impact
margins as well as lower working capital needs.
Backlog in Q3/15 was 7,290EU valued at $3.59bn versus 7,011EU ($3.49bn) in Q2/15 and
6,239EU ($3.07bn) in Q3/14. Of the 1,169 pending new firm and option orders, the company
has received a contract for 725 EU from the Massachusetts Bay Transportation Authority
which include a firm order for 175 CNG XN40 and 150 diesel-electric hybrid XDE40 buses
as well as options for an additional 200 clean diesel buses XD40 and 200 diesel-electric
hybrid XDE40 buses. On a TTM basis, the company reported a book-to-bill ratio of 1.00x in
Q3/15.
The companys liquidity position of $68mm comprised of $6.5mm in cash and $61.5mm in
available revolving credit facility. At the end of the quarter, the company had $44.0mm in
direct borrowing and $9.5mm in outstanding letters of credit related to the credit facility. We
note the company is intentionally carrying additional inventory to smooth the transition of
NABI to the Xcelsior platform which it expects to deliver by the end of 2015.
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We are updating our estimates to reflect the strong quarter and revising our margin
expectations upwards in 2016. We believe the bus manufacturing margins should expand with
a combination of normalized pricing and improved synergies from product rationalization
should contribute to higher margins levels. As well, we expect aftermarket margins are likely
to expand later in 2016 as the company completes IT systems implementation and a full
analysis of the aftermarket business completing the integration of the legacy NFI, Orion, and
NABI aftermarket businesses. Our 2015e and 2016e EBITDA increase to $144.8mm and
$157.7mm from $140.3mm and $154.8mm, respectively. Our expectations for Adjusted
2015e and 2016e EPS increase to $1.04 and $1.21 from $0.99 and $1.18, respectively. A
summary of our key changes to estimates is provided in the figure below.
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2015e
Change
2016e
2017e
(4.2%)
0.2%
(3.3%)
73 bps
(3.6%)
(0.5%)
(3.1%)
46 bps
(1.1%)
(0.8%)
(1.1%)
5 bps
EBITDA
EBITDA - Bus Manufacturing
Margin - Bus Manufacturing
EBITDA - Aftermarket Ops.
Margin - Aftermarket Ops.
Total EBITDA incl. Other
Margin
78,872
6.1%
61,380
19.2%
132,963
8.3%
92,564
6.4%
62,252
20.7%
154,816
8.8%
93,314
6.5%
66,565
21.0%
159,879
9.1%
82,262
6.7%
62,531
19.5%
136,232
8.8%
93,528
6.7%
64,199
21.5%
157,726
9.3%
99,373
7.0%
69,190
22.0%
168,562
9.7%
4.3%
54 bps
1.9%
32 bps
2.5%
49 bps
1.0%
31 bps
3.1%
75 bps
1.9%
45 bps
6.5%
50 bps
3.9%
100 bps
5.4%
60 bps
Adjusted EBITDA
Margin
140,251
8.7%
154,816
8.8%
159,879
9.1%
144,793
9.3%
157,726
9.3%
168,562
9.7%
3.2%
59 bps
1.9%
45 bps
5.4%
60 bps
Operating Earnings
EBT
93,923
79,188
115,923
104,017
121,826
110,189
96,873
80,931
118,318
106,633
130,053
118,749
3.1%
2.2%
2.1%
2.5%
6.8%
7.8%
Net Incom e
Reported FD EPS
Adjusted FD EPS
50,648
$0.91
$0.99
65,530
$1.18
$1.18
69,419
$1.25
$1.25
55,383
$1.00
$1.04
67,179
$1.21
$1.21
74,812
$1.35
$1.35
9.3%
9.3%
4.6%
2.5%
2.5%
2.5%
7.8%
7.8%
7.8%
68,870
94,596
(15,069)
84,256
92,515
112,449
(14,187)
96,451
61,729
115,676
(13,689)
100,175
80,121
89,487
(12,502)
81,882
126,851
114,933
(14,556)
98,373
111,492
122,178
(14,070)
106,104
16.3%
(5.4%)
(17.0%)
(2.8%)
37.1%
2.2%
2.6%
2.0%
80.6%
5.6%
2.8%
5.9%
105,267
$1.90
9.5%
121,225
$2.18
10.9%
120,162
$2.16
10.9%
104,547
$1.88
9.4%
130,702
$2.35
11.8%
136,341
$2.46
12.3%
(0.7%)
(0.7%)
(9) bps
7.8%
7.8%
83 bps
13.5%
13.5%
143 bps
33,928
32.2%
$0.61
34,413
28.4%
$0.62
34,413
28.6%
$0.62
33,931
32.5%
$0.61
34,413
26.3%
$0.62
34,413
25.2%
$0.62
0.0%
0.0%
0.0%
22 bps (206) bps (340) bps
0.0%
0.0%
0.0%
208,046
1.5x
0.3x
157,087
1.0x
0.2x
137,729
0.9x
0.2x
196,942
1.4x
0.3x
110,547
0.7x
0.2x
39,908
0.2x
0.1x
(5.3%)
(8.3%)
(4.6%)
(29.6%)
(30.9%)
(25.5%)
(71.0%)
(72.5%)
(67.2%)
2,561
501.8
30.8
48.5
1.1x
5.0%
2,755
526.9
33.6
52.6
1.0x
18.7%
2,711
529.5
34.4
52.6
1.0x
20.0%
2,503
491.9
32.9
48.0
1.1x
5.0%
2,709
516.5
34.5
50.7
1.0x
18.4%
2,735
519.1
36.3
51.6
1.0x
19.9%
(2.3%)
(2.0%)
6.7%
(1.0%)
(0.5%)
0 bps
(1.7%)
(2.0%)
2.8%
(3.7%)
0.0%
(26) bps
0.9%
(2.0%)
5.6%
(1.8%)
0.0%
(9) bps
We are also rolling forward our valuation period by one quarter which now represents the four
quarters ending Q3/17. We note our valuation remains sensitive to the multiple applied to
estimates as shown in the figure below.
Sensitivity of Target Price to EBITDA and EBITDA Multiple
% Variance
Valuation Period EBITDA ($000s)
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
149,758
158,078
166,398
174,718
183,038
6.50x
7.00x
$19.89
$21.68
$21.18
$23.06
$22.47
$24.45
$23.75
$25.83
$25.04
$27.22
7.50x
$23.46
$24.94
$26.42
$27.91
$29.39
8.00x
8.50x
$25.24
$27.02
$26.82
$28.70
$28.40
$30.38
$29.99
$32.06
$31.57
$33.74
117
COVERAGE
: [INDUSTRY
]
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
average corporate line entry rate should bookings continue at the current pace. We also
believe that as returns on capital trend higher that multiples should expand, noting the positive
trend that now has metrics above 10% and expected to increase further. We maintain our
Outperform rating and are increasing our 12-month price target to C$26.00 from C$23.00.
Our target price is based on a blend of a 15.0x earnings and 7.5x EBITDA multiple of the four
quarters ending Q3/17 (+1Q) reflecting our 12-month forward valuation period as well as an
exchange rate of C$1.32/$US.
Key risks to failing to achieve our price target include, but are not limited to changes in raw
material and component costs, foreign exchange risks, competition risk, changes in public
sector transportation spending, and failure by management to execute on disclosed strategies.
118
COVERAGE
: [INDUSTRY
]
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
Rating &
Target
Trading
Local
Currency Price
TSX:NFI
OP (C$26.00)
BOVESPA:POMO4
NR
TSX: WJX
NR
TSX: AFN
NR
TSX: SPB
NR
GBX
NR
OSK
NR
SPAR
NR
WNC
NR
THO
NR
WGO
NR
NAV
NR
TSX: STB
NR
BLBD
NR
CUB
NR
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
20.00
2.28
18.99
30.62
10.39
36.87
42.28
4.10
12.95
55.66
21.48
14.12
5.45
10.83
45.75
Market
Cap ($m m )
1,110.4
1,959.7
379.5
439.8
1,460.5
1,049.5
3,311.3
140.5
861.1
2,921.2
579.6
1,151.1
524.0
226.1
1,229.9
EPS
EV
Net
Debt
($m m )
2014
2015e
249.8
1,305.5
167.5
328.7
927.2
204.4
895.6
(15.7)
135.8
(176.3)
(70.2)
4,511.0
199.6
188.1
(43.0)
1,084.9
3,299.0
547.0
768.5
2,387.7
1,384.5
4,206.9
124.6
996.9
2,744.8
509.3
5,672.1
794.0
464.2
1,187.1
0.65
0.25
2.46
0.31
0.45
4.62
3.49
0.03
0.88
3.55
1.61
-5.07
0.03
0.00
2.47
1.04
0.14
1.62
2.14
0.65
6.62
2.68
-0.05
1.39
3.93
1.54
-0.07
0.02
0.76
2.44
P/E
EBITDA
23.0x
6.9x
7.7x
NM
23.0x
8.0x
12.1x
NM
14.8x
15.7x
13.3x
NM
NM
NM
18.5x
14.3x
14.5x
12.3x
11.7x
14.3x
16.0x
5.6x
15.8x
NM
9.3x
14.2x
14.0x
NM
NM
14.2x
18.7x
13.4x
12.4x
7.4x
11.3x
9.3x
11.2x
6.6x
12.0x
NM
9.4x
12.3x
12.3x
5.6x
NM
9.4x
16.4x
10.4x
EV/EBITDA
2014
2015e
2016e
2014
2015e
2016e
Price
to BV
ROIC
ROE
107.4
268.8
82.4
63.4
282.4
257.4
591.2
9.4
160.7
298.8
65.8
331.0
69.0
25.9
119.3
144.8
170.0
77.5
75.5
277.7
489.3
494.8
8.1
214.5
333.5
66.1
566.1
70.3
75.5
120.6
157.7
343.0
80.6
101.8
342.7
441.6
589.1
10.9
206.8
390.8
75.3
758.0
88.6
81.7
132.3
10.1x
12.3x
6.6x
12.1x
8.5x
5.4x
7.1x
13.2x
6.2x
9.2x
7.7x
17.1x
11.5x
17.9x
10.0x
10.3x
7.5x
19.4x
7.1x
10.2x
8.6x
2.8x
8.5x
15.4x
4.6x
8.2x
7.7x
10.0x
11.3x
6.2x
9.8x
9.2x
6.9x
9.6x
6.8x
7.5x
7.0x
3.1x
7.1x
11.4x
4.8x
7.0x
6.8x
7.5x
9.0x
5.7x
9.0x
7.3x
1.7x
1.0x
1.2x
1.7x
2.4x
1.5x
1.7x
0.9x
2.0x
2.7x
2.6x
NM
2.0x
NM
1.6x
1.8x
7.0%
2.3%
7.9%
6.1%
6.0%
21.5%
8.7%
(0.0%)
13.7%
17.7%
18.1%
9.7%
2.6%
4.5%
5.8%
8.8%
10.2%
8.2%
11.7%
(2.5%)
7.2%
36.9%
11.8%
(4.7%)
22.6%
19.8%
19.9%
NM
NA
NM
4.6%
12.1%
119
Disclosure Requirements
C$20.00
Rating:
Outperform
12 Month Target:
C$26.00
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
Does any director, officer, employee of AltaCorp Capital or member of their household serve as a director or
officer or advisory capacity of the issuer? If yes, state name:
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
12 Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
13 Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
61%
26%
Sector Perform
25%
9%
Underperform
2%
0%
Speculative Buy
3%
0%
Restricted
2%
50%
Not Rated
5%
0%
Tender
3%
0%
100%
19%
Total
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied
upon, by any other person.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts
responsibility for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital
(USA) Inc. at 403-539-8600.
120
Direct
@altacorpcapital.com
__________________________________________________________________________________________________________
porourke
ysiddiqi
nlupick
sbernhardsdottir
tmatthews
cerana
Energy Infrastructure
Dirk Lever, CA, Senior Analyst
Ward Hallett, CA, Associate
dlever
whallett
Oilfield Services
Dana Benner, CFA, Senior Analyst
Karim Merali, Associate
Mark Westby, Analyst
dbenner
kmerali
mwestby
Dave Mowat
Diversified Industries
Chris Murray, P.Eng., CFA, Senior Analyst
Samarth Modwal, Associate
cmurray
smodwal
Agriculture
Peter Prattas, CPA, CA, CFA, Analyst
Stuart Pattillo, Associate
pprattas
spattillo
Ian Wild
All Sectors
Victoria Hoa, Research Assistant
vhoa
George FJ Gosbee
Chairman & CEO
403 539 8601
ggosbee@altacorpcapital.com
ATB Financial
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
khilton
Toronto
Paul Sarachman, CFA, FCSI
Adam Carlson
Jamie Riff
Tim Miller
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Institutional Trading
Calgary
Tate Pinder
Shane Dungey
tpinder
sdungey
Toronto
Mervin Kopeck
Jon Varley
Michael Capobianco
mkopeck
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
410, 585 8 Avenue SW
Calgary AB Canada T2P 1G1
403 539 8600 Main
403 539 8575 Fax
TORONTO
66 Wellington Street West, Suite 3530
Toronto, ON Canada M5K 1A1
647 776 8230 Main
647 776 8248 Fax
www.altacorpcapital.com
George Gosbee
ggosbee
jcaldarelli
ggill
mreynolds
Oilfield Services
Jesse Hardage
jhardage
jfallows
All Sectors
Patrick Stables
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
pstables
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
David Lush, Head of Private Wealth
Vojtech Krb, Investment Advisor
Tomasz Okuszko, Investment Advisor
Michelle Hennebery, Client & Marketing Coordinator
dlush
vkrb
tokuszko
mhennebery
121
Price: Cdn$17.88
StockRating: Outperform
TargetPrice: Cdn$20.00
November 8, 2015
Headline: XX
NFI (T)
Outperform
Stock Rating:
Cdn$24.00
Target:
(Was Cdn$20.00)
Average
Risk Rating:
(Unchanged)
23.1%
Stock Data:
Cash Yield
3.1%
20.0%
$20.86-$12.05
Bloomberg/Reuters:
Forecasts: DEC YE
Revenue (USmln)
Q3/15 Review
(Unchanged)
2014a
2015e
HIGHLIGHTS
2016e
EBITDA (USmln)
$86.5
$129.8
DCPS ($US)
$1.06
$1.19
$141.0
$1.48
Dividend
$0.58
$0.60
$0.62
Payout Ratio
49%
39%
32%
DC Yield
5.9%
7.6%
9.6%
EV/EBITDA
12.4x
9.6x
8.3x
P/DCPS
16.9x
13.1x
10.4x
Financial Data
Shares Outstanding (mln)
55.5
$1,110.4
Cash
Net Debt
$6.5
$239.7
18%
1.7x
16
14
Associates:
Endri Leno - (416) 869-8047
endri.leno@nbc.ca
Kyle Stanley - (416) 507-8108
kyle.stanley@nbc.ca
Alex Bauer - (416) 869-7535
alex.bauer@nbc.ca
12
Vol, NFI.TO, 2015-11-06, 117,163.00
Volume
0
17 01 16 02 16 02 17 02 16
Q4 2014
Q1 2015
01 16 01 19 01 16 02 16 04 17 01 16 01 16 02 16
Q2 2015
Q3 2015
Q4 2015
122
Page 2
Investment Summary
Q3s backlog / order book update and financial results both continue to support our positive
investment bias, as it is clear the appetite for transit bus demand is robust and operationally
NFI is performing the best we have seen in our eight years following the company.
1) In the LTM NFI added 4k units of new firm and option orders, representing over 54% of
the current 7.3k unit / US$3.6 bln backlog. This represents more than three years of
production at the current run-rate, and we expect the pricing and margins from this book
of business to be consistent with the healthy performance realized of late. NFI has finally
chewed through less attractive backlog signed up during the economic downturn, and
evidence suggests the sharp improvements realized the last few quarters (particularly in
terms of EBITDA/delivery) better reflects the amount transit bus manufacturers can
make in the current environment. Transit authorities are replacing fleets given better
access to funding, an elevated age, environmental reasons and to drive operating
efficiencies all themes positioned to continue.
2) Management has been actively investing in improved IT, plant design / workflow,
operating efficiencies and to standardize its bus platform to Xcelsior, the benefits being
reflected in margin gains from the manufacturing segment and to a lesser extent
aftermarkets.
3) Aftermarkets profitability is at its highest levels ever, and while the ending of the CTA
mid-life overhaul program will weigh on top line the next three quarters, this segments
EBITDA outlook remains robust. We continue to believe the disconnect between NFIs
manufacturing market share (~48% of North America) and aftermarkets (~33%)
represents an opportunity as the latter plays catch up.
After adjusting for Q3 takeaways our 2016e EBITDA forecast increases 7% to US$141 mln
and DCPS +8% to US$1.48 reflecting a 32% payout. Given this cushion and NFIs
conservatively leveraged 1.7x net debt to EBITDA balance sheet, we believe investors
should anticipate continued dividend increases.
We use an unchanged ~10x 2016e EV/EBITDA multiple on our new estimates (and update
our FX assumptions) to arrive at a $24 target price (was $20), our target multiple
representing the average valuation for TSX diversified yield equities which we argue fairly
reflects NFIs relative attributes. With a 23%+ implied total return we reiterate an Outperform
rating.
123
Page 3
DISCLOSURES:
Ratings And What They Mean: PRIMARY STOCK RATING: NBF has a three-tiered rating system that is relative to the coverage universe of the particular analyst. Here is a brief
description of each: Outperform The stock is expected to outperform the analysts coverage universe over the next 12 months; Sector Perform The stock is projected to perform in
line with the sector over the next 12 months; Underperform The stock is expected to underperform the sector over the next 12 months. SECONDARY STOCK RATING: Under
Review Our analyst has withdrawn the rating because of insufficient information and is awaiting more information and/or clarification; Tender Our analyst is recommending that
investors tender to a specific offering for the companys stock; Restricted Because of ongoing investment banking transactions or because of other circumstances, NBF policy and/or
laws or regulations preclude our analyst from rating a companys stock. INDUSTRY RATING: NBF has an Industry Weighting system that reflects the view of our Economics & Strategy
Group, using its sector rotation strategy. The three-tiered system rates industries as Overweight, Market Weight and Underweight, depending on the sectors projected performance
against broader market averages over the next 12 months. RISK RATING: NBF utilizes a four-tiered risk rating system, Below Average, Average, Above Average and Speculative.
The system attempts to evaluate risk against the overall market. In addition to sector-specific criteria, analysts also utilize quantitative and qualitative criteria in choosing a rating. The
criteria include predictability of financial results, share price volatility, credit ratings, share liquidity and balance sheet quality.
General National Bank Financial (NBF) is an indirect wholly owned subsidiary of National Bank of Canada. National Bank of Canada is a public company listed on Canadian stock
exchanges.
The particulars contained herein were obtained from sources which we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed are based
upon our analysis and interpretation of these particulars and are not to be construed as a solicitation or offer to buy or sell the securities mentioned herein.
Research Analysts The Research Analyst(s) who prepare these reports certify that their respective report accurately reflects his or her personal opinion and that no part of his/her
compensation was, is, or will be directly or indirectly related to the specific recommendations or views as to the securities or companies.
NBF compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of NBF including, Institutional
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Canadian Residents In respect of the distribution of this report in Canada, NBF accepts responsibility for its contents. To make further inquiry related to this report, Canadian residents
should contact their NBF professional representative. To effect any transaction, Canadian residents should contact their NBF Investment advisor.
U.S. Residents With respect to the distribution of this report in the United States, National Bank of Canada Financial Inc. (NBCFI) is regulated by the Financial Industry Regulatory
Authority (FINRA) and a member of the Securities Investor Protection Corporation (SIPC). This report has been prepared in whole or in part by, research analysts employed by non-US
affiliates of NBCFI that are not registered as broker/dealers in the US. These non-US research analysts are not registered as associated persons of NBCFI and are not licensed or
qualified as research analysts with FINRA or any other US regulatory authority and, accordingly, may not be subject (among other things) to FINRA restrictions regarding communications
by a research analyst with the subject company, public appearances by research analysts and trading securities held a research analyst account.
All of the views expressed in this research report accurately reflect the research analysts personal views regarding any and all of the subject securities or issuers. No part of the analysts
compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. The analyst responsible for the production of
this report certifies that the views expressed herein reflect his or her accurate personal and technical judgment at the moment of publication. Because the views of analysts may differ,
members of the National Bank Financial Group may have or may in the future issue reports that are inconsistent with this report, or that reach conclusions different from those in this
report. To make further inquiry related to this report, United States residents should contact their NBCFI registered representative.
UK Residents In respect of the distribution of this report to UK residents, National Bank Financial Inc. has approved the contents (including, where necessary, for the purposes of
Section 21(1) of the Financial Services and Markets Act 2000). National Bank Financial Inc. and/or its parent and/or any companies within or affiliates of the National Bank of Canada
group and/or any of their directors, officers and employees may have or may have had interests or long or short positions in, and may at any time make purchases and/or sales as
principal or agent, or may act or may have acted as market maker in the relevant securities or related financial instruments discussed in this report, or may act or have acted as
investment and/or commercial banker with respect thereto. The value of investments can go down as well as up. Past performance will not necessarily be repeated in the future. The
investments contained in this report are not available to retail customers. This report does not constitute or form part of any offer for sale or subscription of or solicitation of any offer to
buy or subscribe for the securities described herein nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever.
This information is only for distribution to Eligible Counterparties and Professional Clients in the United Kingdom within the meaning of the rules of the Financial Conduct Authority.
National Bank Financial Inc. is authorised and regulated by the Financial Conduct Authority and has its registered office at 71 Fenchurch Street, London, EC3M 4HD.. National Bank
Financial Inc. is not authorised by the Prudential Regulation Authority and the Financial Conduct Authority to accept deposits in the United Kingdom.
Copyright This report may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or
conclusions contained in it be referred to without in each case the prior express written consent of National Bank Financial.
NBF is a member of the Canadian Investor Protection Fund.
NBF quarterly ratings summary and the total ratings by month can be found on our website under Research and Analysis/Equities/About NBF Research/Quarterly Ratings Summary (link
attached) http://www.nbcn.ca/cmst/site/index.jhtml?navid=803&templateID=249
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Click on the following link to see the company specific disclosures http://www.nbcn.ca/contactus/disclosures.html
Click on the following link to see National Bank Financial Markets Statement of Policies http://nbfm.ca/en/statement-of-policies/
If a company specific disclosure is not found herein for a listed company, NBF at this time does not provide research coverage or stock rating for the company in question.
Additional company related disclosures for New Flyer Industries Inc. (6,7)
6 National Bank Financial Inc. or an affiliate has a non-investment banking services related relationship during the past 12 months.
7 The issuer is a client, or was a client, of National Bank Financial Inc. or an affiliate within the past 12 months.
124
Current (CAD)
Ticker: NFI
Country: CA
Currency: CAD
Buy
Exchange: Toronto SE
1W (CAD)
1W (%)
LW (CAD)
Close price
20.00
1.04
5.4 8 %
18.96
T arget price
20.08
0.63
3.23 %
19.4 5
New Flyer Industries Inc. (NFI) is a manufacturer of heavy-duty transit buses in the United States and Canada. The Company operates in two
business segments: Bus Operations and Aftermarket Operations. The Bus Operations segment is involved in the manufacture of heavy-duty
transit buses for public transportation and MiDi. The Aftermarket Operations segment is involved in the provision of service parts and
support related to transit buses. The Company offers the product line, including drive systems powered by diesel, natural gas, electric trolley,
fuel cell, diesel-electric hybrid and battery-electric. NFI also operates the industry's aftermarket parts organization, sourcing parts from
hundreds of different suppliers and providing support for all types of heavy-duty transit buses.
-
Rat ios
MA18
MA36
T his week
20.00
18.96
High
20.56
19.4 9
Low
19.91
18.63
Beta
0.09
0.05
1,110 M
1,04 5 M
Market cap
19
18
Volume
- -
11/4
11/5
P/S ratio
0.57 x
0.55 x
P/E ratio
27.73 x
26.56 x
P/B ratio
1.84 x
1.76 x
DPS yield
+3.52 %
+3.65 %
EV/EBITDA
11/3
Last week
Close price
- -
11/6
(UnitCAD)
Headline
Created at
Type
Title
2015/11/04
reuters.com
2015/10/15
reuters.com
2015/10/05
reuters.com
BRIEF-Wood Buffalo, Alberta awards New Flyer a contract for 25 midi and xcelsior buses
2015/09/28
reuters.com
BRIEF-New Flyer of America says Omnitrans awards contract for up to 217 Xcelsior Buses
(UnitCAD)
Analyst projections(2015)
Consensus
Target price
Revenue
20.08
Buy
Last week
Weight
17.17
+5.51 %
2,136 M
1,982 M
1.11
+55.00 %
1.11
1.11
DPS
0.74
+5.62 %
0.81
0.62
T arget price
(UnitCAD)
2010
2011
2012
2013
2014
1,284 M
1,209 M
1,129 M
1,565 M
1,894 M
84 M
89 M
43 M
66 M
66 M
3M
20 M
12 M
34 M
34 M
Operating income
+37 %
Net income
-
Outperform
Part icipant s
2,037 M
Revenue
Analyst s consensus
Low
Overvalued
17.51
T arget price
High
EPS
Overvalued
(UnitCAD)
vs.LFY
2B
Outperf orm
21.63
20.83
+63 %
1B
T arget price
2010
2011
Tot al revenue
2012
2013
2014
Net income
T he c om pany profile, other c om pany- related inform ation, analysts' opinion and projec tions in this Report are supplied by T hom son Reuters. T his Report is intended to be used for inform ation and referenc e
purposes only, and does not c onstitute a solic itation, or an offer to m ake an investm ent in, or to purc hases or sell, any spec ific investm ent produc ts. T he inform ation in this Report m ay c ontain projec tions,
opinions, assum ptions, estim ates and forec asts relating to future business perform anc e and events. Minkabu Group m akes no warranty regarding the ac c urac y or reliability of suc h projec tions, opinions,
assum ptions, estim ates or forec asts, and has no liability for any dam age of any kind arising out of relianc e on suc h inform ation. For m ore details, please refer to the Disc laim er on the last page of this
Report.
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125
Valuation analysis
Overvalued
based on
Target price
Potential
P/S ratio
17.51 CAD
-12.44 %
Overall results
Last week
Overvalued
based on
Target price
P/S ratio
17.17 CAD
Curr.
Max.
Min.
Price
20.00
19.07
20.4 7
16.96
Volume
117,163
124 ,988
300,960
17,833
Market cap
1,110 M
1,062 M
1,138 M
994 M
(KPI: P/S ratio) and peer (KPI: P/B ratio) comparison analysis. As a result,
this stock is considered 'overvalued'. However New Flyer Industries Inc
would be considered 'undervalued' if its price declined below 17.51.
(UnitCAD)
Valuation analysis
Historical comparison
Peer comparison
Sales
Prof it
BookValue
Dividend
Cash-f low
P/S rat io
P/E rat io
P/B rat io
DPS yield
EV/EBIT DA
0.57 x
27.73 x
1.84 x
+3.52 %
Result
overvalued
overvalued
overvalued
overvalued
overvalued
Average
0.50 x
23.11 x
1.51 x
+4 .4 5 %
10.61 x
Importance
High
Low
Low
Low
Low
Result
overvalued
undervalued
overvalued
overvalued
overvalued
Average
2.84 x
35.56 x
6.54 x
+1.52 %
25.23 x
Adjusted
0.50 x
35.56 x
1.51 x
+4 .4 5 %
10.61 x
Correlation
0.26
0.73
+0.4 9
Low
Low
High
Low
Low
Comparison
Importance
Historical comparison
Currently, New Flyer Industries Inc is considered 'overvalued' by the analysis because its P/S ratio is higher than its historical average.
Peer comparison
On the other hand, the P/B ratio of this stock tends to have a high correlation with the average of all listed companies worldwide. As a result, many
investors may estimate the trend of its net assets by comparing the company with all listed companies worldwide.And New Flyer Industries Inc
tended to trade at a discount in the past compared to its peers. As a result, this stock is considered 'overvalued' based on a peer comparison.
Analysts consensus
Outperform
2 weeks ago
Outperf orm
-
Target price
Potential
21.63 CAD
+8.14 %
Last week
Outperf orm
20.83 CAD
Low
High
Domest ic()
PSR
0.54 x
0.53 x
0.57 x
0.83 x
2.12 x
PER
17.89 x
17.89 x
17.89 x
17.4 9 x
28.19 x
Global()
Number of Opinions
Target price
Outperform
Valuation
Current
Outperf orm
Last week
Global()
0
2 we e ks ago
Buy
Out perf o rm
Las t we e k
Ho ld
Curre nt
Underperf o rm
Sell
Domest ic()
P/S ratio
0.57 x
1.77 x
3.4 1 x
P/E ratio
27.73 x
20.4 9 x
4 7.02 x
T he c om pany profile, other c om pany- related inform ation, analysts' opinion and projec tions in this Report are supplied by T hom son Reuters. T his Report is intended to be used for inform ation and referenc e
purposes only, and does not c onstitute a solic itation, or an offer to m ake an investm ent in, or to purc hases or sell, any spec ific investm ent produc ts. T he inform ation in this Report m ay c ontain projec tions,
opinions, assum ptions, estim ates and forec asts relating to future business perform anc e and events. Minkabu Group m akes no warranty regarding the ac c urac y or reliability of suc h projec tions, opinions,
assum ptions, estim ates or forec asts, and has no liability for any dam age of any kind arising out of relianc e on suc h inform ation. For m ore details, please refer to the Disc laim er on the last page of this
Report.
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126
Industry average (domestic): Heavy Machinery & Vehicles w/Top 3 market cap
Rating & Valuation
(UnitCAD)
AT S Aut omat ion
New Flyer
Inc
[AT A/CA]
Close price
20.00
Rating
Valuation analysis
Overvalued
Target price
Potential
Rating
Analysts consensus
Exco T echnologies
Ag Growt h
Lt d
[XT C/CA]
[AFN/CA]
12.51
Undervalued
14 .19
Undervalued
Domest ic()
30.62
Undervalued
17.51
14 .87
14 .89
51.07
-12.4 4 %
+18.93 %
+4 .93 %
+66.79 %
Outperf orm
Target price
Outperf orm
Outperf orm
Outperf orm
21.63
17.78
18.70
4 4 .64
+8.15 %
+4 2.17 %
+31.78 %
+4 5.79 %
Rating
Target price
Potential
Market cap
1,110 M
1,157 M
601 M
4 39 M
173 M
EnterpriseValue
Potential
Retail consensus
P/E ratio
1,4 13 M
1,34 2 M
593 M
572 M
268 M
last FY (norm.)
27.73 x
29.78 x
19.4 2 x
90.98 x
20.4 9 x
projected
17.89 x
15.4 7 x
14 .4 5 x
13.4 2 x
17.4 9 x
last FY
0.57 x
1.23 x
1.63 x
1.09 x
1.77 x
projected
0.54 x
1.10 x
1.22 x
0.93 x
0.83 x
11.4 4 x
12.4 8 x
11.01 x
9.17 x
7.77 x
PSR
EV/EBITDA(LFT)
Fundamentals
New Flyer
Indust ries Inc
Sales
Exco T echnologies
Ag Growt h
Lt d
Inc
Domest ic()
last FY
1,930 M
936 M
368 M
4 00 M
318 M
projected
2,037 M
1,052 M
4 91 M
4 72 M
4 88 M
vs last FY
+5.51 %
+12.39 %
+33.4 8 %
+18.10 %
49 M
55 M
40 M
36 M
27 M
27 M
last FY
Income bef ore tax
projected
66 M
60 M
41 M
13 M
vs last FY
+76.76 %
+9.4 3 %
+2.4 8 %
-63.04 %
EBITDA(LFY)
123 M
107 M
53 M
62 M
42 M
Book value(LFY)
602 M
570 M
202 M
209 M
124 M
100
80
60
40
20
0
P/E(LFY)
P/E(Proje cte d)
P/S(LFY)
P/S(Proje cte d)
Exco Technologies Lt d
EV/EBITDA(LFT)
T he c om pany profile, other c om pany- related inform ation, analysts' opinion and projec tions in this Report are supplied by T hom son Reuters. T his Report is intended to be used for inform ation and referenc e
purposes only, and does not c onstitute a solic itation, or an offer to m ake an investm ent in, or to purc hases or sell, any spec ific investm ent produc ts. T he inform ation in this Report m ay c ontain projec tions,
opinions, assum ptions, estim ates and forec asts relating to future business perform anc e and events. Minkabu Group m akes no warranty regarding the ac c urac y or reliability of suc h projec tions, opinions,
assum ptions, estim ates or forec asts, and has no liability for any dam age of any kind arising out of relianc e on suc h inform ation. For m ore details, please refer to the Disc laim er on the last page of this
Report.
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127
Industry average (worldwide): Heavy Machinery & Vehicles Market cap Top3
Rating & Valuation
(UnitCAD)
New Flyer
Danaher Corp
CRRC Corp Lt d
ABB Lt d
[DHR/US]
[601766/CN]
[ABBN/CH]
Close price
20.00
Rating
Valuation analysis
Overvalued
Target price
Potential
Rating
Analysts consensus
3.10
-
25.37
Undervalued
17.51
164 .80
27.26
-12.4 4 %
+30.62 %
+7.4 6 %
Outperf orm
Target price
126.16
Undervalued
Global()
Outperf orm
Hold
Hold
21.63
130.81
2.64
25.97
+8.15 %
+3.69 %
-14 .92 %
+2.37 %
Rating
Target price
Potential
Market cap
1,110 M
86,4 55 M
78,54 3 M
58,729 M
836 M
EnterpriseValue
1,4 13 M
87,071 M
79,884 M
59,910 M
28,286 M
last FY (norm.)
27.73 x
26.4 0 x
37.94 x
24 .85 x
4 7.02 x
projected
17.89 x
22.22 x
33.61 x
17.91 x
28.19 x
last FY
0.57 x
3.29 x
3.16 x
1.12 x
3.4 1 x
projected
0.54 x
3.13 x
1.70 x
1.24 x
2.12 x
11.4 4 x
15.13 x
4 0.35 x
10.4 9 x
20.85 x
Potential
Retail consensus
P/E ratio
PSR
EV/EBITDA(LFT)
Fundamentals
New Flyer
Indust ries Inc
Sales
CRRC Corp Lt d
ABB Lt d
Global()
last FY
1,930 M
26,216 M
24 ,837 M
52,4 36 M
613 M
projected
2,037 M
27,54 9 M
4 9,668 M
4 7,333 M
1,094 M
vs.LFY
+5.51 %
+5.08 %
+99.97 %
-9.73 %
last FY
49 M
4 ,632 M
1,64 4 M
5,184 M
52 M
83 M
projected
66 M
4 ,758 M
3,539 M
4 ,296 M
+76.76 %
+3.81 %
+117.31 %
-16.67 %
EBITDA(LFY)
123 M
5,752 M
1,979 M
5,710 M
75 M
Book value(LFY)
602 M
31,106 M
8,4 84 M
21,64 7 M
317 M
vs.LFY
Danaher Corp
50
40
30
20
10
0
P/E(LFY)
P/E(Proje cte d)
P/S(LFY)
Danaher Corp
CRRC Corp Lt d
P/S(Proje cte d)
ABB Lt d
EV/EBITDA(LFT)
Global()
T he c om pany profile, other c om pany- related inform ation, analysts' opinion and projec tions in this Report are supplied by T hom son Reuters. T his Report is intended to be used for inform ation and referenc e
purposes only, and does not c onstitute a solic itation, or an offer to m ake an investm ent in, or to purc hases or sell, any spec ific investm ent produc ts. T he inform ation in this Report m ay c ontain projec tions,
opinions, assum ptions, estim ates and forec asts relating to future business perform anc e and events. Minkabu Group m akes no warranty regarding the ac c urac y or reliability of suc h projec tions, opinions,
assum ptions, estim ates or forec asts, and has no liability for any dam age of any kind arising out of relianc e on suc h inform ation. For m ore details, please refer to the Disc laim er on the last page of this
Report.
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128
Financials
Income statement
(UnitMCAD)
2010
2011
2012
2013
2014
Revenue
1,284
1,209
1,129
1,565
1,894
Total revenue
1,284
1,209
1,129
1,565
1,894
-2
-0
-3
1,129
1,059
1,033
1,4 08
1,713
154
150
96
157
180
61
54
56
90
106
11
1,200
1,119
1,085
1,4 99
1,828
84
89
43
66
66
-85
-53
-28
-18
-14
-0
Other net
-3
-1
-1
-2
-2
-5
34
13
45
49
-8
14
10
14
20
12
34
34
20
12
34
34
Net income
20
12
34
34
20
14
40
34
Dilution adjustment
20
12
34
34
20
12
34
34
25
68
76
72
(UnitMCAD)
2010
2011
2012
2013
2014
Cash
95
13
14
15
95
13
14
15
22
22
68
14 4
14 1
288
255
79
151
14 8
300
277
Total inventory
108
122
162
239
300
Prepaid expenses
290
293
331
565
607
84
95
112
172
-35
-4 6
-57
-89
48
48
54
84
83
Goodwill net
263
263
263
277
Intangibles net
4 66
446
4 26
74 3
4 33
39
83
94
90
81
1,108
1,136
1,171
1,4 83
1,4 83
304
124
198
196
278
Accrued expenses
Payable accrued
14
54
47
54
91
51
49
110
95
224
267
300
4 37
4 61
528
217
232
259
261
533
220
235
261
265
T he c om pany profile, other c om pany- related inform ation, analysts' opinion and projec tions in this Report are supplied by T hom son Reuters. T his Report is intended to be used for inform ation and referenc e
purposes only, and does not c onstitute a solic itation, or an offer to m ake an investm ent in, or to purc hases or sell, any spec ific investm ent produc ts. T he inform ation in this Report m ay c ontain projec tions,
opinions, assum ptions, estim ates and forec asts relating to future business perform anc e and events. Minkabu Group m akes no warranty regarding the ac c urac y or reliability of suc h projec tions, opinions,
assum ptions, estim ates or forec asts, and has no liability for any dam age of any kind arising out of relianc e on suc h inform ation. For m ore details, please refer to the Disc laim er on the last page of this
Report.
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129
164
155
159
14 9
19
15
26
40
22
94 2
659
722
889
892
-129
-14 5
-170
-173
-177
-3
-1
-2
165
4 77
449
594
590
1,108
1,136
1,171
1,4 83
1,4 83
536
235
289
308
320
(UnitMCAD)
2010
2011
2012
2013
2014
20
12
34
34
Depreciation depletion
10
10
10
12
20
Amortization
20
20
20
24
26
14
10
14
95
14
14
40
65
56
22
14
15
14
24
15
-37
-131
-4 5
-56
-76
92
-50
39
59
Capital expenditures
-10
-10
-14
-27
-14
-132
-10
-10
-14
-159
-14
-24
-32
-4 4
-38
-38
11
15
55
13
-28
-24
121
-38
-15
-7
-4
14 5
-0
55
-82
2B
1.5B
1B
500M
2010
2011
2012
Tot al Asset s
2013
2014
T he c om pany profile, other c om pany- related inform ation, analysts' opinion and projec tions in this Report are supplied by T hom son Reuters. T his Report is intended to be used for inform ation and referenc e
purposes only, and does not c onstitute a solic itation, or an offer to m ake an investm ent in, or to purc hases or sell, any spec ific investm ent produc ts. T he inform ation in this Report m ay c ontain projec tions,
opinions, assum ptions, estim ates and forec asts relating to future business perform anc e and events. Minkabu Group m akes no warranty regarding the ac c urac y or reliability of suc h projec tions, opinions,
assum ptions, estim ates or forec asts, and has no liability for any dam age of any kind arising out of relianc e on suc h inform ation. For m ore details, please refer to the Disc laim er on the last page of this
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130
Corporate profile
Company profile
New Flyer Industries Inc. (NFI) is a manuf acturer of heavy-duty transit buses in the United States and Canada. The
Company operates in two business segments: Bus Operations and Af termarket Operations. The Bus Operations
segment is involved in the manuf acture of heavy-duty transit buses f or public transportation and MiDi. The
Business summary
Af termarket Operations segment is involved in the provision of service parts and support related to transit buses. The
Company of f ers the product line, including drive systems powered by diesel, natural gas, electric trolley, f uel cell,
diesel-electric hybrid and battery-electric. NFI also operates the industry's af termarket parts organization, sourcing
parts f rom hundreds of dif f erent suppliers and providing support f or all types of heavy-duty transit buses.
BRIEF: For the 26 weeks ended 28 June 2015, New Flyer Industries Inc. revenues increased 13% to $755.3M. Net
income increased f rom $9M to $23.2M. Revenues ref lect Bus Operations segment increase of 12% to $576.5M, Af ter
Financial summary
Market Operations segment increase of 16% to $178.8M, United States segment increase of 17% to $668M. Net
income benef ited f rom Foreign exchange loss (gain) decrease f rom $1.2M (expense) to $767K (income).
Homepage
http://www.newf lyer.com/
Address
Public contact
Phone number
Contact email
investor@newf lyer.com
Management
Rank
Name
Posit ion
Since
Brian V. Tobin
Paul Soubry
2009-5-11
Glenn Asham
2013
Colin Pewarchuk
2007
Wayne R. Joseph
2008-7
Ian Smart
2011-10
David White
2006-1-1
Janice Harper
2009-10
10
Margaret Lewis
2009-10
Age
60
56
On December 29, 2013 New Flyer Industries Inc had 3,200 Employees.
T he c om pany profile, other c om pany- related inform ation, analysts' opinion and projec tions in this Report are supplied by T hom son Reuters. T his Report is intended to be used for inform ation and referenc e
purposes only, and does not c onstitute a solic itation, or an offer to m ake an investm ent in, or to purc hases or sell, any spec ific investm ent produc ts. T he inform ation in this Report m ay c ontain projec tions,
opinions, assum ptions, estim ates and forec asts relating to future business perform anc e and events. Minkabu Group m akes no warranty regarding the ac c urac y or reliability of suc h projec tions, opinions,
assum ptions, estim ates or forec asts, and has no liability for any dam age of any kind arising out of relianc e on suc h inform ation. For m ore details, please refer to the Disc laim er on the last page of this
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131
Historical Charts
M3 Chart
Historical data
(UnitCAD)
High
MA18
MA36
18
16
14
8/17
8/31
9/14
9/28
10/12
10/26
Y1 Chart
Low
Volume
2015/08/10 -
19.29
17.95
851,4 00
2015/08/17 -
19.95
18.36
837,258
2015/08/24 -
19.11
16.08
366,011
2015/08/31 -
19.36
18.54
4 07,925
2015/09/07 -
19.25
18.01
397,206
2015/09/14 -
19.10
18.06
4 09,526
2015/09/21 -
19.88
18.95
4 11,151
2015/09/28 -
20.84
18.4 1
776,239
2015/10/05 -
20.20
19.27
64 7,84 9
2015/10/12 -
20.00
19.02
4 76,399
2015/10/19 -
19.4 5
18.04
74 7,058
2015/10/26 -
19.54
18.51
535,382
During
20.84
16.08
Historical data
(UnitCAD)
High
MA18
MA36
17.5
15
12.5
Low
Volume
2014 /12/01 -
13.60
12.05
1,869,288
2015/01/01 -
13.88
12.58
1,221,080
2015/02/01 -
13.99
12.95
656,14 0
2015/03/01 -
14 .4 4
13.4 6
1,363,24 2
3,007,086
2015/04 /01 -
14 .90
13.75
2015/05/01 -
14 .4 9
14 .25
128,100
2015/07/01 -
16.61
15.93
610,384
During
16.61
12.05
10
1/1
3/1
7/1
9/1
Y5 Chart
-
MA18
MA36
10
2011/9
2012/1
2012/5
2012/9
2013/1
2013/5
2013/9
2014/1
2014/5
2014/9
2015/1
2015/5
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133
RESEARCH ALERT
NFI | TSX
$20.32
Rating: Outperform
November 5, 2015
Q3/15 Results: New Flyer announced Q3/15 results reporting revenue, Adjusted
EBITDA and Adjusted FD EPS of $364.7mm, $36.3mm and $0.26 as compared to
our estimates of $387.8mm, $32.1mm and $0.22, respectively. Consensus
expectations for revenue, Adjusted EBITDA and Adjusted FD EPS were
$371.8mm, $31.4mm and $0.23. A conference call is scheduled for Friday,
November 6, 2015 at 9:00am ET (1-888-231-8191) where we expect management
to provide further insights on the transition to the Xcelsior platform, updates on the
synchronization of the aftermarket business and details on future margins.
Regulatory Disclosures and policy on the dissemination of research: last page or at www.altacorpcapital.com
134
Q3/14
Q2/15
Grow th y/y Grow th
Estim ate
Estim ate
Variance $ Variance %
625.0
508.0
29.2
3,568.6
625.0
468.8
34.6
3,590.0
621.0
448.8
20.2
3,069.5
0.6%
4.4%
71.0%
17.0%
2.1%
5.3%
58.1%
(1.5%)
(39.2)
5.4
21
0.0%
(7.7%)
18.3%
0.6%
317,500
18,256
5.8%
5.8%
292,970
21,606
7.4%
7.4%
278,713
12,557
4.5%
4.9%
5.1%
72.1%
2.9%
2.4%
7.5%
65.1%
2.6%
2.4%
(24,530)
3,350
(7.7%)
18.3%
1.6%
1.6%
70,284
13,880
19.7%
71,713
14,671
20.5%
82,049
13,140
16.0%
(12.6%)
11.7%
4.4%
10.6%
28.3%
2.6%
1,429
791
2.0%
5.7%
0.7%
387,784
32,137
11,975
364,683
36,277
16,559
360,762
25,697
10,245
1.1%
41.2%
61.6%
8.2%
45.3%
247.2%
(23,101)
4,140
4,584
(6.0%)
12.9%
38.3%
$0.22
$0.22
$0.30
$0.26
$0.18
$0.15
61.5%
75.2%
246.9%
81.4%
$0.08
$0.04
38.3%
19.8%
Afterm arket
Revenue
EBITDA
EBITDA Margin
Total
Revenue
Adjusted EBITDA
Reported Net Income
Fully Diluted Earnings Per Share
Reported
Adjusted
Consensus
Actual vs.
Consensus
371,803
31,350
(1.9%)
15.7%
$0.23
14.8%
700
(in $mm)
600
9.3%
8.6%
8.0%
6.2%
641.5
300
503.0
706.6
703.2
547.6
2.0%
100
0
6.0%
4.0%
200
2011
2012
Figure 2. Historical Return on Invested Capital
Source: AltaCorp Capital, Company reports
12.0%
10.0%
8.5%
500
400
14.0%
0.0%
2013
2014
LTM-Q3/15
135
Disclosure Requirements
C$20.32
Rating:
Outperform
12 Month Target:
C$23.00
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
Does any director, officer, employee of AltaCorp Capital or member of their household serve as a director or
officer or advisory capacity of the issuer? If yes, state name:
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
12 Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
13 Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
61%
26%
Sector Perform
25%
9%
Underperform
2%
0%
Speculative Buy
3%
0%
Restricted
2%
50%
Not Rated
5%
0%
Tender
3%
0%
100%
19%
Total
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied
upon, by any other person.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts
responsibility for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital
(USA) Inc. at 403-539-8600.
136
Direct
@altacorpcapital.com
__________________________________________________________________________________________________________
porourke
ysiddiqi
nlupick
sbernhardsdottir
tmatthews
cerana
Energy Infrastructure
Dirk Lever, CA, Senior Analyst
Ward Hallett, CA, Associate
dlever
whallett
Oilfield Services
Dana Benner, CFA, Senior Analyst
Karim Merali, Associate
Mark Westby, Analyst
dbenner
kmerali
mwestby
Dave Mowat
Diversified Industries
Chris Murray, P.Eng., CFA, Senior Analyst
Samarth Modwal, Associate
cmurray
smodwal
Agriculture
Peter Prattas, CPA, CA, CFA, Analyst
Stuart Pattillo, Associate
pprattas
spattillo
Ian Wild
All Sectors
Victoria Hoa, Research Assistant
vhoa
George FJ Gosbee
Chairman & CEO
403 539 8601
ggosbee@altacorpcapital.com
ATB Financial
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
khilton
Toronto
Paul Sarachman, CFA, FCSI
Adam Carlson
Jamie Riff
Tim Miller
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Institutional Trading
Calgary
Tate Pinder
Shane Dungey
tpinder
sdungey
Toronto
Mervin Kopeck
Jon Varley
Michael Capobianco
mkopeck
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
410, 585 8 Avenue SW
Calgary AB Canada T2P 1G1
403 539 8600 Main
403 539 8575 Fax
TORONTO
66 Wellington Street West, Suite 3530
Toronto, ON Canada M5K 1A1
647 776 8230 Main
647 776 8248 Fax
www.altacorpcapital.com
George Gosbee
ggosbee
jcaldarelli
ggill
mreynolds
Oilfield Services
Jesse Hardage
jhardage
jfallows
All Sectors
Patrick Stables
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
pstables
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
David Lush, Head of Private Wealth
Vojtech Krb, Investment Advisor
Tomasz Okuszko, Investment Advisor
Michelle Hennebery, Client & Marketing Coordinator
dlush
vkrb
tokuszko
mhennebery
137
Market Perform
Target Price:
Price (4-Nov):
$19.00
$20.32
November 4, 2015
416-359-5301
416-359-6193
Our View:
So far in 2015 it appears that the product rationalization plans and industry fundamentals have enabled NFI to beat
expectations and improve the margins.
This is the second quarter in a row where NFI has booked higher-than-anticipated EBITDA per EU. The increase was
mainly driven by the sales mix and operational improvement initiatives. The aftermarket segment EBITDA margin has
also improved by 450 bps y/y to 20.5% mainly due to improved market fundamentals and product mix.
NFI expects its core aftermarket parts revenue to grow by 5% in 2015. The company is also looking to identify costcutting initiatives in this business to improve the margin.
Management has said that margins should be higher in 2015 after working through some lower margin backlog and cost
initiatives. Management continues to say these improvements are expected to offset the benefits of the ITCs that were
included in EBITDA last year. EBITDA for the first three quarters is already in excess of last year's EBITDA including
ITCs, so we are not sure how to interpret the implications for guidance.
With no changes in production, NFI is a cost story and has delivered in excess of what we thought on that front. NFI
continues to look for cost opportunities, but there are limits to growth from cost initiatives.
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s) under
FINRA rules. For disclosure statements, including the Analyst's Certification, please refer to pages 2 to 5.
Flash Page 1
138
Quarterly Price
25
20
20
18
18
16
16
14
14
12
12
10
10
25
20
20
15
15
10
10
2) Mkt
1) NR
5
NFI Relative to S&P/TSX Comp.
NFI Relative to Machinery
500
400
400
300
300
200
200
100
2005
2010
400
200
200
2015
Revenue / Share
Price / Revenue
300
1.0
200
600
400
100
2000
600
500
1995
2013
2014
2015
200
200
0.5
100
-200
2013
0.0
EPS (4 Qtr Trailing)
Price / Earnings
2014
2015
-200
400
200
0
1995
FYE
(Dec.)
EPS
$
2011
2012
2013
2014
0.81
0.22
0.49
0.48
Range*:
Current*
0.73
2000
2005
P/E
Hi - Lo
9.5
40.5
24.2
29.4
6.4
23.6
15.9
21.6
40.5
6.4
25.8
2010
2015
DPS
$
Yield%
Hi - Lo
Payout
%
BV
$
P/B
Hi - Lo
0.86
0.59
0.59
0.59
16.5 11.2
11.3 6.6
7.5 4.9
5.7 4.2
>100
>100
>100
>100
8.2
7.7
8.1
8.1
0.9
1.2
1.5
1.7
0.6
0.7
1.0
1.3
1.7
0.6
84
10.8
16.5
0.62
4.2
3.3
1.8
ROE
%
3
6
6
1
2
Date
20-Feb-13
3-Jul-13
Rating Change
R to NR
NR to Mkt
Share Price
$9.94
$11.14
Flash Page 2
139
IMPORTANT DISCLOSURES
Analyst's Certification
I, Bert Powell, CFA, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I
also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this
report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates,
which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and
in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA (exceptions:
Alex Arfaei and Brodie Woods). These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the
NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a
research analyst account.
Company Specific Disclosure
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past
12 months.
Disclosure 6: This issuer is a client (or was a client) of BMO NB, BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12 months:
Non-Securities Related Services.
Disclosure 13: A partner, director, officer, employee or agent of BMO Capital Markets is an officer, director, employee of, or serves in an advisory
capacity to, this issuer: Brian Tobin (Member of Board of Directors)
Methodology and Risks to Price Target/Valuation
Methodology: Our $19.00 target is based on ~7.3x our 2016E EBITDA.
Risks: A significant portion of new transit bus purchases are funded from government sources. As long as federal, state/provincial and municipal budgets
remain under pressure, funding for new bus purchases could be reduced or eliminated. Other risks include: price volatility of raw materials, warranty costs
could be material, labour disruptions from its predominantly unionized workforce and customer contract issues (early termination, deferral, non-renewal).
Distribution of Ratings (September 30, 2015)
Rating
BMOCM US
BMOCM US
BMOCM US
BMOCM
BMOCM
Starmine
Category
BMO Rating
Universe*
IB Clients**
IB Clients***
Universe****
IB Clients*****
Universe
Buy
Outperform
42.5%
18.6%
54.7%
44.3%
56.9%
56.3%
Hold
Market Perform
54.3%
11.3%
42.7%
51.8%
40.9%
38.7%
Sell
Underperform
3.5%
11.1%
2.7%
3.9%
2.2%
5.0%
*
Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.
**
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services
as percentage within ratings category.
***
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking
services as percentage of Investment Banking clients.
****
Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.
*****
Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as
percentage of Investment Banking clients.
Flash Page 3
140
Flash Page 4
141
To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct
Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in
matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the
Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The
contents hereof are not intended for the use of and may not be issued or passed on to retail clients.
Unauthorized reproduction, distribution, transmission or publication without the prior written consent of BMO Capital Markets is strictly prohibited.
Click here for data vendor disclosures when referenced within a BMO Capital Markets research document.
Financial Group
Flash Page 5
142
Khaled Omar
1 (416) 956-6807
Kevin.Chiang@cibc.com
Khaled.Omar@cibc.com
EARNINGS UPDATE
j
November 4, 2015
Capital Equipment
Stock Rating:
Sector Weighting:
Key Ratios and Statistics
12-18 mo. Price Target
NFI-TSX (11/4/15)
SECTOR OUTPERFORMER
MARKET WEIGHT
C$24.00
C$20.32
Key Indices:
3-5-Yr. EPS
Gr. Rate (E)
52-week
Range
Shares Outstanding
Float
Avg. Daily Trading Vol.
Market Capitalization
Dividend/Div Yield
Fiscal Year Ends
Book Value
2015 ROE (E)
LT Debt
Net AssetEquity
Value
Common
Convertible Available
EBITDA ($mln)
Current
Prior
Estimates (Dec.
(Dec. 31)
31)
Valuation
EV/EBITDA-Curr
EV/EBITDA-Prior
Toronto
NM
C$12.05-C$20.85
55.5M
44.0M Shrs
38,000
C$1,054.5M
C$0.62 / 3.3%
December
$11.90 per Shr
13.0%
$141.0M
$474.1M
Yes
2013
$94.7A
2014
$107.4A
2015
$143.1E
$132.5E
2016
$147.5E
$138.4E
11.7X
10.3X
7.6X
8.3X
7.4X
8.0X
Company Description
New Flyer Industries Inc. is the largest North American manufacturer of
heavy-duty transit buses supplying transit authorities in Canada and the U.S.
www.newflyer.com
15-138888 2015
CIBC World Markets Corp., the U.S. broker-dealer, and CIBC World Markets Inc., the Canadian broker-dealer (collectively,
CIBC World Markets Corp./Inc.) do and seek to do business with companies covered in its research reports. As a result,
investors should be aware that CIBC World Markets Corp./Inc. may have a conflict of interest that could affect the
objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
For required regulatory disclosures please refer to "Important Disclosures" beginning on page 6. Please see
"Price Target Calculations" and "Key Risks to Price Target" information on page(s) 3 to 4.
Find CIBC research on Bloomberg, Reuters, firstcall.com
and ResearchCentral.cibcwm.com
CIBC World Markets Inc., P.O. Box 500, 161 Bay Street, Brookfield Place, Toronto, Canada M5J 2S8 (416) 594-7000
CIBC World Markets Corp., 425 Lexington Avenue, New York, NY 10017 (212)-856-4000
143
Strong Margins Drive Q3 Beat - Reiterate SO And Raising PT To C$24 (From C$22) - November 04, 2015
Sector Outperformer
NFI-TSX
11/4/15
12- To 18- Month Price Target:
Capital Equipment
Sector Weighting:
All figures in US$ millions, except per share data.
EV/EBITDA Multiples
Consensus estimates except New Flyer
New Flyer Industries
High-Yielding Industrials
Commercial Vehicle & Parts
Manufacturers
P/E Multiples
Consensus estimates except New Flyer
New Flyer Industries
High-Yielding Industrials
Commercial Vehicle & Parts
Manufacturers
Key Financial Metrics
2013A
EBITDA Margin
Current Ratio
Debt/Equity
Debt/Total Capital
Income Statement
Bus Manufacturing Revenues
Aftermarket Revenues
Revenues - Consolidated
Cost of Sales
Gross Profit
EBITDA
EBIT
EBT
Net Income
Balance Sheet
C$20.32
C$24.00
Market Weight
2014A
2015E
2016E
10.3x
9.5x
10.0x
7.7x
8.4x
8.5x
7.4x
7.0x
7.4x
2014A
2015E
2016E
Investment Thesis
24.5x
16.9x
17.0x
17.8x
14.6x
13.0x
18.0x
13.1x
11.8x
Fundamentals for bus demand are improving due to rising U.S. state/municipal tax revenue, growing
bus ridership numbers (reflecting the cost advantage of taking bus transit versus driving and modestly
declining unemployment rate), and public transit being a more green option.
2014A
2015E
2016E
New Flyer is well positioned to take advantage of the improving heavy duty bus fundamentals given its
leading market share in both bus manufacturing and aftermarket services.
7.9%
1.1x
51.3%
33.9%
2013A
7.4%
1.1x
53.1%
34.7%
2014A
9.4%
1.3x
40.6%
28.9%
2015E
9.6%
1.3x
49.5%
33.1%
2016E
$991.2
$215.0
$1,199.4
$1,078.7
$120.8
$94.7
$49.0
$34.6
$26.8
$1,132.1
$319.0
$1,451.1
$1,312.8
$138.3
$107.4
$51.4
$37.6
$26.7
$1,200.7
$324.3
$1,525.0
$1,341.2
$183.7
$143.1
$93.2
$78.8
$54.6
$1,231.3
$308.3
$1,539.6
$1,353.5
$186.0
$147.5
$109.2
$94.8
$62.8
Q3/15A
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Shareholders' Equity
468
1,135
326
661
474
Company Profile
New Flyer Industries Inc. is the largest North American manufacturer of heavy-duty transit buses
supplying transit authorities in Canada and the U.S. with approximately one-third the market.
New Flyer is guiding towards 2015 production line rate of ~50 EUs/week, we view its $0.62/share
annual dividend as safe.
Canada
16%
$1,000,000
2,500
$300
$800,000
2,000
$250
$600,000
1,500
$200
$400,000
1,000
$200,000
500
$0
0
2009
2010
Revenues ($ Millions)
2011
2012
Deliveries(EUs)
2013
2014
$ Millions
3,000
2008
United States
84%
Bus Operations
78%
$1,200,000
2007
$319
$215
$150
$100
$83
$96
$108
$106
$116
$119
2009
2010
2011
2012
$50
$0
2007
2008
2013
2014
144
Strong Margins Drive Q3 Beat - Reiterate SO And Raising PT To C$24 (From C$22) - November 04, 2015
The outlook for NFI remains favourable with the company noting that bus
competitions have normalized and expects that bus margins realized this year
will be, on average, higher than those realized in 2014. NFI also reiterated that
it expects the average line entry rate to be ~50 EUs this year and next year, in
line with our expectations. With respect to the Aftermarket segment, NFI
continues to expect core aftermarket parts revenue growth of ~5% in 2015.
Combined with improving industry fundamentals, NFI is also benefiting from its
restructuring plans as it converts the old NABI facility to the Xcelsior platform.
While this restructuring will cost ~$20 million, annualized cost savings will be
~$14 million, highlighting a quick payback.
We have adjusted our estimates as we actualized Q3/15 results and increased
our margins per EU in 2016 from ~$32,000 to ~$35,000 to reflect the improving
fundamentals and cost-savings initiatives. On a TTM basis, average margins per
EU were just over ~$33,000. We have also tweaked our Aftermarkets margins
by 70 bps higher after a strong Q3 to 19.5%. As such, our 2015E and 2016E
EBITDA increases to $143 million (from $133 million) and $148 million (from
$138 million) respectively. Our price target increases from C$22.00 to C$24.00.
We reiterate our SO rating with Q3 results reaffirming our positive thesis on the
name. We continue to like NFI based on its margin expansion opportunities
(reflecting improving industry fundamentals and cost cutting); increasing FCF
conversion with capex expected to hover around $12 million-$14 million
annually even with the step up in earnings; and improving ROIC. On this last
point, NFI's ROIC at the end of Q3 was 11.5%, up 90 bps Q/Q and versus 8.5%
at the end of 2014. Overall, we see the company positioned well to continue to
raise its dividend and pursue strategic tuck-in acquisitions.
Exhibit 1. Summary Of Changes
2015
2016
Before
After
Before
After
2476
2481
2500
2500
$1,532
$1,525
$1,542
$1,540
$1,205
$1,201
$1,231.3
$1,231.3
$487
$484
$311
$493
$326
$324
$311
$308
$133
$143
$138
$148
$72
$81
$80
$87
Margin (%)
6.0%
6.7%
6.5%
7.1%
$29.0
$32.6
$32.0
$35.0
$61
$62
$58
$60
18.6%
19.2%
18.8%
19.5%
145
Strong Margins Drive Q3 Beat - Reiterate SO And Raising PT To C$24 (From C$22) - November 04, 2015
Q1/F14
Q2/F14
Q3/F14
Q4/F14
F2014
Q1/F15
Q2/F15
Q3/F15
Q4/F15E
F2015E
F2016E
Revenue
$1,199,424
$323,865
$346,484
$360,762
$419,989
$1,451,100
$380,301
$375,012
$364,683
$404,970
$1,524,966
$1,539,571
Cost of Sales
$1,078,657
$293,851
$309,256
$326,482
$383,228
$1,312,817
$340,674
$326,581
$315,349
$358,639
$1,341,243
$1,353,540
Gross Profit
$120,767
$30,014
$37,228
$34,280
$36,761
$138,283
$39,627
$48,431
$49,334
$46,331
$183,723
$186,031
SGA
$26,082
$10,348
$10,262
$8,583
$1,725
$30,918
$8,213
$9,240
$13,057
$10,124
$40,634
$38,489
EBITDA
$94,685
$19,666
$26,966
$25,697
$35,036
$107,365
$31,414
$39,191
$36,277
$36,207
$143,089
$147,541
Amortization
$28,001
$7,718
$8,131
$10,012
$9,976
$35,837
$9,507
$9,845
$10,021
$9,913
$39,286
$38,320
FX loss (gain)
$118
$802
$387
$226
$132
$0
($1,455)
$688
$628
$0
($139)
$0
Operating Earnings
$66,566
$11,146
$18,448
$15,459
$24,928
$69,981
$23,362
$28,658
$25,628
$26,294
$103,942
$109,221
Unrealized FX Loss
$2,146
$380
($1,000)
$117
($317)
$0
$1,914
($829)
$984
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$15,457
$762
$6,685
$2,561
$9,353
$19,361
$3,209
$4,846
$645
$0
$8,700
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
EBIT
$48,963
$10,004
$12,763
$12,781
$15,892
$51,440
$18,239
$24,641
$23,999
$26,294
$93,173
$109,221
$8,749
$2,257
$2,257
$2,203
$2,180
$8,897
$2,334
$2,200
$2,161
$2,409
$9,635
$9,763
$2,208
$540
$549
$565
$575
$2,229
$584
$598
$609
$609
$2,400
$2,436
$2,857
$823
$1,190
$713
$795
$3,521
$726
$602
$590
$600
$2,518
$2,400
$532
($314)
$377
($785)
($53)
($775)
$487
($310)
$128
$0
$0
$0
Interest Expense
$14,346
$3,306
$4,373
$2,696
$3,497
$13,872
$4,131
$3,090
$3,488
$3,618
$14,327
$14,419
EBT
$34,617
$6,698
$8,390
$10,085
$12,395
$37,568
$14,108
$21,551
$20,511
$22,676
$78,846
$94,803
$7,856
$1,214
$4,827
($160)
$4,968
$10,849
$3,253
$9,181
$3,952
$7,835
$24,221
$32,031
Net Income
$26,761
$5,484
$3,563
$10,245
$7,427
$26,719
$10,855
$12,370
$16,559
$14,842
$54,626
$62,772
$0.81
$0.11
$0.18
$0.18
$0.30
$0.83
$0.24
$0.29
$0.31
$0.27
$1.14
$1.13
FD EPS (ex-unusuals)
146
Strong Margins Drive Q3 Beat - Reiterate SO And Raising PT To C$24 (From C$22) - November 04, 2015
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2013 Current
$15.4A
$18.1A
$24.4A
$36.8A
$94.7A
2014 Current
$19.7A
$27.0A
$25.7A
$35.0A
$107.4A
2015 Prior
$31.4A
$39.2A
$30.0E
$31.9E
$132.5E
2015 Current
$31.4A
$39.2A
$36.3A
$36.2E
$143.1E
2016 Prior
--
--
--
--
$138.4E
2016 Current
--
--
--
--
$147.5E
147
Strong Margins Drive Q3 Beat - Reiterate SO And Raising PT To C$24 (From C$22) - November 04, 2015
IMPORTANT DISCLOSURES:
Analyst Certification: Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research
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148
Strong Margins Drive Q3 Beat - Reiterate SO And Raising PT To C$24 (From C$22) - November 04, 2015
Rating
Description
SO
Sector Outperformer
Stock is expected to outperform the sector during the next 12-18 months.
SP
Sector Performer
Stock is expected to perform in line with the sector during the next 12-18 months.
SU
Sector Underperformer
Stock is expected to underperform the sector during the next 12-18 months.
NR
Not Rated
CIBC World Markets does not maintain an investment recommendation on the stock.
Restricted
CIBC World Markets is restricted (due to potential conflict of interest) from rating the stock.
Stock Ratings
Sector Weightings (note: Broader market averages refer to S&P 500 in the U.S. and S&P/TSX Composite in Canada.)
O
Overweight
Market Weight
Underweight
NA
None
"Speculative" indicates that an investment in this security involves a high amount of risk due to volatility and/or liquidity issues.
Count
Percent
152
42.2%
162
45.0%
37
10.3%
2.2%
Count
Percent
147
96.7%
155
95.7%
Restricted
31
83.8%
100.0%
Count
Percent
100.0%
Restricted
Count
Percent
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Restricted
0.0%
Important disclosures required by applicable rules can be obtained by visiting CIBC World Markets on the web at
http://researchcentral.cibcwm.com. Important disclosures for each issuer can be found using the "Coverage" tab on the
top left of the Research Central home page. Access to the system for rating investment opportunities and our
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Disclosures Request.
149
Strong Margins Drive Q3 Beat - Reiterate SO And Raising PT To C$24 (From C$22) - November 04, 2015
HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS CORP./INC. RECOMMENDATIONS FOR NEW FLYER
INDUSTRIES INC. (NFI)
Date
12/13/2012
01/10/2013
01/25/2013
02/05/2013
03/01/2013
05/10/2013
06/21/2013
07/15/2013
08/07/2013
10/15/2013
11/08/2013
04/15/2014
05/11/2014
07/16/2014
08/06/2014
03/19/2015
05/08/2015
07/15/2015
08/07/2015
09/20/2015
Change Type
Closing Price
8.38
8.80
9.95
9.72
10.30
9.86
10.30
11.13
11.54
11.07
10.94
11.20
11.82
12.85
13.17
13.92
14.69
15.77
17.88
18.85
Rating
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SO
SO
Price Target
8.50
8.75
10.00
10.50
11.00
10.00
11.00
11.50
12.00
12.50
12.00
12.25
12.50
13.00
14.00
15.00
15.75
16.50
19.50
22.00
Coverage
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
The chart above reflects the combined historical recommendations of CIBC World Markets Corp. and CIBC World Markets
Inc.
150
Strong Margins Drive Q3 Beat - Reiterate SO And Raising PT To C$24 (From C$22) - November 04, 2015
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151
Strong Margins Drive Q3 Beat - Reiterate SO And Raising PT To C$24 (From C$22) - November 04, 2015
10
152
RESEARCH ALERT
NFI | TSX
$18.56
Rating: Outperform
Large Order from MBTA: New Flyer announced that the company has been
awarded an award for up to 725 40-foot Xcelsior heavy-duty transit buses (725
equivalent units (EU)) by the Massachusetts Bay Authority (MBTA). The contract
includes a firm order for 175 CNG buses and 150 diesel-electric hybrid buses along
with five-year options for an additional 200 clean diesel and 200 diesel-electric
hybrid buses.
Orders Part of Q4/15 backlog: The order for 725EU represents the pending award
highlighted in the Q3/15 orders and backlog release and is included in the Q4/15
backlog. We note the company has an additional 444EU firm and option orders for
which approvals have been received but the manufacturer is awaiting purchase
documentation.
Long-Standing Relationship with the MBTA: We note MBTA is the fifth largest
mass transit system in the US in terms of daily ridership with more than 70% of its
fleet supported by New Flyer. MBTA presently operates a fleet of 1,008 heavy-duty
transit buses, including 412 built by New Flyer and 299 built by NABI.
Expect a Strong Book to Bill at Year End: With the announcement, we expect the
book to bill in Q4/15 and for the year to be well in excess of 1.0x. We are
forecasting a book to bill of 1.30x for Q4/15 and 1.06x for 2015. We continue to
highlight New Flyers improving margin profile and a healthy order book which
should accelerate discussions around return of capital to shareholders.
Regulatory Disclosures and policy on the dissemination of research: last page or at www.altacorpcapital.com
153
13-Oct-15
08-Oct-15
05-Oct-15
30-Sep-15
28-Sep-15
24-Sep-15
13-Aug-15
13-Aug-15
08-Jul-15
07-Jul-15
30-Jun-15
29-Jun-15
29-Jun-15
22-Jun-15
12-Jun-15
01-Jun-15
28-May-15
26-May-15
26-May-15
26-May-15
22-May-15
21-May-15
20-May-15
14-May-15
13-May-15
13-May-15
01-May-15
09-Apr-15
09-Apr-15
08-Apr-15
13-Mar-15
10-Mar-15
10-Mar-15
03-Mar-15
26-Feb-15
18-Feb-15
18-Feb-15
06-Feb-15
03-Feb-15
21-Jan-15
09-Jan-15
08-Jan-15
Midi
40'
13
28
40'
Option
60'
EU
Total
Buses
400
400
725
20
1
12
20
1
25
28
15
4
3
17
234
16
252
20
325
2
20
14
36
15
20
2
63
39
20
26
3
4
72
40
28
1
75
27
4
14
52
9
5
14
36
195
202
122
2,445
63
63
202
7
202
10
10
83
1
25
35
217
4
3
17
228
8
138
10
325
2
20
14
18
15
10
2
63
29
10
13
3
4
72
20
75
1
305
18
20
7
110
9
5
20
18
120
212
424
3,458
16
8
114
10
325
2
14
0
10
0
18
15
10
2
63
19
10
10
13
3
4
72
20
28
1
35
9
20
9
2
7
52
9
5
45
202
1,490
Midi
325
24
79
EU
325
15
4
3
5
202
12
Firm
60'
7
18
75
61
438
10
47
150
47
100
18
58
13
10
200
1,140
20
163
304
350
36
58
26
10
526
1,755
EU
Propulsion
725
CNG/ Clean
Diesel/Diesel-Electric
83
CNG
1
Electric
25
Diesel
35
Diesel
217
CNG
4
Diesel
3
Diesel
17
Diesel
244
CNG
16 Clean Diesel/ Electric
Clean
252 Diesel, Hybrid, Trolley
20
Clean Diesel
325
CNG
2
Clean Diesel
40
Clean Diesel
14
Clean Diesel
36
Clean Diesel
15
20
Clean Diesel
2
63
CNG
39
Clean Diesel
20
Diesel-Hybrid
26
CNG
3
Diesel
4
Diesel
72
40
Clean Diesel
75
Clean Diesel
1
Fuel Cell
425
CNG
27
Clean Diesel
40 Clean Diesel / Hybrid
14
CNG
110
CNG
9
Clean Diesel
5
Clean Diesel
40
Hybrid
36
CNG
195
Clean Diesel
212
CNG
648
Hybrid
4,200
2,600
4,200
161.5%
1.2x
154
Disclosure Requirements
C$18.56
Rating:
Outperform
12 Month Target:
C$23.00
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
Does any director, officer, employee of AltaCorp Capital or member of their household serve as a director or
officer or advisory capacity of the issuer? If yes, state name:
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
12 Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
13 Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
60%
21%
Sector Perform
25%
9%
Underperform
2%
0%
Speculative Buy
3%
0%
Restricted
2%
50%
Not Rated
6%
0%
Tender
3%
0%
100%
16%
Total
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied
upon, by any other person.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts
responsibility for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital
(USA) Inc. at 403-539-8600.
155
Direct
@altacorpcapital.com
__________________________________________________________________________________________________________
porourke
ysiddiqi
nlupick
sbernhardsdottir
tmatthews
cerana
Energy Infrastructure
Dirk Lever, CA, Senior Analyst
Ward Hallett, CA, Associate
dlever
whallett
Oilfield Services
Dana Benner, CFA, Senior Analyst
Karim Merali, Associate
Mark Westby, Analyst
dbenner
kmerali
mwestby
Dave Mowat
Diversified Industries
Chris Murray, P.Eng., CFA, Senior Analyst
Samarth Modwal, Associate
cmurray
smodwal
Agriculture
Peter Prattas, CPA, CA, CFA, Analyst
Stuart Pattillo, Associate
pprattas
spattillo
Ian Wild
All Sectors
Victoria Hoa, Research Assistant
vhoa
George FJ Gosbee
Chairman & CEO
403 539 8601
ggosbee@altacorpcapital.com
ATB Financial
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
khilton
Toronto
Paul Sarachman, CFA, FCSI
Adam Carlson
Jamie Riff
Tim Miller
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Institutional Trading
Calgary
Tate Pinder
Shane Dungey
tpinder
sdungey
Toronto
Mervin Kopeck
Jon Varley
Michael Capobianco
mkopeck
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
410, 585 8 Avenue SW
Calgary AB Canada T2P 1G1
403 539 8600 Main
403 539 8575 Fax
TORONTO
66 Wellington Street West, Suite 3530
Toronto, ON Canada M5K 1A1
647 776 8230 Main
647 776 8248 Fax
www.altacorpcapital.com
George Gosbee
ggosbee
jcaldarelli
ggill
mreynolds
Oilfield Services
Jesse Hardage
jhardage
jfallows
All Sectors
Patrick Stables
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
pstables
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
David Lush, Head of Private Wealth
Vojtech Krb, Investment Advisor
Tomasz Okuszko, Investment Advisor
Michelle Hennebery, Client & Marketing Coordinator
dlush
vkrb
tokuszko
mhennebery
156
COMPANY UPDATE
NFI | TSX
$19.95
Rating: Outperform
One Year Target: C$23.00
Total Return: 18.4%
Yield: 3.1%
October 16, 2015
C$20.85 / C$12.04
3.1%
Dividend Yield:
Shares Outstanding ($mm):
55.5 (basic)
C$1106.6
55.5 (fd)
39.7
123.0
$248.5
$1107.3
2014
Revenue ($mm)
2015e
2016e
EBITDA ($mm)
FD EPS
EBITDA ($m m )
Q1
2014
$19.7
$107.4
$140.3
$154.8
$0.65
$0.99
$1.18
Q2
Q3
Q4
$27.0
$25.7
$35.0
2015
$31.4
$39.2
$32.1e
$37.5e
2016
$39.4e
$36.5e
$36.5e
$42.4e
Adjusted FD EPS
2014
Q1
$0.10
Q2
Q3
Q4
$0.16
$0.15
$0.24
2015
$0.20
$0.30
$0.22e
$0.28e
2016
$0.30e
$0.27e
$0.27e
$0.34e
$25
1000
Last Sale Price
$20
800
$15
600
$10
400
$5
200
$0
0
Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15
Q3/15 Orders and Deliveries: New Flyer released orders and backlog data for
Q3/15 reporting deliveries of 625 equivalent units (EU) compared to 621EU in Q3/14.
Work-in-process (WIP) decreased to 417EU, down 30EU from the previous quarter and
down 9EU from our estimates for Q3/15. We expect WIP to decline further by the end
of 2015 with the company completing the transition to the Xcelsior platform at its
Anniston, AL facility.
A Weak Book to Bill Is Merely a Timing Issue: In Q3/15, the company received
firm orders for 253EU valued at $114.5mm and new option orders for 880EU valued at
$400.6mm. Options for 213EU valued at $120.1mm were converted to firm orders.
During the quarter, options for 76EU expired as compared to options for 119EUs that
expired in Q2/15. The company also reported that 153EU in firm orders were either
cancelled or expired which included a firm order for 100EU where the customer
declined to convert from NABI to the Xcelsior bus model. Management notes that the
same customer is now soliciting proposals for this order. TTM book to bill ratio of 1.00x
for Q3/15 was below our expectations for 1.33x. We note NFI has pending firm and
option orders for 1,169 EU which are not included in the Q3/15 backlog as the company
is awaiting purchase documentation. Subsequent to Q3/15, NFI received purchase
documentation for 725EU of the 1,169EU which are now part of the Q4/15 backlog. The
companys active bid universe decreased to 6,195EU, down 18% sequentially. Backlog
in Q3/15 was 7,290EU valued at $3.59bn versus 7,011EU ($3.49bn) in Q2/15 and
6,239EU ($3.07bn) in Q3/14.
Y/Y Decline in Aftermarket Orders Expected: The company reported a 20.3% y/y
decline in gross orders with the expiry of the Chicago Transit Authority (CTA) mid-life
upgrade program. When normalized for the CTA program, NFI reported a 7.6% y/y
increase in gross orders. Total aftermarket shipments decreased by 14.0% y/y but
increased by 4.0% y/y when normalized for the CTA contract.
Estimate Changes: Management maintained guidance for the average line entry rate
of approximately 50 EU/ production week which we believe implies a production
increase in Q4/15. Our 2015e Adjusted EBITDA declines to $140.3mm from $141.4mm
with no material change in our 2016 estimate.
Maintain Outperform and C$23.00 Target: Overall, we continue to highlight
NFIs strong order book and an improving margin profile with the completion of the
transition to the Xcelsior platform and the expected synchronization in the aftermarket
segment. We maintain our Outperform rating and our 12-month target price of C$23.00.
Our target price is based on a blend of a 15.0x earnings and 7.5x EBITDA multiple of
the four quarters ending Q2/17 reflecting our 12-month forward valuation period as well
as an exchange rate of C$1.27/$US.
Regulatory Disclosures and policy on the dissemination of research: last page or at www.altacorpcapital.com
157
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
$19.95
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
10.4x
8.2x
7.0x
Peer Average
14.0x
13.2x
11.1x
10.2x
7.8x
7.1x
23.6x
15.6x
13.1x
2014
2015e
2016e
2017e
Trend
Revenues
Bus Manufacturing
Aftermarket
Revenue
320,186
300,069
316,975
Aftermarket % of Total
22.0%
19.9%
17.1%
18.1%
57,374
78,872
92,564
93,314
5.1%
6.1%
6.4%
6.5%
2014
2015e
2016e
45,823
74,972
96,407 151,706
35,255
19,624
16,042 (36,030)
81,078
(1,766)
(1,812)
(1,812)
2017e
(1,812)
6,765
49,991
61,380
62,252
66,565
(154)
(223)
15.7%
19.2%
20.7%
21.0%
83,667
84,256
86,457
132,963
154,816
159,879
6.0%
8.3%
8.8%
9.1%
107,365
140,251
154,816
159,879
per Share
7.4%
8.7%
8.8%
9.1%
FCF Yield
Amortization
35,837
39,040
38,893
38,052
Operating Earnings
50,620
93,923
115,923
121,826
EBT
37,568
79,188
104,017
110,189
Taxes
10,849
28,540
38,486
40,770
Net Income
26,719
50,648
65,530
69,419
Reported FD EPS
$0.48
$0.91
$1.18
$1.25
Adjusted FD EPS
$0.65
$0.99
$1.18
$1.25
2015e
2016e
2017e
Grow th
2014
Revenue
Weeks of Production
$1.90
96,451 100,175
$2.18
$2.16
8.4%
9.5%
10.9%
10.9%
82.8%
13.3%
15.2%
(0.9%)
2014
2015e
2016e
2017e
32,457
33,928
34,413
34,413
35.0%
$0.585
32.2%
$0.611
28.4%
$0.620
28.6%
Cash Yield
2.9%
3.1%
3.1%
3.1%
2014
2015e
2016e
2017e
2,437
2,561
2,755
2,711
529.5
464.5
501.8
526.9
23.5
30.8
33.6
34.4
5.6%
49.2
51.2
54.0
54.2
0.0%
3.3%
48.5
0.9x
48.5
1.1x
52.6
1.0x
52.6
1.0x
52
53
52
15.0%
13.5%
13.0%
(1.1%)
Aftermarket
48.4%
0.4%
(6.3%)
Adjusted EBITDA
21.0%
13.4%
10.6%
30.6%
9.1%
10.4%
Adjusted FD EPS
2.7%
51.8%
18.8%
5.9%
2014
0.9057
2015e
0.8004
2016e
0.7953
2017e
0.8335
0.9050
0.7874
0.8130
0.8547
Leverage
Net Debt (EOP)
Net Debt to Trailing EBITDA
Net Debt to Total Capitalization
Trend
$0.620
52
Bus Manufacturing
FX Assum ptions
$1.67
Trend
Trend
20.7%
5.0%
18.7%
20.0%
2014
2015e
2016e
2017e
37,759
2.1x
1.4x
1.0x
0.2x
33.6%
29.7%
22.2%
6.4%
Trend
Trend
Option
2020, 12%
2015, 8%
$4.0
2016, 16%
$3.0
2019, 28%
$2.0
2017, 10%
$1.0
$0.0
Q109 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15
2018, 26%
158
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
Rating &
Target
Trading
Local
Currency Price
TSX:NFI
OP (C$23.00)
BOVESPA:POMO4
NR
TSX: WJX
NR
TSX: AFN
NR
TSX: SPB
NR
GBX
NR
OSK
NR
SPAR
NR
WNC
NR
THO
NR
WGO
NR
NAV
NR
TSX: STB
NR
BLBD
NR
CUB
NR
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
19.95
1.87
23.80
36.10
10.92
38.29
39.68
4.52
11.26
53.94
19.28
14.61
5.55
10.97
43.01
Market
Cap ($m m )
1,107.6
1,659.3
475.6
518.0
1,383.3
1,125.7
3,107.7
154.8
749.7
2,826.2
519.3
1,191.0
533.6
229.0
1,156.2
Net
Debt
EV
P/E
($m m )
2014
2015e
2016e
Price
to BV
ROIC
ROE
249.4
1,268.6
167.3
328.7
939.9
316.0
854.2
(15.4)
196.5
(176.3)
(49.2)
4,511.0
199.6
188.1
(43.0)
1,098.1
2,953.9
642.9
846.7
2,323.2
1,552.3
3,961.9
139.3
946.2
2,649.8
470.1
5,712.0
785.1
467.1
1,113.5
23.6x
5.8x
9.7x
NM
24.2x
8.3x
11.4x
NM
12.8x
15.2x
12.0x
NM
NM
NM
17.4x
14.0x
10.2x
11.0x
7.8x
13.4x
8.2x
6.0x
6.7x
14.8x
5.9x
8.9x
7.1x
17.3x
11.4x
18.0x
9.3x
10.4x
7.8x
11.5x
7.3x
11.1x
8.3x
3.4x
7.3x
11.2x
4.7x
7.8x
7.0x
10.1x
10.2x
6.2x
9.3x
8.2x
7.1x
8.4x
7.0x
8.1x
7.3x
3.3x
6.8x
8.2x
4.7x
6.8x
6.6x
7.4x
8.9x
5.7x
8.3x
7.0x
1.9x
1.0x
1.5x
2.0x
2.4x
1.6x
1.6x
0.9x
1.9x
2.7x
2.5x
NM
2.1x
NM
1.5x
1.8x
6.4%
3.2%
9.0%
6.1%
6.2%
18.1%
8.9%
1.6%
12.1%
17.7%
19.4%
9.7%
3.0%
4.5%
5.8%
8.8%
9.0%
11.8%
13.0%
(2.5%)
5.7%
34.7%
12.2%
0.7%
20.6%
19.8%
21.5%
NM
2.0%
NM
4.6%
11.8%
15.6x
8.5x
11.4x
16.7x
20.5x
6.3x
12.2x
NM
8.8x
13.7x
12.5x
NM
NM
14.4x
17.4x
13.2x
EV/EBITDA
13.1x
6.0x
10.8x
10.8x
11.4x
6.1x
10.8x
23.8x
8.5x
12.0x
11.3x
5.9x
NM
9.5x
15.9x
11.1x
159
Disclosure Requirements
C$19.95
Rating:
Outperform
12 Month Target:
C$23.00
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
Does any director, officer, employee of AltaCorp Capital or member of their household serve as a director or
officer or advisory capacity of the issuer? If yes, state name:
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
12 Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
13 Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
60%
21%
Sector Perform
25%
9%
Underperform
2%
0%
Speculative
3%
0%
Restricted
2%
50%
Not Rated
6%
0%
Tender
3%
0%
100%
16%
Total
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied
upon, by any other person.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts
responsibility for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital
(USA) Inc. at 403-539-8600.
160
Direct
@altacorpcapital.com
__________________________________________________________________________________________________________
porourke
ysiddiqi
nlupick
sbernhardsdottir
tmatthews
cerana
Energy Infrastructure
Dirk Lever, CA, Senior Analyst
Ward Hallett, CA, Associate
dlever
whallett
Oilfield Services
Dana Benner, CFA, Senior Analyst
Karim Merali, Associate
Mark Westby, Analyst
dbenner
kmerali
mwestby
Dave Mowat
Diversified Industries
Chris Murray, P.Eng., CFA, Senior Analyst
Samarth Modwal, Associate
cmurray
smodwal
Agriculture
Peter Prattas, CPA, CA, CFA, Analyst
Stuart Pattillo, Associate
pprattas
spattillo
Ian Wild
All Sectors
Victoria Hoa, Research Assistant
vhoa
George FJ Gosbee
Chairman & CEO
403 539 8601
ggosbee@altacorpcapital.com
ATB Financial
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
khilton
Toronto
Paul Sarachman, CFA, FCSI
Adam Carlson
Jamie Riff
Tim Miller
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Institutional Trading
Calgary
Tate Pinder
Shane Dungey
tpinder
sdungey
Toronto
Mervin Kopeck
Jon Varley
Michael Capobianco
mkopeck
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
410, 585 8 Avenue SW
Calgary AB Canada T2P 1G1
403 539 8600 Main
403 539 8575 Fax
TORONTO
66 Wellington Street West, Suite 3530
Toronto, ON Canada M5K 1A1
647 776 8230 Main
647 776 8248 Fax
www.altacorpcapital.com
George Gosbee
ggosbee
jcaldarelli
ggill
mreynolds
Oilfield Services
Jesse Hardage
jhardage
jfallows
All Sectors
Patrick Stables
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
pstables
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
David Lush, Head of Private Wealth
Vojtech Krb, Investment Advisor
Tomasz Okuszko, Investment Advisor
Michelle Hennebery, Client & Marketing Coordinator
dlush
vkrb
tokuszko
mhennebery
161
Lowering Recommendation
HOLD
from BUY
PRICE TARGET
from C$21.00
Price (15-Oct)
Ticker
C$20.00
C$19.95
NFI-TSX
12.04 - 20.85
0.06
1,107
0.62
3.1
62.0
3.4
247.5
www.newflyer.com
2014A
2015E
2016E
2017E
1.18
1.18
0.5
1.51
1.53
0.4
1.80
1.86
0.3
1.89
1.95
0.3
Sales (US$M)
Previous
ROIC (%)
Quarterly FCF /
Shr
2014A
2015E
2016E
2017E
Q1
Q2
Q3
Q4
0.19
0.22A
0.49
0.52
0.29
0.39
0.46
0.48
0.32
0.39
0.43
0.45
0.38
0.42
0.42
0.44
22
20
18
16
14
12
Oct-15
Sep-15
Jul-15
Aug-15
Jun-15
Apr-15
May-15
Mar-15
Jan-15
Feb-15
Dec-14
Nov-14
10
NFI
Source:FactSet
Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX | CF. : LSE)
The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all
the companies and securities that are the subject of this report discussed herein.
For important information, please see the Important Disclosures beginning on page 13 of this document.
162
Hold from Buy Target Price C$20.00 from C$21.00 | 16 October 2015
Auto Components 2
163
Figure 1: Revised Canaccord Genuity forecast for New Flyer: limited changes
Q 3/15E
Old
New
Fc s t
Fc s t
0.155 0.155
6%
6%
2015E
Old
New
Fc s t
Fc s t
0.608 0.608
4%
4%
2016E
Old
New
Fc s t
Fc s t
0.620 0.620
2%
2%
2017E
Old
New
Fc s t
Fc s t
0.620 0.620
0%
0%
2018E
Old
New
Fc s t
Fc s t
0.620 0.620
0%
0%
2019E
Old
New
Fc s t
Fc s t
0.620 0.620
0%
0%
2014
0.59
n.m.
Q 2/15
0.15
4%
1.18
#N/A
0.48
66%
0.39
22%
0.41
26%
1.51
28%
1.53
30%
1.80
19%
1.86
21%
1.89
5%
1.95
5%
1.97
5%
2.05
5%
2.04
3%
2.11
3%
50%
32%
40%
38%
40%
40%
34%
33%
33%
32%
31%
30%
30%
29%
1,451
21%
375
8%
371
3%
380
5%
1,527
5%
1,538
6%
1,496
-2%
1,535
0%
1,540
3%
1,579
3%
1,577
2%
1,624
3%
1,626
3%
1,668
3%
91
6.3%
34
9.0%
32
8.5%
33
8.6%
128
8.4%
130
8.4%
136
9.1%
140
9.1%
142
9.2%
147
9.3%
148
9.4%
154
9.5%
153
9.4%
158
9.5%
46
44
(8)
(8)
23
23
20
20
17
17
17
17
17
17
2,437
465
24
50
594
481
38
17
625
481
28
14
635
481
28
15
2,476
487
30
62
2,486
487
30
63
2,485
484
31
59
2,535
484
31
62
2,535
487
32
61
2,584
487
32
64
2,571
490
33
63
2,634
490
33
67
2,629
493
33
66
2,679
493
33
69
2,263
2,102
864
2,192
313
1,880
615
2,172
2,476
2,102
2,486
2,102
2,485
2,102
2,535
2,102
2,535
2,102
2,584
2,102
2,571
2,102
2,634
2,102
2,629
2,102
2,679
2,102
10.5%
11.0%
11.8%
12.3%
12.9%
13.5%
1.300
1.300
1.300
1.300
1.300
1.300
Yrs E n ded D ec . 31 ( $M )
Dividend/share (C$)
% change
Free cash flow/share (C$) 1
% change
Payout ratio
Revenue
% change
EBITDA
EBITDA margin
Investment in NCWC & capital assets
Return on capital
CAD / USD (period average)
1
5.2%
1.230
1.104
8.8%
7.8%
1.300
8.2%
1.300
8.4%
1.300
8.5%
1.300
9.3%
1.300
9.7%
1.300
NCWC means non-cash working capital. Positive number means NCWC generates cash.
Hold from Buy Target Price C$20.00 from C$21.00 | 16 October 2015
Auto Components 3
164
Forecast outlook
We are projecting solid revenue and EBITDA growth over the next five years from a
combination of the modest growth from bus deliveries and margin expansion.
Hold from Buy Target Price C$20.00 from C$21.00 | 16 October 2015
Auto Components 4
165
Valuation
NFIs yields (Figure 3) and valuation (Figure 4) appear to be settling into a new range.
The companys dividend yield seems to be settling into the 4-5% range (about 2.5%
over the 10-year Canada bond yield) and EV/EBITDA is stable in the 7-8x NTM EBITDA
range.
Figure 2: NFI distribution/dividend yields settling into the 4-5% range, or roughly 2.5% above the 10-year Canada bond yield
NFIs dividend yield also appears to have converged with other high-yield industrial
names (Figure 5).
Hold from Buy Target Price C$20.00 from C$21.00 | 16 October 2015
Auto Components 5
166
Figure 4: We think a mid-point valuation multiple is reasonable versus industrial high yield companies
Mar k et
Ne w F l y e r I nd ustr i e s
Cur .
Eq ui ty Pr i ce :
Cur .
Year
Di v.
2015
$19. 95
$0. 61
Co nse nsus A ve r a ge
Di v.
EB I TDA
Cur .
Pa y o ut
Ca p .
Cur .
Y i e l d F CF PS
r a ti o
($M )
EPS
3. 0%
$1. 53
4. 6%
De b t/
P/E
Gr o wth
Ca p ('15- '17)
39. 6%
6. 3%
70. 2%
17. 0 39. 5%
10. 5%
Chorus Aviation
2015
$5.53
$0.48
8.7%
$0.88
54.7%
$676 $0.80
6.9
89.6%
12.9%
Davis + Henderson
2015
$39.62
$1.28
3.2%
$2.09
61.2%
$4,183 $2.59
15.3
41.2%
15.8%
Westshore Terminals
2015
$27.29
$1.32
4.8%
$1.27
103.9%
$2,026 $1.86
14.7
0.0%
3.3%
Cineplex Galaxy
2015
$48.04
$1.54
3.2%
$1.68
91.7%
$3,031 $2.03
23.6
32.1%
14.1%
Note that the New Flyer dividend is the new sustainable dividend level
Source: Company reports, Bloomberg, Canaccord Genuity Research estimates
We maintain our valuation multiple at 7.5x EV/NTM EBITDA (or 7.5x Q2/16E EV /
Q3/16E - Q2/17E EBITDA), given that the stock has traded in this range for some time
(average of 7.5x over the past 60 months). We think our target multiple is supported
by NFIs 3.1% dividend yield. We think there is dividend upside potential from
forecasted stronger future free cash, which further strengthens the dividend yield
support argument.
Our target multiple generates a target dividend yield of 3.1% and a FCFPS yield of
9.2%, both of which seem reasonable relative to comparable companies and
appropriately better than in the past, reflecting NFIs improved risk profile.
Our valuation also translates into acceptable 1.7% dividend yield and 7.8% FCFPS
spreads over Government of Canada bond rates, which reflects the much higher risk
of NFI versus government bonds.
Hold from Buy Target Price C$20.00 from C$21.00 | 16 October 2015
Auto Components 6
167
1-year
t arget
138.9
2-year
t arget
145.4
7.5
1,042.0
(88.7)
953.3
7.5
1,090.2
(27.3)
1,062.9
62.0
15.37
20.00
62.0
17.14
22.00
0.62
20.62
1.24
23.24
3.4%
16.5%
3.1%
9.2%
2.8%
8.8%
1.7%
7.8%
FCFPS C$
1.84
1.93
We reduced our target price C$1.00 to C$20.00 due to our slightly lower forecast.
We are cutting our rating to HOLD from BUY rating as the 1-year projected investment
return is a relatively small 3.4% including a 3.1% annual dividend yield.
Hold from Buy Target Price C$20.00 from C$21.00 | 16 October 2015
Auto Components 7
168
Figure 6: Canaccord Genuity Researchs forecast for New Flyer Industries Dividend payout analysis
Y ears ended Dec. 3 1 ($ m illions)
F ree cash
Cash from operations
Change in working capital
Interest paid
Interest expense
Income taxes paid
Current income tax expense
Principal portion of capital lease payments
Capital expenditures
Proceeds from sale of redundant assets
Business acquisition cost
Costs associated with strategic initiatives
Defined benefit funding
Defined benefit expense
Realized investment tax credits
Foreign exchange impact on cash
Free cash flow
Exchange rate
Free cash flow (CAD)
Declared dividends (CAD)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
5.5
24.0
17.1
(14.6)
6.5
(12.8)
(2.4)
(4.0)
0.7
7.3
(1.8)
2.2
27.8
0.001
27.8
33.1
30.0
23.0
10.9
(11.6)
19.0
(23.8)
(2.0)
(13.8)
1.2
6.0
8.7
(2.8)
(1.5)
0.2
43.4
1.039
45.1
30.7
17.5
(7.9)
3.8
(3.1)
4.4
(3.4)
(0.4)
(3.3)
0.4
2.1
(0.7)
0.0
9.5
1.109
10.6
8.1
1.1
18.9
3.8
(3.4)
4.4
(8.2)
(0.3)
(1.5)
0.2
0.1
(0.7)
0.4
14.7
1.085
15.9
8.1
0.5
21.8
1.8
(2.9)
1.6
(4.1)
(0.5)
(1.9)
0.0
0.2
0.8
(0.7)
(0.4)
16.3
1.097
17.9
8.1
26.9
2.5
2.2
(3.0)
1.5
(11.2)
(0.6)
(1.7)
2.8
0.5
(0.6)
(0.6)
(0.1)
18.6
1.136
21.1
8.1
45.8
35.3
11.6
(12.4)
12.0
(26.8)
(1.8)
(8.4)
0.6
3.1
3.5
(2.6)
(0.6)
(0.2)
59.1
1.104
65.5
32.5
28.7
(4.6)
4.0
(3.1)
2.1
(13.7)
(0.5)
(4.3)
1.3
0.8
(0.7)
(0.2)
9.8
1.252
12.3
8.1
(22.8)
42.3
1.8
(2.8)
16.4
(12.5)
(0.5)
(1.9)
1.6
0.8
(4.5)
(0.1)
21.5
1.226
26.4
8.4
38.9
(15.8)
3.0
(3.0)
9.1
(9.1)
(0.7)
(2.0)
0.8
(4.5)
(0.1)
16.8
1.300
21.8
8.6
44.4
51.9
55.5
55.5
55.5
55.5
55.5
55.5
55.5
0.63
0.75
0.87
0.58
0.19
0.15
0.29
0.15
0.32
0.15
0.38
0.15
1.18
0.59
0.22
0.15
0.48
0.15
Q2 /1 5 Q3 /1 5 E Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
44.9
(20.5)
3.0
(3.0)
9.7
(9.7)
(0.7)
(2.0)
0.8
(4.5)
(0.1)
17.9
1.300
23.3
8.6
89.8
1.4
11.8
(11.8)
37.3
(45.1)
(2.2)
(10.2)
2.9
3.2
(14.3)
(0.3)
66.1
1.300
83.8
33.8
94.0
8.4
11.3
(11.3)
36.7
(36.7)
(2.6)
(8.0)
3.2
(18.0)
(0.2)
76.8
1.300
99.8
34.4
101.5
4.7
10.7
(10.7)
40.0
(40.0)
(2.6)
(8.0)
3.2
(18.0)
(0.2)
80.5
1.300
104.7
34.4
105.2
4.7
10.1
(10.1)
43.0
(43.0)
(2.6)
(8.0)
3.2
(18.0)
(0.2)
84.2
1.300
109.5
34.4
108.4
4.4
9.4
(9.4)
45.3
(45.3)
(2.6)
(8.0)
3.2
(18.0)
(0.2)
87.1
1.300
113.2
34.4
55.5
55.5
55.5
55.5
55.5
55.5
55.5
0.39
0.16
0.42
0.16
1.51
0.61
1.80
0.62
1.89
0.62
1.97
0.62
2.04
0.62
Hold from Buy Target Price C$20.00 from C$21.00 | 16 October 2015
Auto Components 8
169
Figure 7: Canaccord Genuity Researchs forecast for New Flyer Industries Income statement
Y ears ended Dec. 3 1 ($ m illions)
Incom e statem ent
Revenues
Cost of sales and SG&A
Foreign exchange gain (loss)
EBITDA
Depreciation & amortization
Unrealized FX gain (loss)
Fair value adjustments
Other
Operating profit (EBIT)
Interest expense on long-term debt
Other interest and bank charges
Fair value adjustment on int rate swaps
Other expenses
Distributions on B and C shares
Pre-tax income
Income taxes
Net Income (loss)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
Q2 /1 5 Q3 /1 5 E Q4 /1 5 E
865.3 1,199.4
(810.2) (1,120.2)
2.8
(0.1)
57.8
79.1
(24.3)
(28.0)
(1.4)
(2.1)
(1.4)
0.0
(5.5)
0.0
25.2
49.0
(11.9)
(8.7)
(2.7)
(2.9)
0.8
(0.5)
(2.8)
(2.2)
0.0
0.0
10.0
34.6
(0.7)
(7.9)
9.3
26.8
323.9
(305.0)
(0.8)
18.1
(7.7)
(0.4)
0.0
0.0
10.0
(2.3)
(0.8)
0.3
(0.5)
0.0
6.7
(1.2)
5.5
346.5
(322.3)
(0.4)
23.8
(8.1)
1.0
0.0
(3.9)
12.8
(2.3)
(1.2)
(0.4)
(0.5)
0.0
8.4
(4.8)
3.6
360.8
(337.6)
(0.2)
22.9
(10.0)
(0.1)
0.0
0.0
12.8
(2.2)
(0.7)
0.8
(0.6)
0.0
10.1
0.2
10.2
420.0 1,451.1
(393.4) (1,358.3)
(0.1)
(1.5)
26.5
91.3
(10.0)
(35.8)
0.3
0.8
0.0
0.0
(0.9)
(4.8)
15.9
51.4
(2.2)
(8.9)
(0.8)
(3.5)
0.1
0.8
(0.6)
(2.2)
0.0
0.0
12.4
37.6
(5.0)
(10.8)
7.4
26.7
380.3
(352.1)
1.5
29.7
(9.5)
(1.9)
0.0
0.0
18.2
(2.3)
(0.7)
(0.5)
(0.6)
0.0
14.1
(3.3)
10.9
375.0
(340.7)
(0.7)
33.7
(9.8)
0.8
0.0
0.0
24.6
(2.2)
(0.6)
0.3
(0.6)
0.0
21.6
(9.2)
12.4
371.2
(339.6)
0.0
31.6
(10.0)
0.0
0.0
0.0
21.6
(2.3)
(0.7)
0.0
0.0
0.0
18.6
(7.1)
11.5
2015E
2016E
2017E
2018E
2019E
0.75
0.63
0.63
0.58
0.87
0.87
0.15
0.19
0.19
0.15
0.29
0.29
0.15
0.32
0.32
0.15
0.38
0.38
0.59
1.18
1.18
0.15
0.22
0.22
0.15
0.48
0.48
0.16
0.39
0.39
0.16
0.42
0.42
0.61
1.51
1.51
0.62
1.80
1.80
0.62
1.89
1.89
0.62
1.97
1.97
0.62
2.04
2.04
52.3
58.9
55.5
55.6
55.7
55.7
55.6
55.8
55.9
62.0
62.0
58.9
62.0
62.0
62.0
62.0
-6.6%
-0.4%
-30.6%
6.7%
38.6%
38.4%
-21.5%
6.6%
32.1%
26.8%
0.0%
5.6%
30.0%
56.0%
0.0%
6.9%
16.8%
36.0%
0.0%
6.4%
10.9%
34.4%
0.0%
6.3%
21.0%
36.0%
0.0%
6.3%
17.4%
16.6%
0.0%
7.8%
8.2%
65.6%
4.0%
9.0%
2.9%
21.8%
6.0%
8.5%
-4.7%
10.3%
6.0%
8.3%
5.2%
27.9%
4.0%
8.4%
-2.0%
19.1%
1.9%
9.1%
2.9%
4.9%
0.0%
9.2%
2.4%
4.6%
0.0%
9.4%
3.1%
3.4%
0.0%
9.4%
3.9%
5.3%
3.9%
5.9%
4.8%
6.1%
5.2%
7.6%
8.8%
7.8%
8.6%
8.4%
9.3%
10.5%
11.8%
12.9%
Bus revenues
Bus EBITDA (excl. FX gains/losses)
Bus sales growth
Bus EBITDA % (excl. FX gains/losses)
Deliveries
Revenue/unit
EBITDA/unit
LTM EBITDA/unit
753.9
42.0
-7.0%
5.6%
1,656
455
25
25
984.4
63.6
30.6%
6.5%
2,191
449
29
29
250.9
7.8
20.7%
3.1%
554
453
14
27
265.8
13.9
23.5%
5.2%
582
457
24
28
278.7
12.6
11.2%
4.5%
621
449
20
26
336.6
23.2
7.5%
6.9%
680
495
34
24
1132.1
57.4
15.0%
5.1%
2,437
465
24
24
290.7
14.7
15.9%
5.1%
572
508
26
26
285.8
22.4
7.5%
7.8%
594
481
38
30
300.7
17.5
7.9%
5.8%
625
481
28
31
329.6
19.2
-2.1%
5.8%
685
481
28
30
1206.8
73.8
6.6%
6.1%
2,476
487
30
30
1203.1
77.0
-0.3%
6.4%
2,485
484
31
31
1234.9
81.1
2.6%
6.6%
2,535
487
32
32
1260.1
84.8
2.0%
6.7%
2,571
490
33
33
1296.4
86.8
2.9%
6.7%
2,629
493
33
33
Aftermarket revenues
Aftermarket EBITDA (excl. FX)
Aftermarket sales growth
Aftermarket EBITDA % (excl. FX)
119.1
19.6
2.6%
16.4%
215.0
31.0
80.6%
14.4%
73.0
11.9
95.4%
16.3%
80.7
13.1
57.1%
16.2%
82.0
13.1
40.7%
16.0%
83.4
11.9
22.6%
14.2%
319.0
50.0
48.4%
15.7%
89.6
16.7
22.8%
18.6%
89.2
16.8
10.6%
18.8%
70.5
14.1
-14.1%
20.0%
70.5
14.1
-15.4%
20.0%
319.8
61.7
0.2%
19.3%
293.2
58.6
-8.3%
20.0%
304.8
61.0
4.0%
20.0%
316.8
63.4
3.9%
20.0%
329.6
65.9
4.0%
20.0%
Hold from Buy Target Price C$20.00 from C$21.00 | 16 October 2015
Auto Components 9
170
Figure 8: Canaccord Genuity Researchs forecast for New Flyer Industries Balance sheet
Y ears ended Dec. 3 1 ($ m illio ns)
Balance sheet
Cash
Accounts receivable
Inventories
Prepaid expenses and deposits
Derivative financial instruments
Future income tax assets
Other
Total current assets
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
11.2
113.5
124.7
4.7
0.0
0.0
0.0
254.1
11.9
230.3
183.3
7.7
0.0
0.0
0.0
433.2
14.2
201.0
207.7
6.6
0.0
1.6
0.0
431.1
4.3
146.3
246.4
5.7
0.0
3.2
0.0
406.0
8.7
164.1
267.4
4.6
0.1
3.4
0.0
448.2
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
7.6
186.9
232.0
3.5
0.1
0.0
0.0
430.0
8.8
189.2
242.3
3.9
0.2
0.0
0.0
444.4
Capital assets
Deferred charges
Intangible assets
Future income tax assets
Derivative financial instruments
Accrued benefit asset
Total assets
42.0
0.0
528.5
72.6
0.0
0.0
897.2
64.8
0.0
568.9
68.9
0.0
0.0
1,135.9
65.5
0.0
564.1
67.6
0.0
1.1
1,129.4
65.4
0.0
556.1
65.7
0.0
0.5
1,093.7
65.2
0.0
550.7
65.0
0.0
0.0
1,129.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
64.3
0.0
539.1
67.9
0.0
0.0
1,101.4
64.3
0.0
533.9
68.6
0.0
0.0
1,111.2
Bank indebtedness
Accounts payable & accrued liabs
Due to parent company
Deferred revenue
Provision for warranty costs
Current portion of capital leases
Current portion of LTD
Other current liabilities
Total current liabilities
0.0
150.8
0.0
19.2
20.1
1.9
40.0
6.8
238.8
0.0
212.9
0.0
57.6
26.1
1.3
35.0
1.5
334.4
0.0
225.5
0.0
55.4
25.1
1.1
30.0
0.5
337.6
0.0
204.5
0.0
47.7
25.1
1.3
30.0
1.8
310.3
0.0
227.1
0.0
36.8
28.7
1.7
45.0
3.9
343.2
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
226.5
0.0
23.0
35.0
1.6
13.0
18.6
317.6
0.0
201.8
0.0
18.3
39.7
1.7
48.0
10.4
319.8
0.0
201.5
0.0
18.3
39.7
1.7
48.0
9.6
318.8
0.0
217.7
0.0
18.3
39.7
1.7
48.0
8.8
334.1
0.0
217.7
0.0
18.3
39.7
1.7
48.0
8.8
334.1
0.0
196.1
0.0
18.3
39.7
1.7
48.0
6.8
310.6
0.0
201.5
0.0
18.3
39.7
1.7
48.0
5.8
314.9
0.0
206.9
0.0
18.3
39.7
1.7
48.0
4.8
319.3
0.0
212.8
0.0
18.3
39.7
1.7
48.0
3.8
324.2
9.0
2.3
122.2
177.7
2.0
1.2
0.2
1.8
114.8
198.6
2.5
28.3
0.0
1.6
113.2
199.1
2.2
22.1
0.0
2.7
112.2
199.6
2.6
16.5
0.6
3.4
110.5
200.0
1.8
17.4
1.0
3.2
108.5
200.5
1.7
14.7
1.0
3.2
108.5
200.5
1.7
14.7
0.9
2.9
105.5
201.0
2.2
13.9
4.1
5.0
102.5
201.6
1.9
12.7
4.1
5.0
100.5
201.6
1.9
12.7
4.1
5.0
98.5
201.6
1.9
12.7
4.1
5.0
98.5
201.6
1.9
12.7
4.1
5.0
90.6
201.6
1.9
12.7
4.1
5.0
82.7
201.6
1.9
12.7
4.1
5.0
74.7
201.6
1.9
12.7
4.1
5.0
66.8
201.6
1.9
12.7
0.0
480.8
(136.8)
0.0
593.3
(138.2)
0.0
593.6
(140.0)
0.0
593.8
(143.9)
0.0
594.1
(141.8)
0.0
594.5
(141.8)
0.0
594.5
(141.8)
0.0
594.7
(137.5)
Q2 /1 5 Q3 /1 5 E Q4 /1 5 E
0.0
595.2
(131.6)
33.3
183.6
231.2
3.8
0.2
0.0
0.0
452.0
63.7
202.2
207.0
4.1
0.2
0.0
0.0
477.2
2015E
2016E
2017E
2018E
2019E
63.7
202.2
207.0
4.1
0.2
0.0
0.0
477.2
119.2
183.9
210.6
3.7
0.2
0.0
0.0
517.7
182.1
189.2
214.2
3.8
0.2
0.0
0.0
589.6
248.6
194.6
217.8
4.0
0.2
0.0
0.0
665.2
318.3
200.2
221.4
4.1
0.2
0.0
0.0
744.2
67.6
70.7
70.7
64.0
59.0
55.3
52.6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
528.5
523.1
523.1
501.7
480.2
458.7
437.3
68.6
68.6
68.6
68.6
68.6
68.6
68.6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(3.7)
(7.4)
(7.4)
(22.2)
(37.1)
(51.9)
(66.7)
1,113.0 1,132.2 1,132.2 1,129.6 1,160.3 1,196.0 1,235.9
0.0
595.2
(126.7)
0.0
595.2
(120.9)
0.0
595.2
(120.9)
0.0
595.2
(92.0)
0.0
595.2
(57.8)
0.0
0.0
595.2
(18.6)
595.2
24.4
897.2
1,135.9
1,129.4
1,093.7
1,129.1
1,136.1
1,136.1
1,101.4
1,111.2
1,113.0
1,132.2
1,132.2
1,129.6
1,160.3
1,196.0
1,235.9
10.8
46.0
15.4
123.2
3.5
110.5
1.8
122.7
2.5
143.1
2.8
135.7
10.7
135.7
4.3
119.4
1.9
165.5
7.9
149.7
7.9
129.2
21.9
129.2
12.0
137.6
12.1
142.3
12.2
147.0
12.3
151.4
210.7
3.6x
7.75
21.8x
224.7
2.8x
8.77
22.4x
217.6
1.4x
8.18
19.9x
229.3
1.5x
8.11
21.2x
241.5
2.5x
8.15
22.1x
227.8
2.5x
8.15
26.0x
227.8
2.5x
8.16
22.6x
210.9
2.1x
8.24
23.8x
247.5
2.2x
8.35
23.3x
223.0
1.8x
8.44
22.5x
192.6
1.5x
8.54
23.1x
192.6
1.5x
8.54
22.7x
137.1
1.0x
9.06
22.2x
74.2
0.5x
9.68
25.1x
7.7
0.1x
10.39
27.6x
(62.0)
0.0x
11.16
30.2x
Hold from Buy Target Price C$20.00 from C$21.00 | 16 October 2015
Auto Components 10
171
Figure 9: Canaccord Genuity Researchs forecast for New Flyer Industries Cash flow statement
Y ears ended Dec. 3 1 ($ m illio ns)
C ash flo w statem ent
Net income
Amortization of fixed assets
Amortization of intangibles
Amortization of deferred charges
Loss on disposition of PP&E
Future income taxes (recovery)
Unrealized gain on int rate swap
Unrealized FX gain (loss)
Fair value adjustments
Defined benefit expense
Defined benefit funding
Items not affecting cash
Other
Cash from operations before WC
Change in working capital
Cash from operations after WC
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
9.8
8.3
16.0
0.0
0.0
1.5
0.0
1.4
1.4
3.6
(7.3)
(2.2)
(2.9)
29.5
(24.0)
5.5
26.8
9.6
18.4
0.0
0.0
17.5
0.0
2.1
0.0
2.8
(8.7)
0.1
(15.6)
53.0
(23.0)
30.0
5.5
2.9
4.8
0.0
0.0
2.2
0.0
0.4
0.0
0.7
(2.1)
3.3
(8.0)
9.6
7.9
17.5
3.6
3.3
4.8
0.0
0.0
4.8
0.0
(1.0)
0.0
0.7
0.0
4.4
(0.6)
19.9
(18.9)
1.1
10.2
4.6
5.4
0.0
0.0
2.4
0.0
0.1
0.0
0.7
(0.8)
(3.4)
3.1
22.3
(21.8)
0.5
7.4
4.6
5.4
0.0
0.0
14.9
0.0
(0.3)
0.0
0.6
(0.5)
(3.4)
0.7
29.3
(2.5)
26.8
26.7
15.4
20.5
0.0
0.0
24.3
0.0
(0.8)
0.0
2.6
(3.5)
0.8
(4.9)
81.1
(35.3)
45.8
10.9
4.2
5.3
0.0
0.0
3.4
0.0
1.9
0.0
0.7
(0.8)
0.4
(2.0)
24.1
4.6
28.7
12.4
4.5
5.4
0.0
0.0
9.2
0.0
(0.8)
0.0
4.5
(0.8)
0.3
(15.1)
19.5
(42.3)
(22.8)
11.5
4.6
5.4
0.0
0.0
(2.0)
0.0
0.0
0.0
4.5
(0.8)
0.0
0.0
23.2
15.8
38.9
Investing
Additions to capital assets
Net funds used in investing
(10.8)
(11.0)
(15.4)
(122.5)
(3.5)
(3.6)
(1.8)
(1.8)
(2.5)
(2.6)
(2.8)
(2.9)
(10.7)
(10.9)
(4.3)
(4.3)
(1.9)
(1.9)
Financing
Bank indebtness, net
Proceeds from issue of long-term debt
Redemption of class B and C shares
Repayment of long-term debt
Repayment of capital leases
Deferred debt financing costs
Due to parent company
Share issuance
Dividends
Net funds from financing
0.0
103.2
0.0
(62.4)
(2.4)
0.0
0.0
0.0
(34.0)
4.3
0.0
12.6
0.0
0.0
(2.0)
0.0
0.0
111.7
(29.3)
93.0
0.0
(3.9)
0.0
0.0
(0.4)
0.0
0.0
0.0
(7.4)
(11.6)
0.0
(1.7)
0.0
0.0
(0.3)
0.0
0.0
0.0
(7.4)
(9.4)
0.0
15.0
0.0
0.0
(0.6)
0.0
0.0
0.0
(7.5)
6.9
0.0
(7.4)
0.0
0.0
(0.5)
0.0
0.0
0.0
(7.2)
(15.1)
0.0
2.1
0.0
0.0
(1.8)
0.0
0.0
0.0
(29.5)
(29.2)
0.0
(27.0)
0.0
0.0
(0.5)
0.0
0.0
0.0
(6.7)
(34.1)
0.0
33.1
0.0
0.0
(0.5)
0.0
0.0
0.0
(6.6)
26.0
Q2 /1 5 Q3 /1 5 E Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
12.4
4.8
5.4
0.0
0.0
(2.0)
0.0
0.0
0.0
4.5
(0.8)
0.0
0.0
24.3
20.5
44.9
47.1
18.1
21.4
0.0
0.0
8.6
0.0
1.1
0.0
14.3
(3.2)
0.7
(17.0)
91.2
(1.4)
89.8
55.4
18.7
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
18.0
(3.2)
0.0
0.0
102.5
(8.4)
94.0
60.7
17.1
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
18.0
(3.2)
0.0
0.0
106.2
(4.7)
101.5
65.7
15.9
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
18.0
(3.2)
0.0
0.0
109.9
(4.7)
105.2
69.4
15.0
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
18.0
(3.2)
0.0
0.0
112.8
(4.4)
108.4
(7.9)
(7.9)
(7.9)
(7.9)
(21.9)
(22.0)
(12.0)
(12.0)
(12.1)
(12.1)
(12.2)
(12.2)
(12.3)
(12.3)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(6.6)
(6.6)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(6.6)
(6.6)
0.0
6.1
0.0
0.0
(0.9)
0.0
0.0
0.0
(26.5)
(21.3)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
2.2
0.2
0.0
0.4
0.0
(0.5)
(0.2)
(0.2)
(0.1)
0.0
0.0
(0.2)
0.0
0.0
0.0
0.0
1.0
10.1
11.2
0.7
11.2
11.9
2.3
11.9
14.2
(9.9)
14.2
4.3
4.7
4.3
9.1
8.4
9.1
17.5
5.6
11.9
17.5
(9.9)
17.5
7.6
1.3
7.6
8.8
24.5
8.8
33.3
30.4
33.3
63.7
46.2
17.5
63.7
55.5
63.7
119.2
62.9
119.2
182.1
66.5
182.1
248.6
69.6
248.6
318.3
(5.4)
(92.5)
13.9
(0.8)
(2.1)
24.0
34.9
24.4
(24.7)
31.1
37.0
67.8
82.0
89.4
93.0
96.1
Hold from Buy Target Price C$20.00 from C$21.00 | 16 October 2015
Auto Components 11
172
Investment risks
Potential risks to our investment thesis and target price valuation methodology
include, but are not limited to, availability of government funding and company
execution of contracts.
Hold from Buy Target Price C$20.00 from C$21.00 | 16 October 2015
Auto Components 12
173
Coverage Universe
IB Clients
#
%
%
Buy
608
62.87%
31.74%
Hold
275
28.44%
12.00%
Sell
26
2.69%
3.85%
Speculative Buy
58
6.00%
58.62%
967*
100.0%
*Total includes stocks that are Under Review
Canaccord Genuity Ratings System
BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.
HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.
SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.
NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.
Risk-adjusted return refers to the expected return in relation to the amount of risk associated with the designated investment or the
relevant issuer.
Risk Qualier
SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the
stock may result in material loss.
Canaccord Genuity Company-Specific Disclosures (as of date of this publication)
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Corporate Finance/
Investment Banking services from New Flyer Industries Inc. in the next six months.
Hold from Buy Target Price C$20.00 from C$21.00 | 16 October 2015
Auto Components 13
174
22
20
18
16
14
12
10
8
6
H:C$12.00
07/16/14
H:C$8.75
01/11/13
Jan 2013
B:C$14.00
08/06/14
H:C$9.25
01/29/13
H:C$9.75
02/06/13
Apr 2013
H:C$14.00
11/09/14
Jul 2013
B:C$12.50
12/12/14
H:C$10.00
03/25/13
Oct 2013
H:C$14.00
01/12/15
H:C$10.25
04/18/13
Jan 2014
B:C$15.00
03/19/15
B:C$11.25
06/24/13
Apr 2014
B:C$16.00
05/11/15
Closing Price
H:C$11.75
08/07/13
Jul 2014
B:C$17.00
07/20/15
H:C$11.25
11/07/13
Oct 2014
B:C$12.00
01/15/14
Jan 2015
B:C$12.50
03/23/14
Apr 2015
H:C$11.50
05/11/14
Jul 2015
H:C$11.75
06/24/14
Oct 2015
B:C$21.00
08/10/15
Target Price
Buy (B); Speculative Buy (SB); Sell (S); Hold (H); Suspended (SU); Under Review (UR); Restricted (RE); Not Rated (NR)
Online Disclosures
Up-to-date disclosures may be obtained at the following website (provided as a hyperlink if this report is being read electronically)
http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx; or by sending a request to Canaccord Genuity Corp. Research, Attn:
Disclosures, P.O. Box 10337 Pacific Centre, 2200-609 Granville Street, Vancouver, BC, Canada V7Y 1H2; or by sending a request
by email to disclosures@canaccordgenuity.com. The reader may also obtain a copy of Canaccord Genuitys policies and procedures
regarding the dissemination of research by following the steps outlined above.
General Disclosures
Canaccord Genuity is the business name used by certain wholly owned subsidiaries of Canaccord Genuity Group Inc., including
Canaccord Genuity Inc., Canaccord Genuity Limited, Canaccord Genuity Corp., and Canaccord Genuity (Australia) Limited, an affiliated
company that is 50%-owned by Canaccord Genuity Group Inc.
The authoring analysts who are responsible for the preparation of this research are employed by Canaccord Genuity Corp. a Canadian
broker-dealer with principal offices located in Vancouver, Calgary, Toronto, Montreal, or Canaccord Genuity Inc., a US broker-dealer
with principal offices located in New York, Boston, San Francisco and Houston, or Canaccord Genuity Limited., a UK broker-dealer with
principal offices located in London (UK) and Dublin (Ireland), or Canaccord Genuity (Australia) Limited, an Australian broker-dealer with
principal offices located in Sydney and Melbourne.
The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon
(among other factors) the Corporate Finance/Investment Banking revenues and general profits of Canaccord Genuity. However, such
authoring analysts have not received, and will not receive, compensation that is directly based upon or linked to one or more specific
Corporate Finance/Investment Banking activities, or to recommendations contained in the research.
Canaccord Genuity and its affiliated companies may have a Corporate Finance/Investment Banking or other relationship with the issuer
that is the subject of this research and may trade in any of the designated investments mentioned herein either for their own account
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Hold from Buy Target Price C$20.00 from C$21.00 | 16 October 2015
Auto Components 15
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Hold from Buy Target Price C$20.00 from C$21.00 | 16 October 2015
Auto Components 16
177
Market Perform
$19.00 Total Return: 2%
$19.31
416-359-5301
416-359-6193
Earnings/Share
20
1.0
15
Event
NFI Q3/15 deliveries were up 2% y/y to 625 equivalent units (EUs). New firm
orders were 253 EUs ($114.5 million), up from 57 EUs ($33.2 million) during
the same period last year. Total firm backlog was down 6% q/q to $1.07 billion
partially due to certain order cancellations. Q2/15 aftermarket shipments (excl.
CTA program) increased 4% y/y.
0.5
10
0.0
-0.5
-1.0
Volume (mln)
0
NFI Relative to S&P/TSX Comp
400
200
Q3/15 bus deliveries were slightly below our expectations of 639 EUs. NFI was
able to reduce some of its work-in-progress (WIP) ending inventory during the
quarter as the company finalizes its platform rationalization plans. Without a
material increase in production schedule to drive revenue, NFI remains a cost
story. Last quarter, NFI achieved an EBITDA per EU (excl. ITCs) of ~$38k vs.
$19k in Q2/14, mainly due to product mix and cost savings. Management
previously guided that they would expect higher margins in 2015 due to work
orders and cost-saving initiatives. EBITDA per bus does spike periodically, so
we are cautious that this may be one of those quarters. We expect EBITDA per
EU to remain volatile and normalize around ~$30k in 2016. Build rate was
maintained for 2015 and 2016 as firm orders remain below annual production.
Pending orders, including firm orders and options, stood at 1,169 EUs after
quarter-end.
Changes
400
Annual CFPS
2015E $1.61 to $1.58
2016E $1.56 to $1.59
1.5
200
2012
2013
2014
2015
(FY-Dec.)
EPS
P/E
CFPS
P/CFPS
Rev. ($mm)
EV ($mm)
EBITDA ($mm)
EV/EBITDA
2013A
$0.49
2014A
$0.48
2015E
$0.88
21.9x
2016E
$1.05
18.4x
$0.95
$1.46
$1.58
12.2x
$1.59
12.1x
$1,199
$839
$95
8.8x
$1,451
$1,000
$91
10.9x
$1,509
$1,060
$127
8.3x
Quarterly EPS
2013A
2014A
2015E
Q1
$0.08
$0.10
$0.20a
Q2
$0.03
$0.06
$0.22a
Q3
$0.14
$0.18
$0.23
Dividend
Book Value
Shares O/S (mm)
Float O/S (mm)
Wkly Vol (000s)
Net Debt ($mm)
$0.62
$8.24
55.5
43.9
417
$248
Yield
Price/Book
Mkt. Cap (mm)
Float Cap (mm)
Wkly $ Vol (mm)
Next Rep. Date
$1,532
$1,007
$130
7.7x
Q4
$0.23
$0.13
$0.24
3.2%
1.8x
$1,072
$848
$6.3
Nov (E)
Notes: Share price, target & capitalization in C$, all others US$
Major Shareholders: Marcopolo S.A. (19.9%), Coliseum Capital
(11.1%), Mawer (9.8%), QV Investors (6.4%)
First Call Mean Estimates: NEW FLYER INDUSTRIES INC (US$)
2015E: $0.85; 2016E: $1.07
Quarterly EPS
Q3/15E $0.22 to $0.23
Q4/15E $0.21 to $0.24
Target
$16.00 to $19.00
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s) under
FINRA rules. For disclosure statements, including the Analyst's Certification, please refer to pages 5 to 8.
178
Revised Estimates
(US$ millions, except per share data)
BMO CM Estimates
Current
Prior
Mean
2015
2016
2015
2016
Deliveries
2,428
2,510
2,417
2,549
Bus Manufacturing
$1,190
$1,182
$1,217
$1,179
y/y%
4.4%
3.0%
4.1%
1.0%
Aftermarket Operations
$326
$315
$326
$305
y/y%
2015
2016
2.3%
-3.6%
2.2%
-6.4%
$1,509
$1,532
$1,505
$1,495
$1,534
$1,585
4.0%
1.6%
3.7%
-0.6%
5.7%
3.3%
$1,297
$211
$1,325
$207
$1,305
$200
$1,297
$198
% of revenue
14.0%
13.5%
13.3%
13.2%
Total Revenue
y/y%
Bus Manufacturing
y/y%
Aftermarket Operations
$75
$75
$65
$71
6.4%
6.2%
5.5%
6.0%
$59
$55
$57
$52
18.2%
17.5%
17.4%
17.0%
Corporate
Total Adjusted EBITDA
-$7.3
$127
$0.0
$130
-$2.0
$120
$0.0
$123
$130
$137
% of revenue
8.4%
8.5%
8.0%
8.2%
8.5%
8.7%
$38
$30
$38
$31
y/y%
$88
$100
$80
$92
$84
$98
5.8%
6.5%
5.3%
6.2%
5.5%
6.2%
$14
$74
$13
$87
$13
$67
$9
$83
5.5%
$0.85
$1.07
4.9%
5.7%
4.4%
$25
$29
$21
$27
Tax Rate
34%
33%
31%
33%
Net Income
$49
$59
$46
$56
% of revenue
3.2%
3.8%
3.1%
3.7%
$0.88
$0.84
$1.05
$1.02
$0.83
$0.78
$1.00
$0.94
EPS - Basic
EPS - Fully Diluted
179
2014
2013
2,191
984.4
31.8%
215.0
81.7%
1,199.4
38.6%
1,078.7
89.9%
120.8
10.1%
69.5
5.8%
0.1
0.0%
63.6
2015E
Q1
Q2
Q3
Q4E
2014
554
582
621
680
2,437
Q1
Q2
Q3E
572
594
625
290.7
15.9%
89.6
22.8%
380.3
17.4%
340.7
89.6%
39.6
10.4%
20.9
5.5%
(1.5)
-0.4%
14.7
285.8
7.5%
89.2
10.6%
375.0
8.2%
326.6
87.1%
48.4
12.9%
23.9
6.4%
0.7
0.2%
22.4
300.0
7.6%
73.2
-10.8%
373.2
3.5%
331.2
88.7%
42.0
11.3%
19.8
5.3%
0.0
0.0%
18.9
7.8%
16.8
2016E
Q4E
2015E
Q1E
Q2E
637
2,428
598
662
Q3E
630
Q4E
2016E
620
2,510
305.6
1.9%
76.9
5.0%
382.4
2.5%
337.8
88.3%
44.6
11.7%
19.1
5.0%
0.0
0.0%
19.6
300.7 1,217.5
-1.7%
3.0%
78.1
314.6
5.0%
-3.6%
378.8 1,532.1
-0.4%
1.6%
334.4 1,355.2
88.3% 88.5%
44.4
176.8
11.7% 11.5%
18.9
76.6
5.0%
5.0%
0.0
0.0
0.0%
0.0%
19.2
75.3
6.4%
13.5
6.5%
31.0
3.1%
11.9
5.2%
13.1
4.5%
13.1
6.9%
11.9
5.1%
50.0
5.1%
16.7
6.3%
12.8
6.3%
13.0
6.4%
59.3
5.5%
14.0
6.4%
13.9
6.4%
13.7
6.2%
55.1
% of aftermarket revenue
One time items (expenses)
14.4%
(15.6)
16.3%
(1.6)
16.2%
(3.2)
16.0%
(2.8)
14.2%
(8.6)
15.7%
(16.1)
17.5%
0.0
18.2%
(7.3)
17.5%
(0.0)
17.5%
0.0
79.1
6.6%
9.6
0.8%
18.4
1.5%
2.1
49.0
4.1%
14.3
1.2%
34.6
2.9%
7.9
23%
26.8
2.2%
$0.52
$0.49
18.1
5.6%
2.9
0.9%
4.8
1.5%
0.4
10.0
3.1%
3.3
1.0%
6.7
2.1%
1.2
18%
5.5
1.7%
$0.10
$0.10
23.8
6.9%
3.3
1.0%
4.8
1.4%
2.9
12.8
3.7%
4.4
1.3%
8.4
2.4%
4.8
58%
3.6
1.0%
$0.06
$0.06
22.9
6.4%
4.6
1.3%
5.4
1.5%
0.1
12.8
3.5%
2.7
0.7%
10.1
2.8%
(0.2)
-2%
10.2
2.8%
$0.18
$0.18
26.5
6.3%
4.6
1.1%
5.4
1.3%
0.6
15.9
3.8%
3.5
0.8%
12.4
3.0%
5.0
40%
7.4
1.8%
$0.13
$0.12
91.3
6.3%
15.4
1.1%
20.5
1.4%
4.0
51.4
3.5%
13.9
1.0%
37.6
2.6%
10.8
29%
26.7
1.8%
$0.48
$0.46
29.7
7.8%
4.2
1.1%
5.3
1.4%
1.9
18.2
4.8%
4.1
1.1%
14.1
3.7%
3.3
23%
10.9
2.9%
$0.20
$0.18
32.3
8.5%
4.4
1.1%
5.0
1.3%
0.0
22.9
6.0%
3.3
0.9%
19.6
5.2%
6.5
33%
13.2
3.5%
$0.24
$0.23
127.3
8.4%
17.5
1.2%
20.7
1.4%
1.1
88.0
5.8%
13.9
0.9%
74.1
4.9%
25.1
34%
49.0
3.2%
$0.88
$0.84
30.0
8.1%
3.6
1.0%
4.0
1.1%
0.0
22.3
6.0%
3.2
0.9%
19.1
5.2%
6.3
33%
12.8
3.5%
$0.23
$0.22
34.5
8.6%
3.6
0.9%
4.0
1.0%
0.0
26.9
6.7%
3.2
0.8%
23.7
5.9%
7.8
33%
15.9
4.0%
$0.28
$0.27
130.4
8.5%
14.1
0.9%
16.0
1.0%
0.0
100.2
6.5%
12.9
0.8%
87.4
5.7%
28.8
33%
58.5
3.8%
$1.05
$1.02
62.1
60.6
60.9
61.1
61.1
61.4
60.3
60.3
EBITDA
% of revenues
Depreciation of property and equipment
% of revenues
Amortization of intangible assets
% of revenues
Other income
EBIT
% of revenues
Net interest expense
% of revenues
EBT
% of revenues
Income taxes
Tax rate as % of EBT
Net incom e
% of revenues
Reported EPS (basic)
Reported EPS (fully diluted)
WA Fully diluted Shares O/S (millions)
62.3
$86.6
7.2%
$25.3
3.0%
33.7
9.0%
4.5
1.2%
5.4
1.4%
(0.8)
24.6
6.6%
3.1
0.8%
21.6
5.7%
9.2
43%
12.4
3.3%
$0.22
$0.21
31.7
8.5%
4.5
1.2%
5.0
1.3%
0.0
22.2
6.0%
3.4
0.9%
18.8
5.0%
6.2
33%
12.6
3.4%
$0.23
$0.22
61.3
60.3
$39.2 $31.7
10.5% 8.5%
$37.7 $30.2
96.9% 84.7%
60.3
60.2
$32.3
8.5%
$30.2
17.0%
$134.4
8.9%
$30.9
65.2%
$30.0 $34.5
8.1%
8.6%
$26.7 $31.0
4.8% -17.7%
33.0
8.6%
3.5
0.9%
4.0
1.0%
0.0
25.5
6.7%
3.2
0.8%
22.3
5.8%
7.4
33%
14.9
3.9%
$0.27
$0.26
32.9
8.7%
3.4
0.9%
4.0
1.1%
0.0
25.5
6.7%
3.2
0.8%
22.3
5.9%
7.3
33%
14.9
3.9%
$0.27
$0.26
60.3
60.3
60.3
$33.0
8.6%
$31.0
2.6%
$32.9
8.7%
$31.0
2.6%
$130.4
8.5%
$30.0
-3.1%
180
In millions of US$
2015E
2016E
2013
Q1
Q2
Q3
Q4E
2014
Q1
Q2E
Q3E
Q4E
2015E
Q1E
Q2E
Q3E
Q4E
2016E
Operating activities
Net income
Items not affecting cash
Depreciation & amortization
Deferred income taxes
Other
Cash Provided From Operations
Changes in non-cash w orking capital items
Cash Provided From Operations
27
10
27
11
12
13
13
49
13
16
15
15
59
28
(11)
9
53
(23)
30
8
(3)
(0)
10
8
17
8
0
8
20
(19)
1
10
(2)
4
22
(22)
0
10
3
8
29
(2)
27
36
(1)
20
81
(35)
46
10
1
3
24
5
29
10
(7)
5
20
(42)
(23)
10
0
0
22
24
46
9
0
0
23
(5)
18
38
(24)
7
70
(19)
51
8
0
0
20
24
44
8
0
0
23
(41)
(18)
7
0
0
22
12
35
7
0
0
22
6
29
30
0
0
89
1
89
Financing activities
Long-term debt (net of repayments)
Issue (repayment) of capital lease
Proceeds from share issue
Dividends on common shares
Share repurchases
Other
Cash Provided From Financing
13
(2)
114
(29)
0
(2)
93
(4)
(0)
0
(7)
0
0
(12)
0
(0)
0
(7)
0
(2)
(9)
15
(0)
0
(8)
0
(0)
7
(6)
(1)
0
(7)
0
(1)
(15)
5
(2)
0
(30)
0
(3)
(29)
(27)
(0)
0
(7)
0
0
(34)
35
(0)
0
(7)
0
(2)
26
(15)
(1)
0
(7)
0
0
(22)
(10)
(1)
0
(7)
0
0
(17)
(17)
(2)
0
(27)
0
(2)
(47)
0
(1)
0
(7)
0
0
(7)
0
(1)
0
(7)
0
0
(7)
0
(1)
0
(7)
0
0
(7)
0
(1)
0
(7)
0
0
(7)
0
(2)
0
(27)
0
0
(29)
Investing activities
Purchase of property, plant and equipment
(15)
(4)
Business acquisitions
(102)
0
0
0
Dispositions of property, plant and equipme
Other
(6)
(0)
Cash Used for Investing
(123)
(4)
Effect of FX translation on cash
0
0
Change in Cash
1
2
Beginning Cash Balance (Deficit)
11
12
Ending Cash Balance (Deficit)
12
14
Source: BMO Capital Markets Estimates, Company Reports
(2)
0
0
(0)
(2)
0
(10)
14
4
(3)
0
0
(0)
(3)
(0)
4
4
9
(3)
0
0
(0)
(3)
(0)
9
9
17
(11)
0
0
(0)
(11)
(0)
6
12
17
(4)
0
0
(0)
(4)
(0)
(10)
17
8
(2)
0
0
(0)
(2)
(0)
1
8
9
(3)
0
0
0
(3)
0
21
9
30
(3)
0
0
0
(3)
0
(2)
30
28
(11)
0
0
(0)
(11)
(0)
(8)
17
10
(3)
0
0
0
(3)
0
34
28
62
(3)
0
0
0
(3)
0
(27)
62
35
(3)
0
0
0
(3)
0
25
35
60
(3)
0
0
0
(3)
0
19
60
79
(10)
0
0
0
(10)
0
51
28
79
BALANCE SHEET
2014
In millions of US$
2015E
2016E
2013
Q1
Q2
Q3
Q4
2014
Q1
Q2E
Q3E
Q4E
2015E
Q1E
Q2E
Q3E
Q4E
2016E
Cash
Accounts receivable
Inventories
Other
Total Current Assets
12
230
183
8
433
14
201
208
8
431
4
146
246
9
406
9
164
267
8
448
17
212
230
6
465
17
212
230
6
465
8
187
232
4
430
9
189
242
4
444
30
185
226
4
445
28
192
222
4
447
28
192
222
4
447
62
182
224
4
473
35
202
245
4
486
60
189
236
4
489
79
191
220
4
495
79
191
220
4
495
Fixed assets
Intangible assets
Unused ITC
Goodw ill
Future income tax assets
Other
Total Assets
65
357
66
352
13
212
55
1
1,129
65
343
9
213
57
1
1,094
65
338
6
213
59
0
1,129
64
332
0
213
62
0
1,136
64
326
0
213
68
0
1,101
64
321
0
213
69
0
1,111
62
316
0
213
69
0
1,104
60
311
0
213
69
0
1,100
59
307
0
213
69
0
1,120
58
303
0
213
69
0
1,129
57
299
0
213
69
0
1,127
56
295
0
213
69
0
1,128
212
55
14
1,136
64
332
0
213
62
0
1,136
60
311
0
213
69
0
1,100
56
295
0
213
69
0
1,128
213
58
26
35
3
334
225
55
25
30
2
338
205
48
25
30
3
310
227
37
29
45
6
343
233
41
32
40
8
354
233
41
32
40
8
354
226
23
35
13
20
318
202
18
40
48
12
320
205
18
40
0
12
275
204
18
40
0
12
274
204
18
40
0
12
274
219
18
40
0
12
289
219
18
40
0
12
289
209
18
40
0
12
279
202
18
40
0
12
272
202
18
40
0
12
272
0
115
225
0
6
681
0
113
210
0
15
676
0
112
200
0
22
644
1
111
200
0
23
677
1
108
207
0
13
683
1
108
207
0
13
683
1
106
208
0
12
644
4
103
202
0
20
648
4
103
235
0
19
635
4
103
225
0
19
624
4
103
225
0
19
624
4
103
225
0
18
638
4
103
225
0
18
637
4
103
225
0
17
627
4
103
225
0
17
620
4
103
225
0
17
620
589
(139)
1,094
588
(136)
1,129
588
(136)
1,136
589
(126)
1,111
589
(120)
1,104
589
(114)
1,100
589
(98)
1,129
589
(90)
1,127
589
(82)
1,128
589
(82)
1,128
Share capital
588
589
Retained earnings
(133) (135)
Total Liabilities & Shareholders' Equity
1,136 1,129
Source: BMO Capital Markets Estimates, Company Reports
588
589
(136) (131)
1,136 1,101
589
589
(114) (107)
1,100 1,120
181
Quarterly Price
25
20
20
18
18
16
16
14
14
12
12
10
10
25
20
20
15
15
10
10
2) Mkt
1) NR
5
NFI Relative to S&P/TSX Comp.
NFI Relative to Machinery
500
400
400
300
300
200
200
100
2005
2010
400
200
200
2015
Revenue / Share
Price / Revenue
300
1.0
200
600
400
100
2000
600
500
1995
2013
2014
2015
200
200
0.5
100
-200
2013
0.0
EPS (4 Qtr Trailing)
Price / Earnings
2014
2015
-200
400
200
0
1995
FYE
(Dec.)
EPS
$
2011
2012
2013
2014
0.81
0.22
0.49
0.48
Range*:
Current*
2000
2005
P/E
Hi - Lo
9.5
40.5
24.2
29.4
6.4
23.6
15.9
21.6
40.5
6.4
0.58
34.6
2010
2015
DPS
$
Yield%
Hi - Lo
Payout
%
BV
$
P/B
Hi - Lo
0.86
0.59
0.59
0.59
16.5 11.2
11.3 6.6
7.5 4.9
5.7 4.2
>100
>100
>100
>100
8.2
7.7
8.1
8.1
0.9
1.2
1.5
1.7
0.6
0.7
1.0
1.3
1.7
0.6
>100
11.0
16.5
0.62
4.2
3.1
1.8
ROE
%
3
6
6
1
2
Date
20-Feb-13
3-Jul-13
Rating Change
R to NR
NR to Mkt
Share Price
$9.94
$11.14
182
IMPORTANT DISCLOSURES
Analyst's Certification
I, Bert Powell, CFA, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I
also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this
report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their
affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating
new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA (exceptions:
Alex Arfaei and Brodie Woods). These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the
NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a
research analyst account.
Company Specific Disclosure
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the
past 12 months.
Disclosure 6: This issuer is a client (or was a client) of BMO NB, BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12 months:
Non-Securities Related Services.
Disclosure 13: A partner, director, officer, employee or agent of BMO Capital Markets is an officer, director, employee of, or serves in an advisory
capacity to, this issuer: Brian Tobin (Member of Board of Directors)
Methodology and Risks to Price Target/Valuation
Methodology: Our $19.00 target is based on ~7.3x our 2016E EBITDA.
Risks: A significant portion of new transit bus purchases are funded from government sources. As long as federal, state/provincial and municipal
budgets remain under pressure, funding for new bus purchases could be reduced or eliminated. Other risks include: price volatility of raw materials,
warranty costs could be material, labour disruptions from its predominantly unionized workforce and customer contract issues (early termination,
deferral, non-renewal).
Distribution of Ratings (September 30, 2015)
Rating
BMOCM US
BMOCM US
BMOCM US
BMOCM
BMOCM
Starmine
Category
BMO Rating
Universe*
IB Clients**
IB Clients***
Universe****
IB Clients*****
Universe
Buy
Outperform
42.2%
18.6%
54.7%
44.3%
56.9%
56.3%
Hold
Market Perform
54.3%
11.3%
42.7%
51.8%
40.9%
38.7%
Sell
Underperform
3.5%
11.1%
2.7%
3.9%
2.2%
5.0%
*
Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.
**
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as
percentage within ratings category.
***
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking
services as percentage of Investment Banking clients.
**** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.
***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as
percentage of Investment Banking clients.
Rating and Sector Key (as of April 5, 2013):
We use the following ratings system definitions:
OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis
Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis
Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis
(S) = speculative investment;
NR = No rating at this time;
R = Restricted Dissemination of research is currently restricted.
BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US
Large Cap, US Small cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating).
183
184
Financial Group
185
Khaled Omar
1 (416) 956-6807
Kevin.Chiang@cibc.com
Khaled.Omar@cibc.com
COMPANY UPDATE
j
SECTOR OUTPERFORMER
MARKET WEIGHT
C$22.00
C$19.95
Key Indices:
3-5-Yr. EPS
Gr. Rate (E)
52-week
Range
Shares Outstanding
Float
Avg. Daily Trading Vol.
New bus orders in the quarter totaled 1,133 EUs consisting of firm
Market Capitalization
orders for 253 EUs (valued at ~$114.5M), new option orders for 880 Dividend/Div Yield
EUs (valued at ~$400.6M), and options for 213 EUs converted to
Fiscal Year Ends
firm orders (valued at ~$120.1M). In addition, at the end of Q3,
Book Value
1,169 EUs of new firm and option orders were pending from
2015 ROE (E)
customers. Over the past couple of weeks, NFI has received
LT Debt
purchase documentation for 725 of these units and will be added to Common
Net AssetEquity
Value
the Q4 backlog once customer approval is received.
Convertible Available
We continue to see a strong pipeline of demand for heavy-duty
buses with NFI's TTM book-to-bill ratio at 162% and the company
maintaining its average line entry rate of ~50 EUs/week. As well,
NFI's total backlog at the end of Q3 sat at 7,290 EUs (valued at
~$3.6B), up 279 EUs Q/Q. The company did note that 153 EUs were
removed from the backlog reflecting contracts that were cancelled or
expired without a notice to proceed from the customer. Note, of this
total, 100 EUs were related to customers that did not want to
convert their firm order from NABI buses to Xcelsior. That said, new
bids have gone out for these buses though and we suspect NFI will
participate. As well, NFI's total bid universe sits at 19,420 EUs with
total active bids reaching 6,195 EUs. While this is down from 7,571
EUs in Q2, this reflects recent large contract wins.
EBITDA ($mln)
Current
Estimates (Dec.
(Dec. 31)
31)
Valuation
EV/EBITDA-Curr
Toronto
NM
C$12.04-C$20.85
55.5M
44.0M Shrs
38,000
C$1,054.5M
C$0.80 / 3.3%
December
$8.36 per Shr
9.0%
$141.0M
$464.0M
Yes
2013
$94.7A
2014
$107.4A
2015
$132.5E
2016
$138.4E
11.5X
10.2X
8.2X
7.9X
Company Description
New Flyer Industries Inc. is the largest North American manufacturer of
heavy-duty transit buses supplying transit authorities in Canada and the U.S.
www.newflyer.com
15-138502 2015
CIBC World Markets Corp., the U.S. broker-dealer, and CIBC World Markets Inc., the Canadian broker-dealer (collectively,
CIBC World Markets Corp./Inc.) do and seek to do business with companies covered in its research reports. As a result,
investors should be aware that CIBC World Markets Corp./Inc. may have a conflict of interest that could affect the
objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
For required regulatory disclosures please refer to "Important Disclosures" beginning on page 5. Please see
"Price Target Calculations" and "Key Risks to Price Target" information on page(s) 3.
Find CIBC research on Bloomberg, Reuters, firstcall.com
and ResearchCentral.cibcwm.com
CIBC World Markets Corp., 425 Lexington Avenue, New York, NY 10017 (212)-856-4000, jointly prepared by
CIBC World Markets Inc., P.O. Box 500, 161 Bay Street, Brookfield Place, Toronto, Canada M5J 2S8 (416) 594-7000
186
Q3 Deliveries In-line With Expectations - Continue To Maintain Favourable Outlook - October 15, 2015
Sector Outperformer
NFI-TSX
10/15/15
12- To 18- Month Price Target:
Capital Equipment
Sector Weighting:
All figures in US$ millions, except per share data.
EV/EBITDA Multiples
Consensus estimates except New Flyer
New Flyer Industries
High-Yielding Industrials
Commercial Vehicle & Parts
Manufacturers
P/E Multiples
Consensus estimates except New Flyer
New Flyer Industries
High-Yielding Industrials
Commercial Vehicle & Parts
Manufacturers
Key Financial Metrics
2013A
EBITDA Margin
Current Ratio
Debt/Equity
Debt/Total Capital
Income Statement
Bus Manufacturing Revenues
Aftermarket Revenues
Revenues - Consolidated
Cost of Sales
Gross Profit
EBITDA
EBIT
EBT
Net Income
Balance Sheet
C$19.95
C$22.00
Market Weight
2014A
2015E
2016E
10.2x
9.5x
10.0x
8.2x
8.4x
8.5x
7.9x
7.0x
7.4x
2014A
2015E
2016E
Investment Thesis
24.0x
16.9x
17.0x
20.0x
14.6x
13.0x
17.7x
13.1x
11.8x
Fundamentals for bus demand are improving due to rising U.S. state/municipal tax revenue, growing
bus ridership numbers (reflecting the cost advantage of taking bus transit versus driving and modestly
declining unemployment rate), and public transit being a more green option.
2014A
2015E
2016E
New Flyer is well positioned to take advantage of the improving heavy duty bus fundamentals given its
leading market share in both bus manufacturing and aftermarket services.
7.9%
1.1x
51.3%
33.9%
2013A
7.4%
1.1x
53.1%
34.7%
2014A
8.7%
1.3x
41.0%
29.1%
2015E
9.0%
1.3x
50.1%
33.4%
2016E
$991.2
$215.0
$1,199.4
$1,078.7
$120.8
$94.7
$49.0
$34.6
$26.8
$1,132.1
$319.0
$1,451.1
$1,312.8
$138.3
$107.4
$51.4
$37.6
$26.7
$1,205.3
$326.4
$1,531.7
$1,362.4
$169.4
$132.5
$85.2
$70.7
$47.4
$1,231.3
$310.6
$1,541.8
$1,364.8
$177.0
$138.4
$100.6
$86.3
$62.5
Q2/15A
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Shareholders' Equity
444
1,111
320
648
464
Company Profile
New Flyer Industries Inc. is the largest North American manufacturer of heavy-duty transit buses
supplying transit authorities in Canada and the U.S. with approximately one-third the market.
New Flyer is guiding towards 2015 production line rate of ~50 EUs/week, we view its $0.62/share
annual dividend as safe.
Canada
16%
$1,000,000
2,500
$300
$800,000
2,000
$250
$600,000
1,500
$200
$400,000
1,000
$200,000
500
$0
0
2009
2010
Revenues ($ Millions)
2011
2012
Deliveries(EUs)
2013
2014
$ Millions
3,000
2008
United States
84%
Bus Operations
78%
$1,200,000
2007
$319
$215
$150
$100
$83
$96
$108
$106
$116
$119
2009
2010
2011
2012
$50
$0
2007
2008
2013
2014
187
Q3 Deliveries In-line With Expectations - Continue To Maintain Favourable Outlook - October 15, 2015
Given Q3 deliveries were generally in-line with our expectations, we have kept
our earnings estimates unchanged. NFI is tentatively scheduled to report Q3
results on November 4. For the quarter we are forecasting revenue of $371M
(consensus $375M), up from $361M the year prior. We expect EBITDA to come
in at $30M (consensus $32M), up $4M Y/Y.
We maintain our $22 price target and SO rating. Our favourable view is
predicated on the uptrend in bus fundamentals, increasing margins, and
improving FCF conversion.
188
Q3 Deliveries In-line With Expectations - Continue To Maintain Favourable Outlook - October 15, 2015
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2013 Current
$15.4A
$18.1A
$24.4A
$36.8A
$94.7A
2014 Current
$19.7A
$27.0A
$25.7A
$35.0A
$107.4A
2015 Current
$31.4A
$39.2A
$30.0E
$31.9E
$132.5E
2016 Current
--
--
--
--
$138.4E
189
Q3 Deliveries In-line With Expectations - Continue To Maintain Favourable Outlook - October 15, 2015
IMPORTANT DISCLOSURES:
Analyst Certification: Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research
report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions
expressed herein accurately reflect such research analyst's personal views about the company and securities that are the
subject of this report and all other companies and securities mentioned in this report that are covered by such research
analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the
specific recommendations or views expressed by such research analyst in this report.
Analysts employed outside the U.S. are not registered as research analysts with FINRA. These analysts may not be
associated persons of CIBC World Markets Corp. and therefore may not be subject to FINRA Rule 2241 restrictions on
communications with a subject company, public appearances and trading securities held by a research analyst account.
Potential Conflicts of Interest: Equity research analysts employed by CIBC World Markets Corp./Inc. are
compensated from revenues generated by various CIBC World Markets Corp./Inc. businesses, including the CIBC World
Markets Investment Banking Department. Research analysts do not receive compensation based upon revenues from
specific investment banking transactions. CIBC World Markets Corp./Inc. generally prohibits any research analyst and
any member of his or her household from executing trades in the securities of a company that such research analyst
covers. Additionally, CIBC World Markets Corp./Inc. generally prohibits any research analyst from serving as an officer,
director or advisory board member of a company that such analyst covers.
In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report,
CIBC World Markets Corp./Inc. may have a long position of less than 1% or a short position or deal as principal in the
securities discussed herein, related securities or in options, futures or other derivative instruments based thereon.
Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures
set forth below, may at times give rise to potential conflicts of interest.
190
Q3 Deliveries In-line With Expectations - Continue To Maintain Favourable Outlook - October 15, 2015
Rating
Description
SO
Sector Outperformer
Stock is expected to outperform the sector during the next 12-18 months.
SP
Sector Performer
Stock is expected to perform in line with the sector during the next 12-18 months.
SU
Sector Underperformer
Stock is expected to underperform the sector during the next 12-18 months.
NR
Not Rated
CIBC World Markets does not maintain an investment recommendation on the stock.
Restricted
CIBC World Markets is restricted (due to potential conflict of interest) from rating the stock.
Stock Ratings
Sector Weightings (note: Broader market averages refer to S&P 500 in the U.S. and S&P/TSX Composite in Canada.)
O
Overweight
Market Weight
Underweight
NA
None
"Speculative" indicates that an investment in this security involves a high amount of risk due to volatility and/or liquidity issues.
Count
Percent
Count
Percent
162
43.8%
161
43.5%
157
96.9%
152
35
9.5%
30
94.4%
85.7%
Restricted
11
3.0%
Restricted
11
100.0%
Count
Percent
100.0%
Restricted
Count
Percent
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Restricted
0.0%
Important disclosures required by applicable rules can be obtained by visiting CIBC World Markets on the web at
http://researchcentral.cibcwm.com. Important disclosures for each issuer can be found using the "Coverage" tab on the
top left of the Research Central home page. Access to the system for rating investment opportunities and our
dissemination policy can be found at the bottom of each page on the Research Central website. These important
disclosures can also be obtained by writing to CIBC World Markets Corp., 425 Lexington Avenue, New York, NY 10017
(212-856-4000) or CIBC World Markets Inc.,161 Bay Street, 4th Floor, Toronto, ON M5H 2S8, Attention: Research
Disclosures Request.
191
Q3 Deliveries In-line With Expectations - Continue To Maintain Favourable Outlook - October 15, 2015
HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS CORP./INC. RECOMMENDATIONS FOR NEW FLYER
INDUSTRIES INC. (NFI)
Date
12/13/2012
01/10/2013
01/25/2013
02/05/2013
03/01/2013
05/10/2013
06/21/2013
07/15/2013
08/07/2013
10/15/2013
11/08/2013
04/15/2014
05/11/2014
07/16/2014
08/06/2014
03/19/2015
05/08/2015
07/15/2015
08/07/2015
09/20/2015
Change Type
Closing Price
8.38
8.80
9.95
9.72
10.30
9.86
10.30
11.13
11.54
11.07
10.94
11.20
11.82
12.85
13.17
13.92
14.69
15.77
17.88
18.85
Rating
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SO
SO
Price Target
8.50
8.75
10.00
10.50
11.00
10.00
11.00
11.50
12.00
12.50
12.00
12.25
12.50
13.00
14.00
15.00
15.75
16.50
19.50
22.00
Coverage
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
The chart above reflects the combined historical recommendations of CIBC World Markets Corp. and CIBC World Markets
Inc.
192
Q3 Deliveries In-line With Expectations - Continue To Maintain Favourable Outlook - October 15, 2015
Legal Disclaimer
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193
Q3 Deliveries In-line With Expectations - Continue To Maintain Favourable Outlook - October 15, 2015
194
CAD11.75-CAD20.50
Sector
Auto
Market Cap
Shares Outstanding
55,505,604
94
ISIN
CA64438T4019
PermID
1-4295861010
Description
Value
Rank
Quartile
MCap (US$)
828.7M
7,950
Top
982.3M
8,542
Top
Revenue (US$)
1.2B
5,200
Top
22M
9,747
Top
Return on Equity %
5.7
17,651
Second
1.8
21,667
Second
Price Earnings
37.6
17,731
Second
Yield %
3.0
7,040
Top
1,358
4,532
Top
30.4
5,112
Top
93
3,114
Top
* 1 year ago CAD 1 = USD 0.92; Sep 30, 2015: CAD 1 = USD 0.75
2014
2013
2012
Sales (USD)
1.2B
922.6M
645.7M
31
26.6
7.5
22
20.6
6.9
EPS (CAD)
0.5303
0.5398
0.2169
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Page 1
195
Analysis
Bullish Signals
The 2.4% discount to 12-month high of CAD20.50 against
the 70.3% premium to 12-month low of CAD11.75
suggests the stock continues to push for new highs.
Rises to Falls: In the last three months the number of rises
outnumbered falls 36:26 or 1.4:1.
In the last 8 trading sessions there has been a net rise of
4.5%; the stock has advanced eleven times and the
biggest one day rise was 5.3% on Sep 21.
In the Canadian market of 1,815 stocks and 75 units
traded today, the stock has a 6-month relative strength
of 94 which means it is beating 94% of the market.
A price rise combined with a high relative strength is a
bullish signal.
The Moving Average Convergence Divergence (MACD)
indicator of 12-day Exponential Moving Average (EMA)
of 19.29 minus the 26-day EMA of 18.95 is positive
suggesting a bullish signal. Both the 12-day EMA as well
as the 26-day EMA are rising, another bullish signal.
The Price/MAP 200 of 1.31 for New Flyer Industries is
higher than the Price/MAP 200 for the S&P/TSX 60 Index
of 0.9.
The price to 200-day MAP ratio is 1.31, a bullish indicator.
In the past 200 days this ratio has exceeded 1.31, ten
times suggesting further upside. The stock is trading
above both its MAPs and the 50-day MAP of CAD18.32 is
higher than the 200-day MAP of CAD15.23, a bullish
indicator. The 200-day MAP has increased to CAD15.23.
An increase is another bullish indicator.
The present value of CAD1,000 (PV1000) invested three
years ago in New Flyer Industries is CAD2,785, including a
capital gain of CAD1,665 and dividend reinvested of
CAD121.
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Page 2
196
Analysis (continued)
Undervaluation:
The earnings yield of 2.7% is 1.9 times the 10-year bond
yield of 1.43%.
The Q Ratio, defined by James Tobin as MCap divided
by Total Assets, is 0.8. Compared with the rest of the
market the stock is undervalued.
Value
Rank In Market
Price/MAP200
1.31
In Top 5%
Price/MAP50
1.09
In Top 6%
94
In Top 7%
Turnover in Quarter
CAD122.3 million
In Top Quartile
MCap
US$828.7 million
In Top Quartile
Annual Revenue
CAD1.6 billion
(US$1.2 billion)
In Top Quartile
Price Change %
4.1
In Top Quartile
Relative Strength
(6M)
Note
Bearish Signals:
Overvaluation:
Price/Earnings of 37.6 versus sector average of 11.8 and
market average of 15.1. We estimate the shares are
trading at a current year P/E of 24.9 and a forward year
P/E of 16.5.
Price/Sales of 0.69 versus sector average of 0.6 and
market average of 1.1. We estimate the shares are
trading at a current year Price/Sales of 0.5 and a
forward year Price/Sales of 0.4.
The Relative yield of the stock, defined by its yield of 3%,
divided by average yield of dividend yielding stocks in
the S&P/TSX 60 Index of 3.4% is 86.9%. This suggests the
stock is overvalued in dividend yield terms.
ROE
Profit
Margin
Asset
Turnover
Equity
Multiplier
Current
Year
5.7
1.8
1.2
2.5
Previous
Year
5.8
2.2
1.0
2.5
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197
Analysis (continued)
Fig 6: Bearish Indicators and Rank
in Market
Description
Value
Rank In Market
Return on Assets
[ROA] %
2.2
In Bottom Quartile
EBITDA Margin %
6.4
In Bottom Quartile
Price Earnings
37.6
In Bottom Quartile
1.8
In Bottom Quartile
Brokerage
Action
Current
Rating
Boost Price
Target
Outperform
Buy
08-Aug- CIBC
2015
Upgrade
Sector
Outperformer
07-Aug- CIBC
2015
Boost Price
Target
Outperform
20-Jul2015
Buy
16-Jul2015
CIBC
Sector Perform
Boost Price
Target
PVCAD1,000
Trailing Qtr
Trailing Yr
Trailing 3 Yrs
CAD1,307
CAD1,632
CAD2,785
Auto sector
879
990
1,605
S&P/TSX 60
Index
926
908
1,116
NFI
Last
Close
(CAD)
20
0.6
58.5
4.7
63.3
0.05
14.3
0.4
14.7
1 Yr ago 12.62
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Page 4
198
Volatility
The stock traded between a 52-week low of CAD11.75 and a
high of CAD20.50. The average daily volatility of 2.2% places
the stock in the 3rd quartile in the market meaning it is mildly
volatile.
US$91.3 million
Volume
6,686,063
1.2
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199
Quarter
Year
3 Years
NFI
29.55
56.72
166.49
Auto
-12.1
-0.98
60.55
S&P/TSX 60 index
-8
-9.23
11.62
2014
2013
2012
2011
20
12.76
11.04
7.5
6.29
% Price Change
56.7
15.6
47.1
19.2
87,720
58,201
62,993
48,793
294,528
VWP (CAD)
15.25
11.47
9.67
6.53
6.14
Turnover Period
3 yrs 4 mo
4 yrs 2 mo
3 yrs 10 mo
4 yrs 10 mo
22 yrs 6 mo
11.75 - 20.5
9.53 - 13.62
7.31 - 11.48
5.04 - 8.07
5.42 - 7.46
Index Change %
-9.2
17.9
4.3
5.4
65.9
-2.3
42.8
13.9
Fig 18: CAD1 buys USD 0.74 today: Appreciation of USD from 0.86
twenty-five years ago
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Page 6
200
In the trailing 12 months New Flyer Industries has overperformed the S&P/TSX 60 index by 66.0%.
New Flyer Industries hit a 3-month high of CAD20 on Sep 30 and a 3-month low of CAD15 on Jul 07.
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Page 7
201
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Page 8
202
Ranking
Fig 22: Global Peer Group Analysis (all figures in USD)
Name
Relative Str.
(6 mo)
MCap
PV $1000
(1 yr)
Revenue
Net Profit
Total Assets
Piaggio
46
866.6M
934.2
1.4B
17.9M
1.7B
33
834M
397.5M
43.5M
589.3M
48
832.4M
1,264.2
235.5M
20.9M
572.9M
95
829.9M
2,139.0
47.4M
10.3M
106.1M
93
828.7M
1,358.3
1.2B
22M
982.3M
85
806.4M
1,449.4
879.4M
40.4M
905.4M
Ceat
96
788.2M
1,537.3
990.3M
48.5M
584.8M
ARB
77
778.5M
1,057.1
210.4M
29.9M
169.6M
Indus Motor
82
752.3M
1,598.2
558.5M
37.2M
250.7M
Country
Last Price
P/E
P/S
PIA
IT
EUR2.15
48.3
002454
CN
CNY13.08
300100
CN
002553
P/Book
Turnover
Rate (%)
% Disc to 52w Hi
0.6
67.4
32.4
19.2
2.1
760.2
57.3
CNY13.45
39.8
3.5
4.6
291.7
58.8
CN
CNY15.17
80.9
17.5
8.6
442.4
19.0
NFI
CA
CAD20.0
37.6
0.7
30.4
2.4
A064960
KR
KRW70,000.0
20.0
0.9
1.8
64.6
CEATLTD
IN
Rs1,281.95
16.4
0.8
3.2
311.7
1.3
ARB
AU
AUD14.02
26.1
3.7
6.1
42.6
3.2
INDU
PK
PKR997.0
20.2
1.4
3.9
13.3
24.2
Sector Sorting
For Company searches, or for sorting by stocks and variables, an interactive version of today's Table is available
here
www.BuySellSignals.com
Page 9
203
Ranking (continued)
Fig 23: Relative Strength
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Page 10
204
31 December, 2014
Unfavourable Changes:
Note:
Annual
Company Name : New Flyer Industries Inc. (NFI)
December 31
Description
2014
CAD m
2013
CAD m
2014
$US m
2013
$US m
Change
(%)
Total Revenue
1,602.7
1,235.9
1,381.4
1,161
Up 29.7
EBITDA
102.5
81.6
88.4
76.7
Up 25.6
EBIT
57.7
49.9
49.7
46.9
Up 15.6
Interest
16.2
14.2
13.9
13.4
Up 13.7
Pre-Tax Profit/(Loss)
41.5
35.7
35.8
33.5
Up 16.3
Profit/(Loss) after
Tax
29.5
27.6
25.4
25.9
Up 7
Working Capital
148.1
104.9
127.6
98.6
Up 41.1
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205
565
460.3
487
432.4
Up 22.7
Current Liabilities
416.9
355.3
359.4
333.8
Up 17.3
479.5
448
450.5
Up 8.4
Total Liabilities
796.1
727.3
686.2
683.2
Up 9.5
Total Assets
1,315.9
1,206.8
1,134.2
1,133.7
Up 9
Current Debt
48.1
38.6
41.5
36.2
Up 24.8
Non-Current Debt
240.3
216.9
207.2
203.8
Up 10.8
Total Debt
288.5
255.5
248.6
240
Up 12.9
20.2
12.6
17.4
11.9
Up 60
Operating Cash
Flow
50.6
30.9
43.6
29
Up 63.8
Net Assets
519.8
479.5
448
450.5
Up 8.4
(124.9)
(95.5)
(117.3)
Improved 11.3
2014
2013
2014
2013
Change (%)
Description
CAD
CAD
$US
$US
EBIT
0.9
0.9
Up 8.2
EBITDA
1.8
1.6
1.6
1.5
Up 17.6
Working Capital
2.7
2.3
1.9
Up 32.1
9.2
8.1
8.7
Up 1.5
Total Liabilities
14.3
14
12.4
13.2
Up 2.4
Total Assets
23.7
23.2
20.4
21.8
Up 2.1
Current Debt
0.9
0.7
0.7
0.7
Up 16.8
Non-Current Debt
4.3
4.2
3.7
3.9
Up 3.7
Total Debt
5.2
4.9
4.5
4.6
Up 5.7
(2.4)
(1.7)
(2.3)
Improved 16.7
EPS Final
0.5
0.5
0.5
Down 1.9
0.5
December 31
Performance Ratios
2014
2013
Change (%)
5.7
5.8
Down 1.7
2.2
2.3
Down 4.3
7.8
8.9
Down 12.9
15.7
23.5
Down 33.2
Debt/Equity
0.6
0.5
Up 3.8
0.6
0.6
Steady
Interest Cover
3.6
3.5
Up 1.4
Current Ratio
1.4
1.3
Up 4.6
50.1
Down 4.4
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47.9
Page 12
206
42.9
38.1
Up 12.5
20.2
16.1
Up 25.1
20.3
Down 7.8
5.7
Down 1.9
5.6
88.0
87.6
Up 0.5
EBITDA to Revenues
6.4
6.6
Down 3.1
EBIT to Revenues
3.6
4.0
Down 10.8
2.6
2.9
Down 9.9
1.8
2.2
Down 19.3
Description
Annual (CAD M)
Annual (US$ M)
5 years CAGR %
Total Revenue
1,602.7
1,381.4
1,234.5
1,064
20.5
EBITDA
102.5
88.4
79.7
68.7
2.0
Operating Profit
57.7
49.7
44.5
38.4
-5.2
Net Profit
29.5
25.4
22.1
19.1
23.2
Description
Annual
3 years Avg
EBITDA Margin
6.4
6.5
3.6
3.5
1.8
1.7
Return on Equity
5.7
4.7
Return on Assets
2.2
1.9
6.4
5.4
Currency Conversion (December 31, 2014): $US1 = CAD1.16Currency Conversion (December 31, 2013): $US1 = CAD1.06
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Page 13
207
Paul Soubry
President
http://www.newflyer.com.
Business Sector
Industry Group
Economic Sector
Consumer Cyclicals
Stock BUZZ
To view the Stock BUZZ on New-Flyer-Industries, click
Adam Gray
Director
John Marinucci
Director
Phyllis Cochran
Director
here
Issued Capital
Krystyna Hoeg
Director
V. James Sardo
Independent Director
Larry Edwards
Independent Director
Colin Pewarchuk
Company Secretary
Meetings
May 01: New Flyer Industries announces AGM
New Flyer Industries has announced its Annual General
Meeting will take place on May 07, 2015.
Dividends
September 15: New Flyer Industries announces
dividend
New Flyer Industries today announced a monthly dividend of
5.17c per share. The record date is September 30, 2015 and it
is payable on October 15, 2015.
For more details click here.
www.BuySellSignals.com
Page 14
208
Performance
August 06: New Flyer Announces Results for the Second
Quarter of 2015
[News Story] Summary (U.S. Dollars except as noted):
Consolidated revenue of $375.0 million increased by 8.2%
compared to 2014 Q2 due to growth in both bus
manufacturing and aftermarket revenue. Record quarterly
consolidated Adjusted EBITDA of $39.2 million, an increase of
45.3% compared to 2014 Q2.
For more details click here.
www.BuySellSignals.com
Press Releases
September 30: Southeastern Pennsylvania
Transportation Authority awards New Flyer a contract
for up to 35 MiDi(Registered) buses
WINNIPEG, Sept. 30, 2015(TSX: NFI) (TSX: NFI.DB.U) New Flyer of
America Inc., a subsidiary of New Flyer Industries Inc. ("New
Flyer" or the "Company"), the leading manufacturer of heavyduty transit buses in the United States and Canada,
announced today that the Southeastern Pennsylvania
Transportation Authority ("SEPTA") awarded New Flyer a
contract for up to 35 30-foot MiDi(Registered) clean diesel
buses.
For more details click here.
209
Page 16
210
WINNIPEG, June 12, 2015 (TSX: NFI) (TSX: NFI.DB.U) New Flyer
of America Inc., a subsidiary of New Flyer Industries Inc. ("New
Flyer" or the "Company"), the leading manufacturer of heavyduty transit buses in the United States and Canada,
announced today that Oahu Transit Services Inc., located in
Honolulu, Hawaii awarded New Flyer a contract for up to 20
heavy-duty 60-foot, clean diesel transit buses (40 equivalent
units or "EUs").
For more details click here.
[News Story] WINNIPEG, May 22, 2015 /CNW/ - (TSX: NFI) (TSX:
NFI.DB.U) New Flyer of America Inc., a subsidiary of New Flyer
Industries Inc. ("New Flyer" or the "Company"), the leading
manufacturer of heavy-duty transit buses in the United States
and Canada, announced today that the Dallas Area Rapid
Transit "(DART)" has exercised options for 17 40-foot NABI LFW
and 46 duty 40-foot New Flyer Xcelsior compressed natural
gas ("CNG") buses.
For more details click here.
www.BuySellSignals.com
211
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Page 18
212
Glossary
Annual Return (Fig 8):
Current Ratio:
Debt/Equity:
Dividend Yield:
EBIT Margin :
Earnings Yield:
Interest Cover:
BuySellSignals Financial Research provides equity research on over 48,000 companies listed in
more than 90 countries and 120 markets across the world. BuySellSignals believes that every
stock has a story to tell and that this story changes every day. To capture this story,
BuySellSignals offers the latest pertinent and comprehensive information so that investors can
make well-informed investment decisions.
For further details on definitions and quotations from investing legends, Click here
For any enquiries, please email: feedback@buysellsignals.com
Disclaimer: While this document is based on information sources which are considered reliable, it has been prepared without consideration of
your specific investment objectives, financial situation or needs, so you should carry out your own analysis or seek professional investment
advice before an investment decision is made. The document contains unbiased, independent equities data from BuySellSignals (AFS Licence
222756), who provide round the clock data on every stock and sector. BuySellSignals is not a broker, and does not have an executing,
corporate advisory or investment banking function. BuySellSignals, its directors, employees and consultants do not represent, warrant or
guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.
The data is sourced from annual reports and company releases and may not be fully up to date. It should be used as a guide only.
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Page 19
213
Khaled Omar
1 (416) 956-6807
Kevin.Chiang@cibc.com
Khaled.Omar@cibc.com
EARNINGS UPDATE
j
Sector Weighting:
Key Ratios and Statistics
NFI [Paul Soubry (President & CEO) and Glenn Asham (CFO)] was at 12-18 mo. Price Target
NFI-TSX (9/18/15)
our Montreal Conference and participated in a group lunch in
Toronto. We are increasing our PT to C$22 from C$19.50 and
Key Indices:
maintaining our SO rating. Key points from NFI's presentation were:
3-5-Yr. EPS
Gr. Rate (E)
52-week
Range
Shares Outstanding
Bus Margins Showing An Upward Trajectory: Bus margins (EBITDA
Float
per EU) took a hit in 2014, down on average over ~$5,000 to
Avg. Daily Trading Vol.
~$23,500, reflecting the impact of lower margin backlog booked in
Market Capitalization
2012/13 as the heavy duty bus industry faced a period of very
Dividend/Div Yield
competitive pricing for bids. Bus margins in H1/15 averaged just
Fiscal Year Ends
under ~$32,000. While we recognize that mix plays a role, this also
Book Value
reflects the fact that NFI is benefiting from lower margin buses
2015 ROE (E)
exiting the backlog and more normalized pricing. On the latter, the
LT Debt
heavy duty bus industry in North America has shrunk from five
Net AssetEquity
Value
Common
players to three (NFI having acquired NABI and Orion shutting
Convertible
Available
down) with NFI having 48% market share. As well, the improving
What's The Event
EBITDA ($mln)
Current
Estimates (Dec.
(Dec. 31)
31)
Valuation
EV/EBITDA-Curr
SECTOR OUTPERFORMER
MARKET WEIGHT
C$22.00
C$19.00
Toronto
NM
C$12.04-C$19.95
55.5M
44.0M Shrs
38,000
C$1,054.5M
C$0.62 / 3.3%
December
$8.36 per Shr
9.0%
$141.0M
$464.0M
Yes
2013
$94.7A
2014
$107.4A
2015
$132.5E
2016
$138.4E
11.1x
9.8x
7.9x
7.6x
15-138096 2015
CIBC World Markets does and seeks to do business with companies covered in its research reports. As a result, investors
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
See "Important Disclosures" section at the end of this report for important required disclosures, including potential
conflicts of interest. See "Price Target Calculation" and "Key Risks to Price Target" sections at the end of this report,
where applicable.
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and ResearchCentral.cibcwm.com
CIBC World Markets Inc., P.O. Box 500, 161 Bay Street, Brookfield Place, Toronto, Canada M5J 2S8 (416) 594-7000
214
Sector Outperformer
NFI-TSX
9/20/15
12- To 18- Month Price Target:
Capital Equipment
Sector Weighting:
C$19.00
C$22.00
Market Weight
2014A
2015E
2016E
Company Profile
9.8x
9.4x
7.9x
8.4x
7.6x
6.9x
9.6x
8.3x
7.3x
P/E Multiples
2014A
2015E
2016E
Investment Thesis
22.9x
19.0x
16.9x
Fundamentals for bus demand are improving due to rising U.S. state/municipal tax revenue, growing
High-Yielding Industrials
Commercial Vehicle & Parts
16.8x
16.2x
14.4x
12.6x
12.8x
11.2x
bus ridership numbers (reflecting the cost advantage of taking bus transit versus driving and modestly
declining unemployment rate), and public transit being a more green option.
New Flyer is well positioned to take advantage of the improving heavy duty bus fundamentals given
Manufacturers
Key Financial Metrics
2013A
2014A
2015E
2016E
EBITDA Margin
7.9%
7.4%
8.7%
9.0%
Current Ratio
Debt/Equity
1.1x
51.3%
1.1x
53.1%
1.3x
41.0%
1.3x
50.1%
Debt/Total Capital
Income Statement
33.9%
2013A
34.7%
2014A
29.1%
2015E
33.4%
2016E
$991.2
$215.0
$1,132.1
$319.0
$1,205.3
$326.4
$1,231.3
$310.6
$1,199.4
$1,078.7
$1,451.1
$1,312.8
$1,531.7
$1,362.4
$1,541.8
$1,364.8
Gross Profit
EBITDA
$120.8
$94.7
$138.3
$107.4
$169.4
$132.5
$177.0
$138.4
EBIT
EBT
$49.0
$34.6
$51.4
$37.6
$85.2
$70.7
$100.6
$86.3
Net Income
$26.8
$26.7
$47.4
$62.5
Balance Sheet
Q2/15A
New Flyer Industries Inc. is the largest North American manufacturer of heavy-duty transit buses
supplying transit authorities in Canada and the U.S. with approximately one-third the market.
its leading market share in both bus manufacturing and aftermarket services.
Revenues - Consolidated
Cost of Sales
Current Assets
444
Total Assets
Current Liabilities
Bus Operations
78%
1,111
320
Total Liabilities
Shareholders' Equity
New Flyer is guiding towards 2015 production line rate of ~50 EUs/week, we view its $0.62/share
annual dividend as safe.
Canada
16%
648
464
Revenue from Bus Manufacturing Operations
$1,000,000
2,500
$300
$800,000
2,000
$250
$600,000
1,500
$200
$400,000
1,000
$200,000
500
$0
0
2007
2008
2009
2010
2011
2012
2013
Del iveries(EUs)
2014
$ Millions
3,000
$1,200,000
$319
$215
$150
$100
$83
$96
$108
$106
$116
$119
2009
2010
2011
2012
$50
$0
2007
2008
2013
2014
215
216
5300
48%
NFI EU Shipments
EBITDA Per EU
Bus EBITDA
Bus Multiple
2518
$31,000
7.0x
$546,297,500
$320,000,000
Aftermarket EBITDA
Aftermarkets Multiple
Aftermarkets EV
19%
$60,800,000
10.0x
$608,000,000
Total EV
$1,154,297,500
Net Debt
$244,654,000
Equity Value
$909,643,500
Shares Outstanding
=> Assume this is "normalized" bus margins and benefit of cost cutting
$78,042,500
Bus EV
Aftermarket EBITDA Margin
=> Current industry deliv eries but could get to ov er 6,000 EUs
55,510,000
$16.39
$21.54
217
event can occur again in the future, resulting in production delays and increased
costs.
Foreign Exchange Rates: New Flyer is exposed to changes in the C$/US$ rate,
in terms of revenue, operating costs, and financial obligations. New Flyer
engages in hedging practices to protect itself from changes in the value of the
C$/US$ exchange rate and by adjusting prices of its products by attempting to
anticipate, as closely as possible, the number of orders for the year (TAs
generally order buses one year in advance).
Raw Material And Component Costs: Raw materials and components
represent a majority of the costs in the manufacturing of buses. Nearly 92% of
New Flyers costs are variable costs. Additional costs are generally passed onto
customers through price adjustments. However, significant increases, or
fluctuations, in copper, resins or oil prices could affect margins.
218
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2013 Current
$15.4A
$18.1A
$24.4A
$36.8A
$94.7A
2014 Current
$19.7A
$27.0A
$25.7A
$35.0A
$107.4A
2015 Current
$31.4A
$39.2A
$30.0E
$31.9E
$132.5E
2016 Current
--
--
--
--
$138.4E
219
IMPORTANT DISCLOSURES:
Analyst Certification: Each CIBC World Markets research analyst named on the front page of this research report, or
at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein
accurately reflect such research analyst's personal views about the company and securities that are the subject of this
report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii)
no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or views expressed by such research analyst in this report.
Potential Conflicts of Interest: Equity research analysts employed by CIBC World Markets are compensated from
revenues generated by various CIBC World Markets businesses, including the CIBC World Markets Investment Banking
Department. Research analysts do not receive compensation based upon revenues from specific investment banking
transactions. CIBC World Markets generally prohibits any research analyst and any member of his or her household from
executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets
generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that
such analyst covers.
In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report,
CIBC World Markets may have a long position of less than 1% or a short position or deal as principal in the securities
discussed herein, related securities or in options, futures or other derivative instruments based thereon.
Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures
set forth below, may at times give rise to potential conflicts of interest.
220
Rating
Description
SO
Sector Outperformer
Stock is expected to outperform the sector during the next 12-18 months.
SP
Sector Performer
Stock is expected to perform in line with the sector during the next 12-18 months.
SU
Sector Underperformer
Stock is expected to underperform the sector during the next 12-18 months.
NR
Not Rated
CIBC World Markets does not maintain an investment recommendation on the stock.
Restricted
CIBC World Markets is restricted (due to potential conflict of interest) from rating the stock.
Stock Ratings
Sector Weightings (note: Broader market averages refer to S&P 500 in the U.S. and S&P/TSX Composite in Canada.)
O
Overweight
Market Weight
Underweight
NA
None
"Speculative" indicates that an investment in this security involves a high amount of risk due to volatility and/or liquidity issues.
Count
Percent
163
44.2%
161
43.6%
35
9.5%
2.4%
Restricted
Count
Percent
157
96.3%
153
95.0%
30
85.7%
100.0%
Count
Percent
100.0%
Restricted
Count
Percent
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Restricted
0.0%
Important disclosures required by IIROC Rule 3400, can be obtained by visiting CIBC World Markets Inc. on the web at
http://researchcentral.cibcwm.com. Important disclosures for each issuer can be found using the "Coverage" tab on the
top left of the Research Central home page. Access to the system for rating investment opportunities and our
dissemination policy, can be found under 'Quick Links' on bottom right side of the Research Central homepage. These
important disclosures can also be obtained by writing to CIBC World Markets Inc., Brookfield Place, 161 Bay Street, 4th
Floor, Toronto, Ontario M5J 2S8, Attention: Research Disclosures Request
221
HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS INC. RECOMMENDATIONS FOR NEW FLYER
INDUSTRIES INC. (NFI)
Date
12/13/2012
01/10/2013
01/25/2013
02/05/2013
03/01/2013
05/10/2013
06/21/2013
07/15/2013
08/07/2013
10/15/2013
11/08/2013
04/15/2014
05/11/2014
07/16/2014
08/06/2014
03/19/2015
05/08/2015
07/15/2015
08/07/2015
Change Type
Closing Price
8.38
8.80
9.95
9.72
10.30
9.86
10.30
11.13
11.54
11.07
10.94
11.20
11.82
12.85
13.17
13.92
14.69
15.77
17.88
Rating
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SO
Price Target
8.50
8.75
10.00
10.50
11.00
10.00
11.00
11.50
12.00
12.50
12.00
12.25
12.50
13.00
14.00
15.00
15.75
16.50
19.50
Coverage
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
222
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and recommendations expressed herein constitute judgments as of the date of this report and are subject to change
10
223
11
224
(NFI-TSX)
Stock Rating:
Target Price:
Market Perform
$16.00
(FY-Dec.)
Price (10-Sep)
Total Return
$18.47
-10%
52-Week High
52-Week Low
$19.95
$12.04
Dividend
Yield
$0.62
3.4%
Book Value
Price/Book
$8.24
1.7x
55.5
43.9
418
$218
Quarterly EPS
2013A
2014A
2015E
Q1
$0.08
$0.10
$0.20 a
Q2
$0.03
$0.06
$0.22 a
2013A
2014A
2015E
2016E
EPS
P/E
$0.49
$0.48
$0.85
21.7x
$1.00
18.5x
CFPS
P/CFPS
$0.95
$1.46
$1.61
11.5x
$1.56
11.8x
$1,025
$811
$6.3
Nov (E)
Rev. ($mm)
EV ($mm)
EBITDA ($mm)
EV/EBITDA
$1,199
$839
$95
8.8x
$1,451
$1,000
$91
10.9x
$1,518
$891
$121
7.3x
$1,500
$817
$124
6.6x
Q4
$0.23
$0.13
$0.21
EBITDA Margin
EBIT Margin
EBT Margin
Net Margin
6.2%
3.7%
2.5%
2.0%
6.5%
4.1%
3.3%
2.6%
7.8%
5.7%
5.0%
3.3%
na
na
na
na
Q3
$0.14
$0.18
$0.22
Notes: Share price, target & capitalization in C$, all others US$ Disclosures: 5, 6C, 13
Quarterly Price
15
15
10
10
18
18
16
16
14
14
12
12
10
Earnings (4 Quarter Trailing)
10
Volume (mln)
1
0
400
400
200
200
1980
1985
1990
1995
2000
2005
2010
2015
1.0
1.0
0.8
0.8
0.6
Q4
Q1
Q2
Q3
2014
Q4
Q1
Q2
Q3
0.6
2015
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s) under
FINRA rules. For disclosure statements, including the Analyst's Certification, please refer to the back pages.
225
226
Disclosure Statement
fs
Page 3
227
Disclosure Statement
IMPORTANT DISCLOSURES
Analyst's Certification
I, Bert Powell, CFA, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers.
I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in
this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their
affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating
new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA
(exceptions: Alex Arfaei and Brodie Woods). These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be
subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading
securities held by a research analyst account.
Company Specific Disclosure
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the
past 12 months.
Disclosure 6: This issuer is a client (or was a client) of BMO NB, BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12
months: Non-Securities Related Services.
Disclosure 13: A partner, director, officer, employee or agent of BMO Capital Markets is an officer, director, employee of, or serves in an advisory
capacity to, this issuer: Brian Tobin (Member of Board of Directors)
Page 4
228
Disclosure Statement
Page 5
229
Disclosure Statement
Unauthorized reproduction, distribution, transmission or publication without the prior written consent of BMO Capital Markets is strictly prohibited.
Click here for data vendor disclosures when referenced within a BMO Capital Markets research document.
Page 6
230
BUY
unchanged
PRICE TARGET
from C$17.00
Price (7-Aug)
Ticker
C$21.00
C$17.88
NFI-TSX
12.04 - 18.10
0.08
993
0.62
3.5
62.0
20.9
247.5
www.newflyer.com
2014A
2015E
2016E
2017E
1.18
1.18
0.5
1.53
1.37
0.4
1.86
1.62
0.3
1.95
1.72
0.3
Sales (US$M)
Previous
ROIC (%)
Quarterly FCF /
Shr
2014A
2015E
2016E
2017E
Q1
Q2
Q3
Q4
0.19
0.22A
0.51
0.54
0.29
0.39
0.47
0.49
0.32
0.41
0.44
0.47
0.38
0.43
0.44
0.46
19
18
17
16
15
14
13
12
Aug-15
Jul-15
Jun-15
Apr-15
May-15
Mar-15
Jan-15
Feb-15
Dec-14
Oct-14
Nov-14
Sep-14
11
NFI
Source:FactSet
Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX | CF. : LSE)
The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all
the companies and securities that are the subject of this report discussed herein.
For important information, please see the Important Disclosures beginning on page 14 of this document.
231
Q 2/15
0.15
EPS (C$)
Free cash flow per share (C$)
CG es t . Con s en s u s
0.15
0.22
0.48
0.31
0.39
0.20
Q 2/14
0.15
Q 1/15
0.06
0.29
0.19
0.15
0.22
Payout ratio
32%
39%
51%
66%
286
302
266
291
Aftermarket revenue
Revenue
89
375
91
393
380
81
346
380
39.2
10.5%
31.4
8.0%
31.1
8.2%
27.0
7.8%
31.4
(44)
(65)
(21)
594
594
582
572
481
38
16.8
508
26
16.0
457
24
13.1
508
16.7
864
2,192
864
2,192
202
2,228
1,922
EBITDA
EBITDA margin
Investment in NCWC & capital assets
90
8.3%
26
392
Return on capital
8.8%
11.8%
5.9%
7.6%
1.23
1.24
1.09
1.24
Auto Components 2
232
enable it to take advantage of its industry-leading installed bus market share. This
appears to be bearing fruit on both a sales and a margin basis.
Management believes aftermarket order growth is running in the 5%/year range. We
have boosted our aftermarket sales forecast to 4%/year from 2%/year due to
continued good aftermarket sales performance.
Auto Components 3
233
Auto Components 4
234
Figure 2: Revised Canaccord Genuity forecast for New Flyer: limited changes
Yrs E n ded D ec . 31 ( $M )
Dividend/share (C$)
% change
Q 3/15E
New
Old
Fc s t
Fc s t
0.155 0.155
6%
6%
2015E
New
Old
Fc s t
Fc s t
0.608 0.608
4%
4%
2016E
New
Old
Fc s t
Fc s t
0.620 0.620
2%
2%
2017E
New
Old
Fc s t
Fc s t
0.620 0.620
0%
0%
2018E
New
Old
Fc s t
Fc s t
0.620 0.620
0%
0%
2019E
New
Old
Fc s t
Fc s t
0.620 0.620
0%
0%
2014
0.59
n.m.
Q 2/15
0.15
4%
0.71
#N/A
(0.54)
n.m.
0.67
n.m.
0.90
n.m.
1.53
114%
1.28
79%
1.78
17%
1.27
-1%
1.93
9%
1.41
11%
2.02
4%
1.45
3%
2.08
3%
1.48
2%
82%
-28%
23%
17%
40%
48%
35%
49%
32%
44%
31%
43%
30%
42%
1,451
21%
375
8%
380
5%
415
15%
1,538
6%
1,592
10%
1,535
0%
1,598
0%
1,579
3%
1,637
2%
1,624
3%
1,676
2%
1,668
3%
1,714
2%
91
6.3%
34
9.0%
33
8.6%
31
7.5%
130
8.4%
123
7.7%
140
9.1%
124
7.8%
147
9.3%
132
8.1%
154
9.5%
134
8.0%
158
9.5%
137
8.0%
46
44
(8)
(24)
23
24
20
19
17
17
17
16
17
16
2,437
465
24
50
594
481
38
17
635
481
28
15
670
508
26
14
2,486
487
30
63
2,486
508
26
60
2,535
484
31
62
2,535
511
27
56
2,584
487
32
64
2,584
514
29
57
2,634
490
33
67
2,634
517
29
58
2,679
493
33
69
2,679
520
29
59
2,263
2,102
864
2,192
615
2,172
615
2,137
2,486
2,102
2,486
2,102
2,535
2,102
2,535
2,102
2,584
2,102
2,584
2,102
2,634
2,102
2,634
2,102
2,679
2,102
2,679
2,102
11.7%
11.0%
12.2%
12.3%
12.3%
13.5%
12.3%
1.300
1.300
1.300
1.300
1.300
1.300
1.300
Return on capital
CAD / USD (period average)
1
5.2%
1.104
8.8%
1.230
8.2%
1.300
11.3%
1.300
8.5%
1.300
10.8%
1.300
9.7%
1.300
NCWC means non-cash working capital. Positive number means NCWC generates cash.
Auto Components 5
235
VALUATION
NFIs yields (Figure 3) and valuation (Figure 4) appear to be settling into a new range.
The companys dividend yield seems to be settling into the 4-5% range (about 2% over
the 10-year Canada bond yield) and EV/EBITDA is stable in the 6-7x NTM EBITDA
range.
Figure 3: NFI distribution/dividend yields settling into the 3-4% range, or roughly 2.5% above the 10-year Canada bond yield
NFIs dividend yield also appears to have converged with other high-yield industrial
names (Figure 5).
Auto Components 6
236
Figure 5: We think a valuation multiple in-line with other industrial high yield companies is reasonable
Mar k et
Ne w F l y e r I nd ustr i e s
Cur .
Eq ui ty Pr i ce :
Cur .
Year
A ug. 9, 2015
Di v.
2015
$17. 88
$0. 61
Co nse nsus A ve r a ge
Di v.
EB I TDA
Cur .
Pa y o ut
Ca p .
Cur .
Y i e l d F CF PS
r a ti o
($M )
EPS
3. 4%
$1. 37
4. 5%
De b t/
P/E
Gr o wth
Ca p ('15- '17)
44. 4%
3. 6%
63. 0%
15. 4 39. 4%
10. 4%
Chorus Aviation
2015
$6.17
$0.48
7.8%
$1.01
47.5%
$754 $0.86
7.2
92.3%
13.3%
Davis + Henderson
2014
$42.39
$1.28
3.0%
$2.09
61.1%
$4,475 $2.57
16.5
41.2%
17.8%
Westshore Terminals
2014
$27.47
$1.32
4.8%
$1.55
85.4%
$2,040 $1.90
14.5
0.0%
2.5%
Cineplex Galaxy
2015
$47.41
$1.55
3.3%
$2.02
76.7%
$2,991 $2.13
22.3
32.1%
14.7%
Note that the New Flyer dividend is the new sustainable dividend level
Source: Company reports, Bloomberg, Canaccord Genuity Research estimates
We have maintained our valuation multiple at 7.5x EV/NTM EBITDA (or 7.5x Q2/16E
EV / Q3/16E - Q2/17E EBITDA), given that the stock has traded in this range for some
time (average of 7.7x over the past 60 months). We think our target multiple is well
supported by NFIs 3.5% dividend yield. We think the dividend upside potential from
forecasted stronger future free cash further strengthens the dividend yield support
argument.
Our target multiple generates a target dividend yield of 3.0% and a FCFPS yield of
9.1%, both of which seem reasonable relative to comparable companies and
appropriately better than in the past, reflecting NFIs improved risk profile.
Our valuation also translates into a reasonable to attractive 1.5% dividend yield and
7.6% FCFPS spreads over Government of Canada bond rates, which reflects the much
higher risk of NFI versus government bonds.
Auto Components 7
237
1-year
t arget
143.5
2-year
t arget
150.2
7.5
1,076.1
(85.9)
990.3
7.5
1,126.7
(21.6)
1,105.1
62.0
15.97
21.00
62.0
17.82
23.00
0.62
21.62
1.24
24.24
20.9%
35.6%
3.0%
9.1%
2.7%
8.7%
1.5%
7.6%
FCFPS C$
1.91
2.00
Our target was increased C$4.00 to C$21.00 due to our stronger forecast and our
usual one quarter valuation period roll forward.
We have maintained our rating at BUY, given the attractive implied one year
investment return. Our current target and estimated dividend currently produces a
20.9% one-year implied investment return (including a 3.5% dividend yield).
Auto Components 8
238
Figure 7: Canaccord Genuity Researchs forecast for New Flyer Industries Dividend payout analysis
Y ears ended Dec. 3 1 ($ m illions)
F ree cash
Cash from operations
Change in working capital
Interest paid
Interest expense
Income taxes paid
Current income tax expense
Principal portion of capital lease payments
Capital expenditures
Proceeds from sale of redundant assets
Business acquisition cost
Costs associated with strategic initiatives
Defined benefit funding
Defined benefit expense
Realized investment tax credits
Foreign exchange impact on cash
Free cash flow
Exchange rate
Free cash flow (CAD)
Declared dividends (CAD)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
5.5
24.0
17.1
(14.6)
6.5
(12.8)
(2.4)
(4.0)
0.7
7.3
(1.8)
2.2
27.8
0.001
27.8
33.1
30.0
23.0
10.9
(11.6)
19.0
(23.8)
(2.0)
(13.8)
1.2
6.0
8.7
(2.8)
(1.5)
0.2
43.4
1.039
45.1
30.7
17.5
(7.9)
3.8
(3.1)
4.4
(3.4)
(0.4)
(3.3)
0.4
2.1
(0.7)
0.0
9.5
1.109
10.6
8.1
1.1
18.9
3.8
(3.4)
4.4
(8.2)
(0.3)
(1.5)
0.2
0.1
(0.7)
0.4
14.7
1.085
15.9
8.1
0.5
21.8
1.8
(2.9)
1.6
(4.1)
(0.5)
(1.9)
0.0
0.2
0.8
(0.7)
(0.4)
16.3
1.097
17.9
8.1
26.9
2.5
2.2
(3.0)
1.5
(11.2)
(0.6)
(1.7)
2.8
0.5
(0.6)
(0.6)
(0.1)
18.6
1.136
21.1
8.1
45.8
35.3
11.6
(12.4)
12.0
(26.8)
(1.8)
(8.4)
0.6
3.1
3.5
(2.6)
(0.6)
(0.2)
59.1
1.104
65.5
32.5
28.7
(4.6)
4.0
(3.1)
2.1
(13.7)
(0.5)
(4.3)
1.3
0.8
(0.7)
(0.2)
9.8
1.252
12.3
8.1
(22.8)
42.3
1.8
(2.8)
16.4
(12.5)
(0.5)
(1.9)
1.6
0.8
(4.5)
(0.1)
21.5
1.226
26.4
8.4
39.7
(15.9)
3.0
(3.0)
9.5
(9.5)
(0.7)
(2.0)
0.8
(4.5)
(0.1)
17.4
1.300
22.6
8.6
44.4
51.9
55.5
55.5
55.5
55.5
55.5
55.5
55.5
0.63
0.75
0.87
0.58
0.19
0.15
0.29
0.15
0.32
0.15
0.38
0.15
1.18
0.59
0.22
0.15
0.48
0.15
Q2 /1 5 Q3 /1 5 E Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
45.0
(20.2)
3.0
(3.0)
10.0
(10.0)
(0.7)
(2.0)
0.8
(4.5)
(0.1)
18.4
1.300
23.9
8.6
90.7
1.5
11.8
(11.8)
37.9
(45.7)
(2.2)
(10.2)
2.9
3.2
(14.3)
(0.3)
67.1
1.300
85.2
33.8
97.0
8.2
11.3
(11.3)
38.4
(38.4)
(2.6)
(8.0)
3.2
(18.0)
(0.2)
79.6
1.300
103.5
34.4
104.4
4.7
10.7
(10.7)
41.8
(41.8)
(2.6)
(8.0)
3.2
(18.0)
(0.2)
83.4
1.300
108.5
34.4
108.6
4.7
10.0
(10.0)
45.1
(45.1)
(2.6)
(8.0)
3.2
(18.0)
(0.2)
87.6
1.300
113.9
34.4
111.6
4.4
9.3
(9.3)
47.3
(47.3)
(2.6)
(8.0)
3.2
(18.0)
(0.2)
90.3
1.300
117.4
34.4
55.5
55.5
55.5
55.5
55.5
55.5
55.5
0.41
0.16
0.43
0.16
1.53
0.61
1.86
0.62
1.95
0.62
2.05
0.62
2.11
0.62
Auto Components 9
239
Figure 8: Canaccord Genuity Researchs forecast for New Flyer Industries Income statement
Y ears ended Dec. 3 1 ($ m illions)
Incom e statem ent
Revenues
Cost of sales and SG&A
Foreign exchange gain (loss)
EBITDA
Depreciation & amortization
Unrealized FX gain (loss)
Fair value adjustments
Other
Operating profit (EBIT)
Interest expense on long-term debt
Other interest and bank charges
Fair value adjustment on int rate swaps
Other expenses
Distributions on B and C shares
Pre-tax income
Income taxes
Net Income (loss)
Div. per share/Dist. per unit (C$)
FCFPS/Dist. cash per IDS (C$)
FCFPS (CFO - Capex) (C$)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
Q2 /1 5 Q3 /1 5 E Q4 /1 5 E
865.3 1,199.4
(810.2) ######
2.8
(0.1)
57.8
79.1
(24.3)
(28.0)
(1.4)
(2.1)
(1.4)
0.0
(5.5)
0.0
25.2
49.0
(11.9)
(8.7)
(2.7)
(2.9)
0.8
(0.5)
(2.8)
(2.2)
0.0
0.0
10.0
34.6
(0.7)
(7.9)
9.3
26.8
323.9
(305.0)
(0.8)
18.1
(7.7)
(0.4)
0.0
0.0
10.0
(2.3)
(0.8)
0.3
(0.5)
0.0
6.7
(1.2)
5.5
346.5
(322.3)
(0.4)
23.8
(8.1)
1.0
0.0
(3.9)
12.8
(2.3)
(1.2)
(0.4)
(0.5)
0.0
8.4
(4.8)
3.6
360.8
(337.6)
(0.2)
22.9
(10.0)
(0.1)
0.0
0.0
12.8
(2.2)
(0.7)
0.8
(0.6)
0.0
10.1
0.2
10.2
420.0 1,451.1
(393.4) (1,358.3)
(0.1)
(1.5)
26.5
91.3
(10.0)
(35.8)
0.3
0.8
0.0
0.0
(0.9)
(4.8)
15.9
51.4
(2.2)
(8.9)
(0.8)
(3.5)
0.1
0.8
(0.6)
(2.2)
0.0
0.0
12.4
37.6
(5.0)
(10.8)
7.4
26.7
380.3
(352.1)
1.5
29.7
(9.5)
(1.9)
0.0
0.0
18.2
(2.3)
(0.7)
(0.5)
(0.6)
0.0
14.1
(3.3)
10.9
375.0
(340.7)
(0.7)
33.7
(9.8)
0.8
0.0
0.0
24.6
(2.2)
(0.6)
0.3
(0.6)
0.0
21.6
(9.2)
12.4
379.6
(347.0)
0.0
32.6
(10.0)
0.0
0.0
0.0
22.6
(2.3)
(0.7)
0.0
0.0
0.0
19.6
(7.5)
12.1
2015E
2016E
2017E
2018E
2019E
0.75
0.63
(0.10)
0.58
0.87
0.26
0.15
0.19
0.28
0.15
0.29
(0.01)
0.15
0.32
(0.04)
0.15
0.38
0.49
0.59
1.18
0.71
0.15
0.22
0.55
0.15
0.48
(0.54)
0.16
0.41
0.67
0.16
0.43
0.78
0.61
1.53
1.53
0.62
1.86
1.78
0.62
1.95
1.93
0.62
2.05
2.02
0.62
2.11
2.08
52.3
58.9
55.5
55.6
55.7
55.7
55.6
55.8
55.9
62.0
62.0
58.9
62.0
62.0
62.0
62.0
-6.6%
-0.4%
-30.6%
6.7%
38.6%
38.4%
-21.5%
6.6%
32.1%
26.8%
0.0%
5.6%
30.0%
56.0%
0.0%
6.9%
16.8%
36.0%
0.0%
6.4%
10.9%
34.4%
0.0%
6.3%
21.0%
36.0%
0.0%
6.3%
17.4%
16.6%
0.0%
7.8%
8.2%
65.6%
4.0%
9.0%
5.2%
26.2%
6.0%
8.6%
-3.9%
13.0%
6.0%
8.4%
6.0%
30.0%
4.0%
8.4%
-0.2%
21.5%
1.9%
9.1%
2.9%
4.8%
0.0%
9.3%
2.9%
5.0%
0.0%
9.5%
2.7%
3.0%
0.0%
9.5%
3.9%
5.3%
3.9%
5.9%
4.8%
6.1%
5.2%
7.6%
8.8%
8.2%
8.9%
8.5%
9.7%
11.0%
12.3%
13.5%
Bus revenues
Bus EBITDA (excl. FX gains/losses)
Bus sales growth
Bus EBITDA % (excl. FX gains/losses)
Deliveries
Revenue/unit
EBITDA/unit
LTM EBITDA/unit
753.9
42.0
-7.0%
5.6%
1,656
455
25
25
984.4
63.6
30.6%
6.5%
2,191
449
29
29
250.9
7.8
20.7%
3.1%
554
453
14
27
265.8
13.9
23.5%
5.2%
582
457
24
28
278.7
12.6
11.2%
4.5%
621
449
20
26
336.6
23.2
7.5%
6.9%
680
495
34
24
1132.1
57.4
15.0%
5.1%
2,437
465
24
24
290.7
14.7
15.9%
5.1%
572
508
26
26
285.8
22.4
7.5%
7.8%
594
481
38
30
305.6
17.8
9.6%
5.8%
635
481
28
31
329.5
19.2
-2.1%
5.8%
685
481
28
30
1211.6
74.1
7.0%
6.1%
2,486
487
30
30
1227.3
78.6
1.3%
6.4%
2,535
484
31
31
1258.8
82.7
2.6%
6.6%
2,584
487
32
32
1291.0
86.9
2.6%
6.7%
2,634
490
33
33
1321.1
88.4
2.3%
6.7%
2,679
493
33
33
Aftermarket revenues
Aftermarket EBITDA (excl. FX)
Aftermarket sales growth
Aftermarket EBITDA % (excl. FX)
119.1
19.6
2.6%
16.4%
215.0
31.0
80.6%
14.4%
73.0
11.9
95.4%
16.3%
80.7
13.1
57.1%
16.2%
82.0
13.1
40.7%
16.0%
83.4
11.9
22.6%
14.2%
319.0
50.0
48.4%
15.7%
89.6
16.7
22.8%
18.6%
89.2
16.8
10.6%
18.8%
74.0
14.8
-9.8%
20.0%
74.0
14.8
-11.2%
20.0%
326.8
63.1
2.4%
19.3%
308.0
61.6
-5.8%
20.0%
320.4
64.1
4.0%
20.0%
333.2
66.6
4.0%
20.0%
346.4
69.3
4.0%
20.0%
Auto Components 10
240
Figure 8: Canaccord Genuity Researchs forecast for New Flyer Industries Balance sheet
Y ears ended Dec. 3 1 ($ m illio ns)
Balance sheet
Cash
Accounts receivable
Inventories
Prepaid expenses and deposits
Derivative financial instruments
Future income tax assets
Other
Total current assets
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
11.2
113.5
124.7
4.7
0.0
0.0
0.0
254.1
11.9
230.3
183.3
7.7
0.0
0.0
0.0
433.2
14.2
201.0
207.7
6.6
0.0
1.6
0.0
431.1
4.3
146.3
246.4
5.7
0.0
3.2
0.0
406.0
8.7
164.1
267.4
4.6
0.1
3.4
0.0
448.2
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
7.6
186.9
232.0
3.5
0.1
0.0
0.0
430.0
8.8
189.2
242.3
3.9
0.2
0.0
0.0
444.4
Capital assets
Deferred charges
Intangible assets
Future income tax assets
Derivative financial instruments
Accrued benefit asset
Total assets
42.0
0.0
528.5
72.6
0.0
0.0
897.2
64.8
0.0
568.9
68.9
0.0
0.0
1,135.9
65.5
0.0
564.1
67.6
0.0
1.1
1,129.4
65.4
0.0
556.1
65.7
0.0
0.5
1,093.7
65.2
0.0
550.7
65.0
0.0
0.0
1,129.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
64.3
0.0
539.1
67.9
0.0
0.0
1,101.4
64.3
0.0
533.9
68.6
0.0
0.0
1,111.2
Bank indebtedness
Accounts payable & accrued liabs
Due to parent company
Deferred revenue
Provision for warranty costs
Current portion of capital leases
Current portion of LTD
Other current liabilities
Total current liabilities
0.0
150.8
0.0
19.2
20.1
1.9
40.0
6.8
238.8
0.0
212.9
0.0
57.6
26.1
1.3
35.0
1.5
334.4
0.0
225.5
0.0
55.4
25.1
1.1
30.0
0.5
337.6
0.0
204.5
0.0
47.7
25.1
1.3
30.0
1.8
310.3
0.0
227.1
0.0
36.8
28.7
1.7
45.0
3.9
343.2
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
226.5
0.0
23.0
35.0
1.6
13.0
18.6
317.6
0.0
201.8
0.0
18.3
39.7
1.7
48.0
10.4
319.8
0.0
205.9
0.0
18.3
39.7
1.7
48.0
9.6
323.1
0.0
219.3
0.0
18.3
39.7
1.7
48.0
8.8
335.8
0.0
219.3
0.0
18.3
39.7
1.7
48.0
8.8
335.8
0.0
201.1
0.0
18.3
39.7
1.7
48.0
6.8
315.5
0.0
206.6
0.0
18.3
39.7
1.7
48.0
5.8
320.0
0.0
212.1
0.0
18.3
39.7
1.7
48.0
4.8
324.5
0.0
218.0
0.0
18.3
39.7
1.7
48.0
3.8
329.5
9.0
2.3
122.2
177.7
2.0
1.2
0.2
1.8
114.8
198.6
2.5
28.3
0.0
1.6
113.2
199.1
2.2
22.1
0.0
2.7
112.2
199.6
2.6
16.5
0.6
3.4
110.5
200.0
1.8
17.4
1.0
3.2
108.5
200.5
1.7
14.7
1.0
3.2
108.5
200.5
1.7
14.7
0.9
2.9
105.5
201.0
2.2
13.9
4.1
5.0
102.5
201.6
1.9
12.7
4.1
5.0
100.5
201.6
1.9
12.7
4.1
5.0
98.5
201.6
1.9
12.7
4.1
5.0
98.5
201.6
1.9
12.7
4.1
5.0
90.6
201.6
1.9
12.7
4.1
5.0
82.7
201.6
1.9
12.7
4.1
5.0
74.7
201.6
1.9
12.7
4.1
5.0
66.8
201.6
1.9
12.7
0.0
480.8
(136.8)
0.0
593.3
(138.2)
0.0
593.6
(140.0)
0.0
593.8
(143.9)
0.0
594.1
(141.8)
0.0
594.5
(141.8)
0.0
594.5
(141.8)
0.0
594.7
(137.5)
Q2 /1 5 Q3 /1 5 E Q4 /1 5 E
0.0
595.2
(131.6)
34.0
187.7
231.2
3.9
0.2
0.0
0.0
457.0
64.6
204.0
207.0
4.1
0.2
0.0
0.0
479.9
2015E
2016E
2017E
2018E
2019E
64.6
204.0
207.0
4.1
0.2
0.0
0.0
479.9
123.1
188.7
210.6
3.8
0.2
0.0
0.0
526.5
188.9
194.1
214.2
3.9
0.2
0.0
0.0
601.5
258.8
199.7
217.8
4.1
0.2
0.0
0.0
680.6
331.7
205.3
221.4
4.2
0.2
0.0
0.0
762.8
67.6
70.7
70.7
64.0
59.0
55.3
52.6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
528.5
523.1
523.1
501.7
480.2
458.7
437.3
68.6
68.6
68.6
68.6
68.6
68.6
68.6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(3.7)
(7.4)
(7.4)
(22.2)
(37.1)
(51.9)
(66.7)
1,118.0 1,134.9 1,134.9 1,138.5 1,172.2 1,211.3 1,254.5
0.0
595.2
(126.1)
0.0
595.2
(119.9)
0.0
595.2
(119.9)
0.0
595.2
(88.2)
0.0
595.2
(51.0)
0.0
0.0
595.2
(8.4)
595.2
37.8
897.2
1,135.9
1,129.4
1,093.7
1,129.1
1,136.1
1,136.1
1,101.4
1,111.2
1,118.0
1,134.9
1,134.9
1,138.5
1,172.2
1,211.3
1,254.5
10.8
46.0
15.4
123.2
3.5
110.5
1.8
122.7
2.5
143.1
2.8
135.7
10.7
135.7
4.3
119.4
1.9
165.5
7.9
149.5
7.9
129.3
21.9
129.3
12.0
137.5
12.1
142.2
12.2
147.0
12.3
151.3
210.7
3.6x
7.75
21.8x
224.7
2.8x
8.77
22.4x
217.6
1.4x
8.18
19.9x
229.3
1.5x
8.11
21.2x
241.5
2.5x
8.15
22.1x
227.8
2.5x
8.15
26.0x
227.8
2.5x
8.16
22.6x
210.9
2.1x
8.24
23.8x
247.5
2.2x
8.35
23.3x
222.3
1.8x
8.45
23.0x
191.7
1.5x
8.56
23.3x
191.7
1.5x
8.56
22.9x
133.2
1.0x
9.13
22.8x
67.4
0.5x
9.80
25.7x
(2.5)
0.0x
10.57
28.4x
(75.4)
0.0x
11.40
30.9x
Auto Components 11
241
Figure 8: Canaccord Genuity Researchs forecast for New Flyer Industries Cash flow statement
Y ears ended Dec. 3 1 ($ m illio ns)
C ash flo w statem ent
Net income
Amortization of fixed assets
Amortization of intangibles
Amortization of deferred charges
Loss on disposition of PP&E
Future income taxes (recovery)
Unrealized gain on int rate swap
Unrealized FX gain (loss)
Fair value adjustments
Defined benefit expense
Defined benefit funding
Items not affecting cash
Other
Cash from operations before WC
Change in working capital
Cash from operations after WC
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5
9.8
8.3
16.0
0.0
0.0
1.5
0.0
1.4
1.4
3.6
(7.3)
(2.2)
(2.9)
29.5
(24.0)
5.5
26.8
9.6
18.4
0.0
0.0
17.5
0.0
2.1
0.0
2.8
(8.7)
0.1
(15.6)
53.0
(23.0)
30.0
5.5
2.9
4.8
0.0
0.0
2.2
0.0
0.4
0.0
0.7
(2.1)
3.3
(8.0)
9.6
7.9
17.5
3.6
3.3
4.8
0.0
0.0
4.8
0.0
(1.0)
0.0
0.7
0.0
4.4
(0.6)
19.9
(18.9)
1.1
10.2
4.6
5.4
0.0
0.0
2.4
0.0
0.1
0.0
0.7
(0.8)
(3.4)
3.1
22.3
(21.8)
0.5
7.4
4.6
5.4
0.0
0.0
14.9
0.0
(0.3)
0.0
0.6
(0.5)
(3.4)
0.7
29.3
(2.5)
26.8
26.7
15.4
20.5
0.0
0.0
24.3
0.0
(0.8)
0.0
2.6
(3.5)
0.8
(4.9)
81.1
(35.3)
45.8
10.9
4.2
5.3
0.0
0.0
3.4
0.0
1.9
0.0
0.7
(0.8)
0.4
(2.0)
24.1
4.6
28.7
12.4
4.5
5.4
0.0
0.0
9.2
0.0
(0.8)
0.0
4.5
(0.8)
0.3
(15.1)
19.5
(42.3)
(22.8)
12.1
4.6
5.4
0.0
0.0
(2.0)
0.0
0.0
0.0
4.5
(0.8)
0.0
0.0
23.8
15.9
39.7
Investing
Additions to capital assets
Net funds used in investing
(10.8)
(11.0)
(15.4)
(122.5)
(3.5)
(3.6)
(1.8)
(1.8)
(2.5)
(2.6)
(2.8)
(2.9)
(10.7)
(10.9)
(4.3)
(4.3)
(1.9)
(1.9)
Financing
Bank indebtness, net
Proceeds from issue of long-term debt
Redemption of class B and C shares
Repayment of long-term debt
Repayment of capital leases
Deferred debt financing costs
Due to parent company
Share issuance
Dividends
Net funds from financing
0.0
103.2
0.0
(62.4)
(2.4)
0.0
0.0
0.0
(34.0)
4.3
0.0
12.6
0.0
0.0
(2.0)
0.0
0.0
111.7
(29.3)
93.0
0.0
(3.9)
0.0
0.0
(0.4)
0.0
0.0
0.0
(7.4)
(11.6)
0.0
(1.7)
0.0
0.0
(0.3)
0.0
0.0
0.0
(7.4)
(9.4)
0.0
15.0
0.0
0.0
(0.6)
0.0
0.0
0.0
(7.5)
6.9
0.0
(7.4)
0.0
0.0
(0.5)
0.0
0.0
0.0
(7.2)
(15.1)
0.0
2.1
0.0
0.0
(1.8)
0.0
0.0
0.0
(29.5)
(29.2)
0.0
(27.0)
0.0
0.0
(0.5)
0.0
0.0
0.0
(6.7)
(34.1)
0.0
33.1
0.0
0.0
(0.5)
0.0
0.0
0.0
(6.6)
26.0
Q2 /1 5 Q3 /1 5 E Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
12.9
4.8
5.4
0.0
0.0
(2.0)
0.0
0.0
0.0
4.5
(0.8)
0.0
0.0
24.8
20.2
45.0
48.2
18.1
21.4
0.0
0.0
8.6
0.0
1.1
0.0
14.3
(3.2)
0.7
(17.0)
92.2
(1.5)
90.7
58.2
18.7
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
18.0
(3.2)
0.0
0.0
105.3
(8.2)
97.0
63.7
17.1
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
18.0
(3.2)
0.0
0.0
109.1
(4.7)
104.4
69.1
15.9
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
18.0
(3.2)
0.0
0.0
113.3
(4.7)
108.6
72.6
15.0
21.5
0.0
0.0
(7.9)
0.0
0.0
0.0
18.0
(3.2)
0.0
0.0
116.0
(4.4)
111.6
(7.9)
(7.9)
(7.9)
(7.9)
(21.9)
(22.0)
(12.0)
(12.0)
(12.1)
(12.1)
(12.2)
(12.2)
(12.3)
(12.3)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(6.6)
(6.6)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(6.6)
(6.6)
0.0
6.1
0.0
0.0
(0.9)
0.0
0.0
0.0
(26.5)
(21.3)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
2.2
0.2
0.0
0.4
0.0
(0.5)
(0.2)
(0.2)
(0.1)
0.0
0.0
(0.2)
0.0
0.0
0.0
0.0
1.0
10.1
11.2
0.7
11.2
11.9
2.3
11.9
14.2
(9.9)
14.2
4.3
4.7
4.3
9.1
8.4
9.1
17.5
5.6
11.9
17.5
(9.9)
17.5
7.6
1.3
7.6
8.8
25.2
8.8
34.0
30.5
34.0
64.6
47.1
17.5
64.6
58.6
64.6
123.1
65.8
123.1
189.0
69.9
189.0
258.9
72.8
258.9
331.7
(5.4)
(92.5)
13.9
(0.8)
(2.1)
24.0
34.9
24.4
(24.7)
31.8
37.1
68.7
85.0
92.3
96.4
99.3
Auto Components 12
242
Investment risks
Potential risks to our investment thesis and target price valuation methodology
include, but are not limited to, availability of government funding and company
execution of contracts.
Auto Components 13
243
Coverage Universe
IB Clients
#
%
%
Buy
606
61.03%
31.19%
Hold
300
30.21%
13.33%
Sell
33
3.32%
3.03%
Speculative Buy
54
5.44%
53.70%
993*
100.0%
*Total includes stocks that are Under Review
Canaccord Genuity Ratings System
BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.
HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.
SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.
NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.
Risk-adjusted return refers to the expected return in relation to the amount of risk associated with the designated investment or the
relevant issuer.
Risk Qualier
SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the
stock may result in material loss.
Canaccord Genuity Company-Specific Disclosures (as of date of this publication)
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Corporate Finance/
Investment Banking services from New Flyer Industries Inc. in the next six months.
Auto Components 14
244
H:C$8.00
09/19/12
H:C$8.25
11/14/12
H:C$8.75
01/11/13
H:C$9.25
01/29/13
H:C$9.75
02/06/13
Oct 2012
Jan 2013
Apr 2013
Jul 2013
Oct 2013
H:C$11.75
06/24/14
H:C$12.00
07/16/14
H:C$10.00
03/25/13
H:C$10.25
04/18/13
B:C$11.25
06/24/13
H:C$11.75
08/07/13
H:C$11.25
11/07/13
B:C$12.00
01/15/14
B:C$12.50
03/23/14
20
18
16
14
12
10
8
6
H:C$11.50
05/11/14
B:C$14.00
08/06/14
H:C$14.00
11/09/14
B:C$12.50
12/12/14
Jan 2014
H:C$14.00
01/12/15
Closing Price
Apr 2014
B:C$15.00
03/19/15
Jul 2014
B:C$16.00
05/11/15
Oct 2014
Jan 2015
Apr 2015
Jul 2015
B:C$17.00
07/20/15
Target Price
Buy (B); Speculative Buy (SB); Sell (S); Hold (H); Suspended (SU); Under Review (UR); Restricted (RE); Not Rated (NR)
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The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon
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Auto Components 15
245
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Buy unchanged Target Price C$21.00 from C$17.00 | 10 August 2015
Auto Components 16
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Auto Components 17
247
COMPANY UPDATE
NFI | TSX
$17.88
Rating: Outperform
One Year Target: C$23.00
(previously $18.50)
Total Return: 32.1%
Yield: 3.5%
August 10, 2015
C$17.16 / C$12.04
3.5%
55.5 (basic)
55.5 (fd)
C$991.7
39.7
103.4
$248.5
$1005.8
2015e
2014
Revenue ($mm)
EBITDA ($mm)
FD EPS
EBITDA ($mm)
Q1
2014
2015
2016
$19.7
$31.4
$39.4e
Adjusted FD EPS
2014
2015
2016
Q1
$0.10
$0.20
$0.30e
Q2
Q3
Q4
$27.0
$39.2
$36.5e
$25.7
$33.3e
$36.3e
$35.0
$37.5e
$42.4e
Q2
Q3
Q4
$0.16
$0.30
$0.27e
$0.15
$0.23e
$0.27e
$0.24
$0.28e
$0.34e
2016e
Volume ('000)
1000
Last Sale Price
$10
800
600
400
$5
200
$0
0
Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15
Very Strong Margin Performance but Treat as One-time for Now: We note
management continues to see normalization in the pricing and demand environment. We
believe with the implementation of various cost-reduction and operational efficiency
initiatives, margin expansion will continue to take place. The company reported an
average EBITDA of $37.7k per EU in the quarter or $295k per EU on a trailing basis, up
from $23.9k in Q2/14. While the number is impressive, and was well in excess of our
expectations, we caution taking any one particular quarter and extrapolating is not
appropriate. We continue to see the combination of rationalized production offering cost
opportunities (the $14mm in synergies implies ~$5k per EU) plus improved selling
prices and margin capture with a more rational environment leading to margins in the
mid $30k per EU range into 2016.
Estimate Changes: We are updating our estimates to reflect the strong quarter and
are revising our expectations for margin performance upwards through the remainder of
the year. Our 2015e EBITDA increases to $141.4mm (+7.8%) while our 2016e EBITDA
increases by 3.4% to $154.7mm. Our expectations for Adjusted 2015e and 2016e EPS
increase to $0.93 and $1.18 from $0.87 and $1.13, respectively. We are also introducing
our estimates for 2017 forecasting revenue, Adjusted EBITDA and Adjusted FD EPS of
$1.75bn, $159.7mm and $1.25. With our 2017 estimates we have remained relatively
conservative in our assumptions keeping production rates relatively flat from 2016
levels and assuming only incremental margin improvements.
Maintain Outperform; Increasing Target to C$23.00: Overall, we believe the
quarter was well ahead of our and consensus expectations with tailwinds for margin
expansion expected to continue in an increasingly rationalized market. We note that as
the companys operational efficiency initiatives mature, discussions around return of
capital to shareholders will start to gain further traction. We also believe that with return
on capital increasing consistently and sustainably, a higher valuation multiple is
warranted. We maintain our Outperform rating and are increasing our 12-month price
target to C$23.00 from C$18.50. Our target price is based on a blend of a 15.0x earnings
(previously 14.0x) and 7.5x EBITDA (previously 7.0x) multiple of the four quarters
ending Q2/17 reflecting our 12-month forward valuation period as well as an exchange
rate of C$1.27/$US.
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$17.88
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
10.8x
8.4x
7.0x
Peer Average
14.3x
13.3x
11.0x
8.8x
6.7x
6.1x
20.8x
13.5x
11.6x
2014
2015e
2016e
2017e
Trend
Revenues
Bus Manufacturing
Aftermarket
Revenue
319,390
299,235
316,092
2014
2015e
2016e
45,823
76,111
93,835 151,588
35,255
19,320
18,505 (36,029)
81,078
(1,766)
(1,812)
Aftermarket % of Total
22.0%
19.6%
17.1%
18.0%
57,374
80,216
92,584
93,334
5.1%
6.1%
6.4%
6.5%
49,991
61,222
62,077
66,379
15.7%
19.2%
20.7%
21.0%
86,457
134,150
154,661
159,714
6.0%
8.2%
8.8%
9.1%
107,365
141,438
154,661
159,714
per Share
7.4%
8.7%
8.8%
9.1%
FCF Yield
Amortization
35,837
39,040
38,893
38,052
Operating Earnings
50,620
95,110
115,768
121,661
EBT
37,568
80,374
103,862
110,024
Taxes
10,849
28,979
38,429
40,709
Net Income
26,719
51,396
65,433
69,315
Reported FD EPS
$0.48
$0.93
$1.18
$1.25
Adjusted FD EPS
$0.65
$1.01
$1.18
$1.25
2015e
2016e
2017e
Grow th
2014
Weeks of Production
6,765
(154)
(223)
83,667
85,092
96,342 100,059
$1.92
$2.18
9.4%
10.7%
12.2%
$2.16
12.1%
82.8%
14.5%
13.9%
(0.9%)
2014
2015e
2016e
2017e
32,457
33,928
34,413
34,413
35.0%
$0.585
31.9%
$0.611
28.4%
$0.620
28.7%
Cash Yield
3.3%
3.4%
3.5%
3.5%
2014
2015e
2016e
2017e
2,437
2,607
2,755
2,711
464.5
501.9
527.0
529.7
23.5
30.8
33.6
34.4
5.6%
49.2
52.1
54.0
54.2
0.0%
3.3%
48.5
0.9x
49.6
1.3x
52.6
1.0x
52.6
1.0x
20.7%
9.5%
17.8%
20.1%
2014
2015e
2016e
2017e
39,309
52
53
52
15.0%
15.6%
11.0%
(1.1%)
Aftermarket
48.4%
0.1%
(6.3%)
Adjusted EBITDA
21.0%
13.4%
12.2%
31.7%
7.6%
9.3%
Adjusted FD EPS
2.7%
53.9%
17.0%
5.9%
2014
0.9057
2015e
0.8004
2016e
0.7953
2017e
0.8335
0.9050
0.7874
0.8130
0.8547
Leverage
Net Debt (EOP)
Net Debt to Trailing EBITDA
Net Debt to Total Capitalization
Trend
$0.620
52
Bus Manufacturing
FX Assum ptions
(1,812)
Revenue
(1,812)
Trend
Trend
2017e
2.1x
1.4x
1.0x
0.2x
33.6%
29.6%
22.3%
6.6%
Trend
Trend
Firm
Option
2020, 11%
2015, 14%
$4.0
2016, 12%
$3.0
2019, 23%
$2.0
$1.0
2017, 11%
$0.0
Q109 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15
2018, 29%
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Q2/15
Q2/14
y/y
Growth
Q1/15 y/y
Growth
594
481.1
37.7
3,487.1
582
456.8
23.9
3,538.5
2.1%
5.3%
58.1%
(1.5%)
3.2%
12.2%
84.1%
(3.3%)
Operating Segments
Bus Manufacturing
Revenue
EBITDA
EBITDA Margin Reported
EBITDA Margin Normalized
285,793
22,412
7.8%
7.8%
265,831
13,889
5.2%
5.5%
7.5%
61.4%
2.6%
2.4%
15.9%
167.3%
2.0%
2.0%
89,219
16,779
18.8%
80,653
13,077
16.2%
10.6%
28.3%
2.6%
22.8%
40.0%
2.3%
375,012
39,191
12,370
346,484
26,966
3,563
8.2%
45.3%
247.2%
17.4%
59.7%
97.9%
$0.22
$0.30
$0.06
$0.16
247.0%
81.4%
97.8%
105.5%
Aftermarket
Revenue
EBITDA
EBITDA Margin
Total
Revenue
Adjusted EBITDA
Reported Net Income
Fully Diluted Earnings Per Share
Reported
Adjusted
Figure 1 Q2/15 Highlights
Source: Company reports, AltaCorp Capital Inc.
Items of Note
NFI reported record Q2/15 results with total revenue up 8.2% y/y and Adjusted EBITDA up
45.3% y/y. The companys upgrade to the latest version of Oracle R-12 is progressing well
along with the transition of the NABI bus manufacturing line to the Xcelsior platform.
Management indicated annualized savings of $14mm should begin to appear later this year
and throughout 2016. Project Convergence also appears to remain on-track with the goal to
better integrate the spare parts businesses between NABI and New Flyer on a common IT
platform, which is expected to be completed in H1/16 and we expect to be incrementally
positive for margins and working capital requirements.
The company realized a 7.5% y/y growth in bus manufacturing revenues as a result of 2.1%
increase in total bus deliveries and 5.3% increase in average selling price due to a more
favourable mix. Adjusted EBITDA increased by 61.3% y/y due to a favorable mix and cost
savings achieved from Xcelsior transition.
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In the aftermarket segment, revenue increased by 10.6% y/y as a result of incremental revenue
from the Chicago Transit Authority (CTA) midlife overhaul program. Excluding the CTA
contract, revenue from aftermarket segment was $72.4mm, flat y/y. The company continues
to benefit from a broader portfolio of services and parts offerings with EBITDA up 28.3%
y/y. We estimate core aftermarket margins were approximately 19.7% in the quarter
demonstrating the solid performance the company is delivering and a trend we anticipate to
continue through the balance of the year. Management reiterated its guidance for the
aftermarket segment expecting core growth, excluding the CTA contract rate of 5.0% in 2015.
The CTA mid-life upgrade program ended in June 2015 and represented 18.6% of the total
2014 aftermarket revenues, which will impact H2/15 comparable periods.
The company increased its borrowings from the revolving credit facility by $35.0mm during
the quarter to fund working capital requirements cause by increase in inventories and decrease
in accounts payables. At the end of Q2/15, the company had $48.0mm in direct borrowings
and 17.3mm of outstanding letters of credit related to the revolving credit facility. The
company is intentionally carrying additional inventory related to the changeover in production
from NABI platforms to Xcelsior. This excess inventory is expected to be delivered by year
end.
At June 30, 2015 the company became eligible to accelerate the redemption of its US$
denominated 6.25% convertible debentures, due June 30, 2017. The company has the right to
accelerate the redemption, effectively forcing holders to convert to equity should share prices
trade at greater than 125% of the US$10 exercise price for 20 days on a VWAP basis.
Management indicated that barring some change in the business they would be content to hold
the debt to maturity given the tax shield of the interest payments results in a lower cash
impact than paying additional dividends.
The company reported a total backlog of 7,011equivalent units (EU) valued at $3.49bn as
compared to 7,193 EU valued at $3.57bn at the end of Q1/15. Of the 1,238 pending new firm
and option orders highlighted during Q2 orders and backlog update, the company has now
received contracts for 513 EU. On a TTM basis, the company reported a book-to-bill ratio of
0.99x however we expect the book to bill ratio to be well in excess of 1.0x in Q3/15.
The company announced the appointment of Mr. Paulo Cezar da Silva Nunes to the Board of
Directors. The appointment was proposed by Marcopolo, pursuant to the Investment
Agreement between the two companies dated January 23, 2013. Mr. Nunes has almost 40
years of leadership experience in manufacturing, distribution and automotive-related sectors.
Presently, he is an independent automotive business consultant to Brazilian companies and
also a member of the Board of Directors for Cesbe S.A. On the call, management suggested
New Flyer Industries
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that Mr. Nunes appointment does not in their opinion signify any change in intent for
Marcopolo and welcomed the addition of his global experience in automotive and
manufacturing sectors.
Forecast and Outlook
Management maintained an H2/15 deadline for the completion of transition of NABI to the
Xcelsior platform. The company expects to invest ~$20.0mm in direct operating costs and
capital expenditures to fund this transition, of which $13.2mm have already been incurred
with $6.0mm in direct operating costs and $7.2mm in capital expenditures. The company
expects annualized cost savings of ~14.0mm. Management continues to guide towards higher
y/y margins in buses. The company anticipates a corporate average line entry rate of ~50EU
per production week for 2015, however this does imply a higher line entry rate of
approximately 56 EU/week in H2/15 allowing for two weeks of shutdown, one in each of
Q3/15 and Q4/15.
We note management continues to see normalization in the pricing and demand environment.
We believe with the implementation of various cost-reduction and operational efficiency
initiatives, margin expansion will continue to take place. The company reported an average
EBITDA of $37.7k per EU in the quarter or $295k per EU on a trailing basis, up from $23.9k
in Q2/14. While the number is impressive, and was well in excess of our expectations, we
caution taking any one particular quarter and extrapolating is not appropriate. We continue to
see the combination of rationalized production offering cost opportunities (the $14mm in
synergies implies ~$5k per EU) plus improved selling prices and margin capture with a
more rational environment leading to margins in the mid $30k per EU range into 2016.
We are updating our estimates to reflect the strong quarter and are revising our expectations
for margin performance upwards through the remainder of the year. Our 2015e EBITDA
increases to $141.4mm (+7.8%) while our 2016e EBITDA increases by 3.4% to $154.7mm.
Our expectations for Adjusted 2015e and 2016e EPS increase to $0.93 and $1.18 from $0.87
and $1.13, respectively.
We are also introducing our estimates for 2017 forecasting revenue, Adjusted EBITDA and
Adjusted FD EPS of $1.75bn, $159.7mm and $1.25. With our 2017 estimates we have
remained relatively conservative in our assumptions keeping production rates relatively flat
from 2016 levels and assuming only incremental margin improvements. We believe it
important to note the reduction in 2017 revenue and earnings over 2016 levels in bus
manufacturing stems from 2016 having 53 production weeks in the fiscal year, an event that
happens once every four years, while 2017 is expected to have the normal 52 weeks. We
believe the extra week will be included in Q1/16, however the company has not yet released
the formal fiscal schedule for 2016.
We note however, while we remain conservative in our forecasts, should book to bill ratios
continue to trend above 1.0x for a sustained period, that we believe a production rate increase
is likely. We believe the companys existing footprint in the context of its much improved
operational capability could see rates as high at 60EU/week be feasible with only additional
variable costs for materials and direct labour, affording a meaningful improvement in margins
as overheads are more fully absorbed. A summary of our key changes to estimates is provided
in Figure 3.
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1,294,477 1,414,167
305,404 296,999
1,599,881 1,711,165
19.1%
17.4%
Change
2015e
2016e
1.1%
4.6%
1.8%
53 bps
2.7%
0.8%
2.3%
(27) bps
EBITDA
EBITDA - Bus Manufacturing
Margin - Bus Manufacturing
EBITDA - Aftermarket Ops.
Margin - Aftermarket Ops.
Total EBITDA incl. Other
Margin
72,617
5.6%
58,598
19.2%
129,461
8.1%
90,116
6.4%
59,400
20.0%
149,516
8.7%
80,216
6.1%
61,222
19.2%
134,150
8.2%
92,584
6.4%
62,077
20.7%
154,661
8.8%
93,334
6.5%
66,379
21.0%
159,714
9.1%
10.5%
52 bps
4.5%
(2) bps
3.6%
15 bps
2.7%
0 bps
4.5%
75 bps
3.4%
9 bps
Adjusted EBITDA
Margin
131,215
8.2%
149,516
8.7%
141,438
8.7%
154,661
8.8%
159,714
9.1%
7.8%
49 bps
3.4%
9 bps
Operating Earnings
EBT
89,643
73,313
112,124
99,354
95,110
80,374
115,768
103,862
121,661
110,024
6.1%
9.6%
3.3%
4.5%
Net Incom e
Reported FD EPS
Adjusted FD EPS
48,154
$0.87
$0.87
62,593
$1.13
$1.13
51,396
$0.93
$1.01
65,433
$1.18
$1.18
69,315
$1.25
$1.25
6.7%
6.7%
15.3%
4.5%
4.5%
4.5%
78,345
96,987
(16,931)
79,568
108,643
107,570
(13,890)
91,867
76,111
95,431
(15,069)
85,092
93,835
112,340
(14,187)
96,342
151,588
115,560
(13,689)
100,059
(2.9%)
(1.6%)
(11.0%)
6.9%
(13.6%)
4.4%
2.1%
4.9%
99,425
$1.79
11.4%
115,489
$2.08
13.2%
106,319
$1.92
11.3%
121,087
$2.18
12.9%
120,023
$2.16
12.7%
6.9%
4.8%
6.9%
4.8%
(6) bps (33) bps
33,928
34.1%
$0.61
34,413
29.8%
$0.62
33,928
31.9%
$0.61
34,413
28.4%
$0.62
34,413
28.7%
$0.62
0.0%
0.0%
(221) bps (138) bps
0.0%
0.0%
195,660
1.5x
0.3x
171,641
1.2x
0.3x
200,806
1.4x
0.3x
148,526
1.0x
0.2x
39,309
0.2x
0.1x
2.6%
(4.8%)
1.2%
(13.5%)
(22.7%)
(14.7%)
2,547
508.2
28.5
50.9
1.2x
9.5%
2,650
533.6
34.0
52.0
1.0x
16.5%
2,607
501.9
30.8
49.6
1.3x
9.5%
2,755
527.0
33.6
52.6
1.0x
17.8%
2,711
529.7
34.4
52.6
1.0x
20.1%
2.4%
(1.2%)
7.9%
(2.7%)
10.8%
0 bps
4.0%
(1.2%)
(1.2%)
1.3%
0.0%
129 bps
Leverage
Net Debt (EOP)
Net Debt to Trailing EBITDA
Net Debt to Total Capitalization
Key Operating Metrics
Bus Deliveries (Equivalent Units (EU))
Revenue Per EU (US$000's)
EBITDA Per EU (US$000's)
Average Weekly Line Entry Rate (EU)
Book:Bill Ratio (New Orders+Exercised Options)
Option Expiry as % of Opening Options
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We highlight that the companys ROIC on a trailing basis has continued to trend higher even
as capital needs moderate and long-term growth remains at a sustainable level. We estimate a
trailing ROIC of 6.4% in Q2/15 as compared to 5.1% in Q1/15 and 4.9% in December 2014.
Trailing Return on Invested Capital (ROIC)
We believe that with return on capital increasing consistently and sustainably, a higher
valuation multiple is warranted. We are rebasing our valuation using a 7.5x forward
EV/EBITDA (from 7.0x) and 15.0x forward P/E multiple (from 14.0x). Our price target
increases to C$23.00 as a result of a higher multiple, the shift in our C$/US$ exchange rate
from C$1.22 to C$ 1.27 /$US as well as a result of rolling forward our valuation period by
two quarters now ending in Q2/17. We note our valuation remains sensitive to the multiple
applied to estimates as shown in the figure below.
Sensitivity of Target Price to EBITDA and EBITDA Multiple
% Variance
Valuation Period EBITDA ($000s)
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
141,379
149,233
157,088
164,942
172,797
6.50x
7.00x
$16.82
$18.44
$17.99
$19.70
$19.16
$20.96
$20.33
$22.21
$21.49
$23.47
7.50x
$20.06
$21.40
$22.75
$24.10
$25.45
8.00x
8.50x
$21.67
$23.29
$23.11
$24.82
$24.55
$26.35
$25.99
$27.87
$27.43
$29.40
Overall, we believe the quarter was well ahead of our and consensus expectations with
tailwinds for margin expansion expected to continue in an increasingly rationalized market.
We note that as the companys operational efficiency initiatives mature, discussions around
return of capital to shareholders will start to gain further traction. We maintain our
Outperform rating and are increasing our 12-month price target to C$23.00 from C$18.50.
Our target price is based on a blend of a 15.0x earnings and 7.5x EBITDA multiple of the four
quarters ending Q2/17 reflecting our 12-month forward valuation period as well as an
exchange rate of C$1.27/$US.
Key risks to failing to achieve our price target include, but are not limited to changes in raw
material and component costs, foreign exchange risks, competition risk, changes in public
sector transportation spending, and failure by management to execute on disclosed strategies.
254
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
Rating &
Target
TSX:NFI
OP (C$23.00)
BOVESPA:POMO4
NR
TSX: WJX
NR
TSX: AFN
NR
TSX: SPB
NR
GBX
NR
OSK
NR
SPAR
NR
WNC
NR
THO
NR
WGO
NR
NAV
NR
TSX: STB
NR
BLBD
NR
CUB
NR
Trading
Local
Currency Price
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
17.88
2.10
21.77
44.45
10.95
43.63
36.96
4.85
13.58
56.00
21.93
16.75
5.56
13.05
43.62
Market
Cap ($m m )
941.6
1,839.1
404.5
652.2
1,412.5
1,287.7
2,878.2
160.0
911.5
2,915.2
592.0
1,369.2
533.6
269.4
1,243.3
EPS
EV
Net
Debt
($m m )
2014
2015e
249.4
1,268.6
167.3
165.9
939.9
316.0
854.2
(15.4)
196.5
(259.4)
(49.2)
4,419.0
220.9
195.6
(43.0)
949.2
3,133.8
656.5
818.1
2,352.4
1,714.3
3,732.4
144.5
1,108.0
2,655.8
542.8
5,821.2
816.4
515.1
1,200.6
0.65
0.25
2.46
0.31
0.45
4.62
3.49
0.03
0.88
3.55
1.61
-5.07
0.03
0.00
2.47
1.01
0.19
1.92
2.81
0.60
6.16
3.28
0.07
1.29
3.99
1.62
1.05
0.02
0.00
2.25
P/E
EBITDA
20.8x
6.4x
8.9x
NM
24.3x
9.4x
10.6x
NM
15.5x
15.8x
13.6x
NM
NM
NM
17.6x
14.3x
13.5x
8.4x
11.4x
15.8x
18.2x
7.1x
11.3x
NM
10.5x
14.0x
13.5x
15.9x
NM
NM
19.4x
13.3x
11.6x
6.0x
10.0x
11.4x
9.9x
6.9x
10.0x
25.5x
10.1x
12.2x
11.6x
6.9x
NM
NM
NM
11.0x
EV/EBITDA
2014
2015e
2016e
2014
2015e
2016e
Price
to BV
ROIC
ROE
107.4
268.8
82.4
63.4
282.4
257.4
591.2
9.4
160.7
298.8
65.8
331.0
69.0
25.9
119.3
141.4
260.3
83.4
91.2
275.4
458.4
540.0
12.4
206.6
344.1
68.3
648.8
79.1
0.0
114.3
154.7
373.7
92.5
115.8
314.2
473.2
585.2
17.0
208.7
392.0
81.2
852.0
94.4
0.0
139.6
8.8x
11.7x
8.0x
12.9x
8.3x
6.7x
6.3x
15.3x
6.9x
8.9x
8.3x
17.6x
11.8x
19.9x
10.1x
10.8x
6.7x
12.0x
7.9x
9.0x
8.5x
3.7x
6.9x
11.6x
5.4x
7.7x
7.9x
9.0x
10.3x
NM
10.5x
8.4x
6.1x
8.4x
7.1x
7.1x
7.5x
3.6x
6.4x
8.5x
5.3x
6.8x
6.7x
6.8x
8.6x
NM
8.6x
7.0x
1.7x
1.1x
1.1x
2.9x
2.5x
1.9x
1.4x
1.0x
2.3x
2.8x
2.8x
NM
2.1x
NM
1.6x
1.9x
6.4%
3.2%
9.0%
8.4%
6.2%
18.1%
8.9%
1.6%
12.1%
17.8%
19.4%
13.7%
2.9%
NA
5.9%
9.5%
9.0%
11.8%
13.0%
(0.2%)
5.7%
34.7%
12.2%
0.7%
20.6%
20.1%
21.5%
NM
0.7%
NM
4.6%
11.9%
255
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
50,620
95,110
Other
Unrealized FX Loss On Non-Current Monetary Items And Forw ard Foreign Exchange(820)
Contracts 1,085
Follow -On Offering Related Costs
Gain On Disposition Of PPE
Fair Value Adjustment To Embedded Derivative
Fair Value Adjustment To Other Liabilities, Class B And C Common Shares
EBIT
115,768
121,661
51,440
94,025
115,768
121,661
8,897
2,229
3,521
(775)
8,942
1,786
2,745
177
8,829
329
2,749
-
8,833
50
2,754
-
13,872
13,650
11,906
11,637
37,568
80,374
103,862
110,024
25,691
(14,842)
10,849
26,719
39,494
(10,515)
28,979
51,396
30,743
7,686
38,429
65,433
32,567
8,142
40,709
69,315
(133,167)
26,719
(29,333)
(135,781)
(135,781)
51,396
(26,971)
(111,356)
(111,356)
65,433
(27,370)
(73,293)
(73,293)
69,315
(28,682)
(32,660)
0.48
0.93
1.18
1.25
0.65
1.01
1.18
1.25
256
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
2015
2016
2017
17,456
212,125
230,002
4,393
689
778
465,443
55,581
264,144
250,260
4,925
240
575,151
106,049
277,683
273,311
5,178
240
662,460
213,454
292,739
213,428
5,459
240
725,319
63,804
544,464
62,235
169
1,136,115
64,256
523,127
65,300
1,227,834
61,010
501,667
57,614
1,282,751
58,106
480,207
49,473
1,313,105
233,073
45,923
32,330
6,090
1,551
40,000
358,967
253,240
6,492
72,257
40,901
3,888
48,000
424,778
266,220
6,492
71,625
46,890
3,888
48,000
443,116
280,655
6,492
44,976
50,587
3,888
48,000
434,598
1,026
3,225
2,939
108,465
140,747
1,733
6,677
683,493
4,117
5,813
3,533
102,520
141,612
1,911
4,871
749,730
4,117
4,001
3,533
102,520
141,941
1,911
4,871
766,583
4,117
2,189
3,533
102,520
141,991
1,911
4,871
756,304
589,586
(135,781)
452,622
1,136,115
589,701
(111,356)
478,105
1,227,834
589,701
(73,293)
516,168
1,282,751
589,701
(32,660)
556,801
1,313,105
ASSETS
Current Assets
Cash
Accounts Receivable
Inventory
Prepaid Expenses And Other Assets
Embedded Derivative Instrument
Due From Related Party
Future Income Tax Assets + Derivatives
Other
Total Current Assets
Property, Plant & Equipment
Long-term receivable
Intangible Assets
Future Income Tax Assets
Goodw ill
Other Assets & Foreign Exchange Contracts
Unused Investment Tax Credits
Other
Total Assets
Unitholder's Equity
Share Capital
Surplus (Deficit)
Total Equity
10
257
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
2015
2016
2017
51,396
17,629
21,411
3,309
-
65,433
17,433
21,460
7,686
-
69,315
16,592
21,460
8,142
-
1,085
223
604
523
96,180
(19,320)
76,860
329
112,340
(18,505)
93,835
50
115,560
36,029
151,588
(1,812)
8,000
(1,923)
(26,862)
(22,597)
(1,812)
(27,370)
(29,182)
(1,812)
(28,682)
(30,494)
(96)
(3,585)
(11,484)
(15,069)
(15,165)
(223)
38,125
17,456
55,581
(3,375)
(10,812)
(14,187)
(14,187)
50,467
55,581
106,049
(3,256)
(10,433)
(13,689)
(13,689)
107,405
106,049
213,454
11
258
Disclosure Requirements
C$17.88
Rating:
Outperform
12 Month Target:
C$23.00
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
Does any director, officer, employee of AltaCorp Capital or member of their household serve as a director or
officer or advisory capacity of the issuer? If yes, state name:
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
12 Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
13 Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
64%
25%
Sector Perform
21%
4%
Underperform
2%
0%
Speculative
1%
0%
Restricted
2%
50%
Not Rated
6%
12%
Tender
4%
0%
100%
18%
Total
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied
upon, by any other person.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts
responsibility for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital
(USA) Inc. at 403-539-8600.
12
259
Direct
@altacorpcapital.com
__________________________________________________________________________________________________________
E&P- Domestic
Patrick J. ORourke, CFA, Analyst
Yasir Siddiqi, Associate
Nicholas Lupick, CFA, Analyst
Kate-Lynn Gordey, Associate
Thomas Matthews, P.Eng., Analyst
Christian Erana, Associate
porourke
ysiddiqi
nlupick
kgordey
tmatthews
cerana
Energy Infrastructure
Dirk Lever, CA, Senior Analyst
Ward Hallett, CA, Associate
dlever
whallett
Oilfield Services
Dana Benner, CFA, Senior Analyst
Mark Westby, Analyst
dbenner
mwestby
Diversified Industries
Chris Murray, P.Eng., CFA, Senior Analyst
Samarth Modwal, Associate
cmurray
smodwal
Agriculture
Peter Prattas, CPA, CA, CFA, Analyst
Stuart Pattillo, Associate
pprattas
spattillo
All Sectors
Victoria Hoa, Research Assistant
vhoa
George FJ Gosbee
President
Managing Director Capital Markets
647 776 8250
psarachman@altacorpcapital.com
ATB Financial
Dave Mowat
President & CEO
780 408 7181
dmowat@atb.com
Ian Wild
Executive Vice President
403 974 5127
iwild@atb.com
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
khilton
Toronto
Paul Sarachman, CFA, FCSI
Adam Carlson
Jamie Riff
Tim Miller
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Institutional Trading
Calgary
Tate Pinder
Shane Dungey
tpinder
sdungey
Toronto
Cheryl Polan
Jon Varley
Michael Capobianco
cpolan
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
410, 585 8 Avenue SW
Calgary AB Canada T2P 1G1
403 539 8600 Main
403 539 8575 Fax
TORONTO
66 Wellington Street West, Suite 3530
Toronto, ON Canada M5K 1A1
647 776 8230 Main
647 776 8248 Fax
George Gosbee
ggosbee
jcaldarelli
ggill
mreynolds
Oilfield Services
Matt Colucci
mcolucci
jfallows
All Sectors
Patrick Stables
Jesse Hardage
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
pstables
jhardage
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________
www.altacorpcapital.com
Private Wealth
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
dlush
vkrb
tokuszko
mhennebery
260
Price: Cdn$17.88
StockRating: Outperform
TargetPrice: Cdn$20.00
August 9, 2015
NFI (T)
Outperform
Stock Rating:
(Unchanged)
Cdn$20.00
Target:
(Was Cdn$18.00)
Average
Risk Rating:
(Unchanged)
15.3%
Stock Data:
Cash Yield
3.5%
11.9%
52-week High-Low
HIGHLIGHTS
$18.10-$12.04
Bloomberg/Reuters:
Forecasts: DEC YE
Revenue (USmln)
Q2/15 Review
2014a
2015e
2016e
$1,451.1
$1,490.0
$1,599.0
EBITDA (USmln)
$86.5
$123.5
$130.5
DCPS ($US)
$1.06
$1.17
$1.34
Dividend
$0.58
$0.60
$0.62
Payout Ratio
49%
41%
37%
DC Yield
6.6%
8.1%
9.4%
EV/EBITDA
11.3x
9.2x
9.2x
P/DCPS
15.1x
12.3x
10.7x
Financial Data
Shares Outstanding (mln)
Market Capitalization (mln)
Cash
Net Debt
55.5
$992.6
$8.8
$240.8
20%
1.8x
261
Page 2
Investment Summary
Q2s performance marks one of the best quarters weve seen from NFI in our six-plus years
covering the company, and our view is that earnings momentum will remain robust for the
foreseeable future given a number of favourable drivers:
1) Demand growth is sharp, with YTD orders totaling more than half of NFIs current ~7k
unit / ~US$3.5 billion backlog. Transit authorities are replacing fleets given better access
to funding, an elevated age, environmental reasons and to drive operating efficiencies
all themes positioned to continue.
2) Management has been actively investing in better IT, plant design / workflow, operating
efficiencies and to standardize its bus platform to Xcelsior, the benefits being reflected in
margin gains from the manufacturing segment; however, generally only at an early stage
in terms of impact.
3) Aftermarkets profitability is at its highest levels ever, and while the ending of the CTA
mid-life overhaul program will weigh on NTM results the impact is believed minimal and
already adequately captured in our/Street expectations.
After adjusting for Q2 takeaways our 2016e EBITDA forecast increases 4% to US$130 mln
and DCPS +3% to US$1.34 reflecting a 37% payout. Given this cushion and NFIs
conservatively leveraged 1.8x net debt to EBITDA balance sheet, we believe investors
should anticipate continued dividend increases.
As mentioned earlier NFIs manufacturing segment realized extremely robust
EBITDA/delivery of US$37.7k Q2/15 (vs. US$25.6k last quarter and US$23k-US$28k
2012-2014). Given the number of factors at play influencing one quarter of profitability (sales
mix, FX, timing, etc.) we are more conservatively forecasting US$31.2k through 2016, but if
the rebound continues to be as pronounced as Q2/15 there is upwards of US$20 mln
incremental annual EBITDA potential (+15% to our 2016e forecast).
We use a ~10x 2016e EV/EBITDA multiple (was ~9.5x) on our new estimates to arrive at a
$20 target price (was $18), representing the average valuation for TSX diversified yield
equities. With a 15%+ implied total return we reiterate an Outperform rating.
262
Page 3
DISCLOSURES:
Ratings And What They Mean: PRIMARY STOCK RATING: NBF has a three-tiered rating system that is relative to the coverage universe of the particular analyst. Here is a brief
description of each: Outperform The stock is expected to outperform the analysts coverage universe over the next 12 months; Sector Perform The stock is projected to perform in
line with the sector over the next 12 months; Underperform The stock is expected to underperform the sector over the next 12 months. SECONDARY STOCK RATING: Under
Review Our analyst has withdrawn the rating because of insufficient information and is awaiting more information and/or clarification; Tender Our analyst is recommending that
investors tender to a specific offering for the companys stock; Restricted Because of ongoing investment banking transactions or because of other circumstances, NBF policy and/or
laws or regulations preclude our analyst from rating a companys stock. INDUSTRY RATING: NBF has an Industry Weighting system that reflects the view of our Economics & Strategy
Group, using its sector rotation strategy. The three-tiered system rates industries as Overweight, Market Weight and Underweight, depending on the sectors projected performance
against broader market averages over the next 12 months. RISK RATING: NBF utilizes a four-tiered risk rating system, Below Average, Average, Above Average and Speculative.
The system attempts to evaluate risk against the overall market. In addition to sector-specific criteria, analysts also utilize quantitative and qualitative criteria in choosing a rating. The
criteria include predictability of financial results, share price volatility, credit ratings, share liquidity and balance sheet quality.
General National Bank Financial (NBF) is an indirect wholly owned subsidiary of National Bank of Canada. National Bank of Canada is a public company listed on Canadian stock
exchanges.
The particulars contained herein were obtained from sources which we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed are based
upon our analysis and interpretation of these particulars and are not to be construed as a solicitation or offer to buy or sell the securities mentioned herein.
Research Analysts The Research Analyst(s) who prepare these reports certify that their respective report accurately reflects his or her personal opinion and that no part of his/her
compensation was, is, or will be directly or indirectly related to the specific recommendations or views as to the securities or companies.
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should contact their NBF professional representative. To effect any transaction, Canadian residents should contact their NBF Investment advisor.
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All of the views expressed in this research report accurately reflect the research analysts personal views regarding any and all of the subject securities or issuers. No part of the analysts
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this report certifies that the views expressed herein reflect his or her accurate personal and technical judgment at the moment of publication. Because the views of analysts may differ,
members of the National Bank Financial Group may have or may in the future issue reports that are inconsistent with this report, or that reach conclusions different from those in this
report. To make further inquiry related to this report, United States residents should contact their NBCFI registered representative.
UK Residents In respect of the distribution of this report to UK residents, National Bank Financial Inc. has approved the contents (including, where necessary, for the purposes of
Section 21(1) of the Financial Services and Markets Act 2000). National Bank Financial Inc. and/or its parent and/or any companies within or affiliates of the National Bank of Canada
group and/or any of their directors, officers and employees may have or may have had interests or long or short positions in, and may at any time make purchases and/or sales as
principal or agent, or may act or may have acted as market maker in the relevant securities or related financial instruments discussed in this report, or may act or have acted as
investment and/or commercial banker with respect thereto. The value of investments can go down as well as up. Past performance will not necessarily be repeated in the future. The
investments contained in this report are not available to retail customers. This report does not constitute or form part of any offer for sale or subscription of or solicitation of any offer to
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Financial Inc. is not authorised by the Prudential Regulation Authority and the Financial Conduct Authority to accept deposits in the United Kingdom.
Copyright This report may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or
conclusions contained in it be referred to without in each case the prior express written consent of National Bank Financial.
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NBF quarterly ratings summary and the total ratings by month can be found on our website under Research and Analysis/Equities/About NBF Research/Quarterly Ratings Summary (link
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If a company specific disclosure is not found herein for a listed company, NBF at this time does not provide research coverage or stock rating for the company in question.
Additional company related disclosures for New Flyer Industries Inc. (6,7)
6 National Bank Financial Inc. or an affiliate has a non-investment banking services related relationship during the past 12 months.
7 The issuer is a client, or was a client, of National Bank Financial Inc. or an affiliate within the past 12 months.
263
RESEARCH ALERT
NFI | TSX
$16.96
Rating: Outperform
August 7, 2015
Record Q2/15 Results: New Flyer announced Q2/15 results reporting revenue,
Adjusted EBITDA and Adjusted FD EPS of $375.0mm, $39.1mm and $0.30. The
results were well ahead of our expectations for revenue, Adjusted EBITDA and
Adjusted FD EPS of $377.1mm, $31.0mm and $0.18 versus consensus estimates of
$386.9mm, $31.3mm and $0.22. The company has scheduled a conference call at
8:00am ET (1-888-231-8191) where we expect management to provide updated
guidance on the companys significantly improved margin profile and insights on
the demand and pricing outlook.
Regulatory Disclosures and policy on the dissemination of research: last page or at www.altacorpcapital.com
264
Q2/14
Q1/15
Grow th y/y Grow th
Estim ate
Estim ate
Variance $ Variance %
594.0
508.2
28.0
3,443.6
594.0
481.1
37.7
3,487.1
582.0
456.8
23.9
3,538.5
2.1%
5.3%
58.1%
(1.5%)
3.2%
12.2%
84.1%
(3.3%)
(27.1)
9.8
44
0.0%
(5.3%)
35.0%
1.3%
301,892
16,604
5.5%
5.5%
285,793
22,412
7.8%
7.8%
265,831
13,889
5.2%
5.5%
7.5%
61.4%
2.6%
2.4%
15.9%
151.1%
2.0%
2.0%
(16,099)
5,808
(5.3%)
35.0%
2.3%
2.3%
75,234
14,450
19.2%
89,219
16,779
18.8%
80,653
13,077
16.2%
10.6%
28.3%
2.6%
22.8%
40.0%
2.3%
13,985
2,329
18.6%
16.1%
(0.4%)
377,126
31,054
9,985
375,012
39,191
12,370
346,484
26,966
3,563
8.2%
45.3%
247.2%
17.4%
59.7%
97.9%
(2,114)
8,137
2,385
(0.6%)
26.2%
23.9%
$0.18
$0.18
$0.22
$0.30
$0.06
$0.16
247.0%
81.4%
97.8%
105.5%
$0.04
$0.12
23.9%
65.7%
Afterm arket
Revenue
EBITDA
EBITDA Margin
Total
Revenue
Adjusted EBITDA
Reported Net Income
Fully Diluted Earnings Per Share
Reported
Adjusted
Consensus
Actual vs.
Consensus
386,923
31,320
(3.1%)
25.1%
$0.22
37.5%
265
Disclosure Requirements
C$16.96
Rating:
Outperform
12 Month Target:
C$18.50
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
Does any director, officer, employee of AltaCorp Capital or member of their household serve as a director or
officer or advisory capacity of the issuer? If yes, state name:
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
12 Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
13 Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
64%
25%
Sector Perform
21%
4%
Underperform
2%
0%
Speculative
1%
0%
Restricted
2%
50%
Not Rated
6%
12%
Tender
4%
0%
100%
18%
Total
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied
upon, by any other person.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts
responsibility for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital
(USA) Inc. at 403-539-8600.
266
Direct
@altacorpcapital.com
__________________________________________________________________________________________________________
E&P- Domestic
Patrick J. ORourke, CFA, Analyst
Yasir Siddiqi, Associate
Nicholas Lupick, CFA, Analyst
Kate-Lynn Gordey, Associate
Thomas Matthews, P.Eng., Analyst
Christian Erana, Associate
porourke
ysiddiqi
nlupick
kgordey
tmatthews
cerana
Energy Infrastructure
Dirk Lever, CA, Senior Analyst
Ward Hallett, CA, Associate
dlever
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Oilfield Services
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dbenner
mwestby
Diversified Industries
Chris Murray, P.Eng., CFA, Senior Analyst
Samarth Modwal, Associate
cmurray
smodwal
Agriculture
Peter Prattas, CPA, CA, CFA, Analyst
Stuart Pattillo, Associate
pprattas
spattillo
All Sectors
Victoria Hoa, Research Assistant
vhoa
George FJ Gosbee
President
Managing Director Capital Markets
647 776 8250
psarachman@altacorpcapital.com
ATB Financial
Dave Mowat
President & CEO
780 408 7181
dmowat@atb.com
Ian Wild
Executive Vice President
403 974 5127
iwild@atb.com
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
khilton
Toronto
Paul Sarachman, CFA, FCSI
Adam Carlson
Jamie Riff
Tim Miller
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Institutional Trading
Calgary
Tate Pinder
Shane Dungey
tpinder
sdungey
Toronto
Cheryl Polan
Jon Varley
Michael Capobianco
cpolan
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
410, 585 8 Avenue SW
Calgary AB Canada T2P 1G1
403 539 8600 Main
403 539 8575 Fax
TORONTO
66 Wellington Street West, Suite 3530
Toronto, ON Canada M5K 1A1
647 776 8230 Main
647 776 8248 Fax
George Gosbee
ggosbee
jcaldarelli
ggill
mreynolds
Oilfield Services
Matt Colucci
mcolucci
jfallows
All Sectors
Patrick Stables
Jesse Hardage
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
pstables
jhardage
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________
www.altacorpcapital.com
Private Wealth
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
dlush
vkrb
tokuszko
mhennebery
267
Market Perform
Target Price:
Price (6-Aug):
$16.00
$16.96
August 7, 2015
416-359-5301
416-359-6193
Conference call details: Friday, August 7 at 8:00 a.m. ET; Tel: 1-888-231-8191 or 647-427-7450.
Our View:
Results were in line with expectation as the higher tax expense offset the strong increase in EBITDA.
EBITDA was higher than expected mainly due to a favourable sales mix and cost savings from the operational
improvement initiatives. As management previously indicated, the average margin on orders planned for production in
2015 appears to be higher than in the prior year.
NFI looks on track to execute on its platform rationalization plan and improve bus manufacturing margins.
This quarters EBITDA per bus is a surprise to us and is well in excess of what management indicated was achievable.
NFI could be a different story if the average EBITDA per bus is going to be well above $30,000 per bus compared with
our expectation of $27,000. EBITDA per bus does spike periodically, so we are cautious that this may be one of those
quarters.
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s) under
FINRA rules. For disclosure statements, including the Analyst's Certification, please refer to pages 2 to 5.
Flash Page 1
268
Quarterly Price
18
16
16
14
14
12
12
10
10
10
18
16
16
14
14
12
12
10
2) Mkt
6
1) NR
4
NFI Relative to S&P/TSX Comp.
NFI Relative to Machinery
400
400
300
300
200
200
100
100
1995
2000
2005
2010
500
400
400
300
300
200
200
100
100
1.0
200
500
2015
Revenue / Share
Price / Revenue
300
2013
2014
2015
200
200
0.5
100
-200
2013
0.0
EPS (4 Qtr Trailing)
Price / Earnings
2014
2015
-200
400
200
0
1995
FYE
(Dec.)
EPS
$
2011
2012
2013
2014
0.81
0.22
0.49
0.48
Range*:
Current*
0.58
2000
2005
P/E
Hi - Lo
9.5
40.5
24.2
29.4
6.4
23.6
15.9
21.6
40.5
6.4
28.2
2010
2015
DPS
$
Yield%
Hi - Lo
Payout
%
BV
$
P/B
Hi - Lo
0.86
0.59
0.59
0.59
16.5 11.2
11.3 6.6
7.5 4.9
5.7 4.2
>100
>100
>100
>100
8.2
7.7
8.1
8.1
0.9
1.2
1.5
1.7
0.6
0.7
1.0
1.3
1.7
0.6
>100
10.7
16.5
0.62
4.2
3.8
1.5
ROE
%
3
6
6
1
2
Date
29-Oct-12
3-Jul-13
Rating Change
Mkt to NR
NR to Mkt
Share Price
$7.75
$11.14
Flash Page 2
269
IMPORTANT DISCLOSURES
Analyst's Certification
I, Bert Powell, CFA, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I
also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this
report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates,
which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and
in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA (exceptions:
Alex Arfaei and Brodie Woods). These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the
NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a
research analyst account.
Company Specific Disclosure
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past
12 months.
Disclosure 6: This issuer is a client (or was a client) of BMO NB, BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12 months:
Non-Securities Related Services.
Disclosure 13: A partner, director, officer, employee or agent of BMO Capital Markets is an officer, director, employee of, or serves in an advisory
capacity to, this issuer: Brian Tobin (Member of Board of Directors)
Methodology and Risks to Price Target/Valuation
Methodology: Our $16.00 target is based on 7.0x our 2016E EBITDA.
Risks: A significant portion of new transit bus purchases are funded from government sources. As long as federal, state/provincial and municipal budgets
remain under pressure, funding for new bus purchases could be reduced or eliminated. Other risks include: price volatility of raw materials, warranty costs
could be material, labour disruptions from its predominantly unionized workforce and customer contract issues (early termination, deferral, non-renewal).
Distribution of Ratings (June 30, 2015)
Rating
BMOCM US
BMOCM US
BMOCM US
BMOCM
BMOCM
Starmine
Category
BMO Rating
Universe*
IB Clients**
IB Clients***
Universe****
IB Clients*****
Universe
Buy
Outperform
42.0%
21.9%
53.3%
41.9%
54.3%
54.6%
Hold
Market Perform
53.5%
14.4%
44.8%
53.3%
44.4%
40.0%
Sell
Underperform
4.4%
7.4%
1.9%
4.7%
1.3%
5.4%
*
Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.
**
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services
as percentage within ratings category.
***
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking
services as percentage of Investment Banking clients.
****
Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.
*****
Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as
percentage of Investment Banking clients.
Flash Page 3
270
Flash Page 4
271
To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct
Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in
matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the
Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The
contents hereof are not intended for the use of and may not be issued or passed on to retail clients.
Unauthorized reproduction, distribution, transmission or publication without the prior written consent of BMO Capital Markets is strictly prohibited.
Click here for data vendor disclosures when referenced within a BMO Capital Markets research document.
Financial Group
Flash Page 5
272
Khaled Omar
1 (416) 956-6807
Kevin.Chiang@cibc.com
Khaled.Omar@cibc.com
CHANGE
IN
RATING - UPGRADE
August 6, 2015
Capital Equipment
Stock Rating:
Sector Weighting:
Key Ratios and Statistics
12-18 mo. Price Target
NFI-TSX (8/6/15)
SECTOR OUTPERFORMER
MARKET WEIGHT
C$19.50
C$16.96
Key Indices:
3-5-Yr. EPS
Gr. Rate (E)
52-week
Range
Shares Outstanding
Float
Avg. Daily Trading Vol.
Market Capitalization
Dividend/Div Yield
Fiscal Year Ends
Book Value
2015 ROE (E)
LT Debt
Net AssetEquity
Value
Common
Convertible Available
EBITDA ($mln)
Current
2. Sum Of The Parts Suggests Higher Valuation: Using a sum of the Prior
parts model, and applying a 7x for the bus manufacturing operations Estimates (Dec. 31)
Valuation (Dec. 31)
and 10x for the aftermarkets business would yield a value for New
EV/EBITDA-Curr
Flyer of C$20+/share.
EV/EBITDA-Prior
Toronto
NM
C$12.04-C$16.96
55.5M
36.5M Shrs
38,000
C$941.3M
C$0.62 / 3.7%
December
$8.36 per Shr
9.0%
$141.0M
$464.0M
Yes
2013
$94.7A
2014
$107.4A
2015
$132.5E
$124.2E
2016
$138.4E
$126.9E
10.2x
9.0x
7.3x
7.8x
7.0x
7.6x
3. FCF Stepping Up: When we look out into 2016, we are forecasting
New Flyer will generate $1.00 in FCFPS and this compares to ~$0.60
in FCFPS back in 2014. We view New Flyer as a good FCF story
given that it is a low capex business resulting in a higher FCF
conversion rate as it expands its margin profile. Taking our 2016
FCFPS estimate and using New Flyer's FCF yield range of 5.5%-7.5%
would infer a value for the company of ~C$17.50 to ~C$23.50.
Improving FCF supports the dividend and M&A strategy.
4. Industry Fundamentals Look Good: We have a constructive
outlook on the heavy duty bus market and we have seen a step-up
in the total active bids New Flyer is working on.
We raised our estimates to reflect an increase in our margin
assumptions. Our 2015E and 2016E EBITDA increase to $133 million Company Description
New Flyer Industries Inc. is the largest North American manufacturer of
(from $124 million) and $138 million (from $127 million)
heavy-duty transit buses supplying transit authorities in Canada and the U.S.
respectively.
www.newflyer.com
All figures in US dollars, unless otherwise stated.(C$1.312:US$1)
15-137401 2015
CIBC World Markets does and seeks to do business with companies covered in its research reports. As a result, investors
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
See "Important Disclosures" section at the end of this report for important required disclosures, including potential
conflicts of interest. See "Price Target Calculation" and "Key Risks to Price Target" sections at the end of this report,
where applicable.
Find CIBC research on Bloomberg, Reuters, firstcall.com
and ResearchCentral.cibcwm.com
CIBC World Markets Inc., P.O. Box 500, 161 Bay Street, Brookfield Place, Toronto, Canada M5J 2S8 (416) 594-7000
273
Don't Miss The Bus - Upgrading To SO And Raising PT To C$19.50 - August 06, 2015
Sector Outperformer
NFI-TSX
8/6/15
12- To 18- Month Price Target:
Capital Equipment
Sector Weighting:
All figures in US$ millions, except per share data.
EV/EBITDA Multiples
Consensus estimates except New Flyer
New Flyer Industries
High-Yielding Industrials
Commercial Vehicle & Parts
Manufacturers
P/E Multiples
Consensus estimates except New Flyer
New Flyer Industries
High-Yielding Industrials
Commercial Vehicle & Parts
Manufacturers
Key Financial Metrics
2013A
EBITDA Margin
Current Ratio
Debt/Equity
Debt/Total Capital
Income Statement
Bus Manufacturing Revenues
Aftermarket Revenues
Revenues - Consolidated
Cost of Sales
Gross Profit
EBITDA
EBIT
EBT
Net Income
Balance Sheet
C$16.96
C$19.50
Market Weight
2014A
2015E
2016E
9.0x
9.8x
10.3x
7.3x
8.5x
8.5x
7.0x
6.9x
7.5x
2014A
2015E
2016E
Investment Thesis
20.4x
19.8x
17.5x
17.0x
15.4x
13.9x
15.1x
12.9x
12.2x
Fundamentals for bus demand are improving due to rising U.S. state/municipal tax revenue, growing
bus ridership numbers (reflecting the cost advantage of taking bus transit versus driving and modestly
declining unemployment rate), and public transit being a more green option.
2014A
2015E
2016E
New Flyer is well positioned to take advantage of the improving heavy duty bus fundamentals given its
leading market share in both bus manufacturing and aftermarket services.
7.9%
1.1x
51.3%
33.9%
2013A
7.4%
1.1x
53.1%
34.7%
2014A
8.7%
1.3x
41.0%
29.1%
2015E
9.0%
1.3x
50.1%
33.4%
2016E
$991.2
$215.0
$1,199.4
$1,078.7
$120.8
$94.7
$49.0
$34.6
$26.8
$1,132.1
$319.0
$1,451.1
$1,312.8
$138.3
$107.4
$51.4
$37.6
$26.7
$1,205.3
$326.4
$1,531.7
$1,362.4
$169.4
$132.5
$85.2
$70.7
$47.4
$1,231.3
$310.6
$1,541.8
$1,364.8
$177.0
$138.4
$100.6
$86.3
$62.5
Q2/15A
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Shareholders' Equity
444
1,111
320
648
464
Company Profile
New Flyer Industries Inc. is the largest North American manufacturer of heavy-duty transit buses
supplying transit authorities in Canada and the U.S. with approximately one-third the market.
New Flyer is guiding towards 2015 production line rate of ~50 EUs/week, we view its $0.62/share
annual dividend as safe.
Canada
16%
$1,000,000
2,500
$300
$800,000
2,000
$250
$600,000
1,500
$200
$400,000
1,000
$200,000
500
$0
0
2009
2010
Revenues ($ Millions)
2011
2012
2013
Deliveries(EUs)
2014
$ Millions
3,000
2008
United States
84%
Bus Operations
78%
$1,200,000
2007
$319
$215
$150
$100
$83
$96
$108
$106
$116
$119
2009
2010
2011
2012
$50
$0
2007
2008
2013
2014
274
Don't Miss The Bus - Upgrading To SO And Raising PT To C$19.50 - August 06, 2015
12%
10%
8%
6%
4%
2%
Q2/15
Q1/15
Q4/14
Q3/14
Q2/14
Q1/14
Q4/13
Q3/13
Q2/13
Q1/13
0%
And looking ahead, we continue to see New Flyers margin profile improving as it
goes through its restructuring and transitions the production of NABI bus models
from the Anniston, AL facility to the Xcelsior platform. New Flyer expects to
invest, in total, ~$20 million in direct operating costs and capex to complete the
transition. The company has incurred $13.2 million ($6.0 million of costs and
$7.2 million in capex). We expect a quick payback from this investment with
New Flyer noting that the annualized cost savings are expected to be ~$14
million. This restructuring is expect to be completed in H2/15.
275
Don't Miss The Bus - Upgrading To SO And Raising PT To C$19.50 - August 06, 2015
5300
48%
NFI EU Shipments
EBITDA Per EU
Bus EBITDA
Bus Multiple
2518
$29,000
7.0x
$511,052,500
$320,000,000
Aftermarket EBITDA
Aftermarkets Multiple
Aftermarkets EV
19%
$60,800,000
10.0x
$608,000,000
Total EV
$1,119,052,500
Net Debt
$244,654,000
Equity Value
$874,398,500
Shares Outstanding
=> Assume this is "normalized" bus margins and benefit of cost cutting
$73,007,500
Bus EV
Aftermarket EBITDA Margin
=> Current industry deliv eries but could peak at 6,500 EUs
55,510,000
$15.75
$20.48
Our analysis in the exhibit above though assumes current industry demand but
we believe that this could peak-out at 6,500 EUs. If we assume that level of
industry deliveries and New Flyer maintains it market share, all else equal, this
would add another ~$2.75/share in value.
276
Don't Miss The Bus - Upgrading To SO And Raising PT To C$19.50 - August 06, 2015
9,000
8,000
20,000
7,000
6,000
15,000
5,000
4,000
10,000
3,000
2,000
5,000
1,000
Q2/15
Q1/15
Q4/14
Q3/14
Q2/14
Q1/14
Q4/13
Q3/13
Q2/13
Q1/13
Q2/15
Q1/15
Q4/14
Q3/14
Q2/14
Q1/14
Q4/13
Q3/13
Q2/13
0
Q1/13
Taking Up Estimates
New Flyer provided the following guidance:
New Flyer believes pricing in certain types of bus competitions has
normalized and expects that bus margins realized during 2015 will be, on
average, higher than those realized during 2014.
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During the first week of July 2015 there were no scheduled assembly line
entries (vacation time). This resulted in a reduction of ~35 EUs being
entered into production. New Flyer expects an average line entry rate of
~50 EUs per available production week for 2015.
New Flyer expects the core aftermarket parts revenue growth at ~5% in
2015. The aftermarket revenue generated from CTA mid-life upgrade
program ended as of June 2015, which represented 18.6% of the total
aftermarket revenue during H1/15
We have increased our earnings estimates for New Flyer primarily to reflect
increased margin assumptions.
Exhibit 5. Summary Of Changes
Summary Of Changes
2015E
2016E
Before
After
Before
After
EUs
2,496
2,476
-0.8%
2,500
2,500
0.0%
Revenue
1,253
1,205
-3.8%
1,250
1,231
-1.5%
EBITDA
64
72
12.5%
69
80
15.9%
Revenue
332
326
-1.8%
321
310
-3.4%
EBITDA
60
61
1.7%
58
58
0.0%
Bus Manufacturing
Aftermarkets
Our 2015 and 2016 EBITDA estimates increase to $133 million (from $124
million) and $138 million (from $127 million) respectively. We raised our price
target to $19.50 from $16.50 as we use an 8x EV/EBITDA multiple on our 2016
estimate. We increased our price target multiple by 0.5 points to reflect the
increasing contribution from aftermarkets.
Record Q2 Results
New Flyer reported a solid set of Q2/15 results. While revenue of $375 million
(up 8.2% Y/Y) was lower than our estimate of $388 million (consensus of $380
million), adjusted EBITDA came in at $39 million, up 45.3% Y/Y, and versus our
estimate of $32 million and consensus of $31 million. The main variance versus
our EBITDA estimate was higher margins in bus manufacturing, attributed to
favorable sales mix and the cost savings achieved from the restructuring
(i.e. transitioning the NABI bus to Xcelsior). While we saw New Flyers bus
inventory increase by 63 EUs during the quarter, thus negatively impacting
working capital, the company noted that it expects to reduce the excess bus
inventory by year end.
Bus Manufacturing: Q2/15 Bus Manufacturing revenue was $286 million, up
7.5% Y/Y, and versus our estimate of $297 million. While the company reported
a higher average selling price per EU, up 5.3% Y/Y to ~$481,000, this was
below our estimate of ~$500,000, with the company delivering 594 units (prereleased), up 2.1% Y/Y. Bus manufacturing EBITDA during the quarter was $22
million, up from $14 million last year, and versus our estimate of $16 million
primarily reflecting higher margins (up ~2.2 pts Y/Y to 7.8% and versus our
estimate of 5.3%).
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279
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Q1/F14
Q2/F14
Q3/F14
Q4/F14
F2014
Q1/F15
Q2/F15
Q3/F15E
Q4/F15E
F2015E
F2016E
Rev enue
$1,199,424
$323,865
$346,484
$360,762
$419,989
$1,451,100
$380,301
$375,012
$371,444
$404,970
$1,531,727
$1,541,809
Cost of Sales
$1,078,657
$293,851
$309,256
$326,482
$383,228
$1,312,817
$340,674
$326,581
$332,129
$362,982
$1,362,366
$1,364,847
Gross Profit
$120,767
$30,014
$37,228
$34,280
$36,761
$138,283
$39,627
$48,431
$39,315
$41,988
$169,361
$176,962
SGA
$26,082
$10,348
$10,262
$8,583
$1,725
$30,918
$8,213
$9,240
$9,286
$10,124
$36,863
$38,545
EBITDA
$94,685
$19,666
$26,966
$25,697
$35,036
$107,365
$31,414
$39,191
$30,029
$31,863
$132,498
$138,416
Amortization
$28,001
$7,718
$8,131
$10,012
$9,976
$35,837
$9,507
$9,845
$9,841
$9,753
$38,946
$37,782
FX loss (gain)
$118
$802
$387
$226
$132
$0
($1,455)
$688
$0
$0
($767)
$0
Operating Earnings
$66,566
$11,146
$18,448
$15,459
$24,928
$69,981
$23,362
$28,658
$20,188
$22,111
$94,318
$100,634
Unrealized FX Loss
$2,146
$380
($1,000)
$117
($317)
$0
$1,914
($829)
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$15,457
$762
$6,685
$2,561
$9,353
$19,361
$3,209
$4,846
$0
$0
$8,055
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
EBIT
$48,963
$10,004
$12,763
$12,781
$15,892
$51,440
$18,239
$24,641
$20,188
$22,111
$85,178
$100,634
$8,749
$2,257
$2,257
$2,203
$2,180
$8,897
$2,334
$2,200
$2,409
$2,409
$9,635
$9,673
$2,208
$540
$549
$565
$575
$2,229
$584
$598
$598
$598
$2,378
$2,392
$2,857
$823
$1,190
$713
$795
$3,521
$726
$602
$600
$600
$2,528
$2,400
$532
($314)
$377
($785)
($53)
($775)
$487
($310)
$0
$0
$0
$0
Interest Ex pense
$14,346
$3,306
$4,373
$2,696
$3,497
$13,872
$4,131
$3,090
$3,607
$3,607
$14,434
$14,375
EBT
$34,617
$6,698
$8,390
$10,085
$12,395
$37,568
$14,108
$21,551
$16,581
$18,504
$70,744
$86,260
$7,856
$1,214
$4,827
($160)
$4,968
$10,849
$3,253
$9,181
$5,286
$5,671
$23,392
$23,808
Net Income
$26,761
$5,484
$3,563
$10,245
$7,427
$26,719
$10,855
$12,370
$11,295
$12,832
$47,352
$62,451
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1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2013 Current
$15.4A
$18.1A
$24.4A
$36.8A
$94.7A
2014 Current
$19.7A
$27.0A
$25.7A
$35.0A
$107.4A
2015 Prior
$31.4A
$32.1E
$29.7E
$31.0E
$124.2E
2015 Current
$31.4A
$39.2A
$30.0E
$31.9E
$132.5E
2016 Prior
--
--
--
--
$126.9E
2016 Current
--
--
--
--
$138.4E
281
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IMPORTANT DISCLOSURES:
Analyst Certification: Each CIBC World Markets research analyst named on the front page of this research report, or
at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein
accurately reflect such research analyst's personal views about the company and securities that are the subject of this
report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii)
no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or views expressed by such research analyst in this report.
Potential Conflicts of Interest: Equity research analysts employed by CIBC World Markets are compensated from
revenues generated by various CIBC World Markets businesses, including the CIBC World Markets Investment Banking
Department. Research analysts do not receive compensation based upon revenues from specific investment banking
transactions. CIBC World Markets generally prohibits any research analyst and any member of his or her household from
executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets
generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that
such analyst covers.
In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report,
CIBC World Markets may have a long position of less than 1% or a short position or deal as principal in the securities
discussed herein, related securities or in options, futures or other derivative instruments based thereon.
Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures
set forth below, may at times give rise to potential conflicts of interest.
10
282
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Rating
Description
SO
Sector Outperformer
Stock is expected to outperform the sector during the next 12-18 months.
SP
Sector Performer
Stock is expected to perform in line with the sector during the next 12-18 months.
SU
Sector Underperformer
Stock is expected to underperform the sector during the next 12-18 months.
NR
Not Rated
CIBC World Markets does not maintain an investment recommendation on the stock.
Restricted
CIBC World Markets is restricted (due to potential conflict of interest) from rating the stock.
Stock Ratings
Sector Weightings (note: Broader market averages refer to S&P 500 in the U.S. and S&P/TSX Composite in Canada.)
O
Overweight
Market Weight
Underweight
NA
None
"Speculative" indicates that an investment in this security involves a high amount of risk due to volatility and/or liquidity issues.
Count
Percent
155
42.6%
164
45.1%
36
9.9%
2.2%
Restricted
Count
Percent
147
94.8%
156
95.1%
31
86.1%
100.0%
Count
Percent
100.0%
Restricted
Count
Percent
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Restricted
0.0%
Important disclosures required by IIROC Rule 3400, can be obtained by visiting CIBC World Markets Inc. on the web at
http://researchcentral.cibcwm.com. Important disclosures for each issuer can be found using the "Coverage" tab on the
top left of the Research Central home page. Access to the system for rating investment opportunities and our
dissemination policy, can be found under 'Quick Links' on bottom right side of the Research Central homepage. These
important disclosures can also be obtained by writing to CIBC World Markets Inc., Brookfield Place, 161 Bay Street, 4th
Floor, Toronto, Ontario M5J 2S8, Attention: Research Disclosures Request
11
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HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS INC. RECOMMENDATIONS FOR NEW FLYER
INDUSTRIES INC. (NFI)
Date
12/13/2012
01/10/2013
01/25/2013
02/05/2013
03/01/2013
05/10/2013
06/21/2013
07/15/2013
08/07/2013
10/15/2013
11/08/2013
04/15/2014
05/11/2014
07/16/2014
08/06/2014
03/19/2015
05/08/2015
07/15/2015
12
Change Type
Closing Price
8.38
8.80
9.95
9.72
10.30
9.86
10.30
11.13
11.54
11.07
10.94
11.20
11.82
12.85
13.17
13.92
14.69
15.77
Rating
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
Price Target
8.50
8.75
10.00
10.50
11.00
10.00
11.00
11.50
12.00
12.50
12.00
12.25
12.50
13.00
14.00
15.00
15.75
16.50
Coverage
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
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Don't Miss The Bus - Upgrading To SO And Raising PT To C$19.50 - August 06, 2015
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13
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Don't Miss The Bus - Upgrading To SO And Raising PT To C$19.50 - August 06, 2015
14
286
Canada Edition
July 23, 2015
CAD11.78-CAD16.61
Sector
Auto
Market Cap
million)
Shares Outstanding
55,505,604
ISIN
CA64438T4019
daily volume of 80,581 shares so far in 2015 was 1.3 times the
PermID
1-4295861010
89
Year ended
Dec 2014
Dec 2013
Dec 2012
Sales (USD)
1.2B
949.2M
664.3M
27.4
7.7
Net (USD M)
22.7
21.2
7.1
EPS (CAD)
0.5303
0.5398
0.2169
www.BuySellSignals.com
Value
Rank
Quartile
MCap (US$)
698.7M
9572
Top
1B
8518
Top
Revenue (US$)
1.2B
5208
Top
22.7M
9622
Top
Return on Equity %
5.7
17592
Second
1.8
21811
Second
Price Earnings
30.9
16162
Second
1,133.4
12198
Second
9.0
12208
Second
75
11284
Second
Page 1
287
Canada Edition
Analysis
Bullish Signals
Rises to Falls: In the last three months the number of rises
outnumbered falls 32:31 or 1.03:1.
In the Canadian market of 1,900 stocks and 77 units
traded today, the stock has a 6-month relative strength
of 84 which means it is beating 84% of the market.
Also, the relative strength percentile is rising at 84 for 6
months, 89 for 3 months and 90 for 1 month.
The Moving Average Convergence Divergence (MACD)
indicator of 12-day Exponential Moving Average (EMA)
of 16.06 minus the 26-day EMA of 15.75 is positive
suggesting a bullish signal. Both the 12-day EMA as well
as the 26-day EMA are rising, another bullish signal.
The Price/MAP 200 of 1.18 for New Flyer Industries is
higher than the Price/MAP 200 for the S&P/TSX 60 Index
of 0.5.
In the last three months the stock has hit a new 52-week
high nine times, pointing to a significant uptrend.
The price to 200-day MAP ratio is 1.18, a bullish indicator.
In the past 200 days this ratio has exceeded 1.18 just
thrice suggesting a resistance level. The stock is trading
above both its MAPs and the 50-day MAP of CAD15.50 is
higher than the 200-day MAP of CAD13.89, a bullish
indicator. The 200-day MAP has increased to CAD13.89.
An increase is another bullish indicator.
The present value of CAD1,000 (PV1000) invested three
years ago in New Flyer Industries is CAD2,475, including a
capital gain of CAD1,381 and dividend reinvested of
CAD94.
Undervaluation:
The earnings yield of 3.2% is 2.1 times the 10-year bond
yield of 1.54%.
Price/Sales of 0.57 versus sector average of 0.6 and
market average of 1.2. We estimate the shares are
trading at a current year Price/Sales of 0.4 and a
forward year Price/Sales of 0.3.
The Q Ratio, defined by James Tobin as MCap divided
by Total Assets, is 0.7. Compared with the rest of the
market the stock is undervalued.
288
Canada Edition
Analysis (continued)
The stock has a score of 5 out of 9 set by Joseph Piotroski
[pass mark >=5 ]:
Positive net income; positive operating cashflow; good
quality of earnings [operating cashflow exceeds net
income]; improvement in current ratio from 1.3 to 1.4;
improvement in asset turnover [growth in revenue of 29.7%
exceeded growth in assets of 9%].
Value
Rank In Market
Price/MAP50
1.06
In Top 9%
Price/MAP200
1.18
In Top Quartile
CAD1.6 billion
(US$1.2 billion)
In Top Quartile
MCap
US$698.7 million
In Top Quartile
Turnover in Quarter
CAD91.9 million
In Top Quartile
84
In Top Quartile
Annual Revenue
Relative Strength
(6M)
ROE
Profit
Margin
Asset
Turnover
Equity
Multiplier
Current
Year
5.7
1.8
1.2
2.5
Previous
Year
5.8
2.2
1.0
2.5
Bearish Signals
The 1.3% discount to 12-month high of CAD16.61 against
the 39.2% premium to 12-month low of CAD11.78
suggests the climb might be peaking.
The stock is overbought according to the Williams % R
indicator of -14.3.
The Stochastic indicator of 90.0 has broken through the
overbought line of 80; this indicates the price is close to
its 14-day high and is likely to revert to a downtrend.
Value
Rank In Market
Return on Assets
[ROA] %
2.2
In Bottom Quartile
EBITDA Margin %
6.4
In Bottom Quartile
Price Earnings
30.8
In Bottom Quartile
1.8
In Bottom Quartile
Overvaluation:
Price/Earnings of 30.8 versus sector average of 13.8 and
market average of 14.4. We estimate the shares are
trading at a current year P/E of 20.4 and a forward year
P/E of 13.5.
Page 3
289
Canada Edition
PVCAD1,000
Trailing Qtr
Trailing Yr
Trailing 3 Yrs
CAD1,153
CAD1,357
CAD2,475
Auto sector
937
918
1,944
S&P/TSX 60
Index
933
974
1,273
NFI
US$70.6 million
Volume
6,017,334
1.2
www.BuySellSignals.com
Page 4
290
Canada Edition
Quarter
Year
3 Years
NFI
14.22
30.55
138.07
Auto
-6.3
-8.23
94.42
S&P/TSX 60 index
-6.7
-5.25
27.34
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Page 5
291
Canada Edition
2014
2013
2012
15.48
11.95
10.7
6.31
% Price Change
29.5
11.7
69.5
77,767
58,123
56,320
84,534
VWP (CAD)
13.73
10.97
8.89
6.34
Turnover Period
2 yrs 8 mo
3 yrs 4 mo
3 yrs 3 mo
11.78 - 15.8
9.55 - 12.12
6.21 - 10.81
Index Change %
-2.1
24.5
4.8
31.6
-12.8
64.7
5.05 - 8.09
In the past 3 years average daily volume has jumped 38.1% from 56,320 shares to 77,767 shares. Turnover period has
decreased from 3 years 3 months to 2 years 8 months. This indicates a larger number of speculators on the share register,
making a long-term investment less safe.
www.BuySellSignals.com
Page 6
292
Canada Edition
www.BuySellSignals.com
Page 7
293
Canada Edition
Ranking
Fig 20: Global Peer Group Analysis (all figures in USD)
Name
Relative Str.
(6 mo)
MCap
PV $1000
(1 yr)
Revenue
Net Profit
Total Assets
55
742.5M
1,631.7
1.9B
48.1M
2.1B
SAF-Holland
75
738.2M
1,103.7
1B
35.5M
717.9M
30
728.4M
1,228.7
454.5M
26.9M
457.6M
99
708.4M
2,193.6
232.9M
(7M)
191.3M
75
698.7M
1,133.4
1.2B
22.7M
1B
TSRC
28
689.6M
592.1
1B
36.5M
1.1B
DaikyoNishikawa Corporation
77
688.7M
1,958.3
879M
35.2M
798.9M
Wheels India
71
684.7M
1,640.3
284.6M
4.7M
195.3M
62
649.1M
1,074.1
387.9M
28M
290.6M
Country
Last Price
P/E
P/S
600697
CN
CNY28.99
15.2
0.4
SFQ
DE
EUR14.82
20.6
0.7
12.4
108.3
7.4
OTKAR
TR
TRY82.90
32.4
1.7
19.3
181.6
25.0
00360
HK
HKD1.46
3.0
20.3
62.0
39.7
NFI
CA
CAD16.39
30.8
0.6
29.2
1.3
2103
TW
TWD26.10
20.0
0.7
1.6
79.8
43.2
4246
JP
JPY4,700.0
19.6
0.8
2.5
56.5
3.8
WHEELS
IN
Rs1,244.80
2.2
11.4
19.2
22.5
KIRLOSENG
IN
Rs285.90
1.7
3.3
4.8
11.4
23.2
P/Book
Turnover
Rate (%)
% Disc to 52w Hi
30.1
Brokerage
Action
Past Rating
Current Rating
20-Jul-2015
Canaccord Genuity
Buy
16-Jul-2015
CIBC
Sector Perform
16-Jun-2015
Market Perform
www.BuySellSignals.com
Page 8
294
Canada Edition
Ranking (continued)
Fig 22: Rising Relative Strength
Sector Sorting
For Company searches, or for sorting by stocks and
variables, an interactive version of today's Table is
available here
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Page 9
295
Canada Edition
Paul Soubry
President
http://www.newflyer.com.
Industry Group
Economic Sector
Consumer Cyclicals
Business Sector
Stock BUZZ
To view the Stock BUZZ on New-Flyer-Industries, click
Adam Gray
Director
John Marinucci
Director
Phyllis Cochran
Director
here
Issued Capital
Krystyna Hoeg
Director
V. James Sardo
Independent Director
Larry Edwards
Independent Director
Colin Pewarchuk
Company Secretary
Annual Meetings
May 01: New Flyer Industries announces AGM
New Flyer Industries has announced its Annual General
Meeting will take place on May 07, 2015.
Dividends
July 15: New Flyer Industries announces dividend
New Flyer Industries today announced a monthly dividend of
5.17c per share. The record date is July 31, 2015 and it is
payable on August 17, 2015.
www.BuySellSignals.com
Page 10
296
Canada Edition
Performance
April 14: New Flyer Announces First Quarter 2015 Orders
and Backlog
[News Story]
<link>http://tmx.quotemedia.com/article.php?newsid=74749
342&qm_symbol=NFI</link>
Source: TMX Group
For more details click here.
www.BuySellSignals.com
Press Releases
July 15: New Flyer Announces Second Quarter 2015
Orders and Backlog
[News Story] WINNIPEG, July 15, 2015 /CNW/ - (TSX:NFI)
(TSX:NFI.DB.U) New Flyer Industries Inc. ("New Flyer" or the
"Company"), the leading manufacturer of heavy-duty transit
buses in Canada and the United States, announced its order
activity and backlog update for the second fiscal quarter
ended June 28, 2015 ("Q2 2015").
Bus Deliveries, Order Activity, and Option Expiry
New Flyer delivered 594 equivalent units ("EUs") in Q2 2015, an
increase of 12 EUs compared to 582 EUs in the second fiscal
quarter ended June 29, 2014 ("Q2 2014").
<a
href='http://tmx.quotemedia.com/article.php?newsid=76764
906&qm_symbol=NFI'>Read more...</a>
Source: TMX Group
For more details click here.
Page 11
297
Canada Edition
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Page 12
298
Canada Edition
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Page 13
299
Canada Edition
Glossary
Capital Gain/Loss from n Years Ago to n-1 Years Ago:
Current Ratio:
Dividend Yield:
Earnings Yield:
BuySellSignals Financial Research provides equity research on over 48,000 companies listed in
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Page 14
300
BUY
unchanged
PRICE TARGET
from C$16.00
Price (17-Jul)
Ticker
C$16.50
NFI-TSX
C$17.00
12.04 - 16.55
0.08
916
0.62
3.7
62.0
6.8
210.9
www.newflyer.com
2014A
2015E
2016E
2017E
1.18
1.18
0.5
1.37
1.30
0.4
1.62
1.52
0.4
1.72
1.61
0.4
Sales (US$M)
Previous
ROIC (%)
Quarterly FCF /
Shr
2014A
2015E
2016E
2017E
Q1
Q2
Q3
Q4
0.19
0.22A
0.44
0.47
0.29
0.39
0.42
0.44
0.32
0.38
0.38
0.41
0.38
0.38
0.37
0.40
17
16
Maintain BUY for solid dividend yield, potential value from surplus capital generation
We continue to recommend that investors BUY NFI for a solid investment return from a
nice dividend yield and projected share price appreciation plus upside potential from
deployment of surplus capital. We expect NFI to generate significant free cash ($3.88/
share in the next 3 years), which could be used to generate additional shareholder value.
We project a solid 6.8% and 22.7% one-year and two-year implied investment returns,
respectively, including a solid 3.7% annual dividend yield.
Q2/15 forecast benchmarked to actual/reported orders and backlog
We benchmarked our orders and backlog forecasts to the reported data in the quarter.
We lowered our Q2/15 deliveries by 5%, but increased total firm backlog by 26% on
stronger-than-expected new firm orders. However, we do not read too much into it as
deliveries and orders are volatile on quarterly basis. The rest of our forecast was little
changed, other than a small reduction in 2015 deliveries.
2015 guidance suggests EBITDA improvement
NFI bus line entry guidance of 50 bus equivalent units (EUs), down 1 EU from previous
guidance suggests a low single-digit increase in bus deliveries in 2015. We expect
a slight increase in bus EBITDA/EU guidance, implying an 12% increase in bus
manufacturing EBITDA in 2015. The Aftermarket outlook is mixed, with core Aftermarket
sales expected to increase about 5%, but the one-off Chicago Transit Authority midlife extension project ended in mid-2015. We expect improved Aftermarket margins in
2015 based on current trends. Net, we expect this to translate into about 20% stronger
Aftermarket EBITDA. We expect the bus manufacturing and Aftermarket changes to net
to a 34% increase in consolidated EBITDA.
FCF takes a step back likely
We expect NFIs FCF to be quite negative in Q2/15 due to a 63 EU increase in
inventories. This and the 1 EU decrease in line entry rate are reportedly mostly due to the
switchover of the Anniston plant to NFIs Excelsior product.
15
14
13
12
Jul-15
Jun-15
Apr-15
May-15
Mar-15
Jan-15
Feb-15
Dec-14
Oct-14
Nov-14
Sep-14
Aug-14
11
NFI
Source:FactSet
Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX | CF. : LSE)
The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all
the companies and securities that are the subject of this report discussed herein.
For important information, please see the Important Disclosures beginning on page 14 of this document.
301
Auto Components 2
302
Figure 1: Revised Canaccord Genuity forecast for New Flyer: limited changes
Yrs E n ded D ec . 31 ( $M )
Dividend/share (C$)
% change
Free cash flow/share (C$) 1
% change
EBITDA
EBITDA margin
Investment in NCWC & capital assets
2015E
New
Old
Fc s t
Fc s t
0.608 0.608
4%
4%
2016E
New
Old
Fc s t
Fc s t
0.620 0.620
2%
2%
2017E
New
Old
Fc s t
Fc s t
0.620 0.620
0%
0%
2018E
New
Old
Fc s t
Fc s t
0.620 0.620
0%
0%
2019E
New
Old
Fc s t
Fc s t
0.620 0.620
0%
0%
2014
0.59
n.m.
Q 1/15
0.15
0%
0.71
#N/A
0.55
97%
(0.89)
n.m.
0.33
n.m.
1.28
79%
1.24
73%
1.27
-1%
1.21
-2%
1.41
11%
1.32
9%
1.45
3%
1.36
3%
1.48
2%
1.40
2%
82%
27%
-17%
46%
48%
49%
49%
51%
44%
47%
43%
45%
42%
44%
1,451
21%
380
17%
393
14%
398
15%
1,592
10%
1,561
8%
1,598
0%
1,580
1%
1,637
2%
1,618
2%
1,676
2%
1,657
2%
1,714
2%
1,698
2%
91
6.3%
30
7.8%
31
8.0%
30
7.6%
123
7.7%
120
7.7%
124
7.8%
123
7.8%
132
8.1%
131
8.1%
134
8.0%
133
8.1%
137
8.0%
136
8.0%
Payout ratio
Revenue
% change
Q 2/15E
New
Old
Fc s t
Fc s t
0.152 0.152
4%
4%
46
(0)
65
24
20
19
18
17
17
16
16
16
16
2,437
465
24
50
572
508
26
17
594
508
26
16
625
508
26
14
2,486
508
26
60
2,447
508
26
58
2,535
511
27
56
2,500
511
27
56
2,584
514
29
57
2,548
514
29
57
2,634
517
29
58
2,596
517
29
58
2,679
520
29
59
2,648
520
29
59
2,263
2,102
392
1,922
864
2,192
685
1,982
2,486
2,102
2,447
2,102
2,535
2,102
2,500
2,102
2,584
2,102
2,548
2,102
2,634
2,102
2,596
2,102
2,679
2,102
2,648
2,102
11.8%
11.9%
10.8%
10.5%
11.7%
11.7%
12.2%
12.2%
12.3%
12.3%
12.3%
12.3%
1.235
1.230
1.300
1.230
1.300
1.230
1.300
1.230
1.300
1.230
1.300
1.230
Return on capital
CAD / USD (period average)
1
5.2%
1.104
7.6%
1.242
NCWC means non-cash working capital. Positive number means NCWC generates cash.
Auto Components 3
303
Forecast outlook
We are projecting solid revenue and EBITDA growth over the next five years from a
combination of the modest growth from bus deliveries and margin expansion.
Auto Components 4
304
take to mean share buybacks and/or dividend increases. Indeed, NFI increased its
dividend 10.6% to C$0.62/year from C$0.585/year coincident with its Q1/15 results
release.
Auto Components 5
305
Valuation
NFIs yields (Figure 3) and valuation (Figure 4) appear to be settling into a new range.
The companys dividend yield seems to be settling into the 4-5% range (about 2.5%
over the 10-year Canada bond yield) and EV/EBITDA is stable in the 7-8x NTM EBITDA
range.
Figure 2: NFI distribution/dividend yields settling into the 4-5% range, or roughly 2.5% above the 10-year Canada bond yield
NFIs dividend yield also appears to have converged with other high-yield industrial
names (Figure 5).
Auto Components 6
306
Figure 4: We think a mid-point valuation multiple is reasonable versus industrial high yield companies
Mar k et
Ne w F l y e r I nd ustr i e s
Cur .
Eq ui ty Pr i ce :
Cur .
Year
Di v.
2015
$16. 50
$0. 61
Co nse nsus A ve r a ge
Di v.
EB I TDA
Cur .
Pa y o ut
Ca p .
Cur .
Y i e l d F CF PS
r a ti o
($M )
EPS
3. 7%
$1. 37
4. 3%
De b t/
P/E
Gr o wth
Ca p ('15- '17)
44. 4%
3. 6%
67. 9%
15. 6 39. 4%
8. 8%
Chorus Aviation
2015
$6.65
$0.48
7.2%
$1.01
47.5%
$813 $0.86
7.7
92.3%
13.3%
Davis + Henderson
2014
$41.51
$1.28
3.1%
$2.19
58.4%
$4,382 $2.61
15.9
41.2%
9.3%
Westshore Terminals
2014
$31.19
$1.32
4.2%
$1.25
105.3%
$2,316 $1.90
16.4
0.0%
2.6%
Cineplex Galaxy
2015
$48.66
$1.56
3.2%
$1.86
84.0%
$3,069 $2.15
22.7
32.1%
15.3%
Note that the New Flyer dividend is the new sustainable dividend level
Source: Company reports, Bloomberg, Canaccord Genuity Research estimates
We maintain our valuation multiple at 7.5x EV/NTM EBITDA (or 7.5x Q1/16E EV /
Q2/16E - Q1/17E EBITDA), given that the stock has traded in this range for some time
(average of 7.5x over the past 60 months). We think our target multiple is well
supported by NFIs 3.7% dividend yield. We think the dividend upside potential from
forecasted stronger future free cash further strengthens the dividend yield support
argument.
Our target multiple generates a target dividend yield of 3.6% and a FCFPS yield of
9.7%, both of which seem reasonable relative to comparable companies and
appropriately better than in the past, reflecting NFIs improved risk profile.
Our valuation also translates into a reasonable to attractive 2.1% dividend yield and
8.1% FCFPS spreads over Government of Canada bond rates, which reflects the much
higher risk of NFI versus government bonds.
Auto Components 7
307
1-year
t arget
126.2
2-year
t arget
132.6
Multiplier
EV
Debt (excludes unit debt)
Enterprise value to shareholders
7.5
946.8
(121.8)
825.0
7.5
994.3
(84.7)
909.6
62.0
13.30
17.00
62.0
14.67
19.00
0.62
17.62
1.24
20.24
6.8%
22.7%
3.6%
9.7%
3.3%
9.1%
2.1%
8.1%
FCFPS C$
1.65
1.73
Auto Components 8
308
Figure 6: Canaccord Genuity Researchs forecast for New Flyer Industries Dividend payout analysis
Y ears ended Dec. 3 1 ($ m illions)
F ree cash
Cash from operations
Change in working capital
Interest paid
Interest expense
Income taxes paid
Current income tax expense
Principal portion of capital lease payments
Capital expenditures
Proceeds from sale of redundant assets
Business acquisition cost
Costs associated with strategic initiatives
Defined benefit funding
Defined benefit expense
Realized investment tax credits
Foreign exchange impact on cash
Free cash flow
Exchange rate
Free cash flow (CAD)
Declared dividends (CAD)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
5.5
24.0
17.1
(14.6)
6.5
(12.8)
(2.4)
(4.0)
0.7
7.3
(1.8)
2.2
27.8
0.001
27.8
33.1
30.0
23.0
10.9
(11.6)
19.0
(23.8)
(2.0)
(13.8)
1.2
6.0
8.7
(2.8)
(1.5)
0.2
43.4
1.039
45.1
30.7
17.5
(7.9)
3.8
(3.1)
4.4
(3.4)
(0.4)
(3.3)
0.4
2.1
(0.7)
0.0
9.5
1.109
10.6
8.1
1.1
18.9
3.8
(3.4)
4.4
(8.2)
(0.3)
(1.5)
0.2
0.1
(0.7)
0.4
14.7
1.085
15.9
8.1
0.5
21.8
1.8
(2.9)
1.6
(4.1)
(0.5)
(1.9)
0.0
0.2
0.8
(0.7)
(0.4)
16.3
1.097
17.9
8.1
26.9
2.5
2.2
(3.0)
1.5
(11.2)
(0.6)
(1.7)
2.8
0.5
(0.6)
(0.6)
(0.1)
18.6
1.136
21.1
8.1
45.8
35.3
11.6
(12.4)
12.0
(26.8)
(1.8)
(8.4)
0.6
3.1
3.5
(2.6)
(0.6)
(0.2)
59.1
1.104
65.5
32.5
28.7
(4.6)
4.0
(3.1)
2.1
(13.7)
(0.5)
(4.3)
1.3
0.8
(0.7)
(0.2)
9.8
1.252
12.3
8.1
(39.0)
59.4
3.5
(3.5)
7.6
(7.6)
(0.7)
(2.0)
0.8
(0.7)
17.7
1.235
21.9
8.4
48.3
(29.6)
3.5
(3.5)
8.8
(8.8)
(0.7)
(2.0)
0.8
(0.7)
16.1
1.300
20.9
8.6
44.4
51.9
55.5
55.5
55.5
55.5
55.5
55.5
55.5
0.63
0.75
0.87
0.58
0.19
0.15
0.29
0.15
0.32
0.15
0.38
0.15
1.18
0.59
0.22
0.15
0.39
0.15
Q1 /1 5 Q2 /1 5 E Q3 /1 5 E Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
40.8
(22.1)
3.1
(3.1)
8.8
(8.8)
(0.7)
(2.0)
0.8
(0.7)
16.1
1.300
20.9
8.6
78.8
3.1
14.1
(13.2)
27.3
(39.0)
(2.4)
(10.3)
1.3
3.1
(3.0)
(0.2)
59.7
1.300
76.0
33.8
72.3
7.2
11.9
(11.9)
32.8
(32.8)
(2.6)
(8.0)
3.1
(3.0)
69.0
1.300
89.7
34.4
79.3
4.8
11.5
(11.5)
36.3
(36.3)
(2.6)
(8.0)
3.1
(3.0)
73.5
1.300
95.6
34.4
81.5
4.0
11.1
(11.1)
37.7
(37.7)
(2.6)
(8.0)
3.1
(3.0)
75.0
1.300
97.5
34.4
83.1
4.0
10.7
(10.7)
39.1
(39.1)
(2.6)
(8.0)
3.1
(3.0)
76.6
1.300
99.6
34.4
55.5
55.5
55.5
55.5
55.5
55.5
55.5
0.38
0.16
0.38
0.16
1.37
0.61
1.62
0.62
1.72
0.62
1.76
0.62
1.79
0.62
Auto Components 9
309
Figure 7: Canaccord Genuity Researchs forecast for New Flyer Industries Income statement
Y ears ended Dec. 3 1 ($ m illions)
Incom e statem ent
Revenues
Cost of sales and SG&A
Foreign exchange gain (loss)
EBITDA
Depreciation & amortization
Unrealized FX gain (loss)
Fair value adjustments
Other
Operating profit (EBIT)
Interest expense on long-term debt
Other interest and bank charges
Fair value adjustment on int rate swaps
Other expenses
Distributions on B and C shares
Pre-tax income
Income taxes
Net Income (loss)
Div. per share/Dist. per unit (C$)
FCFPS/Dist. cash per IDS (C$)
FCFPS (CFO - Capex) (C$)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
865.3 1,199.4
(810.2) ######
2.8
(0.1)
57.8
79.1
(24.3)
(28.0)
(1.4)
(2.1)
(1.4)
0.0
(5.5)
0.0
25.2
49.0
(11.9)
(8.7)
(2.7)
(2.9)
0.8
(0.5)
(2.8)
(2.2)
0.0
0.0
10.0
34.6
(0.7)
(7.9)
9.3
26.8
323.9
(305.0)
(0.8)
18.1
(7.7)
(0.4)
0.0
0.0
10.0
(2.3)
(0.8)
0.3
(0.5)
0.0
6.7
(1.2)
5.5
346.5
(322.3)
(0.4)
23.8
(8.1)
1.0
0.0
(3.9)
12.8
(2.3)
(1.2)
(0.4)
(0.5)
0.0
8.4
(4.8)
3.6
360.8
(337.6)
(0.2)
22.9
(10.0)
(0.1)
0.0
0.0
12.8
(2.2)
(0.7)
0.8
(0.6)
0.0
10.1
0.2
10.2
420.0 1,451.1
(393.4) (1,358.3)
(0.1)
(1.5)
26.5
91.3
(10.0)
(35.8)
0.3
0.8
0.0
0.0
(0.9)
(4.8)
15.9
51.4
(2.2)
(8.9)
(0.8)
(3.5)
0.1
0.8
(0.6)
(2.2)
0.0
0.0
12.4
37.6
(5.0)
(10.8)
7.4
26.7
Q1 /1 5 Q2 /1 5 E Q3 /1 5 E Q4 /1 5 E
380.3
(352.1)
1.5
29.7
(9.5)
(1.9)
0.0
0.0
18.2
(2.3)
(0.7)
(0.5)
(0.6)
0.0
14.1
(3.3)
10.9
393.3
(361.8)
0.0
31.4
1.1
0.0
0.0
0.0
32.5
(2.3)
(1.1)
0.0
0.0
0.0
29.1
(9.6)
19.5
414.6
(383.4)
0.0
31.1
1.0
0.0
0.0
0.0
32.1
(2.3)
(1.2)
0.0
0.0
0.0
28.6
(10.8)
17.8
2015E
2016E
2017E
2018E
2019E
0.75
0.63
(0.10)
0.58
0.87
0.26
0.15
0.19
0.28
0.15
0.29
(0.01)
0.15
0.32
(0.04)
0.15
0.38
0.49
0.59
1.18
0.71
0.15
0.22
0.55
0.15
0.39
(0.89)
0.16
0.38
0.90
0.16
0.38
0.74
0.61
1.37
1.28
0.62
1.62
1.27
0.62
1.72
1.41
0.62
1.76
1.45
0.62
1.79
1.48
52.3
58.9
55.5
55.6
55.7
55.7
55.6
55.8
62.0
62.0
62.0
60.4
62.0
62.0
62.0
62.0
-6.6%
-0.4%
-30.6%
6.7%
38.6%
38.4%
-21.5%
6.6%
32.1%
26.8%
0.0%
5.6%
30.0%
56.0%
0.0%
6.9%
16.8%
36.0%
0.0%
6.4%
10.9%
34.4%
0.0%
6.3%
21.0%
36.0%
0.0%
6.3%
17.4%
16.6%
0.0%
7.8%
13.5%
37.2%
4.0%
8.0%
14.9%
17.1%
6.0%
7.5%
-3.7%
-1.1%
6.0%
7.6%
9.7%
16.0%
4.0%
7.7%
0.3%
18.0%
1.9%
7.8%
2.4%
6.5%
0.0%
8.1%
2.4%
2.1%
0.0%
8.0%
2.2%
2.1%
0.0%
8.0%
3.9%
5.3%
3.9%
5.9%
4.8%
6.1%
5.2%
7.6%
11.8%
11.3%
11.5%
10.8%
11.7%
12.2%
12.3%
12.3%
Bus revenues
Bus EBITDA (excl. FX gains/losses)
Bus sales growth
Bus EBITDA % (excl. FX gains/losses)
Deliveries
Revenue/unit
EBITDA/unit
LTM EBITDA/unit
753.9
42.0
-7.0%
5.6%
1,656
455
25
25
984.4
63.6
30.6%
6.5%
2,191
449
29
29
250.9
7.8
20.7%
3.1%
554
453
14
27
265.8
13.9
23.5%
5.2%
582
457
24
28
278.7
12.6
11.2%
4.5%
621
449
20
26
336.6
23.2
7.5%
6.9%
680
495
34
24
1132.1
57.4
15.0%
5.1%
2,437
465
24
24
290.7
14.7
15.9%
5.1%
572
508
26
26
301.9
15.4
13.6%
5.1%
594
508
26
27
340.6
17.4
22.2%
5.1%
670
508
26
28
330.3
16.9
-1.9%
5.1%
650
508
26
26
1263.5
64.5
11.6%
5.1%
2,486
508
26
26
1296.0
68.4
2.6%
5.3%
2,535
511
27
27
1328.8
74.9
2.5%
5.6%
2,584
514
29
29
1362.4
76.4
2.5%
5.6%
2,634
517
29
29
1393.7
77.7
2.3%
5.6%
2,679
520
29
29
Aftermarket revenues
Aftermarket EBITDA (excl. FX)
Aftermarket sales growth
Aftermarket EBITDA % (excl. FX)
119.1
19.6
2.6%
16.4%
215.0
31.0
80.6%
14.4%
73.0
11.9
95.4%
16.3%
80.7
13.1
57.1%
16.2%
82.0
13.1
40.7%
16.0%
83.4
11.9
22.6%
14.2%
319.0
50.0
48.4%
15.7%
89.6
16.7
22.8%
18.6%
91.4
16.0
13.3%
17.5%
74.0
13.7
-9.8%
18.5%
74.0
13.7
-11.2%
18.5%
329.0
60.1
3.1%
18.3%
302.0
55.9
-8.2%
18.5%
308.0
57.0
2.0%
18.5%
314.0
58.1
1.9%
18.5%
320.4
59.3
2.0%
18.5%
Auto Components 10
310
Figure 8: Canaccord Genuity Researchs forecast for New Flyer Industries Balance sheet
Y ears ended Dec. 3 1 ($ m illio ns)
Balance sheet
Cash
Accounts receivable
Inventories
Prepaid expenses and deposits
Derivative financial instruments
Future income tax assets
Other
Total current assets
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
11.2
113.5
124.7
4.7
0.0
0.0
0.0
254.1
11.9
230.3
183.3
7.7
0.0
0.0
0.0
433.2
14.2
201.0
207.7
6.6
0.0
1.6
0.0
431.1
4.3
146.3
246.4
5.7
0.0
3.2
0.0
406.0
8.7
164.1
267.4
4.6
0.1
3.4
0.0
448.2
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
7.6
186.9
232.0
3.5
0.1
0.0
0.0
430.0
Capital assets
Deferred charges
Intangible assets
Future income tax assets
Derivative financial instruments
Accrued benefit asset
Total assets
42.0
0.0
528.5
72.6
0.0
0.0
897.2
64.8
0.0
568.9
68.9
0.0
0.0
1,135.9
65.5
0.0
564.1
67.6
0.0
1.1
1,129.4
65.4
0.0
556.1
65.7
0.0
0.5
1,093.7
65.2
0.0
550.7
65.0
0.0
0.0
1,129.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
64.3
0.0
539.1
67.9
0.0
0.0
1,101.4
65.5
0.0
544.5
67.9
0.0
0.0
1,151.2
Bank indebtedness
Accounts payable & accrued liabs
Due to parent company
Deferred revenue
Provision for warranty costs
Current portion of capital leases
Current portion of LTD
Other current liabilities
Total current liabilities
0.0
150.8
0.0
19.2
20.1
1.9
40.0
6.8
238.8
0.0
212.9
0.0
57.6
26.1
1.3
35.0
1.5
334.4
0.0
225.5
0.0
55.4
25.1
1.1
30.0
0.5
337.6
0.0
204.5
0.0
47.7
25.1
1.3
30.0
1.8
310.3
0.0
227.1
0.0
36.8
28.7
1.7
45.0
3.9
343.2
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
226.5
0.0
23.0
35.0
1.6
13.0
18.6
317.6
9.0
2.3
122.2
177.7
2.0
1.2
0.2
1.8
114.8
198.6
2.5
28.3
0.0
1.6
113.2
199.1
2.2
22.1
0.0
2.7
112.2
199.6
2.6
16.5
0.6
3.4
110.5
200.0
1.8
17.4
1.0
3.2
108.5
200.5
1.7
14.7
1.0
3.2
108.5
200.5
1.7
14.7
0.9
2.9
105.5
201.0
2.2
13.9
0.0
480.8
(136.8)
0.0
593.3
(138.2)
0.0
593.6
(140.0)
0.0
593.8
(143.9)
0.0
594.1
(141.8)
0.0
594.5
(141.8)
0.0
594.5
(141.8)
Q1 /1 5 Q2 /1 5 E Q3 /1 5 E Q4 /1 5 E
0.0
594.7
(137.5)
2015E
2016E
2017E
2018E
2019E
21.1
204.4
223.1
3.8
0.1
0.0
0.0
452.4
21.1
204.4
223.1
3.8
0.1
0.0
0.0
452.4
55.0
196.3
226.7
3.6
0.1
0.0
0.0
481.6
95.6
201.1
230.3
3.7
0.1
0.0
0.0
530.8
138.5
206.0
233.8
3.8
0.1
0.0
0.0
582.1
182.8
210.9
237.4
3.9
0.1
0.0
0.0
635.1
66.7
0.0
549.8
67.9
0.0
0.1
1,144.7
67.8
0.0
555.2
67.9
0.0
0.1
1,143.4
67.8
0.0
555.2
67.9
0.0
0.1
1,143.4
62.7
0.0
576.6
67.9
0.0
0.2
1,189.1
58.9
0.0
598.0
67.9
0.0
0.3
1,255.9
56.0
0.0
619.4
67.9
0.0
0.4
1,325.9
54.0
0.0
640.8
67.9
0.0
0.5
1,398.3
43.8
218.7
0.0
23.0
35.0
1.6
13.0
17.8
352.8
7.6
236.0
0.0
23.0
35.0
1.6
13.0
17.1
333.1
0.0
230.0
0.0
23.0
35.0
1.6
13.0
16.3
318.8
0.0
230.0
0.0
23.0
35.0
1.6
13.0
16.3
318.8
0.0
220.2
0.0
23.0
35.0
1.6
13.0
14.2
307.0
0.0
224.9
0.0
23.0
35.0
1.6
13.0
13.2
310.7
0.0
230.5
0.0
23.0
35.0
1.6
13.0
12.2
315.2
0.0
236.1
0.0
23.0
35.0
1.6
13.0
11.2
319.8
0.9
2.9
107.5
201.0
2.2
13.9
0.9
2.9
109.5
201.0
2.2
13.9
0.9
2.9
111.5
201.0
2.2
13.9
0.9
2.9
111.5
201.0
2.2
13.9
0.9
2.9
119.4
201.0
2.2
13.9
0.9
2.9
127.3
201.0
2.2
13.9
0.9
2.9
135.2
201.0
2.2
13.9
0.9
2.9
143.1
201.0
2.2
13.9
(0.0)
190.2
279.4
3.7
0.1
0.0
0.0
473.2
0.0
594.7
(124.8)
(0.0)
205.0
251.3
3.9
0.1
0.0
0.0
460.2
0.0
594.7
(113.6)
0.0
594.7
(102.6)
0.0
594.7
(102.6)
0.0
594.7
(53.0)
0.0
0.0
0.0
594.7
2.2
594.7
59.8
594.7
119.6
897.2
1,135.9
1,129.4
1,093.7
1,129.1
1,136.1
1,136.1
1,101.4
1,151.2
1,144.7
1,143.4
1,143.4
1,189.1
1,255.9
1,325.9
1,398.3
10.8
46.0
15.4
123.2
3.5
110.5
1.8
122.7
2.5
143.1
2.8
135.7
10.7
135.7
5.5
119.4
5.5
178.8
5.5
149.2
5.5
127.1
21.9
127.1
12.0
134.3
12.1
139.0
12.2
143.0
12.3
147.0
210.7
3.6x
7.75
21.8x
224.7
2.8x
8.77
22.4x
217.6
1.4x
8.18
19.9x
229.3
1.5x
8.11
21.2x
241.5
2.5x
8.15
22.1x
227.8
2.5x
8.15
26.0x
227.8
2.5x
8.16
22.6x
210.9
2.1x
8.24
23.8x
262.3
2.4x
8.47
24.2x
226.1
1.9x
8.67
25.1x
197.4
1.6x
8.87
24.1x
197.4
1.6x
8.87
24.2x
163.6
1.3x
9.76
24.5x
122.9
0.9x
10.75
26.9x
80.0
0.6x
11.79
29.2x
35.7
0.3x
12.87
31.2x
Auto Components 11
311
Figure 9: Canaccord Genuity Researchs forecast for New Flyer Industries Cash flow statement
Y ears ended Dec. 3 1 ($ m illio ns)
C ash flo w statem ent
Net income
Amortization of fixed assets
Amortization of intangibles
Amortization of deferred charges
Loss on disposition of PP&E
Future income taxes (recovery)
Unrealized gain on int rate swap
Unrealized FX gain (loss)
Fair value adjustments
Defined benefit expense
Defined benefit funding
Items not affecting cash
Other
Cash from operations before WC
Change in working capital
Cash from operations after WC
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
9.8
8.3
16.0
0.0
0.0
1.5
0.0
1.4
1.4
3.6
(7.3)
(2.2)
(2.9)
29.5
(24.0)
5.5
26.8
9.6
18.4
0.0
0.0
17.5
0.0
2.1
0.0
2.8
(8.7)
0.1
(15.6)
53.0
(23.0)
30.0
5.5
2.9
4.8
0.0
0.0
2.2
0.0
0.4
0.0
0.7
(2.1)
3.3
(8.0)
9.6
7.9
17.5
3.6
3.3
4.8
0.0
0.0
4.8
0.0
(1.0)
0.0
0.7
0.0
4.4
(0.6)
19.9
(18.9)
1.1
10.2
4.6
5.4
0.0
0.0
2.4
0.0
0.1
0.0
0.7
(0.8)
(3.4)
3.1
22.3
(21.8)
0.5
7.4
4.6
5.4
0.0
0.0
14.9
0.0
(0.3)
0.0
0.6
(0.5)
(3.4)
0.7
29.3
(2.5)
26.8
26.7
15.4
20.5
0.0
0.0
24.3
0.0
(0.8)
0.0
2.6
(3.5)
0.8
(4.9)
81.1
(35.3)
45.8
10.9
4.2
5.3
0.0
0.0
3.4
0.0
1.9
0.0
0.7
(0.8)
0.4
(2.0)
24.1
4.6
28.7
19.5
4.3
(5.4)
0.0
0.0
2.0
0.0
0.0
0.0
0.7
(0.8)
0.0
0.0
20.3
(59.4)
(39.0)
17.8
4.3
(5.4)
0.0
0.0
2.0
0.0
0.0
0.0
0.7
(0.8)
0.0
0.0
18.7
29.6
48.3
Investing
Additions to capital assets
Net funds used in investing
(10.8)
(11.0)
(15.4)
(122.5)
(3.5)
(3.6)
(1.8)
(1.8)
(2.5)
(2.6)
(2.8)
(2.9)
(10.7)
(10.9)
(4.3)
(4.3)
(5.5)
(5.5)
Financing
Bank indebtness, net
Proceeds from issue of long-term debt
Redemption of class B and C shares
Repayment of long-term debt
Repayment of capital leases
Deferred debt financing costs
Due to parent company
Share issuance
Dividends
Net funds from financing
0.0
103.2
0.0
(62.4)
(2.4)
0.0
0.0
0.0
(34.0)
4.3
0.0
12.6
0.0
0.0
(2.0)
0.0
0.0
111.7
(29.3)
93.0
0.0
(3.9)
0.0
0.0
(0.4)
0.0
0.0
0.0
(7.4)
(11.6)
0.0
(1.7)
0.0
0.0
(0.3)
0.0
0.0
0.0
(7.4)
(9.4)
0.0
15.0
0.0
0.0
(0.6)
0.0
0.0
0.0
(7.5)
6.9
0.0
(7.4)
0.0
0.0
(0.5)
0.0
0.0
0.0
(7.2)
(15.1)
0.0
2.1
0.0
0.0
(1.8)
0.0
0.0
0.0
(29.5)
(29.2)
0.0
(27.0)
0.0
0.0
(0.5)
0.0
0.0
0.0
(6.7)
(34.1)
Q1 /1 5 Q2 /1 5 E Q3 /1 5 E Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
17.7
4.4
(5.4)
0.0
0.0
2.0
0.0
0.0
0.0
0.7
(0.8)
0.0
0.0
18.7
22.1
40.8
65.8
17.2
(10.7)
0.0
0.0
9.4
0.0
1.9
0.0
3.0
(3.1)
0.4
(2.0)
81.9
(3.1)
78.8
76.0
17.1
(21.4)
0.0
0.0
7.9
0.0
0.0
0.0
3.0
(3.1)
0.0
0.0
79.5
(7.2)
72.3
81.7
15.9
(21.4)
0.0
0.0
7.9
0.0
0.0
0.0
3.0
(3.1)
0.0
0.0
84.0
(4.8)
79.3
84.1
15.0
(21.4)
0.0
0.0
7.9
0.0
0.0
0.0
3.0
(3.1)
0.0
0.0
85.5
(4.0)
81.5
86.3
14.4
(21.4)
0.0
0.0
7.9
0.0
0.0
0.0
3.0
(3.1)
0.0
0.0
87.1
(4.0)
83.1
(5.5)
(5.5)
(5.5)
(5.5)
(20.8)
(20.8)
(12.0)
(12.0)
(12.1)
(12.1)
(12.2)
(12.2)
(12.3)
(12.3)
43.8
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(6.8)
37.0
(36.2)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(6.6)
(42.8)
(7.6)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(6.6)
(14.2)
0.0
(27.0)
0.0
0.0
(0.5)
0.0
0.0
0.0
(26.7)
(54.2)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.5)
(26.5)
2.2
0.2
0.0
0.4
0.0
(0.5)
(0.2)
(0.2)
0.0
0.0
0.0
(0.2)
0.0
0.0
0.0
0.0
1.0
10.1
11.2
0.7
11.2
11.9
2.3
11.9
14.2
(9.9)
14.2
4.3
4.7
4.3
9.1
8.4
9.1
17.5
5.6
11.9
17.5
(9.9)
17.5
7.6
(7.6)
7.6
0.0
0.0
(0.0)
0.0
21.1
(0.0)
21.1
3.7
17.5
21.1
33.9
21.1
55.0
40.7
55.0
95.7
42.9
95.7
138.5
44.3
138.5
182.9
(5.4)
(92.5)
13.9
(0.8)
(2.1)
24.0
34.9
24.4
(44.5)
42.8
35.3
58.0
60.3
67.2
69.3
70.8
Auto Components 12
312
Investment risks
Potential risks to our investment thesis and target price valuation methodology
include, but are not limited to, availability of government funding and company
execution of contracts.
Auto Components 13
313
Coverage Universe
IB Clients
#
%
%
Buy
604
59.57%
31.13%
Hold
319
31.46%
13.79%
Sell
40
3.94%
5.00%
Speculative Buy
51
5.03%
52.94%
1014*
100.0%
*Total includes stocks that are Under Review
Canaccord Genuity Ratings System
BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.
HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.
SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.
NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.
Risk-adjusted return refers to the expected return in relation to the amount of risk associated with the designated investment or the
relevant issuer.
Risk Qualier
SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the
stock may result in material loss.
Canaccord Genuity Company-Specific Disclosures (as of date of this publication)
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Corporate Finance/
Investment Banking services from New Flyer Industries Inc. in the next six months.
Auto Components 14
314
H:C$8.00
09/19/12
H:C$8.25
11/14/12
H:C$8.75
01/11/13
H:C$9.25
01/29/13
H:C$9.75
02/06/13
H:C$10.00
03/25/13
H:C$10.25
04/18/13
B:C$11.25
06/24/13
H:C$11.75
08/07/13
H:C$11.25
11/07/13
B:C$12.00
01/15/14
B:C$12.50
03/23/14
18
16
14
12
10
8
6
H:C$11.50
05/11/14
Oct 2012
H:C$11.75
06/24/14
Jan 2013
H:C$12.00
07/16/14
Apr 2013
B:C$14.00
08/06/14
Jul 2013
H:C$14.00
11/09/14
Oct 2013
B:C$12.50
12/12/14
Jan 2014
H:C$14.00
01/12/15
Closing Price
Apr 2014
B:C$15.00
03/19/15
Jul 2014
Oct 2014
Jan 2015
Apr 2015
Jul 2015
B:C$16.00
05/11/15
Target Price
Buy (B); Speculative Buy (SB); Sell (S); Hold (H); Suspended (SU); Under Review (UR); Restricted (RE); Not Rated (NR)
Online Disclosures
Up-to-date disclosures may be obtained at the following website (provided as a hyperlink if this report is being read electronically)
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Canaccord Genuity Inc., Canaccord Genuity Limited, Canaccord Genuity Corp., and Canaccord Genuity (Australia) Limited, an affiliated
company that is 50%-owned by Canaccord Genuity Group Inc.
The authoring analysts who are responsible for the preparation of this research are employed by Canaccord Genuity Corp. a Canadian
broker-dealer with principal offices located in Vancouver, Calgary, Toronto, Montreal, or Canaccord Genuity Inc., a US broker-dealer
with principal offices located in New York, Boston, San Francisco and Houston, or Canaccord Genuity Limited., a UK broker-dealer with
principal offices located in London (UK) and Dublin (Ireland), or Canaccord Genuity (Australia) Limited, an Australian broker-dealer with
principal offices located in Sydney and Melbourne.
The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon
(among other factors) the Corporate Finance/Investment Banking revenues and general profits of Canaccord Genuity. However, such
authoring analysts have not received, and will not receive, compensation that is directly based upon or linked to one or more specific
Corporate Finance/Investment Banking activities, or to recommendations contained in the research.
Canaccord Genuity and its affiliated companies may have a Corporate Finance/Investment Banking or other relationship with the issuer
that is the subject of this research and may trade in any of the designated investments mentioned herein either for their own account
or the accounts of their customers, in good faith or in the normal course of market making. Accordingly, Canaccord Genuity or their
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Some regulators require that a firm must establish, implement and make available a policy for managing conflicts of interest arising as
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The information contained in this research has been compiled by Canaccord Genuity from sources believed to be reliable, but (with the
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Canaccord Genuitys salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies
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Auto Components 15
315
Canaccord Genuitys affiliates, principal trading desk, and investing businesses may make investment decisions that are inconsistent
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Buy unchanged Target Price C$17.00 from C$16.00 | 20 July 2015
Auto Components 16
316
Auto Components 17
317
COMPANY UPDATE
NFI | TSX
$15.77
Rating: Outperform
One Year Target: C$18.50
Total Return: 21.2%
Yield: 3.9%
July 16, 2015
C$15.84 / C$12.04
3.9%
Dividend Yield:
55.5 (basic)
Q2/15 Orders and Deliveries: New Flyer released orders and backlog data for
Q2/15, delivering 594 equivalent units (EU) as compared to 582 EU in Q2/14 and our
estimate of 678 EU. WIP in the quarter increased to 447 EU, up 63 EU from previous
quarter and 73 EU from our estimates. The increase is attributable to the transition of
NABI to the Xcelsior platform at the Aniston facility and we expect the impact should
be temporary.
55.5 (fd)
C$874.7
33.6
93.2
$212.1
$932.9
2014
Revenue ($mm)
2015e
2016e
EBITDA ($mm)
FD EPS
EBITDA ($m m )
Q1
2014
$19.7
$107.4
$131.2
$149.5
$0.65
$0.87
$1.13
Q2
Q3
Q4
$27.0
$25.7
$35.0
2015
$31.4
$31.1e
$32.7e
$36.0e
2016
$38.3e
$36.7e
$35.4e
$39.1e
Adjusted FD EPS
2014
Q1
$0.10
Q2
Q3
Q4
$0.16
$0.15
$0.24
2015
$0.20
$0.18e
$0.23e
$0.26e
2016
$0.29e
$0.27e
$0.26e
$0.30e
Volume ('000)
1000
Last Sale Price
$10
800
600
400
$5
200
$0
0
Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15
Strong Book to Bill Indicative of Solid H2/15 Results: Book to bill ratio in
Q2/15 was 1.45x, above our estimate of 1.1xs. In Q2/15, NFI received new firm orders
for 318 EU valued at $136.7mm with options for 213 EU valued at $98.0mm. Options
for 546 EU valued at $280.2mm were converted to firm orders. We note the company
did not book 1,238 EU of new orders (firm and options) where NFI has already received
approval however purchase documentation is pending. New Flyers active bid universe
increased to 7,571 EU, up 7% sequentially. Backlog at Q2/15 was 7,011 EU worth
$3.49bn versus 7,193 EU ($3.57bn) in Q1/15 and 7,372 EU ($3.54bn) in Q4/14.
Decline in Aftermarket Orders Expected: The company reported a 6.8% y/y
decrease in gross orders as a result of the expiry of the Chicago Transit Authority (CTA)
mid-life upgrade program where NFI supported the refurbishment of 1,028 buses. On a
sequential quarter basis, gross parts ordered decreased 0.7% while parts shipments were
up 13.5% as compared to Q2/14, which was stronger than our expectations.
Estimate Changes: Management reduced guidance for the average line entry rate to
approximately 50 EU/ production week as compared to 51 EU previously reflecting the
lower H1/15 average rate implying a production increase in H2/15 to approximately
54EU/week. We expect shipments remain consistent with the release of units in
inventory. Our 2015e and 2016e EBITDA move to $131.2mm from $130.9mm and
$149.5mm from $149.4mm. With the strong order intake expected to be formally
recorded in Q3/15 and a robust environment, we believe a discussion around
production rates may become topical. For reference an increase in 2016 production rates
to 56EU/week would increase our 2016e EBITDA to $156.4mm.
Maintain Outperform and C$18.50 Target: Overall, we believe New Flyer will
continue to benefit from a strong demand environment. We maintain our Outperform
rating and our 12-month target price of C$18.50. Our target price is based on a blend of
a 14.0x earnings and 7.0x EBITDA multiple of the four quarters ending Q4/16 reflecting
our 12-month forward valuation period as well as an exchange rate of C$1.22/$US .
318
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
$15.77
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
New Flyer Industries Inc.
10.9x
8.2x
8.3x
6.7x
7.0x
5.9x
Peer Average
New Flyer Industries Inc.
14.7x
18.6x
13.2x
14.0x
11.1x
10.8x
Income Statement
2014
2015e
2016e
2014
2015e
2016e
Revenues
Bus Manufacturing
Aftermarket
Revenue
Aftermarket % of Total
EBITDA - Bus Manufacturing
Margin - Bus Manufacturing
EBITDA - Aftermarket Ops.
Margin - Aftermarket Ops.
Total EBITDA incl. Other
Margin
Adjusted EBITDA
Margin
Amortization
Operating Earnings
EBT
92,829
$1.67
10.6%
82.8%
Taxes
Net Income
10,849
26,719
25,159
48,154
36,761
62,593
Reported FD EPS
Adjusted FD EPS
$0.48
$0.65
$0.87
$0.87
$1.13
$1.13
2014
2015e
2016e
21.0%
13.4%
2.7%
10.3%
22.2%
33.5%
7.0%
13.9%
29.1%
Growth
Revenue
Adjusted EBITDA
Adjusted FD EPS
FX Assumptions
Average CAD/USD Rate
EOP CAD/USD Rate
Leverage
Net Debt (EOP)
Net Debt to Trailing EBITDA
Net Debt to Total Capitalization
2014
2015e
2016e
0.9057
0.9050
0.8004
0.7874
0.7953
0.8130
Trend
2014
2015e
2016e
229,034
2.1x
33.6%
195,660
1.5x
29.2%
171,641
1.2x
26.2%
Trend
2014
2015e
2016e
32,457
35.0%
33,928
34.1%
34,413
29.8%
$0.585
3.7%
$0.611
3.9%
$0.620
3.9%
2014
2015e
2016e
2,437
464.5
23.5
49.2
0.9x
20.7%
2,547
508.2
28.5
50.9
1.2x
9.5%
2,650
533.6
34.0
52.0
1.0x
16.5%
Trend
Trend
Option
2020, 11%
2015, 14%
$4.0
2016, 12%
$3.0
2019, 23%
$2.0
$1.0
2017, 11%
$0.0
Q109 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15
2018, 29%
319
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
Rating &
Target
TSX:NFI
OP (C$18.50)
BOVESPA:POMO4
NR
TSX: WJX
NR
TSX: AFN
NR
TSX: SPB
NR
GBX
NR
OSK
NR
SPAR
NR
WNC
NR
THO
NR
WGO
NR
NAV
NR
TSX: STB
NR
BLBD
NR
CUB
NR
Trading
Local
Currency Price
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
15.77
2.53
20.37
46.11
12.77
46.04
40.98
4.31
12.23
55.73
23.25
19.67
5.64
13.07
45.97
Market
Cap ($m m )
875.5
2,028.6
406.9
660.3
1,617.7
1,353.6
3,205.1
147.7
835.4
2,919.9
626.2
1,603.1
540.3
270.5
1,235.8
EPS
EV
Net
Debt
($m m )
2014
2015e
213.2
1,200.3
252.0
165.9
933.6
316.0
845.3
(6.7)
210.3
(259.4)
(49.2)
4,419.0
220.9
195.6
(55.7)
885.3
3,257.1
658.9
826.3
2,551.3
1,780.2
4,050.4
140.9
1,045.7
2,660.5
577.0
6,055.1
823.1
516.1
1,180.4
0.65
0.25
2.46
0.31
0.45
4.62
3.49
0.03
0.88
3.55
1.61
-5.07
0.03
0.00
2.47
0.87
0.21
1.95
2.88
0.85
6.16
3.89
0.08
1.18
3.99
1.62
1.04
0.02
0.00
2.66
P/E
EBITDA
18.6x
7.8x
8.3x
NM
28.3x
10.0x
11.7x
NM
13.9x
15.7x
14.4x
NM
NM
NM
18.6x
14.7x
14.0x
9.5x
10.5x
16.0x
15.0x
7.5x
10.5x
NM
10.4x
14.0x
14.4x
18.8x
NM
NM
17.3x
13.2x
10.8x
7.2x
9.1x
12.0x
10.7x
7.3x
9.5x
19.2x
9.8x
12.2x
12.3x
8.1x
NM
NM
16.0x
11.1x
EV/EBITDA
2014
2015e
2016e
2014
2015e
2016e
Price
to BV
ROIC
ROE
107.4
268.8
82.4
63.4
282.4
257.4
591.2
9.4
160.7
298.8
65.8
331.0
69.0
25.9
119.3
131.2
291.1
83.5
93.9
304.0
457.3
615.2
10.6
198.9
344.1
68.3
650.1
79.1
0.0
138.2
149.5
376.3
92.4
115.1
329.0
473.2
647.8
16.2
198.3
392.0
81.2
852.0
94.4
0.0
157.4
8.2x
12.1x
8.0x
13.0x
9.0x
6.9x
6.9x
14.9x
6.5x
8.9x
8.8x
18.3x
11.9x
19.9x
9.9x
10.9x
6.7x
11.2x
7.9x
8.8x
8.4x
3.9x
6.6x
13.3x
5.3x
7.7x
8.4x
9.3x
10.4x
NM
8.5x
8.3x
5.9x
8.7x
7.1x
7.2x
7.8x
3.8x
6.3x
8.7x
5.3x
6.8x
7.1x
7.1x
8.7x
NM
7.5x
7.0x
1.5x
1.3x
1.4x
2.9x
2.9x
2.0x
1.7x
0.9x
2.2x
2.8x
3.0x
NM
2.1x
NM
1.7x
2.0x
5.1%
3.6%
9.3%
8.4%
6.9%
18.1%
10.0%
0.5%
11.4%
17.8%
19.4%
13.7%
2.9%
NA
6.6%
9.5%
7.0%
12.7%
16.4%
(0.2%)
(0.5%)
34.7%
13.6%
0.2%
17.9%
20.1%
21.5%
NM
0.7%
NM
5.2%
11.5%
320
Disclosure Requirements
C$15.77
Rating:
Outperform
12 Month Target:
C$18.50
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
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officer or advisory capacity of the issuer? If yes, state name:
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investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
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past 12 months?
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predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
63%
25%
Sector Perform
25%
13%
Underperform
2%
0%
Speculative
1%
0%
Restricted
2%
50%
Not Rated
5%
0%
Tender
3%
0%
100%
20%
Total
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied
upon, by any other person.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts
responsibility for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital
(USA) Inc. at 403-539-8600.
321
Direct
@altacorpcapital.com
__________________________________________________________________________________________________________
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Investment Banking
CALGARY
410, 585 8 Avenue SW
Calgary AB Canada T2P 1G1
403 539 8600 Main
403 539 8575 Fax
TORONTO
66 Wellington Street West, Suite 3530
Toronto, ON Canada M5K 1A1
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322
Price: Cdn$16.26
StockRating: Outperform
TargetPrice: Cdn$17.50
Headline: Backlog Update Light But Pending Orders Prompt Price Target
NFI (T)
Outperform
Stock Rating:
(Unchanged)
Cdn$18.00
Target:
(Was $16.50)
Average
Risk Rating:
(Unchanged)
14.5%
Stock Data:
Cash Yield
3.8%
10.7%
$16.46-$12.04
Bloomberg/Reuters:
Forecasts: DEC YE
Revenue (USmln)
Company Update
2014a
2015e
HIGHLIGHTS
2016e
EBITDA (USmln)
$86.5
$114.7
DCPS ($US)
$1.06
$1.03
$125.3
$1.30
Dividend
$0.58
$0.60
$0.62
Payout Ratio
49%
48%
40%
DC Yield
7.2%
7.7%
9.6%
EV/EBITDA
10.5x
9.5x
8.8x
P/DCPS
13.8x
13.0x
10.5x
Financial Data
Shares Outstanding (mln)
55.5
$902.5
Cash
Net Debt
$17.5
$223.0
20%
1.8x
Company Profile:
Headquartered in Winnipeg, Manitoba, New Flyer Industries
(NFI-TSX) is the leading manufacturer of heavy-duty transit
buses in North America, as well as a comprehensive
provider of aftermarket parts and services.
Stock Performance
323
Page 2
Investment Summary
While Q2s order activity was below the robust 1k+ realized each of the previous two
quarters, the 1.2k pending that we assume will be booked Q3 supports our view that NFIs
order flow outlook remains positive (as does the bid universe provided by management,
which is at a healthy 20.7k). With backlog positioned to grow to approximately four years of
average production, and NFI benefitting from improved profitability following the economic
downturn, the company is one of the better positioned TSX diversified yield equities in terms
of earnings momentum. This contributes to a ~1x higher target valuation (from 8.5x 2016e
EV/EBITDA to 9.5x and from 10.5x P/CF to 11.5x) prompting an $18 target price. This is
more in-line with TSX diversified yield peers, which average ~10x forward EV/EBITDA and
~12.5x P/CF. Reiterate Outperform.
324
Page 3
DISCLOSURES:
Ratings And What They Mean: PRIMARY STOCK RATING: NBF has a three-tiered rating system that is relative to the coverage universe of the particular analyst. Here is a brief
description of each: Outperform The stock is expected to outperform the analysts coverage universe over the next 12 months; Sector Perform The stock is projected to perform in
line with the sector over the next 12 months; Underperform The stock is expected to underperform the sector over the next 12 months. SECONDARY STOCK RATING: Under
Review Our analyst has withdrawn the rating because of insufficient information and is awaiting more information and/or clarification; Tender Our analyst is recommending that
investors tender to a specific offering for the companys stock; Restricted Because of ongoing investment banking transactions or because of other circumstances, NBF policy and/or
laws or regulations preclude our analyst from rating a companys stock. INDUSTRY RATING: NBF has an Industry Weighting system that reflects the view of our Economics & Strategy
Group, using its sector rotation strategy. The three-tiered system rates industries as Overweight, Market Weight and Underweight, depending on the sectors projected performance
against broader market averages over the next 12 months. RISK RATING: NBF utilizes a four-tiered risk rating system, Below Average, Average, Above Average and Speculative.
The system attempts to evaluate risk against the overall market. In addition to sector-specific criteria, analysts also utilize quantitative and qualitative criteria in choosing a rating. The
criteria include predictability of financial results, share price volatility, credit ratings, share liquidity and balance sheet quality.
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325
Page 4
326
Market Perform
Target Price:
Price (15-Jul):
$16.00
$15.77
Total Return: 5%
416-359-5301
416-359-6193
Our View:
Deliveries were 11% below expectations due to higher than expected work-in-progress (WIP) ending inventory level.
WIP was up 16% q/q to 447 EUs. Q2/15 production levels were mainly impacted by the platform rationalization plans.
NFI expects to reduce the WIP in the second half of the year as they complete operational initiatives.
Firm EU order backlog increased 14% sequentially to 2,192 EUs, but is down 1.6% y/y, and is still below annual
production capacity of 2,500 EUs.
Aftermarket shipments were 3.5% above expectations. We expect NFI to continue to grow its product support
operations and partially offset the expiry of the CTA mid-life upgrade program in June 2015. We would expect
negative aftermarket revenue growth in 2016 with the expiry of the CTA program, mitigated somewhat by continued
organic growth.
Based on lower than expected bus deliveries we would expect overall results to reflect miss. Prior to the Q2/15 order
and backlog update we anticipate Adj. EBITDA to be $31.8 million, in line with mean estimates.
Without an increase in production schedule to drive revenue, NFI remains a cost story. We remain confident in the
companys ability to execute on its platform rationalization plan, which is expected to improve bus manufacturing
margins, and view the WIP issues this quarter as transitory.
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s) under
FINRA rules. For disclosure statements, including the Analyst's Certification, please refer to pages 2 to 5.
Flash Page 1
327
Quarterly Price
18
14
14
12
12
10
10
18
16
16
14
14
12
12
10
10
2) Mkt
6
1) NR
4
NFI Relative to S&P/TSX Comp.
NFI Relative to Machinery
4
NFI Relative to S&P/TSX Comp.
NFI Relative to Machinery
600
600
400
400
300
300
400
400
200
200
200
200
100
100
0
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Revenue / Share
Price / Revenue
300
1.0
200
2013
2014
2015
200
200
0.5
100
-200
2013
0.0
EPS (4 Qtr Trailing)
Price / Earnings
2014
2015
-200
400
200
0
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
FYE
(Dec.)
EPS
$
2011
2012
2013
2014
0.81
0.22
0.49
0.48
Range*:
Current*
0.58
P/E
Hi - Lo
9.5
40.5
24.2
29.4
6.4
23.6
15.9
21.6
40.5
6.4
26.7
DPS
$
Yield%
Hi - Lo
Payout
%
BV
$
P/B
Hi - Lo
0.86
0.59
0.59
0.59
16.5 11.2
11.3 6.6
7.5 4.9
5.7 4.2
>100
>100
>100
>100
8.2
7.7
8.1
8.1
0.9
1.2
1.5
1.7
0.6
0.7
1.0
1.3
1.7
0.6
16.5
0.62
4.2
4.0
>100
10.3
1.5
ROE
%
3
6
6
Date
29-Oct-12
Rating Change
Mkt to NR
Share Price
$7.75
3-Jul-13
NR to Mkt
$11.14
Flash Page 2
328
IMPORTANT DISCLOSURES
Analyst's Certification
I, Bert Powell, CFA, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I
also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this
report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates,
which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and
in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA (exceptions:
Alex Arfaei and Brodie Woods). These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the
NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a
research analyst account.
Company Specific Disclosure
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past
12 months.
Disclosure 6: This issuer is a client (or was a client) of BMO NB, BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12 months:
Non-Securities Related Services.
Disclosure 13: A partner, director, officer, employee or agent of BMO Capital Markets is an officer, director, employee of, or serves in an advisory
capacity to, this issuer: Brian Tobin (Member of Board of Directors)
Methodology and Risks to Price Target/Valuation
Methodology: Our $16.00 target is based on ~7.0x our 2016E EBITDA.
Risks: A significant portion of new transit bus purchases are funded from government sources. As long as federal, state/provincial and municipal budgets
remain under pressure, funding for new bus purchases could be reduced or eliminated. Other risks include: price volatility of raw materials, warranty costs
could be material, labour disruptions from its predominantly unionized workforce and customer contract issues (early termination, deferral, non-renewal).
Distribution of Ratings (June 30, 2015)
Rating
BMOCM US
BMOCM US
BMOCM US
BMOCM
BMOCM
Starmine
Category
BMO Rating
Universe*
IB Clients**
IB Clients***
Universe****
IB Clients*****
Universe
Buy
Outperform
42.0%
21.9%
53.3%
41.9%
54.3%
54.6%
Hold
Market Perform
53.5%
14.4%
44.8%
53.3%
44.4%
40.0%
Sell
Underperform
4.4%
7.4%
1.9%
4.7%
1.3%
5.4%
*
Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.
**
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services
as percentage within ratings category.
***
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking
services as percentage of Investment Banking clients.
****
Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.
*****
Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as
percentage of Investment Banking clients.
Flash Page 3
329
Flash Page 4
330
To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct
Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in
matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the
Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The
contents hereof are not intended for the use of and may not be issued or passed on to retail clients.
Unauthorized reproduction, distribution, transmission or publication without the prior written consent of BMO Capital Markets is strictly prohibited.
Click here for data vendor disclosures when referenced within a BMO Capital Markets research document.
Financial Group
Flash Page 5
331
Khaled Omar
1 (416) 956-6807
Kevin.Chiang@cibc.com
Khaled.Omar@cibc.com
EARNINGS UPDATE
j
SECTOR PERFORMER
MARKET WEIGHT
Stock Rating:
Sector Weighting:
Key Ratios and Statistics
12-18 mo. Price Target
NFI-TSX (7/15/15)
C$16.50
C$15.77
Key Indices:
3-5-Yr. EPS
Gr. Rate (E)
52-week
Range
Shares Outstanding
Float
Avg. Daily Trading Vol.
Market Capitalization
Dividend/Div Yield
Fiscal Year Ends
Book Value
2015 ROE (E)
LT Debt
Net AssetEquity
Value
Common
Convertible Available
EBITDA ($mln)
Current
Prior
Estimates (Dec.
(Dec. 31)
31)
Valuation
EV/EBITDA-Curr
EV/EBITDA-Prior
Toronto
NM
C$12.04-C$15.80
55.5M
36.5M Shrs
38,000
C$875.2M
C$0.62 / 3.9%
December
$8.23 per Shr
9.0%
$140.9M
$457.0M
Yes
2013
$94.7A
2014
$107.4A
2015
$124.2E
$122.2E
2016
$126.9E
$124.7E
11.4x
10.1x
8.7x
8.9x
8.5x
8.7x
NFI did adjust its line rate to average ~50 EUs/week for 2015, down
from ~51 EUs. We suspect this reflects relatively weak demand for
NFI's Midibus platform, but this was a lower-margin product.
Overall, we do not view this tweak to the line rate as a major issue.
As well, NFI's work-in-process at the end of Q2 was 447 EUs, up 63
EUs Y/Y as the company transitions its Anniston, AL facility to the
Xcelsior platform. The WIP is expected to decline in H2 as this
restructuring is complete.
Company Description
New Flyer Industries Inc. is the largest North American manufacturer of
heavy-duty transit buses supplying transit authorities in Canada and the U.S.
www.newflyer.com
Continued on page 3
15-136893 2015
CIBC World Markets does and seeks to do business with companies covered in its research reports. As a result, investors
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
See "Important Disclosures" section at the end of this report for important required disclosures, including potential
conflicts of interest. See "Price Target Calculation" and "Key Risks to Price Target" sections at the end of this report,
where applicable.
Find CIBC research on Bloomberg, Reuters, firstcall.com
and ResearchCentral.cibcwm.com
CIBC World Markets Inc., P.O. Box 500, 161 Bay Street, Brookfield Place, Toronto, Canada M5J 2S8 (416) 594-7000
332
Q2 Deliveries In Line With Expectations But Aftermarket Continues To Outperform - July 15, 2015
Sector Performer
NFI-TSX
7/15/15
12- To 18- Month Price Target:
Capital Equipment
Sector Weighting:
C$15.77
C$16.50
Market Weight
2014A
2015E
2016E
10.1x
9.9x
8.7x
8.1x
8.5x
7.0x
10.2x
8.9x
7.6x
Manufacturers
P/E Multiples
2014A
2015E
2016E
Investment Thesis
19.0x
15.1x
14.0x
Fundamentals for bus demand are improving due to rising U.S. state/municipal tax revenue, growing
High-Yielding Industrials
Commercial Vehicle & Parts
20.0x
18.8x
14.9x
13.9x
12.0x
11.9x
bus ridership numbers (reflecting the cost advantage of taking bus transit versus driving and modestly
declining unemployment rate), and public transit being a more green option.
New Flyer is well positioned to take advantage of the improving heavy duty bus fundamentals given
Manufacturers
Key Financial Metrics
2013A
2014A
2015E
2016E
EBITDA Margin
7.9%
7.4%
7.8%
8.1%
Company Profile
New Flyer Industries Inc. is the largest North American manufacturer of heavy-duty transit buses
supplying transit authorities in Canada and the U.S. with approximately one-third the market.
its leading market share in both bus manufacturing and aftermarket services.
Current Ratio
1.1x
1.1x
1.3x
1.3x
Debt/Equity
Debt/Total Capital
51.3%
33.9%
53.1%
34.7%
42.0%
29.6%
51.5%
34.0%
Income Statement
2013A
2014A
2015E
2016E
$991.2
$215.0
$1,132.1
$319.0
$1,252.7
$332.1
$1,250.0
$321.3
$1,199.4
$1,078.7
$1,451.1
$1,312.8
$1,584.8
$1,422.3
$1,571.3
$1,405.1
Gross Profit
$120.8
$138.3
$162.5
$166.2
EBITDA
EBIT
$94.7
$49.0
$107.4
$51.4
$124.2
$89.2
$126.9
$98.2
EBT
Net Income
$34.6
$26.8
$37.6
$26.7
$74.3
$54.6
$83.9
$62.4
Balance Sheet
Q1/15A
Revenues - Consolidated
Cost of Sales
Current Assets
430
Total Assets
Current Liabilities
Bus Operations
78%
1,101
318
Total Liabilities
New Flyer is guiding towards 2014 production line rate of ~51 EUs/week, we view its $0.585/share
Canada
16%
644
Shareholders' Equity
457
Revenue from Bus Manufacturing Operations
$350
$1,000,000
2,500
$300
$800,000
2,000
$250
$600,000
1,500
$200
$400,000
1,000
$200,000
500
$0
0
2007
2008
2009
2010
2011
Revenues ( $ Millions)
2012
2013
Deliveries(EUs)
2014
$ Millions
$1,200,000
$319
$215
$150
$100
$83
$96
$108
$106
$116
$119
2009
2010
2011
2012
$50
$0
2007
2008
2013
2014
333
Q2 Deliveries In Line With Expectations But Aftermarket Continues To Outperform - July 15, 2015
As we have seen the past several quarters, NFIs aftermarkets division continues
to exceed expectations. While gross orders declined 7% Y/Y with the wind-down
of the CTA contract, shipments were up 14% Y/Y and up 1% Q/Q. We
anticipated shipments to be up modestly Y/Y as we expected the wind down of
the CTA contract to be more of a headwind. NFI continues to illustrate its ability
to expand its aftermarkets operations, which is a higher-margin business.
We tweaked our estimates modestly to account for better aftermarkets
performance. Our 2015E and 2016E EBITDA increase to $124M and $127M
respectively. Our Q2E EBITDA increases to $32M from $30M and up from $27M
last year. NFI is scheduled to report Q2 results on Aug. 6 with a call on Aug. 7
(dial in number is 888-231-8191).
Our price target increases to $16.50 from $15.75 reflecting our increased
estimates and weaker C$. We maintain our SP rating. We continue to have a
favourable outlook on NFI given its improving FCF profile which we believe can
be deployed to M&A (aftermarkets industry is fragmented) and towards growing
the dividend.
334
Q2 Deliveries In Line With Expectations But Aftermarket Continues To Outperform - July 15, 2015
335
Q2 Deliveries In Line With Expectations But Aftermarket Continues To Outperform - July 15, 2015
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2013 Current
$15.4A
$18.1A
$24.4A
$36.8A
$94.7A
2014 Current
$19.7A
$27.0A
$25.7A
$35.0A
$107.4A
2015 Prior
$31.4A
$30.3E
$28.9E
$30.2E
$122.2E
2015 Current
$31.4A
$32.1E
$29.7E
$31.0E
$124.2E
2016 Prior
--
--
--
--
$124.7E
2016 Current
--
--
--
--
$126.9E
336
Q2 Deliveries In Line With Expectations But Aftermarket Continues To Outperform - July 15, 2015
IMPORTANT DISCLOSURES:
Analyst Certification: Each CIBC World Markets research analyst named on the front page of this research report, or
at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein
accurately reflect such research analyst's personal views about the company and securities that are the subject of this
report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii)
no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or views expressed by such research analyst in this report.
Potential Conflicts of Interest: Equity research analysts employed by CIBC World Markets are compensated from
revenues generated by various CIBC World Markets businesses, including the CIBC World Markets Investment Banking
Department. Research analysts do not receive compensation based upon revenues from specific investment banking
transactions. CIBC World Markets generally prohibits any research analyst and any member of his or her household from
executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets
generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that
such analyst covers.
In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report,
CIBC World Markets may have a long position of less than 1% or a short position or deal as principal in the securities
discussed herein, related securities or in options, futures or other derivative instruments based thereon.
Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures
set forth below, may at times give rise to potential conflicts of interest.
Companies Mentioned in this Report that Are Not Covered by CIBC World Markets Inc.:
Stock Prices as of 07/15/2015:
Volvo AB (VOLVB-ST, [SEK]114.30, Not Rated)
337
Q2 Deliveries In Line With Expectations But Aftermarket Continues To Outperform - July 15, 2015
Rating
Description
SO
Sector Outperformer
Stock is expected to outperform the sector during the next 12-18 months.
SP
Sector Performer
Stock is expected to perform in line with the sector during the next 12-18 months.
SU
Sector Underperformer
Stock is expected to underperform the sector during the next 12-18 months.
NR
Not Rated
CIBC World Markets does not maintain an investment recommendation on the stock.
Restricted
CIBC World Markets is restricted (due to potential conflict of interest) from rating the stock.
Stock Ratings
Sector Weightings (note: Broader market averages refer to S&P 500 in the U.S. and S&P/TSX Composite in Canada.)
O
Overweight
Market Weight
Underweight
NA
None
"Speculative" indicates that an investment in this security involves a high amount of risk due to volatility and/or liquidity issues.
Count
Percent
158
43.1%
163
44.4%
38
10.4%
1.9%
Count
Percent
150
94.9%
155
95.1%
Restricted
33
86.8%
100.0%
Count
Percent
0.0%
100.0%
0.0%
Restricted
0.0%
Count
Percent
0.0%
100.0%
0.0%
Restricted
0.0%
Important disclosures required by IIROC Rule 3400, can be obtained by visiting CIBC World Markets Inc. on the web at
http://researchcentral.cibcwm.com. Important disclosures for each issuer can be found using the "Coverage" tab on the
top left of the Research Central home page. Access to the system for rating investment opportunities and our
dissemination policy, can be found under 'Quick Links' on bottom right side of the Research Central homepage. These
important disclosures can also be obtained by writing to CIBC World Markets Inc., Brookfield Place, 161 Bay Street, 4th
Floor, Toronto, Ontario M5J 2S8, Attention: Research Disclosures Request
338
Q2 Deliveries In Line With Expectations But Aftermarket Continues To Outperform - July 15, 2015
HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS INC. RECOMMENDATIONS FOR NEW FLYER
INDUSTRIES INC. (NFI)
Date
12/13/2012
01/10/2013
01/25/2013
02/05/2013
03/01/2013
05/10/2013
06/21/2013
07/15/2013
08/07/2013
10/15/2013
11/08/2013
04/15/2014
05/11/2014
07/16/2014
08/06/2014
03/19/2015
05/08/2015
Change Type
Closing Price
8.38
8.80
9.95
9.72
10.30
9.86
10.30
11.13
11.54
11.07
10.94
11.20
11.82
12.85
13.17
13.92
14.69
Rating
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
Price Target
8.50
8.75
10.00
10.50
11.00
10.00
11.00
11.50
12.00
12.50
12.00
12.25
12.50
13.00
14.00
15.00
15.75
Coverage
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
339
Q2 Deliveries In Line With Expectations But Aftermarket Continues To Outperform - July 15, 2015
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340
Q2 Deliveries In Line With Expectations But Aftermarket Continues To Outperform - July 15, 2015
10
341
RESEARCH ALERT
NFI | TSX
$15.17
Rating: Outperform
June 30, 2015
Order Intake Rate Double of Production Year to Date: We estimate these new
contract wins take booked production for the year to 107% of anticipated production
assuming an annual average run rate of 51 EUs/ week with only half the year
complete. Overall, we expect the company to continue to win new contracts even as
it continues to integrate both its manufacturing and aftermarket segments. Should
this pace of bookings continue, we believe it likely a review of production rates may
be necessary. We expect the companys moderating balance sheet and
improvements in return on invested capital to be supportive of share price
appreciation.
647.776.8246
cmurray@altacorpcapital.com
Regulatory Disclosures and policy on the dissemination of research: last page or at www.altacorpcapital.com
342
Transit Authority
Midi
40'
24
Firm
60'
114
10
325
2
14
0
10
0
18
15
10
2
63
19
10
10
13
3
4
72
20
28
1
35
9
20
9
2
7
52
9
5
45
202
26
903
7
18
75
61
414
EU
252
20
325
2
20
14
36
15
20
2
63
39
20
26
3
4
72
40
28
1
75
27
4
14
52
9
5
14
36
195
202
122
1,757
40'
Option
60'
EU
10
20
47
150
47
100
18
58
13
10
200
465
163
304
350
36
58
26
10
526
1,073
Total
Buses
138
10
325
2
20
14
18
15
10
2
63
29
10
13
3
4
72
20
75
1
305
18
20
7
110
9
5
20
18
120
212
424
2,112
EU
Propulsion
Clean
252 Diesel, Hybrid, Trolley
20
Clean Diesel
325
CNG
2
Clean Diesel
40
Clean Diesel
14
Clean Diesel
36
Clean Diesel
15
20
Clean Diesel
2
63
CNG
39
Clean Diesel
20
Diesel-Hybrid
26
CNG
3
Diesel
4
Diesel
72
40
Clean Diesel
75
Clean Diesel
1
Fuel Cell
425
CNG
27
Clean Diesel
40 Clean Diesel / Hybrid
14
CNG
110
CNG
9
Clean Diesel
5
Clean Diesel
40
Hybrid
36
CNG
195
Clean Diesel
212
CNG
648
Hybrid
2,830
Notes
option exercise, $130mm value
30'
valued at US$17mm
30'
35', via Giradin
17 NABI LFW, 40 Xcelsior
option exercise
new customer
30'
30'
supplementary to Jan 2014 aw ard
exercised options
3-year options
w / HYG, SIE $1.7mm contract
5 year options
2,652
2,830
106.7%
343
Disclosure Requirements
C$15.17
Rating:
Outperform
12 Month Target:
C$18.50
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
Does any director, officer, employee of AltaCorp Capital or member of their household serve as a director or
officer or advisory capacity of the issuer? If yes, state name:
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
12 Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
13 Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
60%
25%
Sector Perform
24%
10%
Underperform
2%
0%
Speculative
1%
0%
Restricted
4%
40%
Not Rated
6%
0%
Tender
2%
0%
100%
19%
Total
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied
upon, by any other person.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts
responsibility for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital
(USA) Inc. at 403-539-8600.
344
Direct
@altacorpcapital.com
__________________________________________________________________________________________________________
ATB Financial
Dave Mowat
President & CEO
780 408 7181
dmowat@atb.com
Ian Wild
Executive Vice President
403 974 5127
iwild@atb.com
E&P- Domestic
Jeremy McCrea, CFA, Analyst
Klazina van den Berg, Associate
Patrick J. ORourke, CFA, Analyst
Yasir Siddiqi, Associate
Nicholas Lupick, CFA, Analyst
Kate-Lynn Gordey, Associate
Thomas Matthews, P.Eng., Analyst
Christian Erana, Associate
jmccrea
kvandenberg
porourke
ysiddiqi
nlupick
kgordey
tmatthews
cerana
Energy Infrastructure
Dirk Lever, CA, Senior Analyst
Ward Hallett, CA, Associate
dlever
whallett
Oilfield Services
Dana Benner, CFA, Senior Analyst
John Gibson, Associate
Jason Sawatzky, Analyst
Mark Westby, Associate
dbenner
jgibson
jsawatzky
mwestby
Diversified Industries
Chris Murray, P.Eng., CFA, Senior Analyst
Samarth Modwal, Associate
cmurray
smodwal
Agriculture
Peter Prattas, CPA, CA, CFA, Analyst
Stuart Pattillo, Associate
pprattas
spattillo
All Sectors
Victoria Hoa, Research Assistant
vhoa
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
khilton
Toronto
Paul Sarachman, CFA, FCSI
Adam Carlson
Jamie Riff
Tim Miller
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Institutional Trading
Calgary
Tate Pinder
Shane Dungey
tpinder
sdungey
Toronto
Cheryl Polan
Jon Varley
Michael Capobianco
cpolan
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
410, 585 8 Avenue SW
Calgary AB Canada T2P 1G1
403 539 8600 Main
403 539 8575 Fax
TORONTO
66 Wellington Street West, Suite 3530
Toronto, ON Canada M5K 1A1
647 776 8230 Main
647 776 8248 Fax
George Gosbee
ggosbee
jcaldarelli
ggill
mreynolds
Oilfield Services
Matt Colucci
mcolucci
jfallows
All Sectors
Patrick Stables
Jesse Hardage
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
pstables
jhardage
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________
www.altacorpcapital.com
member CIPF IIROC FINRA SIPC
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
David Lush, Head of Private Wealth
Vojtech Krb, Investment Advisor
Tomasz Okuszko, Investment Advisor
Michelle Hennebery, Client & Marketing Coordinator
dlush
vkrb
tokuszko
mhennebery
345
416-359-5301
Stock Rating:
Market Perform
Industry Rating: Outperform
Alan Kanso
BMO Nesbitt Burns Inc.
alan.kanso@bmo.com
Price (12-Jun)
Target Price
416-359-6193
$15.50
$16.00
52-Week High
52-Week Low
$15.80
$12.04
Earnings/Share
1.5
16
1.0
14
Event
12
We are updating our estimates for New Flyer (NFI) as the company
continues to execute on its operational improvement initiatives for bus
production.
0.5
10
0.0
8
-0.5
6
4
-1.0
Volume (mln)
Changes
Annual EPS
2015E $0.74 to $0.83
2016E $0.96 to $1.00
Annual CFPS
2015E $1.45 to $1.59
2016E $1.54 to $1.56
0
NFI Relative to S&P/TSX Comp
400
400
200
200
2012
2013
2014
2015
(FY-Dec.)
EPS
P/E
CFPS
P/CFPS
Rev. ($mm)
EV ($mm)
EBITDA ($mm)
EV/EBITDA
2013A
$0.49
2014A
$0.48
2015E
$0.83
18.7x
2016E
$1.00
15.5x
$0.95
$1.46
$1.59
9.7x
$1.56
9.9x
$1,199
$839
$95
8.8x
$1,451
$1,000
$91
10.9x
$1,505
$1,049
$120
8.7x
Quarterly EPS
2013A
2014A
2015E
Q1
$0.08
$0.10
$0.20a
Q2
$0.03
$0.06
$0.23
Dividend
Book Value
Shares O/S (mm)
Float O/S (mm)
Wkly Vol (000s)
Net Debt ($mm)
$0.62
$8.24
55.5
43.9
378
$218
Yield
Price/Book
Mkt. Cap (mm)
Float Cap (mm)
Wkly $ Vol (mm)
Next Rep. Date
$1,495
$990
$123
8.0x
Q3
$0.14
$0.18
$0.20
Q4
$0.23
$0.13
$0.20
4.0%
1.6x
$860
$680
$5.2
August (E)
Notes: Share price, target & capitalization in C$, all others US$
Major Shareholders: Marcopolo S.A. (19.9%), Coliseum Capital
(11.1%), Mawer (9.8%)
First Call Mean Estimates: NEW FLYER INDUSTRIES INC (US$)
2015E: $0.75; 2016E: $1.02
Quarterly EPS
Q2/15E $0.20 to $0.23
Q3/15E $0.17 to $0.20
Q4/15E $0.23 to $0.20
Target Price
$16.50 to $16.00
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s) under
FINRA rules. For disclosure statements, including the Analyst's Certification, please refer to pages 5 to 8.
346
Revised Estimates
(US$ millions, except per share data)
Actual
BMO Estimates
Previous Estimates
Mean Estimates
Bus Manufacturing
2014
1,132
2015
1,179
2016
1,190
2015
1,175
2016
1,181
y/y%
15.0%
4.1%
1.0%
3.8%
0.5%
319
326
305
335
352
48.4%
2.2%
-6.4%
5.0%
5.0%
Revenue
1,451
1,505
1,495
1,510
1,532
1,558
1,616
y/y%
21.0%
3.7%
-0.6%
4.1%
1.5%
8.6%
3.8%
1,277
174
1,305
200
1,297
198
1,315
195
1,333
199
% of Revenue
12.0%
13.3%
13.2%
12.9%
13.0%
81
81
75
81
77
66
Aftermarket Operations
y/y%
SG&A
Bus Manufacturing
y/y%
Aftermarket Operations
y/y%
57
65
71
62
5.1%
5.5%
6.0%
50
57
52
53
56
2015
2016
15.7%
17.4%
17.0%
Adjusted EBITDA
107
119
123
114
122
121
130
% of Revenue
7.4%
7.9%
8.2%
7.6%
8.0%
7.8%
8.0%
36
38
31
40
32
51
80
92
75
90
81
99
3.5%
5.3%
6.2%
4.9%
5.9%
5.2%
6.1%
14
38
13
67
9
83
14
61
11
80
2.6%
4.4%
5.5%
4.0%
5.2%
11
21
27
20
26
29%
31%
33%
33%
33%
$0.79
$1.11
Net Income
% of Revenue
EPS - Basic
EPS - Fully Diluted
27
46
56
41
53
1.8%
3.1%
3.7%
2.7%
3.5%
$0.48
$0.45
$0.83
$0.78
$1.00
$0.94
$0.74
$0.70
$0.96
$0.91
347
2012
2013
2014
Q1
2015E
Q2E
Q3E
2015E
2016E
746.9
-7.1%
118.4
5.0%
865.3
-5.6%
791.5
91.5%
73.8
8.5%
43.1
5.0%
(2.8)
-0.3%
57.8
6.7%
8.3
1.0%
16.0
1.8%
8.3
25.2
2.9%
15.2
1.8%
10.0
1.2%
0.7
7%
9.3
1.1%
$0.21
$0.21
984.4
31.8%
215.0
81.7%
1,199.4
38.6%
1,078.7
89.9%
120.8
10.1%
69.5
5.8%
0.1
0.0%
79.1
6.6%
9.6
0.8%
18.4
1.5%
2.1
49.0
4.1%
14.3
1.2%
34.6
2.9%
7.9
23%
26.8
2.2%
$0.52
$0.49
1,132.1
15.0%
319.0
48.4%
1,451.1
21.0%
1,312.8
90.5%
138.3
9.5%
81.3
5.6%
1.5
0.1%
91.3
6.3%
15.4
1.1%
20.5
1.4%
4.0
51.4
3.5%
13.9
1.0%
37.6
2.6%
10.8
29%
26.7
1.8%
$0.48
$0.45
290.7
15.9%
89.6
22.8%
380.3
17.4%
340.7
89.6%
39.6
10.4%
20.9
5.5%
(1.5)
-0.4%
29.7
7.8%
4.2
1.1%
5.3
1.4%
1.9
18.2
4.8%
4.1
1.1%
14.1
3.7%
3.3
23%
10.9
2.9%
$0.20
$0.18
308.8
16.2%
88.7
10.0%
397.5
14.7%
353.8
89.0%
43.7
11.0%
21.5
5.4%
0.0
0.0%
31.8
8.0%
4.5
1.1%
5.0
1.3%
0.0
22.3
5.6%
3.1
0.8%
19.2
4.8%
6.3
33%
12.8
3.2%
$0.23
$0.22
295.8
6.1%
73.2
-10.8%
369.1
2.3%
329.9
89.4%
39.2
10.6%
19.6
5.3%
0.0
0.0%
29.5
8.0%
4.8
1.3%
5.0
1.4%
0.0
19.6
5.3%
3.0
0.8%
16.6
4.5%
5.5
33%
11.1
3.0%
$0.20
$0.19
283.5
-15.8%
74.4
-10.8%
357.9
-14.8%
319.2
89.2%
38.7
10.8%
19.0
5.3%
0.0
0.0%
29.4
8.2%
4.7
1.3%
5.0
1.4%
0.0
19.7
5.5%
2.9
0.8%
16.9
4.7%
5.6
33%
11.3
3.2%
$0.20
$0.19
1,178.9
4.1%
325.9
2.2%
1,504.8
3.7%
1,343.5
89.3%
161.2
10.7%
80.9
5.4%
(1.5)
-0.1%
120.3
8.0%
18.2
1.2%
20.3
1.4%
1.9
79.9
5.3%
13.1
0.9%
66.8
4.4%
20.6
31%
46.1
3.1%
$0.83
$0.78
1,190.2
1.0%
305.0
-6.4%
1,495.3
-0.6%
1,328.2
88.8%
167.1
11.2%
74.8
5.0%
0.0
0.0%
123.3
8.2%
15.0
1.0%
16.0
1.1%
0.0
92.3
6.2%
9.3
0.6%
83.0
5.5%
27.4
33%
55.6
3.7%
$1.00
$0.94
52.3
60.9
7.0%
61.9
94.7
7.9%
62.0
107.4
7.4%
62.0
31.4
8.3%
62.0
31.8
8.0%
62.0
29.5
8.0%
62.0
29.4
8.2%
62.0
122.0
8.1%
62.0
123.3
8.2%
Q4E
2013
2014
Q1
2015E
Q2E
Q3E
Q4E
2015E
2016E
Operating activities
Net income
Items not affecting cash
Depreciation & amortization
Deferred income taxes
Other
Cash Provided From Operations
Changes in non-cash w orking capital items
Cash Provided From Operations
27
27
11
13
11
11
46
56
24
(6)
1
29
(24)
5
28
(11)
9
53
(23)
30
36
(1)
20
81
(35)
46
10
1
3
24
5
29
10
0
0
22
7
30
10
0
0
21
(10)
11
10
0
0
21
2
23
38
1
2
88
4
92
31
0
0
87
11
97
Financing activities
Long-term debt (net of repayments)
Issue (repayment) of capital lease
Proceeds from share issue
Dividends on common shares
Share repurchases
Other
Cash Provided From Financing
45
(2)
0
(34)
0
(4)
4
13
(2)
114
(29)
0
(2)
93
5
(2)
0
(30)
0
(3)
(29)
(27)
(0)
0
(7)
0
0
(34)
0
(1)
0
(7)
0
0
(7)
(13)
(1)
0
(7)
0
0
(20)
(10)
(1)
0
(7)
0
0
(17)
(50)
(2)
0
(27)
0
0
(79)
(50)
(2)
0
(28)
0
0
(80)
Investing activities
Purchase of property, plant and equipment
Business acquisitions
Dispositions of property, plant and equipment
Other
Cash Used for Investing
Effect of FX translation on cash
Change in Cash
Beginning Cash Balance (Deficit)
Ending Cash Balance (Deficit)
(11)
0
0
(0)
(11)
2
0
10
10
(15)
(102)
0
(6)
(123)
0
1
11
12
(11)
0
0
(0)
(11)
(0)
6
12
17
(4)
0
0
(0)
(4)
(0)
(10)
17
8
(9)
0
0
0
(9)
0
14
8
21
(3)
0
0
0
(3)
0
(12)
21
9
(3)
0
0
0
(3)
0
3
9
12
(18)
0
0
(0)
(18)
(0)
(5)
17
12
(10)
0
0
0
(10)
0
7
12
19
348
BALANCE SHEET
In millions of US$
2012
2013
2014
Q1
2015E
Q2E
Q3E
Q4E
2015E
2016E
Cash
Accounts receivable
Inventories
Other
Total Current Assets
11
113
125
5
254
12
230
183
8
433
17
212
230
6
465
8
187
232
4
430
21
197
233
4
455
9
195
217
4
425
12
193
210
4
419
12
193
210
4
419
19
186
209
4
418
Fixed assets
Intangible assets
Unused ITC
Goodw ill
Future income tax assets
Other
Total Assets
42
326
65
357
202
49
23
897
212
55
14
1,136
64
332
0
213
62
0
1,136
64
326
0
213
68
0
1,101
69
321
0
213
68
0
1,125
66
316
0
213
68
0
1,089
64
311
0
213
68
0
1,075
64
311
0
213
68
0
1,075
59
295
0
213
68
0
1,053
151
23
7
40
9
230
213
58
26
35
3
334
233
41
32
40
8
354
226
23
35
13
20
318
245
23
35
13
20
336
217
23
35
0
20
296
210
23
35
0
20
289
210
23
35
0
20
289
213
23
35
0
20
291
9
122
186
0
6
553
0
115
225
0
6
681
1
108
207
0
13
683
1
106
208
0
12
644
1
106
208
0
12
662
1
106
208
0
11
621
1
106
198
0
11
604
1
106
198
0
11
604
1
106
148
0
9
554
474
(130)
897
588
(133)
1,136
588
(136)
1,136
589
(131)
1,101
589
(125)
1,125
589
(121)
1,089
589
(117)
1,075
589
(117)
1,075
589
(89)
1,053
Share capital
Retained earnings
Total Liabilities & Shareholders' Equity
349
Quarterly Price
18
14
14
12
12
18
16
16
14
14
12
12
10
10
10
10
2) Mkt
6
1) NR
4
NFI Relative to S&P/TSX Comp.
NFI Relative to Machinery
4
NFI Relative to S&P/TSX Comp.
NFI Relative to Machinery
600
600
400
400
300
300
400
400
200
200
200
200
100
100
0
2012
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Revenue / Share
Price / Revenue
300
1.0
200
2013
2014
200
200
0.5
100
-200
2012
0.0
EPS (4 Qtr Trailing)
Price / Earnings
2013
-200
2014
400
200
0
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
FYE
(Dec.)
EPS
$
2011
2012
2013
2014
0.81
0.22
0.49
0.48
Range*:
Current*
0.48
P/E
Hi - Lo
9.5
40.5
24.2
29.4
6.4
23.6
15.9
21.6
40.5
6.4
32.8
DPS
$
Yield%
Hi - Lo
Payout
%
BV
$
P/B
Hi - Lo
0.86
0.59
0.59
0.59
16.5 11.2
11.3 6.6
7.5 4.9
5.7 4.2
>100
>100
>100
>100
8.2
7.7
8.1
8.1
0.9
1.2
1.5
1.7
0.6
0.7
1.0
1.3
1.7
0.6
>100
10.2
16.5
0.62
4.2
4.0
1.5
ROE
%
3
6
6
1
2
Date
29-Oct-12
3-Jul-13
Rating Change
Mkt to NR
NR to Mkt
Share Price
$7.75
$11.14
350
IMPORTANT DISCLOSURES
Analyst's Certification
I, Bert Powell, CFA, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I
also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this
report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their
affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating
new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA (exceptions:
Alex Arfaei and Brodie Woods). These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the
NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a
research analyst account.
Company Specific Disclosure
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the
past 12 months.
Disclosure 6: This issuer is a client (or was a client) of BMO NB, BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12 months:
Non-Securities Related Services.
Disclosure 13: A partner, director, officer, employee or agent of BMO Capital Markets is an officer, director, employee of, or serves in an advisory
capacity to, this issuer: Brian Tobin (Member of Board of Directors)
Methodology and Risks to Price Target/Valuation
Methodology: Our $16.00 target is based on ~7.0x our 2016E EBITDA.
Risks: A significant portion of new transit bus purchases are funded from government sources. As long as federal, state/provincial and municipal
budgets remain under pressure, funding for new bus purchases could be reduced or eliminated. Other risks include: price volatility of raw materials,
warranty costs could be material, labour disruptions from its predominantly unionized workforce and customer contract issues (early termination,
deferral, non-renewal).
Distribution of Ratings (March 31, 2015)
Rating
BMOCM US
BMOCM US
BMOCM US
BMOCM
BMOCM
Starmine
Category
BMO Rating
Universe*
IB Clients**
IB Clients***
Universe****
IB Clients*****
Universe
Buy
Outperform
43.7%
18.6%
58.2%
42.7%
55.5%
54.1%
Hold
Market Perform
51.4%
10.4%
38.5%
52.1%
41.9%
40.5%
Sell
Underperform
4.9%
9.4%
3.3%
5.2%
2.6%
5.5%
*
Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.
**
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as
percentage within ratings category.
***
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking
services as percentage of Investment Banking clients.
**** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.
***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as
percentage of Investment Banking clients.
Rating and Sector Key (as of April 5, 2013):
We use the following ratings system definitions:
OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis
Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis
Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis
(S) = speculative investment;
NR = No rating at this time;
R = Restricted Dissemination of research is currently restricted.
BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US
Large Cap, US Small cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating).
351
352
Financial Group
353
BUY
unchanged
PRICE TARGET
from C$15.00
Price (8-May)
Ticker
C$16.00
C$14.69
NFI-TSX
11.53 - 14.90
0.08
815
0.62
4.2
62.0
13.1
210.9
www.newflyer.com
2014A
2015E
2016E
2017E
1.18
1.18
0.5
1.30
1.37
0.5
1.52
1.46
0.4
1.61
1.55
0.4
Sales (US$M)
Previous
ROIC (%)
Quarterly FCF /
Shr
2014A
2015E
2016E
2017E
Q1
Q2
Q3
Q4
0.19
0.22A
0.41
0.44
0.29
0.38
0.39
0.41
0.32
0.35
0.36
0.38
0.38
0.35
0.36
0.38
15.5
15
14.5
14
13.5
13
12.5
12
11.5
Apr- 15
May- 15
Mar- 15
Jan- 15
Feb- 15
Dec- 14
Oct- 14
Nov- 14
Sep- 14
Jul- 14
Aug- 14
Jun- 14
11
NFI
Source: FactSet
Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX | CF. : LSE)
The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all
the companies and securities that are the subject of this report discussed herein.
For important information, please see the Important Disclosures beginning on page 14 of this document.
354
Q 1/15
0.15
EPS (C$)
Free cash flow per share (C$)
CG es t . Con s en s u s
0.15
0.19
0.22
0.16
0.34
0.14
Q 1/14
0.15
Q 4/14
0.10
0.19
0.13
0.15
0.38
Payout ratio
66%
43%
77%
38%
291
260
251
337
Aftermarket revenue
Revenue
90
380
80
340
349
73
324
420
EBITDA
EBITDA margin
31.4
8.3%
26.3
7.7%
26.3
7.5%
19.7
6.1%
83
35.0
8.3%
(5)
572
572
554
680
508
26
16.7
455
25
12.0
453
14
11.9
495
11.9
392
1,922
392
1,922
886
2,608
2,102
34
759
Return on capital
7.6%
6.2%
3.9%
6.1%
1.24
1.23
1.10
1.14
Auto Components 2
355
Auto Components 3
356
Auto Components 4
357
Figure 2: Revised Canaccord Genuity forecast for New Flyer: limited changes
Yrs E n ded D ec . 31 ( $M )
Dividend/share (C$)
% change
Free cash flow/share (C$) 1
% change
EBITDA
EBITDA margin
2015E
New
Old
Fc s t
Fc s t
0.608 0.585
4%
0%
2016E
New
Old
Fc s t
Fc s t
0.620 0.585
2%
0%
2017E
New
Old
Fc s t
Fc s t
0.620 0.585
0%
0%
2018E
New
Old
Fc s t
Fc s t
0.620 0.585
0%
0%
2019E
New
Old
Fc s t
Fc s t
0.620 0.585
0%
0%
2014
0.59
n.m.
Q 1/15
0.15
0%
0.71
#N/A
0.55
97%
0.33
n.m.
0.50
n.m.
1.24
73%
1.56
119%
1.21
-2%
1.12
-28%
1.32
9%
1.28
14%
1.36
3%
1.32
3%
1.40
2%
1.34
2%
82%
27%
46%
29%
49%
38%
51%
52%
47%
46%
45%
44%
44%
44%
1,451
21%
380
17%
398
15%
394
14%
1,561
8%
1,460
1%
1,580
1%
1,450
-1%
1,618
2%
1,479
2%
1,657
2%
1,511
2%
1,698
2%
1,541
2%
91
6.3%
30
7.8%
30
7.6%
29
7.3%
120
7.7%
111
7.6%
123
7.8%
117
8.0%
131
8.1%
124
8.4%
133
8.1%
126
8.3%
136
8.0%
128
8.3%
18
20
17
16
16
16
16
16
Payout ratio
Revenue
% change
Q 2/15E
New
Old
Fc s t
Fc s t
0.152 0.146
4%
0%
46
(0)
(5)
20
(6)
2,437
465
24
50
572
508
26
17
625
508
26
14
701
455
25
11
2,447
508
26
58
2,578
455
25
46
2,500
511
27
56
2,578
458
27
47
2,548
514
29
57
2,614
461
29
48
2,596
517
29
58
2,652
464
29
49
2,648
520
29
59
2,688
467
29
50
2,263
2,102
392
1,922
685
1,982
729
1,950
2,447
2,102
2,578
2,102
2,500
2,102
2,578
2,102
2,548
2,102
2,614
2,102
2,596
2,102
2,652
2,102
2,648
2,102
2,688
2,102
Return on capital
CAD / USD (period average)
1
5.2%
1.104
7.6%
1.242
11.9%
1.230
7.3%
1.250
10.5%
1.230
6.8%
1.245
11.7%
1.230
7.7%
1.250
12.2%
1.230
8.7%
1.250
12.3%
1.230
9.2%
1.250
12.3%
1.230
9.8%
1.250
NCWC means non-cash working capital. Positive number means NCWC generates cash.
Auto Components 5
358
VALUATION
NFIs yields (Figure 3) and valuation (Figure 4) appear to be settling into a new range.
The companys dividend yield seems to be settling into the 4-5% range (about 2.5%
over the 10-year Canada bond yield) and EV/EBITDA is stable in the 7-8x NTM EBITDA
range.
Figure 3: NFI distribution/dividend yields settling into the 4-5% range, or roughly 2.5% above the 10-year Canada bond yield
NFIs dividend yield also appears to have converged with other high-yield industrial
names (Figure 5).
Auto Components 6
359
Figure 5: We think a mid-point valuation multiple is reasonable versus industrial high yield companies
Eq ui ty Pr i ce :
Ne w F l y e r I nd ustr i e s
Mar k et
Cur .
M a y . 10,
Cur .
Year
2015
Di v.
2015
$14. 69
$0. 59
Co nse nsus A ve r a ge
Di v.
EB I TDA
Cur .
Pa y o ut
Ca p .
Cur .
Y i e l d F CF PS
r a ti o
($M )
EPS
4. 0%
$1. 37
4. 4%
De b t/
P/E
Gr o wth
Ca p ('15- '17)
42. 6%
5. 7%
68. 2%
17. 5 39. 0%
8. 8%
Chorus Aviation
2015
$6.06
$0.48
7.9%
$1.01
47.5%
$732 $0.72
8.5
88.4%
12.9%
Davis + Henderson
2014
$41.12
$1.28
3.1%
$2.19
58.4%
$4,341 $2.68
15.4
41.2%
9.3%
Westshore Terminals
2014
$33.45
$1.32
3.9%
$1.25
105.3%
$2,484 $1.84
18.2
0.0%
2.1%
Cineplex Galaxy
2015
$48.53
$1.57
3.2%
$1.79
87.4%
$3,061 $2.14
22.6
32.1%
14.0%
Note that the New Flyer dividend is the new sustainable dividend level
Source: Company reports, Bloomberg, Canaccord Genuity Research estimates
We have maintained our valuation multiple at 7.5x EV/NTM EBITDA (or 7.5x Q1/16E
EV / Q2/16E - Q1/17E EBITDA), given that the stock has traded in this range for some
time (average of 7.7x over the past 60 months). We think our target multiple is well
supported by NFIs 4.2% dividend yield. We think the dividend upside potential from
forecasted stronger future free cash further strengthens the dividend yield support
argument.
Our target multiple generates a target dividend yield of 3.9% and a FCFPS yield of
9.7%, both of which seem reasonable relative to comparable companies and
appropriately better than in the past, reflecting NFIs improved risk profile.
Our valuation also translates into a reasonable to attractive 2.2% dividend yield and
8.0% FCFPS spreads over Government of Canada bond rates, which reflects the much
higher risk of NFI versus government bonds.
Auto Components 7
360
1-year
t arget
125.2
2-year
t arget
131.5
Multiplier
EV
Debt (excludes unit debt)
Enterprise value to shareholders
7.5
939.3
(121.1)
818.2
7.5
986.2
(86.1)
900.2
62.0
13.20
16.00
62.0
14.52
18.00
0.62
16.62
1.24
19.24
13.1%
31.0%
3.9%
9.7%
3.4%
9.0%
2.2%
8.0%
FCFPS C$
1.54
1.62
Our target was increased C$1.00 to C$16.00 due to our stronger forecast and our
usual one quarter valuation period roll forward.
We have maintained our rating at BUY, given the attractive implied one-year
investment return. Our current target and estimated dividend currently produces a
16.0% one-year implied investment return (including a 4.3% dividend yield).
Auto Components 8
361
Figure 7: Canaccord Genuity Researchs forecast for New Flyer Industries Dividend payout analysis
Y ears ended Dec. 3 1 ($ m illions)
F ree cash
Cash from operations
Change in working capital
Interest paid
Interest expense
Income taxes paid
Current income tax expense
Principal portion of capital lease payments
Capital expenditures
Proceeds from sale of redundant assets
Business acquisition cost
Costs associated with strategic initiatives
Defined benefit funding
Defined benefit expense
Realized investment tax credits
Foreign exchange impact on cash
Free cash flow
Exchange rate
Free cash flow (CAD)
Declared dividends (CAD)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
Q1 /1 5 Q2 /1 5 E Q3 /1 5 E Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
5.5
24.0
17.1
(14.6)
6.5
(12.8)
(2.4)
(4.0)
0.7
7.3
(1.8)
2.2
27.8
0.001
27.8
33.1
30.0
23.0
10.9
(11.6)
19.0
(23.8)
(2.0)
(13.8)
1.2
6.0
8.7
(2.8)
(1.5)
0.2
43.4
1.039
45.1
30.7
17.5
(7.9)
3.8
(3.1)
4.4
(3.4)
(0.4)
(3.3)
0.4
2.1
(0.7)
0.0
9.5
1.109
10.6
8.1
1.1
18.9
3.8
(3.4)
4.4
(8.2)
(0.3)
(1.5)
0.2
0.1
(0.7)
0.4
14.7
1.085
15.9
8.1
0.5
21.8
1.8
(2.9)
1.6
(4.1)
(0.5)
(1.9)
0.0
0.2
0.8
(0.7)
(0.4)
16.3
1.097
17.9
8.1
26.9
2.5
2.2
(3.0)
1.5
(11.2)
(0.6)
(1.7)
2.8
0.5
(0.6)
(0.6)
(0.1)
18.6
1.136
21.1
8.1
45.8
35.3
11.6
(12.4)
12.0
(26.8)
(1.8)
(8.4)
0.6
3.1
3.5
(2.6)
(0.6)
(0.2)
59.1
1.104
65.5
32.5
28.7
(4.6)
4.0
(3.1)
2.1
(13.7)
(0.5)
(4.3)
1.3
0.8
(0.7)
(0.2)
9.8
1.252
12.3
8.1
22.3
(2.5)
3.0
(3.0)
7.3
(7.3)
(0.7)
(2.0)
0.8
(0.7)
17.2
1.230
21.2
8.4
16.7
1.6
3.0
(3.0)
8.6
(8.6)
(0.7)
(2.0)
0.8
(0.7)
15.7
1.230
19.3
8.6
13.3
5.1
3.0
(3.0)
8.6
(8.6)
(0.7)
(2.0)
0.8
(0.7)
15.7
1.230
19.3
8.6
81.0
(0.4)
13.1
(12.2)
26.5
(38.2)
(2.4)
(10.3)
1.3
3.1
(3.0)
(0.2)
58.5
1.230
72.1
33.8
73.2
5.8
11.9
(11.9)
32.5
(32.5)
(2.6)
(8.0)
3.1
(3.0)
68.4
1.230
84.2
34.4
78.7
4.7
11.5
(11.5)
35.9
(35.9)
(2.6)
(8.0)
3.1
(3.0)
72.9
1.230
89.6
34.4
80.9
3.9
11.1
(11.1)
37.3
(37.3)
(2.6)
(8.0)
3.1
(3.0)
74.3
1.230
91.4
34.4
82.6
3.9
10.7
(10.7)
38.7
(38.7)
(2.6)
(8.0)
3.1
(3.0)
76.0
1.230
93.5
34.4
44.4
51.9
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
0.63
0.75
0.87
0.58
0.19
0.15
0.29
0.15
0.32
0.15
0.38
0.15
1.18
0.59
0.22
0.15
0.38
0.15
0.35
0.16
0.35
0.16
1.30
0.61
1.52
0.62
1.61
0.62
1.65
0.62
1.68
0.62
Auto Components 9
362
Figure 8: Canaccord Genuity Researchs forecast for New Flyer Industries Income statement
Y ears ended Dec. 3 1 ($ m illions)
Incom e statem ent
Revenues
Cost of sales and SG&A
Foreign exchange gain (loss)
EBITDA
Depreciation & amortization
Unrealized FX gain (loss)
Fair value adjustments
Other
Operating profit (EBIT)
Interest expense on long-term debt
Other interest and bank charges
Fair value adjustment on int rate swaps
Other expenses
Distributions on B and C shares
Pre-tax income
Income taxes
Net Income (loss)
Div. per share/Dist. per unit (C$)
FCFPS/Dist. cash per IDS (C$)
FCFPS (CFO - Capex) (C$)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
865.3 1,199.4
(810.2) ######
2.8
(0.1)
57.8
79.1
(24.3)
(28.0)
(1.4)
(2.1)
(1.4)
0.0
(5.5)
0.0
25.2
49.0
(11.9)
(8.7)
(2.7)
(2.9)
0.8
(0.5)
(2.8)
(2.2)
0.0
0.0
10.0
34.6
(0.7)
(7.9)
9.3
26.8
323.9
(305.0)
(0.8)
18.1
(7.7)
(0.4)
0.0
0.0
10.0
(2.3)
(0.8)
0.3
(0.5)
0.0
6.7
(1.2)
5.5
346.5
(322.3)
(0.4)
23.8
(8.1)
1.0
0.0
(3.9)
12.8
(2.3)
(1.2)
(0.4)
(0.5)
0.0
8.4
(4.8)
3.6
360.8
(337.6)
(0.2)
22.9
(10.0)
(0.1)
0.0
0.0
12.8
(2.2)
(0.7)
0.8
(0.6)
0.0
10.1
0.2
10.2
420.0 1,451.1
(393.4) (1,358.3)
(0.1)
(1.5)
26.5
91.3
(10.0)
(35.8)
0.3
0.8
0.0
0.0
(0.9)
(4.8)
15.9
51.4
(2.2)
(8.9)
(0.8)
(3.5)
0.1
0.8
(0.6)
(2.2)
0.0
0.0
12.4
37.6
(5.0)
(10.8)
7.4
26.7
Q1 /1 5 Q2 /1 5 E Q3 /1 5 E Q4 /1 5 E
380.3
(352.1)
1.5
29.7
(9.5)
(1.9)
0.0
0.0
18.2
(2.3)
(0.7)
(0.5)
(0.6)
0.0
14.1
(3.3)
10.9
397.6
(367.4)
0.0
30.3
1.1
0.0
0.0
0.0
31.3
(2.3)
(0.7)
0.0
0.0
0.0
28.3
(9.3)
19.0
391.6
(361.7)
0.0
29.9
1.0
0.0
0.0
0.0
31.0
(2.3)
(0.7)
0.0
0.0
0.0
27.9
(10.6)
17.4
2015E
2016E
2017E
2018E
2019E
0.75
0.63
(0.10)
0.58
0.87
0.26
0.15
0.19
0.28
0.15
0.29
(0.01)
0.15
0.32
(0.04)
0.15
0.38
0.49
0.59
1.18
0.71
0.15
0.22
0.55
0.15
0.38
0.33
0.16
0.35
0.22
0.16
0.35
0.15
0.61
1.30
1.24
0.62
1.52
1.21
0.62
1.61
1.32
0.62
1.65
1.36
0.62
1.68
1.40
52.3
58.9
55.5
55.6
55.7
55.7
55.6
55.8
62.0
62.0
62.0
60.4
62.0
62.0
62.0
62.0
-6.6%
-0.4%
-30.6%
6.7%
38.6%
38.4%
-21.5%
6.6%
32.1%
26.8%
0.0%
5.6%
30.0%
56.0%
0.0%
6.9%
16.8%
36.0%
0.0%
6.4%
10.9%
34.4%
0.0%
6.3%
21.0%
36.0%
0.0%
6.3%
17.4%
16.6%
0.0%
7.8%
14.8%
32.9%
4.0%
7.6%
8.6%
7.9%
6.0%
7.6%
-6.7%
-8.5%
6.0%
7.6%
7.6%
10.1%
4.0%
7.7%
1.2%
16.6%
1.9%
7.8%
2.4%
6.5%
0.0%
8.1%
2.4%
2.0%
0.0%
8.1%
2.5%
2.3%
0.0%
8.0%
3.9%
5.3%
3.9%
5.9%
4.8%
6.1%
5.2%
7.6%
11.9%
11.7%
11.5%
10.5%
11.7%
12.2%
12.3%
12.3%
Bus revenues
Bus EBITDA (excl. FX gains/losses)
Bus sales growth
Bus EBITDA % (excl. FX gains/losses)
Deliveries
Revenue/unit
EBITDA/unit
LTM EBITDA/unit
753.9
42.0
-7.0%
5.6%
1,656
455
25
25
984.4
63.6
30.6%
6.5%
2,191
449
29
29
250.9
7.8
20.7%
3.1%
554
453
14
27
265.8
13.9
23.5%
5.2%
582
457
24
28
278.7
12.6
11.2%
4.5%
621
449
20
26
336.6
23.2
7.5%
6.9%
680
495
34
24
1132.1
57.4
15.0%
5.1%
2,437
465
24
24
290.7
14.7
15.9%
5.1%
572
508
26
26
317.6
16.3
19.5%
5.1%
625
508
26
27
317.6
16.3
14.0%
5.1%
625
508
26
28
317.6
16.3
-5.6%
5.1%
625
508
26
26
1243.7
63.5
9.9%
5.1%
2,447
508
26
26
1278.1
67.5
2.8%
5.3%
2,500
511
27
27
1310.3
73.9
2.5%
5.6%
2,548
514
29
29
1342.7
75.3
2.5%
5.6%
2,596
517
29
29
1377.6
76.8
2.6%
5.6%
2,648
520
29
29
Aftermarket revenues
Aftermarket EBITDA (excl. FX)
Aftermarket sales growth
Aftermarket EBITDA % (excl. FX)
119.1
19.6
2.6%
16.4%
215.0
31.0
80.6%
14.4%
73.0
11.9
95.4%
16.3%
80.7
13.1
57.1%
16.2%
82.0
13.1
40.7%
16.0%
83.4
11.9
22.6%
14.2%
319.0
50.0
48.4%
15.7%
89.6
16.7
22.8%
18.6%
80.0
14.0
-0.8%
17.5%
74.0
13.7
-9.8%
18.5%
74.0
13.7
-11.2%
18.5%
317.6
58.1
-0.5%
18.3%
302.0
55.9
-4.9%
18.5%
308.0
57.0
2.0%
18.5%
314.0
58.1
1.9%
18.5%
320.4
59.3
2.0%
18.5%
Auto Components 10
363
Figure 8: Canaccord Genuity Researchs forecast for New Flyer Industries Balance sheet
Y e ars e nde d De c. 3 1 ($ m illio ns)
Balance she e t
Cash
Accounts receivable
Inventories
Prepaid expenses and deposits
Derivative financial instruments
Future income tax assets
Other
Total current assets
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
11.2
113.5
124.7
4.7
0.0
0.0
0.0
254.1
11.9
230.3
183.3
7.7
0.0
0.0
0.0
433.2
14.2
201.0
207.7
6.6
0.0
1.6
0.0
431.1
4.3
146.3
246.4
5.7
0.0
3.2
0.0
406.0
8.7
164.1
267.4
4.6
0.1
3.4
0.0
448.2
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
7.6
186.9
232.0
3.5
0.1
0.0
0.0
430.0
17.5
192.3
218.8
3.7
0.1
0.0
0.0
432.3
21.8
193.7
218.8
3.6
0.1
0.0
0.0
437.9
Capital assets
Deferred charges
Intangible assets
Future income tax assets
Derivative financial instruments
Accrued benefit asset
Total assets
42.0
0.0
528.5
72.6
0.0
0.0
897.2
64.8
0.0
568.9
68.9
0.0
0.0
1,135.9
65.5
0.0
564.1
67.6
0.0
1.1
1,129.4
65.4
0.0
556.1
65.7
0.0
0.5
1,093.7
65.2
0.0
550.7
65.0
0.0
0.0
1,129.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
64.3
0.0
539.1
67.9
0.0
0.0
1,101.4
65.5
0.0
544.5
67.9
0.0
0.0
1,110.3
Bank indebtedness
Accounts payable & accrued liabs
Due to parent company
Deferred revenue
Provision for warranty costs
Current portion of capital leases
Current portion of LTD
Other current liabilities
Total current liabilities
0.0
150.8
0.0
19.2
20.1
1.9
40.0
6.8
238.8
0.0
212.9
0.0
57.6
26.1
1.3
35.0
1.5
334.4
0.0
225.5
0.0
55.4
25.1
1.1
30.0
0.5
337.6
0.0
204.5
0.0
47.7
25.1
1.3
30.0
1.8
310.3
0.0
227.1
0.0
36.8
28.7
1.7
45.0
3.9
343.2
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
226.5
0.0
23.0
35.0
1.6
13.0
18.6
317.6
9.0
2.3
122.2
177.7
2.0
1.2
0.2
1.8
114.8
198.6
2.5
28.3
0.0
1.6
113.2
199.1
2.2
22.1
0.0
2.7
112.2
199.6
2.6
16.5
0.6
3.4
110.5
200.0
1.8
17.4
1.0
3.2
108.5
200.5
1.7
14.7
1.0
3.2
108.5
200.5
1.7
14.7
0.9
2.9
105.5
201.0
2.2
13.9
0.0
480.8
(136.8)
0.0
593.3
(138.2)
0.0
593.6
(140.0)
0.0
593.8
(143.9)
0.0
594.1
(141.8)
0.0
594.5
(141.8)
0.0
594.5
(141.8)
Q1 /1 5 Q2 /1 5 E Q3 /1 5 E Q4 /1 5 E
0.0
594.7
(137.5)
2015E
2016E
2017E
2018E
2019E
22.6
198.0
218.8
3.6
0.1
0.0
0.0
443.0
22.6
198.0
218.8
3.6
0.1
0.0
0.0
443.0
55.7
199.7
222.3
3.7
0.1
0.0
0.0
481.4
94.3
204.5
225.8
3.8
0.1
0.0
0.0
528.4
135.0
209.4
229.3
3.9
0.1
0.0
0.0
577.6
177.4
214.6
232.8
3.9
0.1
0.0
0.0
628.7
66.7
0.0
549.8
67.9
0.0
0.1
1,122.4
67.8
0.0
555.2
67.9
0.0
0.1
1,134.0
67.8
0.0
555.2
67.9
0.0
0.1
1,134.0
62.7
0.0
576.6
67.9
0.0
0.2
1,188.8
58.9
0.0
598.0
67.9
0.0
0.3
1,253.5
56.0
0.0
619.4
67.9
0.0
0.4
1,321.3
54.0
0.0
640.8
67.9
0.0
0.5
1,391.9
0.0
222.1
0.0
23.0
35.0
1.6
13.0
17.8
312.4
0.0
222.6
0.0
23.0
35.0
1.6
13.0
17.1
312.2
0.0
222.6
0.0
23.0
35.0
1.6
13.0
16.3
311.4
0.0
222.6
0.0
23.0
35.0
1.6
13.0
16.3
311.4
0.0
224.1
0.0
23.0
35.0
1.6
13.0
14.2
310.9
0.0
228.8
0.0
23.0
35.0
1.6
13.0
13.2
314.6
0.0
234.4
0.0
23.0
35.0
1.6
13.0
12.2
319.1
0.0
240.3
0.0
23.0
35.0
1.6
13.0
11.2
324.0
0.9
2.9
107.5
201.0
2.2
13.9
0.9
2.9
109.5
201.0
2.2
13.9
0.9
2.9
111.5
201.0
2.2
13.9
0.9
2.9
111.5
201.0
2.2
13.9
0.9
2.9
119.4
201.0
2.2
13.9
0.9
2.9
127.3
201.0
2.2
13.9
0.9
2.9
135.2
201.0
2.2
13.9
0.9
2.9
143.1
201.0
2.2
13.9
0.0
594.7
(125.3)
0.0
594.7
(114.9)
0.0
594.7
(104.6)
0.0
594.7
(104.6)
0.0
594.7
(57.1)
0.0
594.7
(4.1)
0.0
0.0
594.7
51.3
594.7
109.0
897.2
1,135.9
1,129.4
1,093.7
1,129.1
1,136.1
1,136.1
1,101.4
1,110.3
1,122.4
1,134.0
1,134.0
1,188.8
1,253.5
1,321.3
1,391.9
10.8
46.0
15.4
123.2
3.5
110.5
1.8
122.7
2.5
143.1
2.8
135.7
10.7
135.7
5.5
119.4
5.5
117.0
5.5
118.5
5.5
123.6
21.9
123.6
12.0
129.4
12.1
134.1
12.2
138.0
12.3
141.9
210.7
3.6x
7.75
21.8x
224.7
2.8x
8.77
22.4x
217.6
1.4x
8.18
19.9x
229.3
1.5x
8.11
21.2x
241.5
2.5x
8.15
22.1x
227.8
2.5x
8.15
26.0x
227.8
2.5x
8.16
22.6x
210.9
2.1x
8.24
23.8x
201.0
1.8x
8.46
24.5x
196.7
1.7x
8.64
23.7x
195.9
1.6x
8.83
23.3x
195.9
1.6x
8.83
23.7x
162.8
1.3x
9.69
24.2x
124.2
0.9x
10.64
26.6x
83.5
0.6x
11.64
28.8x
41.1
0.3x
12.68
30.9x
Auto Components 11
364
Figure 8: Canaccord Genuity Researchs forecast for New Flyer Industries Cash flow statement
Y ears ended Dec. 3 1 ($ m illio ns)
C ash flo w statem ent
Net income
Amortization of fixed assets
Amortization of intangibles
Amortization of deferred charges
Loss on disposition of PP&E
Future income taxes (recovery)
Unrealized gain on int rate swap
Unrealized FX gain (loss)
Fair value adjustments
Defined benefit expense
Defined benefit funding
Items not affecting cash
Other
Cash from operations before WC
Change in working capital
Cash from operations after WC
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2014
9.8
8.3
16.0
0.0
0.0
1.5
0.0
1.4
1.4
3.6
(7.3)
(2.2)
(2.9)
29.5
(24.0)
5.5
26.8
9.6
18.4
0.0
0.0
17.5
0.0
2.1
0.0
2.8
(8.7)
0.1
(15.6)
53.0
(23.0)
30.0
5.5
2.9
4.8
0.0
0.0
2.2
0.0
0.4
0.0
0.7
(2.1)
3.3
(8.0)
9.6
7.9
17.5
3.6
3.3
4.8
0.0
0.0
4.8
0.0
(1.0)
0.0
0.7
0.0
4.4
(0.6)
19.9
(18.9)
1.1
10.2
4.6
5.4
0.0
0.0
2.4
0.0
0.1
0.0
0.7
(0.8)
(3.4)
3.1
22.3
(21.8)
0.5
7.4
4.6
5.4
0.0
0.0
14.9
0.0
(0.3)
0.0
0.6
(0.5)
(3.4)
0.7
29.3
(2.5)
26.8
26.7
15.4
20.5
0.0
0.0
24.3
0.0
(0.8)
0.0
2.6
(3.5)
0.8
(4.9)
81.1
(35.3)
45.8
10.9
4.2
5.3
0.0
0.0
3.4
0.0
1.9
0.0
0.7
(0.8)
0.4
(2.0)
24.1
4.6
28.7
19.0
4.3
(5.4)
0.0
0.0
2.0
0.0
0.0
0.0
0.7
(0.8)
0.0
0.0
19.9
2.5
22.3
17.4
4.3
(5.4)
0.0
0.0
2.0
0.0
0.0
0.0
0.7
(0.8)
0.0
0.0
18.3
(1.6)
16.7
Investing
Additions to capital assets
Net funds used in investing
(10.8)
(11.0)
(15.4)
(122.5)
(3.5)
(3.6)
(1.8)
(1.8)
(2.5)
(2.6)
(2.8)
(2.9)
(10.7)
(10.9)
(4.3)
(4.3)
(5.5)
(5.5)
Financing
Bank indebtness, net
Proceeds from issue of long-term debt
Redemption of class B and C shares
Repayment of long-term debt
Repayment of capital leases
Deferred debt financing costs
Due to parent company
Share issuance
Dividends
Net funds from financing
0.0
103.2
0.0
(62.4)
(2.4)
0.0
0.0
0.0
(34.0)
4.3
0.0
12.6
0.0
0.0
(2.0)
0.0
0.0
111.7
(29.3)
93.0
0.0
(3.9)
0.0
0.0
(0.4)
0.0
0.0
0.0
(7.4)
(11.6)
0.0
(1.7)
0.0
0.0
(0.3)
0.0
0.0
0.0
(7.4)
(9.4)
0.0
15.0
0.0
0.0
(0.6)
0.0
0.0
0.0
(7.5)
6.9
0.0
(7.4)
0.0
0.0
(0.5)
0.0
0.0
0.0
(7.2)
(15.1)
0.0
2.1
0.0
0.0
(1.8)
0.0
0.0
0.0
(29.5)
(29.2)
0.0
(27.0)
0.0
0.0
(0.5)
0.0
0.0
0.0
(6.7)
(34.1)
Q1 /1 5 Q2 /1 5 E Q3 /1 5 E Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
17.3
4.4
(5.4)
0.0
0.0
2.0
0.0
0.0
0.0
0.7
(0.8)
0.0
0.0
18.3
(5.1)
13.3
64.6
17.2
(10.7)
0.0
0.0
9.4
0.0
1.9
0.0
3.0
(3.1)
0.4
(2.0)
80.6
0.4
81.0
75.4
17.1
(21.4)
0.0
0.0
7.9
0.0
0.0
0.0
3.0
(3.1)
0.0
0.0
78.9
(5.8)
73.2
81.0
15.9
(21.4)
0.0
0.0
7.9
0.0
0.0
0.0
3.0
(3.1)
0.0
0.0
83.4
(4.7)
78.7
83.4
15.0
(21.4)
0.0
0.0
7.9
0.0
0.0
0.0
3.0
(3.1)
0.0
0.0
84.8
(3.9)
80.9
85.7
14.4
(21.4)
0.0
0.0
7.9
0.0
0.0
0.0
3.0
(3.1)
0.0
0.0
86.5
(3.9)
82.6
(5.5)
(5.5)
(5.5)
(5.5)
(20.8)
(20.8)
(12.0)
(12.0)
(12.1)
(12.1)
(12.2)
(12.2)
(12.3)
(12.3)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(6.9)
(6.9)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(7.0)
(7.0)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(7.0)
(7.0)
0.0
(27.0)
0.0
0.0
(0.5)
0.0
0.0
0.0
(27.5)
(55.0)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(28.0)
(28.0)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(28.0)
(28.0)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(28.0)
(28.0)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(28.0)
(28.0)
2.2
0.2
0.0
0.4
0.0
(0.5)
(0.2)
(0.2)
0.0
0.0
0.0
(0.2)
0.0
0.0
0.0
0.0
1.0
10.1
11.2
0.7
11.2
11.9
2.3
11.9
14.2
(9.9)
14.2
4.3
4.7
4.3
9.1
8.4
9.1
17.5
5.6
11.9
17.5
(9.9)
17.5
7.6
10.0
7.6
17.5
4.2
17.5
21.8
0.8
21.8
22.6
5.1
17.5
22.6
33.2
22.6
55.8
38.6
55.8
94.3
40.7
94.3
135.1
42.3
135.1
177.4
(5.4)
(92.5)
13.9
(0.8)
(2.1)
24.0
34.9
24.4
16.8
11.2
7.8
60.3
61.2
66.6
68.7
70.3
Auto Components 12
365
Investment risks
Potential risks to our investment thesis and target price valuation methodology
include, but are not limited to, availability of government funding and company
execution of contracts.
Auto Components 13
366
Coverage Universe
IB Clients
#
%
%
Buy
575
57.73%
32.00%
Hold
338
33.94%
16.27%
Sell
38
3.82%
2.63%
Speculative Buy
45
4.52%
55.56%
996*
100.0%
*Total includes stocks that are Under Review
Canaccord Genuity Ratings System
BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.
HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.
SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.
NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.
Risk-adjusted return refers to the expected return in relation to the amount of risk associated with the designated investment or the
relevant issuer.
Risk Qualier
SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the
stock may result in material loss.
Canaccord Genuity Company-Specific Disclosures (as of date of this publication)
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Corporate Finance/
Investment Banking services from New Flyer Industries Inc. in the next six months.
Auto Components 14
367
H:C$7.25
08/13/12
H:C$8.00
09/19/12
H:C$8.25
11/14/12
H:C$8.75
01/11/13
H:C$9.25
01/29/13
H:C$9.75
02/06/13
Jul 2012
Oct 2012
Jan 2013
Apr 2013
Jul 2013
Oct 2013
H:C$11.50
05/11/14
H:C$11.75
06/24/14
H:C$12.00
07/16/14
H:C$10.00
03/25/13
H:C$10.25
04/18/13
B:C$11.25
06/24/13
H:C$11.75
08/07/13
H:C$11.25
11/07/13
B:C$12.00
01/15/14
16
14
12
10
8
6
B:C$12.50
03/23/14
B:C$14.00
08/06/14
H:C$14.00
11/09/14
B:C$12.50
12/12/14
Closing Price
Jan 2014
H:C$14.00
01/12/15
Apr 2014
Jul 2014
Oct 2014
Jan 2015
Apr 2015
B:C$15.00
03/19/15
Target Price
Buy (B); Speculative Buy (SB); Sell (S); Hold (H); Suspended (SU); Under Review (UR); Restricted (RE); Not Rated (NR)
General Disclosures
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Canaccord Genuity Inc., Canaccord Genuity Limited, Canaccord Genuity Corp., and Canaccord Genuity (Australia) Limited, an affiliated
company that is 50%-owned by Canaccord Genuity Group Inc.
The authoring analysts who are responsible for the preparation of this research are employed by Canaccord Genuity Corp. a Canadian
broker-dealer with principal offices located in Vancouver, Calgary, Toronto, Montreal, or Canaccord Genuity Inc., a US broker-dealer
with principal offices located in New York, Boston, San Francisco and Houston, or Canaccord Genuity Limited., a UK broker-dealer with
principal offices located in London (UK) and Dublin (Ireland), or Canaccord Genuity (Australia) Limited, an Australian broker-dealer with
principal offices located in Sydney and Melbourne.
The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon
(among other factors) the Corporate Finance/Investment Banking revenues and general profits of Canaccord Genuity. However, such
authoring analysts have not received, and will not receive, compensation that is directly based upon or linked to one or more specific
Corporate Finance/Investment Banking activities, or to recommendations contained in the research.
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that is the subject of this research and may trade in any of the designated investments mentioned herein either for their own account
or the accounts of their customers, in good faith or in the normal course of market making. Accordingly, Canaccord Genuity or their
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Canaccord Genuitys salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies
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Auto Components 15
368
particular person. Investors should obtain advice based on their own individual circumstances before making an investment decision.
To the fullest extent permitted by law, none of Canaccord Genuity, its affiliated companies or any other person accepts any liability
whatsoever for any direct or consequential loss arising from or relating to any use of the information contained in this research.
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This research has been approved by Canaccord Genuity Corp., which accepts sole responsibility for this research and its dissemination
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For United States Residents:
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any matters arising from, or in connection with, the research.
Additional information is available on request.
Copyright Canaccord Genuity Corp. 2015 . Member IIROC/Canadian Investor Protection Fund
Buy unchanged Target Price C$16.00 from C$15.00 | 11 May 2015
Auto Components 16
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Copyright Canaccord Genuity Limited 2015 . Member LSE, authorized and regulated by the Financial Conduct Authority.
Copyright Canaccord Genuity Inc. 2015 . Member FINRA/SIPC
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370
COMPANY UPDATE
NFI | TSX
$14.32
Rating: Outperform
One Year Target: C$18.50
(previously $17.50)
Total Return: 26.5%
Yield: 4.2%
May 8, 2015
C$14.90 / C$11.53
4.3%
Dividend Yield:
55.5 (basic)
55.5 (fd)
C$794.3
33.6
82.0
$212.1
$866.6
2014
Revenue ($mm)
2015e
2016e
EBITDA ($mm)
FD EPS
EBITDA ($m m )
Q1
$107.4
$130.9
$149.4
$0.65
$0.87
$1.13
Q2
Q3
Q4
2014
$19.7
$27.0
$25.7
$35.0
2015
$31.4
$33.1e
$31.3e
$35.1e
2016
$38.0e
$36.9e
$35.8e
$38.8e
Q2
Q3
Q4
$0.16
$0.15
$0.24
Adjusted FD EPS
2014
Q1
$0.10
2015
$0.20
$0.20e
$0.21e
$0.25e
2016
$0.29e
$0.28e
$0.26e
$0.30e
Volume ('000)
800
Last Sale Price
Strong Q1/15 Results: New Flyer announced Q1/15 results reporting revenue,
Adjusted EBITDA and Adjusted FD EPS of $380.3mm, $31.4mm and $0.20. The
results were well ahead of our expectations for revenue, Adjusted EBITDA and
Adjusted FD EPS of $363.2mm, $27.8mm and $0.15 versus consensus estimates of
$349.6mm, $25.3mm and $0.16.
Boosting Dividend Shows Confidence in Outlook: The company announced an
increase in annual dividend rate from C$0.585 to C$0.62 effective for dividends
declared subsequent to May 6, 2015, an increase of 6.0%. Management was hesitant to
disclose any specific metrics related to the increase, however we believe it indicates an
expectation of continuing financial improvement. On the conference call, the company
disclosed that review of the dividend has become a more of a regular process at the
board level, which we believe is constructive for future increases in line with earnings
growth.
Estimate Changes Driven by Aftermarket Margin Expansion: The most
impactful item in the quarter was the remarkably strong EBITDA margin in aftermarket
at 18.6%, which is significantly stronger than the company's recent performance over the
past several quarters. Management explained that the improvement came about as a
result of a number of concerted efforts with the ongoing integration of the various
components of the aftermarket business. Our estimate changes stem from our revised
expectation for margin performance for the companys aftermarket business, where we
have increased margin expectations to 19.1% (+286bps) and 20.0% (+300bps)
respectively. Our 2015e EBITDA increases to $131.3mm (+7.8%) while our 2016e
EBITDA increases by 9.0% to $151.0mm.
600
$10
$5
400
200
$0
0
May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15
Regulatory Disclosures and policy on the dissemination of research: last page or at www.altacorpcapital.com
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$14.32
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
11.3x
8.5x
7.6x
Peer Average
16.1x
13.6x
12.1x
8.2x
6.7x
5.9x
18.0x
13.6x
10.5x
2014
2015e
2016e
2015e
2016e
Trend
Revenues
Bus Manufacturing
Aftermarket
Revenue
303,118
294,666
2014
45,823
78,432 114,728
35,255
18,073
81,078
96,504 107,236
(1,766)
(1,812)
(7,492)
(1,812)
Aftermarket % of Total
22.0%
19.0%
17.2%
57,374
72,378
90,108
5.1%
5.6%
6.4%
49,991
58,151
58,933
15.7%
19.2%
20.0%
86,457
128,775
149,041
6.0%
8.1%
8.7%
107,365
130,529
149,041
per Share
7.4%
8.2%
8.7%
Amortization
35,837
39,818
37,392
Operating Earnings
50,620
88,958
111,649
EBT
37,568
72,628
98,880
2014
2015e
2016e
Taxes
10,849
24,905
36,585
32,457
33,928
34,413
Net Income
26,719
47,723
62,294
35.0%
34.0%
29.9%
Reported FD EPS
$0.48
$0.86
$1.12
Adjusted FD EPS
$0.65
$0.87
$1.12
Cash Yield
2014
2015e
2016e
Revenue
21.0%
10.0%
7.1%
Adjusted EBITDA
Adjusted FD EPS
FX Assum ptions
Average CAD/USD Rate
13.4%
2.7%
2014
0.9057
0.9050
21.6%
32.3%
2015e
0.7916
0.7813
14.2%
29.6%
2016e
0.7945
0.8130
Trend
2014
2015e
2016e
Trend
229,034
195,271
167,270
2.1x
1.5x
1.2x
33.6%
29.2%
25.7%
(154)
(162)
83,667
79,085
91,533
92,829
99,885 115,200
$1.67
$1.80
$2.08
FCF Yield
11.7%
12.6%
14.5%
82.8%
7.6%
15.3%
Grow th
Trend
Trend
$0.585
$0.611
$0.620
4.1%
4.3%
4.3%
2014
2015e
2016e
2,437
2,544
2,650
464.5
23.5
49.2
0.9x
508.2
28.5
50.9
1.0x
533.6
34.0
52.0
1.0x
20.7%
11.0%
17.7%
Trend
Trend
Option
2020, 8%
2015, 18%
$4.0
2019, 21%
$3.0
2016, 11%
$2.0
$1.0
2017, 11%
$0.0
Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314 Q115 Q315
2018, 31%
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Q1/15
Q1/14
y/y
Growth
Q4/14 y/y
Growth
572
508.2
25.8
554
452.9
14.0
3.2%
12.2%
84.1%
7.1%
0.4%
5.9%
3,568.8
3,689.5
(3.3%)
(7.2%)
Operating Segments
Bus Manufacturing
Revenue
EBITDA
EBITDA Margin Reported
EBITDA Margin Normalized
290,711
14,734
5.1%
5.3%
250,889
7,751
3.1%
3.3%
15.9%
90.1%
2.0%
2.0%
7.5%
11.6%
0.4%
0.5%
89,590
16,680
18.6%
72,976
11,915
16.3%
22.8%
40.0%
2.3%
22.6%
24.6%
0.2%
380,301
31,414
10,855
323,865
19,666
5,484
17.4%
59.7%
97.9%
10.2%
(4.9%)
(45.9%)
$0.20
$0.20
$0.10
$0.10
97.8%
105.5%
(46.0%)
(18.0%)
Aftermarket
Revenue
EBITDA
EBITDA Margin
Total
Revenue
Adjusted EBITDA
Reported Net Income
Fully Diluted Earnings Per Share
Reported
Adjusted
Figure 1 Q1/15 Highlights
Source: Company reports, AltaCorp Capital Inc.
Items of Note
The company announced an increase in annual dividend rate from C$0.585 to C$0.62
effective for dividends declared subsequent to May 6, 2015, an increase of 6.0%.
Management was hesitant to disclose any specific metrics related to the increase, however we
believe it indicates an expectation of continuing financial improvement. On the conference
call, the company disclosed that review of the dividend has become a more of a regular
process at the board level, which we believe is constructive for future increases in line with
earnings growth.
NFI reported a 15.9% y/y increase in bus manufacturing revenue at $290.7mm as a result of
increased deliveries and higher average selling price. The company realized a price of
$508.2k/EU during the quarter, 12.2% higher than previous quarter. We highlight the
companys historical revenue per EU in the graph below. We note the overall positive trend in
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pricing although are mindful of the fact that sales mix can materially impact the average
price/EU during the quarters.
Evolution of Revenue per EU
The companys aftermarket revenue increased to $89.6mm (+22.8% y/y) as a result of higher
volume associated the Chicago Transit Authority (CTA) contract. We note excluding the CTA
mid-life overhaul program, the companys aftermarket revenue for Q1/15 was $73.1mm, up
10.1% from Q1/14, which was stronger than expected.
Adjusted EBITDA margin in bus manufacturing was weaker than we had expected at 5.1% of
revenue or $25.8k/EU compared to our estimate for a 5.5% margin and $27.6K/EU, although
we note quarters can be lumpy. The most impactful item in the quarter however, was the
remarkably strong EBITDA margin in aftermarket at 18.6%, which is significantly stronger
than the company's recent performance over the past several quarters and our 15.7% estimate,
made more surprising by the mix of CTA contract work, which we estimate is several
percentage points lower in margin. In discussions with management on the companys
conference call we were left with the impression that the underlying performance of the core
aftermarket business was very strong at 19.5%, assuming an approximate 5% reduction for
CTA contract work. Management explained that the improvement came about as a result of a
number of concerted efforts with the ongoing integration of the various components of the
aftermarket business.
During the quarter, the companys liquidity position increased to $90.3mm compared to
$73.2mm in Q4/14 as a result of increased cash flows from operating activities attributable to
change in non-cash working capital. The company reported a decrease in accounts receivables
and an increase in income taxes payable offset by a decrease in deferred revenue and accounts
payable.
NFI announced the member of the UNIFOR main collective bargaining unit at the companys
Winnipegs facility had ratified a new three year collective bargaining agreement through
March 31, 2018 replacing the previous agreement that expired on March 31, 2015
Forecast and Outlook
Management maintained the Q2/15 date for the completing the transition of NABI bus
product lines to Xcelsior platform at the Anniston facility. In the last quarter, the company
had guided to $20.0mm in capex and direct operating costs of which $4.4mm of costs were
incurred this quarter and NFI invested $4.8mm in capex. The company has revised upwards
the cost reductions and synergies from to $12.2mm (from $11.9mm) in annualized cost
savings. NFI realized a final $0.2mm credit in Q1/15 related to investment tax credits. NFI
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continues to target an average corporate entry line rate of ~51EU per production week.
although we note that production rates may vary during the quarter. Order intake is expected
to remain strong with management describing the demand environment as "robust". The
primary change to our estimates stems from our revised expectation for margin performance
for the companys aftermarket business, where we have increased margin expectations to
19.1% and 20.0% respectively. Our 2015e EBITDA increases to $131.3mm (+7.8%) while
our 2016e EBITDA increases by 9.0% to $151.0mm.
Change in Estimates ($000s, except per share)
Revenue
Bus Manufacturing
Aftermarket
Revenue
Aftermarket % of Total
Change
2015e
2016e
1,281,330 1,397,547
295,968 291,698
1,577,298 1,689,245
18.8%
17.3%
1,292,952 1,414,167
309,279 304,635
1,602,231 1,718,801
19.3%
17.7%
0.9%
4.5%
1.6%
54 bps
1.2%
4.4%
1.7%
46 bps
EBITDA
EBITDA - Bus Manufacturing
Margin - Bus Manufacturing
EBITDA - Aftermarket Ops.
Margin - Aftermarket Ops.
Total EBITDA incl. Other
Margin
73,812
5.8%
47,968
16.2%
121,780
7.7%
89,036
6.4%
49,589
17.0%
138,625
8.2%
72,378
5.6%
58,958
19.1%
129,582
8.1%
90,108
6.4%
60,927
20.0%
151,035
8.8%
(1.9%)
(16) bps
22.9%
286 bps
6.4%
37 bps
1.2%
0 bps
22.9%
300 bps
9.0%
58 bps
Adjusted EBITDA
Margin
121,780
7.7%
138,625
8.2%
131,336
8.2%
151,035
8.8%
7.8%
48 bps
9.0%
58 bps
Operating Earnings
EBT
82,046
68,794
102,644
90,307
89,764
73,434
113,643
100,873
9.4%
6.7%
10.7%
11.7%
Net Incom e
Reported FD EPS
Adjusted FD EPS
43,340
$0.78
$0.78
56,893
$1.02
$1.02
48,231
$0.87
$0.88
63,550
$1.14
$1.14
11.3%
11.3%
12.1%
11.7%
11.7%
11.7%
66,392
89,226
(26,436)
62,223
108,679
99,719
(12,599)
86,552
78,107
97,072
(16,931)
79,653
116,126
108,639
(13,890)
92,937
17.6%
8.8%
(36.0%)
28.0%
6.9%
8.9%
10.3%
7.4%
75,168
$1.35
9.3%
103,853
$1.87
12.9%
96,048
$1.73
11.9%
111,520
$2.01
13.8%
27.8%
27.8%
259 bps
7.4%
7.4%
95 bps
32,471
43.2%
$0.59
32,471
31.3%
$0.59
33,928
35.3%
$0.61
34,413
30.9%
$0.62
4.5%
(787) bps
4.5%
6.0%
(41) bps
6.0%
215,997
1.8x
0.3x
145,345
1.1x
0.2x
196,538
1.5x
0.3x
168,803
1.2x
0.3x
(9.0%)
(15.6%)
(7.0%)
16.1%
7.7%
10.8%
2,554
501.7
28.9
51.1
1.0x
0.0%
2,653
526.8
33.6
52.0
1.0x
19.6%
2,544
508.2
28.5
50.9
1.0x
0.0%
2,650
533.6
34.0
52.0
1.0x
19.6%
(0.4%)
1.3%
(1.6%)
(0.4%)
(0.1%)
0 bps
(0.1%)
1.3%
1.3%
(0.1%)
0.0%
0 bps
Leverage
Net Debt (EOP)
Net Debt to Trailing EBITDA
Net Debt to Total Capitalization
Key Operating Metrics
Bus Deliveries (Equivalent Units (EU))
Revenue Per EU (US$000's)
EBITDA Per EU (US$000's)
Average Weekly Line Entry Rate (EU)
Book:Bill Ratio (New Orders+Exercised Options)
Option Expiry as % of Opening Options
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We note our valuation is sensitive to the multiple applied to estimates. We believe as the
company completes integration of both the manufacturing and aftermarket segments of the
business that there are a number of opportunities to drive improvements in return on invested
capital, which we believe could drive the next leg of share price appreciation. In decomposing
multiples a number of factors play into our fair value assessment including the companys
long-term growth rate (low), cost of capital (moderate), tax rate (typical), level of capital
intensity and required reinvestment (extremely low a <1% of revenue) leaving the remaining
key driver being the return on capital. A more efficient balance sheet, utilizing less capital in
the form of working capital, a different capital mix or higher operating earnings all can
contribute to improvements in total returns. In Figure 4, we show our estimate of the
companys ROIC on a trailing basis, where we believe we are at an inflection point which
ultimately could result in higher multiples. We estimate trailing ROIC was 5.1% at Q1/15.
Trailing Return on Invested Capital
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Q1/07 Q1/08 Q1/09 Q1/10 Q1/11
Figure 4 Trailing Return on Invested Capital
Source: AltaCorp Capital Inc.
Q1/12
Q1/13
Q1/14
Q1/15
Q1/16
The impact of higher multiples on fair value estimates is shown in Figure 5. While we
currently value NFI at a 7.0x EBITDA multiple, we note peers currently trade at 8.5x on
2015e and 7.6x on 2016e.
Sensitivity of Target Price to EBITDA and EBITDA Multiple
% Variance
Valuation Period EBITDA ($000s)
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
134,485
141,957
149,428
156,899
164,371
6.50x
7.00x
7.50x
8.00x
8.50x
$14.90
$16.38
$17.86
$19.33
$20.81
$15.97
$17.53
$19.09
$20.65
$22.21
$17.04
$18.68
$20.32
$21.96
$23.60
$18.10
$19.83
$21.55
$23.28
$25.00
$19.17
$20.98
$22.78
$24.59
$26.40
While guidance and the companys outlook for the remainder of 2015 remained consistent the
step jump in aftermarket margins, which we believe are sustainable, leads us to increase
estimates. We believe the introduction of the higher dividend is an indication in
managements confidence that continuous improvement activities should lead to improved
financial performance which coupled with a 4.3% yield offers an attractive return. We
maintain our Outperform rating and are increasing our 12-month target price to C$18.50 from
C$17.50. Our target price is based on a blend of a 15.0x earnings and 7.0x EBITDA multiple
of the four quarters ending Q4/16 reflecting our 12-month forward valuation period as well as
an exchange rate of C$1.22/$US.
Key risks to failing to achieve our price target include, but are not limited to changes in raw
material and component costs, foreign exchange risks, competition risk, changes in public
sector transportation spending, and failure by management to execute on disclosed strategies.
New Flyer Industries
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Rating &
Target
Trading Local
Market
Currency Price Cap ($mm)
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
14.32
2.95
24.84
50.27
13.90
63.25
52.54
4.35
14.73
59.99
20.99
29.62
6.59
11.72
48.03
794.9
2,387.7
416.8
663.0
1,754.3
1,669.4
4,109.2
149.1
1,000.4
3,202.9
565.3
2,413.6
550.4
242.5
1,290.1
Net
Debt
EV
($mm)
2014
EPS
2015e
213.2
1,200.3
252.0
132.3
933.6
386.4
845.3
(6.7)
210.3
(248.3)
(7.9)
4,349.0
311.1
197.1
(114.7)
875.3
3,616.2
668.8
795.3
2,687.9
2,149.0
4,954.5
142.2
1,210.7
2,954.6
557.3
6,796.6
913.5
439.6
1,175.7
0.65
0.25
2.46
0.31
0.45
4.62
3.49
0.03
0.88
3.55
1.61
(5.07)
0.03
0.00
2.77
0.87
0.23
2.04
3.26
0.88
6.28
4.18
0.08
1.18
4.01
1.60
1.82
0.07
0.00
2.93
P/E
2016e 2014 2015e 2016e
1.13
0.29
2.44
4.01
1.19
0.00
4.55
0.23
1.24
4.60
1.86
2.95
0.07
0.00
3.31
18.0x
9.7x
10.1x
NM
30.8x
13.7x
15.1x
NM
16.8x
16.9x
13.0x
NM
NM
NM
17.3x
16.1x
13.6x 10.5x
10.6x 8.3x
12.2x 10.2x
15.4x 12.5x
15.8x 11.7x
10.1x NM
12.6x 11.5x
NM
19.3x
12.4x 11.9x
15.0x 13.1x
13.1x 11.3x
16.3x 10.0x
NM
NM
NM
NM
16.4x 14.5x
13.6x 12.1x
2014
EBITDA
2015e
2016e
2014
EV/EBITDA
2015e
2016e
Price
to BV
ROIC
ROE
107.4
268.8
82.4
63.4
282.4
257.4
591.2
9.4
160.7
298.8
65.8
331.0
69.0
25.9
128.8
130.9
315.1
84.3
98.8
308.8
433.3
651.0
10.6
198.7
345.8
69.3
756.7
88.3
0.0
142.0
149.4
401.5
93.0
117.4
328.9
0.0
679.0
16.2
199.1
389.5
79.8
904.6
89.7
0.0
155.7
8.2x
13.5x
8.1x
12.5x
9.5x
8.3x
8.4x
15.1x
7.5x
9.9x
8.5x
20.5x
13.2x
17.0x
9.1x
11.3x
6.7x
11.5x
7.9x
8.0x
8.7x
5.0x
7.6x
13.4x
6.1x
8.5x
8.0x
9.0x
10.4x
NM
8.3x
8.5x
5.9x
9.0x
7.2x
6.8x
8.2x
NM
7.3x
8.8x
6.1x
7.6x
7.0x
7.5x
10.2x
NM
7.6x
7.6x
1.4x
1.5x
1.7x
3.2x
3.1x
3.1x
2.2x
0.9x
2.6x
3.1x
2.8x
NM
3.4x
0.0x
1.6x
2.2x
5.1%
3.6%
9.3%
8.4%
6.9%
16.9%
10.0%
0.5%
11.4%
17.9%
19.9%
9.2%
2.5%
NA
6.9%
9.2%
7.0%
12.7%
16.4%
2.0%
(0.5%)
35.9%
13.6%
0.2%
17.9%
20.2%
22.4%
NM
1.3%
NM
9.3%
12.2%
377
Disclosure Requirements
C$14.32
Rating:
Outperform
12 Month Target:
C$18.50
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
Does any director, officer, employee of AltaCorp Capital or member of their household serve as a director or
officer or advisory capacity of the issuer? If yes, state name:
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
12 Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
13 Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
63%
26%
Sector Perform
24%
14%
Underperform
2%
0%
Speculative
1%
0%
Restricted
2%
0%
Not Rated
6%
0%
Tender
2%
0%
100%
20%
Total
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied
upon, by any other person.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts
responsibility for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital
(USA) Inc. at 403-539-8600.
378
Direct
@altacorpcapital.com
__________________________________________________________________________________________________________
ATB Financial
Dave Mowat
President & CEO
780 408 7181
dmowat@atb.com
Ian Wild
Executive Vice President
403 974 5127
iwild@atb.com
E&P- Domestic
Jeremy McCrea, CFA, Analyst
Klazina van den Berg, Associate
Patrick J. ORourke, CFA, Analyst
Yasir Siddiqi, Associate
Nicholas Lupick, CFA, Analyst
Kate-Lynn Gordey, Associate
Thomas Matthews, P.Eng., Analyst
Christian Erana, Associate
jmccrea
kvandenberg
porourke
ysiddiqi
nlupick
kgordey
tmatthews
cerana
Energy Infrastructure
Dirk Lever, CA, Senior Analyst
Ward Hallett, CA, Associate
dlever
whallett
Oilfield Services
Dana Benner, CFA, Senior Analyst
John Gibson, Associate
Jason Sawatzky, Analyst
Mark Westby, Associate
dbenner
jgibson
jsawatzky
mwestby
Diversified Industries
Chris Murray, P.Eng., CFA, Senior Analyst
Samarth Modwal, Associate
cmurray
smodwal
Agriculture
John Chu, CFA, Senior Analyst
Stuart Pattillo, Associate
jchu
spattillo
All Sectors
Victoria Hoa, Research Assistant
vhoa
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
khilton
Toronto
Paul Sarachman, CFA, FCSI
Adam Carlson
Jamie Riff
Tim Miller
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Institutional Trading
Calgary
Tate Pinder
Shane Dungey
tpinder
sdungey
Toronto
Cheryl Polan
Jon Varley
Michael Capobianco
cpolan
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
410, 585 8 Avenue SW
Calgary AB Canada T2P 1G1
403 539 8600 Main
403 539 8575 Fax
TORONTO
66 Wellington Street West, Suite 3530
Toronto, ON Canada M5K 1A1
647 776 8230 Main
647 776 8248 Fax
George Gosbee
ggosbee
jcaldarelli
ggill
mreynolds
Oilfield Services
Matt Colucci
mcolucci
jfallows
All Sectors
Patrick Stables
Jesse Hardage
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
pstables
jhardage
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________
www.altacorpcapital.com
member CIPF IIROC FINRA SIPC
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
David Lush, Head of Private Wealth
Vojtech Krb, Investment Advisor
Tomasz Okuszko, Investment Advisor
Ellen McKane, Client and Market Coordinator
dlush
vkrb
tokuszko
emckane
379
Price: Cdn$14.15
StockRating: Outperform
TargetPrice: Cdn$15.50
May 7, 2015
NFI (T)
Outperform
Stock Rating:
(Unchanged)
Cdn$15.50
Target:
(Unchanged)
Average
Risk Rating:
(Unchanged)
13.9%
Stock Data:
Cash Yield
4.4%
9.5%
$14.90-$11.53
Bloomberg/Reuters:
Forecasts: DEC YE
Revenue (USmln)
Q1/15 Review
2014a
2015e
$86.5
$111.2
$121.9
DCPS ($US)
$1.06
$1.05
$1.24
Dividend*
$0.58
$0.60
$0.62
Payout Ratio
49%
46%
39%
DC Yield
8.3%
8.9%
10.5%
9.4x
9.2x
8.2x
12.0x
11.2x
9.5x
EV/EBITDA
P/DCPS
2016e
EBITDA (USmln)
HIGHLIGHTS
Financial Data
Shares Outstanding (mln)
55.5
$785.4
Cash
Net Debt
$17.5
$223.0
22%
2.1x
380
Page 2
DISCLOSURES:
Ratings And What They Mean: PRIMARY STOCK RATING: NBF has a three-tiered rating system that is relative to the coverage universe of the particular analyst. Here is a brief
description of each: Outperform The stock is expected to outperform the analysts coverage universe over the next 12 months; Sector Perform The stock is projected to perform in
line with the sector over the next 12 months; Underperform The stock is expected to underperform the sector over the next 12 months. SECONDARY STOCK RATING: Under
Review Our analyst has withdrawn the rating because of insufficient information and is awaiting more information and/or clarification; Tender Our analyst is recommending that
investors tender to a specific offering for the companys stock; Restricted Because of ongoing investment banking transactions or because of other circumstances, NBF policy and/or
laws or regulations preclude our analyst from rating a companys stock. INDUSTRY RATING: NBF has an Industry Weighting system that reflects the view of our Economics & Strategy
Group, using its sector rotation strategy. The three-tiered system rates industries as Overweight, Market Weight and Underweight, depending on the sectors projected performance
against broader market averages over the next 12 months. RISK RATING: NBF utilizes a four-tiered risk rating system, Below Average, Average, Above Average and Speculative.
The system attempts to evaluate risk against the overall market. In addition to sector-specific criteria, analysts also utilize quantitative and qualitative criteria in choosing a rating. The
criteria include predictability of financial results, share price volatility, credit ratings, share liquidity and balance sheet quality.
General National Bank Financial (NBF) is an indirect wholly owned subsidiary of National Bank of Canada. National Bank of Canada is a public company listed on Canadian stock
exchanges.
The particulars contained herein were obtained from sources which we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed are based
upon our analysis and interpretation of these particulars and are not to be construed as a solicitation or offer to buy or sell the securities mentioned herein.
Research Analysts The Research Analyst(s) who prepare these reports certify that their respective report accurately reflects his or her personal opinion and that no part of his/her
compensation was, is, or will be directly or indirectly related to the specific recommendations or views as to the securities or companies.
NBF compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of NBF including, Institutional
Equity Sales and Trading, Retail Sales, the correspondent clearing business, and Corporate and Investment Banking. Since the revenues from these businesses vary, the funds for
research compensation vary. No one business line has a greater influence than any other for Research Analyst compensation.
Canadian Residents In respect of the distribution of this report in Canada, NBF accepts responsibility for its contents. To make further inquiry related to this report, Canadian residents
should contact their NBF professional representative. To effect any transaction, Canadian residents should contact their NBF Investment advisor.
U.S. Residents With respect to the distribution of this report in the United States, National Bank of Canada Financial Inc. (NBCFI) is regulated by the Financial Industry Regulatory
Authority (FINRA) and a member of the Securities Investor Protection Corporation (SIPC). This report has been prepared in whole or in part by, research analysts employed by non-US
affiliates of NBCFI that are not registered as broker/dealers in the US. These non-US research analysts are not registered as associated persons of NBCFI and are not licensed or
qualified as research analysts with FINRA or any other US regulatory authority and, accordingly, may not be subject (among other things) to FINRA restrictions regarding communications
by a research analyst with the subject company, public appearances by research analysts and trading securities held a research analyst account.
All of the views expressed in this research report accurately reflect the research analysts personal views regarding any and all of the subject securities or issuers. No part of the analysts
compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. The analyst responsible for the production of
this report certifies that the views expressed herein reflect his or her accurate personal and technical judgment at the moment of publication. Because the views of analysts may differ,
members of the National Bank Financial Group may have or may in the future issue reports that are inconsistent with this report, or that reach conclusions different from those in this
report. To make further inquiry related to this report, United States residents should contact their NBCFI registered representative.
UK Residents In respect of the distribution of this report to UK residents, National Bank Financial Inc. has approved the contents (including, where necessary, for the purposes of
Section 21(1) of the Financial Services and Markets Act 2000). National Bank Financial Inc. and/or its parent and/or any companies within or affiliates of the National Bank of Canada
group and/or any of their directors, officers and employees may have or may have had interests or long or short positions in, and may at any time make purchases and/or sales as
principal or agent, or may act or may have acted as market maker in the relevant securities or related financial instruments discussed in this report, or may act or have acted as
investment and/or commercial banker with respect thereto. The value of investments can go down as well as up. Past performance will not necessarily be repeated in the future. The
investments contained in this report are not available to retail customers. This report does not constitute or form part of any offer for sale or subscription of or solicitation of any offer to
buy or subscribe for the securities described herein nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever.
This information is only for distribution to Eligible Counterparties and Professional Clients in the United Kingdom within the meaning of the rules of the Financial Conduct Authority.
National Bank Financial Inc. is authorised and regulated by the Financial Conduct Authority and has its registered office at 71 Fenchurch Street, London, EC3M 4HD.. National Bank
Financial Inc. is not authorised by the Prudential Regulation Authority and the Financial Conduct Authority to accept deposits in the United Kingdom.
Copyright This report may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or
conclusions contained in it be referred to without in each case the prior express written consent of National Bank Financial.
NBF is a member of the Canadian Investor Protection Fund.
NBF quarterly ratings summary and the total ratings by month can be found on our website under Research and Analysis/Equities/About NBF Research/Quarterly Ratings Summary (link
attached) http://www.nbcn.ca/cmst/site/index.jhtml?navid=803&templateID=249
The NBF Research Dissemination Policy is available on our website under Legal/Research Policy (link attached) http://www.nbcn.ca/cmst/site/index.jhtml?navid=712&templateid=243
Click on the following link to see the company specific disclosures http://www.nbcn.ca/contactus/disclosures.html
Click on the following link to see National Bank Financial Markets Statement of Policies http://nbfm.ca/en/statement-of-policies/
If a company specific disclosure is not found herein for a listed company, NBF at this time does not provide research coverage or stock rating for the company in question.
381
Page 3
382
May 6, 2015
Industrial Products
(NFI-TSX)
Stock Rating:
Stock Price:
Target Price:
Market Perform
$14.15
$16.50
416-359-5301
416-359-6193
Our View:
Results were above expectations mainly due to higher margins in both the bus manufacturing and aftermarket
segments. Average bus price of $508k was up 12% y/y and we believe would have been as a result of better mix. We
expected higher bus manufacturing margins in 2015 relative to prior year due to higher margin backlog and operational
efficiencies, but performance this quarter was above expectations. We will wait for commentary from the conference
call to see if this is more of a timing issue or if margins can remain at these levels.
The 23% y/y growth in aftermarket sales was mainly driven by increased volumes from the CTA mid-life overhaul
program, which is expected to continue until June 2015. Excluding this program, aftermarket sales were up by 10% y/y.
Margin improvement was mainly due to product mix.
We believe the increase in dividend signals NFIs confidence in its underlying cash flow, although we expected the
dividend to remain flat to provide NFI more flexibility with respect to the next leg of its growth.
We would expect New Flyer to improve margins as the expiring tax credits will be more than offset by operating
efficiencies and platform rationalization savings over the next two years.
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s) under
FINRA rules. For disclosure statements, including the Analyst's Certification, please refer to pages 3 to 6.
Flash Page 1
383
Estimate
Q1/15
Actual
Q1/15
Variance
Actual
Q4/14
Actual
Q1/14
Q/Q
% Chg
Y/Y
% Chg
Bus Manufacturing
Aftermarket Operations
286.3
80.3
290.7
89.6
4.4
9.3
336.6
83.4
250.9
73.0
-13.6%
7.5%
15.9%
22.8%
Revenues
366.6
380.3
13.7
420.0
323.9
-9.4%
17.4%
Cost of Sales
% of revenues
322.8
88.1%
331.2
87.1%
8.4
-1.0%
373.3
88.9%
286.1
88.3%
-11.3%
15.8%
-180 bps
-130 bps
Gross Profit
% of revenues
43.8
11.9%
49.1
12.9%
5.3
1.0%
46.7
11.1%
37.7
11.7%
5.0%
180 bps
30.1%
130 bps
19.8
5.4%
0.0
20.9
5.5%
(1.5)
1.1
0.1%
(1.5)
20.1
4.8%
0.1
18.8
5.8%
0.8
3.9%
11.2%
70 bps
-1202.3%
-30 bps
-281.4%
EBITDA
% of revenues
24.0
6.5%
29.6
7.8%
5.7
1.3%
26.5
6.3%
18.1
5.6%
11.9%
150 bps
63.6%
220 bps
ITCs
Other
Adjusted EBITDA
% of revenues
$0
$0
24.1
6.6%
$0.2
$1.6
31.4
8.2%
0.0
1.6
7.2
1.7%
$5.6
$3.9
35.9
8.6%
$1.0
$0.6
19.7
6.1%
-12.7%
-30 bps
59.5%
220 bps
4.5
1.2%
4.5
1.2%
0.0
0.0%
4.6
1.1%
2.9
0.9%
-2.1%
54.1%
10 bps
30 bps
5.0
1.4%
0.0
5.0
1.3%
1.9
0.0
0.0%
1.9
5.4
1.3%
(0.3)
4.8
1.5%
0.4
-7.7%
0 bps
-703.8%
3.7%
-20 bps
403.7%
EBIT
% of revenues
Net Interest Expense
Other Expense
14.5
4.0%
3.4
0.0
18.2
4.8%
4.1
0.0
3.7
0.8%
0.7
0.0
16.8
4.0%
4.4
(0.9)
10.0
3.1%
3.3
0.0
8.5%
80 bps
-6.4%
-100.0%
82.3%
170 bps
25.0%
#DIV/0!
EBT
% of revenues
11.1
3.0%
14.1
3.7%
3.0
0.7%
13.3
3.2%
6.7
2.1%
6.0%
110.6%
50 bps
160 bps
Income Taxes
Tax Rate as % of EBT
3.7
33.0%
3.3
23.1%
(0.4)
-9.9%
5.0
37.3%
1.2
18.1%
-34.5%
168.0%
Net Income
% of revenues
7.4
2.0%
10.9
2.9%
3.4
0.8%
8.3
2.0%
5.5
1.7%
30.2%
90 bps
97.9%
120 bps
$0.13
$0.20
$0.06
$0.13
$0.10
46.1%
97.8%
$0.13
$0.18
$0.04
$0.12
$0.10
44.6%
80.7%
55.5
55.5
0.0
55.5
55.5
0.0%
0.1%
11.5
4.0%
12.7
15.8%
24.1
6.6%
14.7
5.1%
16.7
18.6%
31.4
8.3%
3.3
1.1%
4.0
2.8%
7.3
1.7%
23.2
6.9%
11.9
14.2%
35.0
8.3%
7.8
3.1%
11.9
16.3%
19.7
6.1%
-36.4%
-180 bps
40.7%
440 bps
-10.3%
-10 bps
90.1%
200 bps
40.0%
230 bps
59.7%
220 bps
$0.13
$0.22
$0.08
$0.20
$0.11
7.7%
103.2%
Flash Page 2
384
Quarterly Price
18
14
14
12
12
10
10
18
16
16
14
14
12
12
10
8
10
3) Mkt
6
2) NR
41) Mkt
NFI Relative to S&P/TSX Comp.
NFI Relative to Machinery
400
400
300
300
200
200
100
100
Revenue / Share
Price / Revenue
500
400
400
300
300
200
200
100
100
1.0
200
500
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
300
2012
2013
2014
200
200
0.5
100
-200
0.0
EPS (4 Qtr Trailing)
Price / Earnings
2012
2013
-200
2014
400
200
0
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
FYE
(Dec.)
EPS
$
2011
2012
2013
2014
0.81
0.22
0.49
0.48
Range*:
Current*
0.48
P/E
Hi - Lo
9.5
40.5
24.2
29.4
6.4
23.6
15.9
21.6
40.5
6.4
30.1
DPS
$
Yield%
Hi - Lo
Payout
%
BV
$
P/B
Hi - Lo
0.86
0.59
0.59
0.59
16.5 11.2
11.3 6.6
7.5 4.9
5.7 4.2
>100
>100
>100
>100
8.2
7.7
8.1
8.1
0.9
1.2
1.5
1.7
0.6
0.7
1.0
1.3
1.7
0.6
>100
9.9
16.5
0.59
4.2
4.1
1.4
ROE
%
3
6
6
1
2
3
Date
5-Jun-12
29-Oct-12
3-Jul-13
Rating Change
R to Mkt
Mkt to NR
NR to Mkt
Share Price
$6.59
$7.75
$11.14
Flash Page 3
385
IMPORTANT DISCLOSURES
Analyst's Certification
I, Bert Powell, CFA, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I
also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this
report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates,
which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and
in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA (exceptions:
Alex Arfaei and Brodie Woods). These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the
NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a
research analyst account.
Company Specific Disclosure
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past
12 months.
Disclosure 6: This issuer is a client (or was a client) of BMO NB, BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12 months:
Non-Securities Related Services.
Disclosure 13: A partner, director, officer, employee or agent of BMO Capital Markets is an officer, director, employee of, or serves in an advisory
capacity to, this issuer: Brian Tobin (Member of Board of Directors)
Methodology and Risks to Price Target/Valuation
Methodology: Our $16.50 target is based on ~6.8x our 2016E EBITDA.
Risks: A significant portion of new transit bus purchases are funded from government sources. As long as federal, state/provincial and municipal budgets
remain under pressure, funding for new bus purchases could be reduced or eliminated. Other risks include: price volatility of raw materials, warranty costs
could be material, labour disruptions from its predominantly unionized workforce and customer contract issues (early termination, deferral, non-renewal).
Distribution of Ratings (March 31, 2015)
Rating
BMOCM US
BMOCM US
BMOCM US
BMOCM
BMOCM
Starmine
Category
BMO Rating
Universe*
IB Clients**
IB Clients***
Universe****
IB Clients*****
Universe
Buy
Outperform
43.7%
18.6%
58.2%
42.7%
55.5%
54.1%
Hold
Market Perform
51.4%
10.4%
38.5%
52.1%
41.9%
40.5%
Sell
Underperform
4.9%
9.4%
3.3%
5.2%
2.6%
5.5%
*
Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.
**
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services
as percentage within ratings category.
***
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking
services as percentage of Investment Banking clients.
****
Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.
*****
Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as
percentage of Investment Banking clients.
Flash Page 4
386
Flash Page 5
387
To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct
Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in
matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the
Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The
contents hereof are not intended for the use of and may not be issued or passed on to retail clients.
Unauthorized reproduction, distribution, transmission or publication without the prior written consent of BMO Capital Markets is strictly prohibited.
Click here for data vendor disclosures when referenced within a BMO Capital Markets research document.
Financial Group
Flash Page 6
388
Khaled Omar
1 (416) 956-6807
Kevin.Chiang@cibc.com
Khaled.Omar@cibc.com
EARNINGS UPDATE
j
May 7, 2015
Capital Equipment
SECTOR PERFORMER
MARKET WEIGHT
Stock Rating:
Sector Weighting:
Key Ratios and Statistics
12-18 mo. Price Target
NFI-TSX (5/7/15)
C$15.75
C$14.32
Key Indices:
3-5-Yr. EPS
Gr. Rate (E)
52-week
Range
Shares Outstanding
Float
Avg. Daily Trading Vol.
Market Capitalization
Dividend/Div Yield
Fiscal Year Ends
Book Value
2015 ROE (E)
LT Debt
Net AssetEquity
Value
Common
Convertible Available
EBITDA ($mln)
Current
Prior
Estimates (Dec.
(Dec. 31)
31)
Valuation
EV/EBITDA-Curr
EV/EBITDA-Prior
Toronto
NM
C$11.53-C$14.90
55.5M
36.5M Shrs
38,000
C$794.8M
C$0.62 / 4.3%
December
$8.23 per Shr
9.0%
$140.9M
$457.0M
Yes
2013
$94.7A
2014
$107.4A
2015
$122.2E
$111.4E
2016
$124.7E
$119.4E
10.6x
9.3x
8.2x
9.0x
8.0x
8.4x
15-135928 2015
CIBC World Markets does and seeks to do business with companies covered in its research reports. As a result, investors
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
See "Important Disclosures" section at the end of this report for important required disclosures, including potential
conflicts of interest. See "Price Target Calculation" and "Key Risks to Price Target" sections at the end of this report,
where applicable.
Find CIBC research on Bloomberg, Reuters, firstcall.com
and ResearchCentral.cibcwm.com
CIBC World Markets Inc., P.O. Box 500, 161 Bay Street, Brookfield Place, Toronto, Canada M5J 2S8 (416) 594-7000
389
NFI-TSX
5/7/15
12- To 18- Month Price Target:
Capital Equipment
Sector Weighting:
All figures in US$ millions, except per share data.
EV/EBITDA Multiples
Consensus estimates except New Flyer
New Flyer Industries
High-Yielding Industrials
Commercial Vehicle & Parts
Manufacturers
P/E Multiples
Consensus estimates except New Flyer
New Flyer Industries
High-Yielding Industrials
Commercial Vehicle & Parts
Manufacturers
Key Financial Metrics
2013A
Sector Performer
C$14.32
C$15.75
Market Weight
2014A
2015E
2016E
9.3x
9.9x
10.2x
8.2x
8.1x
8.9x
8.0x
7.0x
7.6x
2014A
2015E
2016E
Investment Thesis
17.2x
20.0x
18.8x
14.4x
14.9x
13.9x
13.1x
12.0x
11.9x
Fundamentals for bus demand are improving due to rising U.S. state/municipal tax revenue, growing
bus ridership numbers (reflecting the cost advantage of taking bus transit versus driving and
modestly declining unemployment rate), and public transit being a more green option.
2014A
2015E
2016E
7.9%
1.1x
51.3%
33.9%
2013A
7.4%
1.1x
53.1%
34.7%
2014A
7.8%
1.3x
42.2%
29.7%
2015E
8.0%
1.3x
52.0%
34.2%
2016E
$991.2
$215.0
$1,199.4
$1,078.7
$120.8
$94.7
$49.0
$34.6
$26.8
$1,132.1
$319.0
$1,451.1
$1,312.8
$138.3
$107.4
$51.4
$37.6
$26.7
$1,255.7
$319.1
$1,574.8
$1,414.5
$160.3
$122.2
$85.7
$70.8
$51.8
$1,250.0
$310.7
$1,560.7
$1,397.0
$163.7
$124.7
$96.0
$81.7
$60.6
Balance Sheet
Q1/15A
EBITDA Margin
Current Ratio
Debt/Equity
Debt/Total Capital
Income Statement
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Shareholders' Equity
430
1,101
318
644
457
Company Profile
New Flyer Industries Inc. is the largest North American manufacturer of heavy-duty transit buses
supplying transit authorities in Canada and the U.S. with approximately one-third the market.
New Flyer is well positioned to take advantage of the improving heavy duty bus fundamentals given
its leading market share in both bus manufacturing and aftermarket services.
New Flyer is guiding towards 2014 production line rate of ~51 EUs/week, we view its $0.585/share
annual dividend as safe.
Canada
16%
$1,000,000
2,500
$300
$800,000
2,000
$250
$600,000
1,500
$200
$400,000
1,000
$200,000
500
$0
2009
2010
Revenues ($ Millions)
2011
2012
2013
Deliveries(EUs)
2014
$ Millions
3,000
2008
United States
84%
Bus Operations
78%
$1,200,000
2007
$319
$215
$150
$100
$83
$96
$108
$106
$116
$119
2008
2009
2010
2011
2012
$50
$0
2007
2013
2014
390
Q1/15 Recap
New Flyers (NFI-SP) Q1 results were better than expected. Revenue during the
quarter was $380 million, up 17% Y/Y, and versus our estimate of $339 million
and consensus of $349 million. Adjusted EBITDA was $31 million, up 60% Y/Y,
and versus our estimate of $25 million (consensus at $26 million). The main
variance was higher average selling price in Bus Manufacturing due to more
favorable sales mix, as well as better margin performance in Aftermarkets.
Additionally, New Flyer increased its annual dividend rate by ~6% to $0.62 from
$0.585 previously reflecting its strong free cash flow profile.
Bus Manufacturing: Q1/15 Bus Manufacturing revenue was $291 million, up
16% Y/Y, and versus our estimate of $252 million, driven by increased deliveries
(pre-released) and higher average selling price per EU, with the former being
the main variance versus our estimate. New Flyers average selling price was
~$508,000, up 12% Y/Y, and versus our estimate of ~$440,000, with the
company delivering 572 units, up 3.2% Y/Y. Bus manufacturing EBITDA during
the quarter was $15 million, up from $8 million last year, and versus our
estimate of $12 million.
Aftermarkets: Aftermarkets revenue was $90 million, up 23% Y/Y, and versus
our estimate of $87 million. Excluding the CTA mid-life overhaul program,
revenue was $73 million, representing an increase of 10% in the core business.
EBITDA for the quarter was $17 million, up 40% Y/Y, and versus our estimate of
$13 million as margins came in better than we had expected, attributed to
improved aftermarket parts market fundamentals and more favorable product
mix.
Restructuring Bus Manufacturing: Looking ahead, the main focus for New
Flyer remains on restructuring its bus manufacturing operations to integrate the
NABI acquisition, which is expected to yield cost savings and boost margins. The
transition is on target to be complete in H2/15. As noted previously, New Flyer
expects to invest ~$20 million in direct operating costs and capital expenditure
by utilizing operating cash flow and current credit facilities. As of Q1/15, New
Flyer incurred ~$4 million of costs and invested ~$5 million in capital
expenditures with current annualized savings expected to be $12 million once
fully implemented.
Exhibit 1. Q1/15 Review
Q1/F15
in $Mln Unless Noted
Q1/F14A
Q4/F14A
CIBC
Actual
Y/Y %
Q/Q %
554
680
572
572
3.2%
-15.9%
323.9
420.0
338.5
380.3
17.4%
-9.4%
250.9
336.6
251.7
290.7
15.9%
-13.6%
73.0
83.4
86.8
89.6
22.8%
7.5%
19.7
35.0
25.0
31.4
59.8%
-10.3%
7.8
23.2
11.6
14.7
90.1%
-36.4%
11.9
11.9
13.5
16.7
40.0%
40.7%
Total Revenue
Total EBITDA
Adjusting Estimates
New Flyer reiterated its production rate guidance and expects the average line
rate to be ~51 EUs in 2015. In addition, management anticipates that increased
391
bus margins for 2015 will substantially mitigate the loss to EBITDA from the
companys investment tax credits, which have been fully utilized as of Q1/15
($11.7 million of ITCs realized in 2014 and realized final $0.2 million in Q1).
We had adjusted our estimates as we raised our selling pricing per EU to
~$500,000 (up ~10% from what we were modeling before) with EBITDA per EU
of ~$26,000-$28,000 (up ~$1,500 per EU from previous forecast). In addition,
we raised our Aftermarkets EBITDA margin by ~100 bps to ~17.5%. We
essentially brought forward some of the improvements we had expected to occur
later on. Overall, our 2015 and 2016 EBITDA increase to $122 million and $125
million, respectively. Our price target increases to $15.75 from $15.00 and we
maintain our Sector Performer rating.
Exhibit 2. Summary Of Changes
2015
2016
Before
After
Before
After
2,502
2,502
2,500
2500
$1,443.9
$1,574.8
$1,453.7
$1,560.7
$1,127.6
$1,255.7
$1,125.0
$1,250.0
$450.7
$501.9
$450.0
$500.0
$316.3
$319.1
$328.7
$310.7
$111.4
$122.2
$119.4
$124.7
$60.2
$63.9
$65.3
$68.8
Margin (%)
5.3%
5.1%
5.8%
5.5%
$24.1
$25.5
$26.1
$27.5
$51.2
$56.8
$54.2
$55.9
Margin (%)
16.2%
17.8%
16.5%
18.0%
392
disruption at its Winnipeg facility in 2006. There is always a risk that such an
event can occur again in the future, resulting in production delays and increased
costs.
Foreign Exchange Rates: New Flyer is exposed to changes in the C$/US$ rate,
in terms of revenue, operating costs, and financial obligations. New Flyer
engages in hedging practices to protect itself from changes in the value of the
C$/US$ exchange rate and by adjusting prices of its products by attempting to
anticipate, as closely as possible, the number of orders for the year (TAs
generally order buses one year in advance).
Raw Material And Component Costs: Raw materials and components
represent a majority of the costs in the manufacturing of buses. Nearly 92% of
New Flyers costs are variable costs. Additional costs are generally passed onto
customers through price adjustments. However, significant increases, or
fluctuations, in copper, resins or oil prices could affect margins.
Exhibit 3. Income Statement
F2013
Q1/F14
Q2/F14
Q3/F14
Q4/F14
F2014
Q1/F15
Q2/F15E
Q3/F15E
Q4/F15E
F2015E
F2016E
Revenue
$1,199,424
$323,865
$346,484
$360,762
$419,989
$1,451,100
$380,301
$382,266
$393,434
$418,770
$1,574,771
$1,560,660
Cost of Sales
$1,078,657
$293,851
$309,256
$326,482
$383,228
$1,312,817
$340,674
$342,413
$354,747
$378,141
$1,414,520
$1,396,975
Gross Profit
$120,767
$30,014
$37,228
$34,280
$36,761
$138,283
$39,627
$39,853
$38,687
$40,629
$160,251
$163,685
SGA
$26,082
$10,348
$10,262
$8,583
$1,725
$30,918
$8,213
$9,557
$9,836
$10,469
$38,075
$39,017
EBITDA
$94,685
$19,666
$26,966
$25,697
$35,036
$107,365
$31,414
$30,297
$28,851
$30,160
$122,176
$124,669
Amortization
$28,001
$7,718
$8,131
$10,012
$9,976
$35,837
$9,507
$7,258
$7,317
$7,272
$31,355
$28,654
FX loss (gain)
$118
$802
$387
$226
$132
$0
($1,455)
$0
$0
$0
$0
$0
Operating Earnings
$66,566
$11,146
$18,448
$15,459
$24,928
$69,981
$23,362
$23,038
$21,534
$22,888
$90,821
$96,014
Unrealized FX Loss
$2,146
$380
($1,000)
$117
($317)
$0
$1,914
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$15,457
$762
$6,685
$2,561
$9,353
$19,361
$3,209
$0
$0
$0
$3,209
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
EBIT
$48,963
$10,004
$12,763
$12,781
$15,892
$51,440
$18,239
$23,038
$21,534
$22,888
$85,698
$96,014
$8,749
$2,257
$2,257
$2,203
$2,180
$8,897
$2,334
$2,409
$2,409
$2,409
$9,635
$9,673
$2,208
$540
$549
$565
$575
$2,229
$584
$584
$584
$584
$2,336
$2,336
$2,857
$823
$1,190
$713
$795
$3,521
$726
$600
$600
$600
$2,526
$2,400
$532
($314)
$377
($785)
($53)
($775)
$487
$0
$0
$0
$0
$0
Interest Expense
$14,346
$3,306
$4,373
$2,696
$3,497
$13,872
$4,131
$3,593
$3,593
$3,593
$14,909
$14,319
EBT
$14,108
$19,445
$17,941
$34,617
$6,698
$8,390
$10,085
$12,395
$37,568
$19,295
$70,789
$81,696
$7,856
$1,214
$4,827
($160)
$4,968
$10,849
$3,253
$5,345
$5,042
$5,317
$18,957
$21,070
Net Income
$26,761
$5,484
$3,563
$10,245
$7,427
$26,719
$10,855
$14,100
$12,899
$13,978
$51,833
$60,626
$0.81
$0.11
$0.18
$0.18
$0.30
$0.83
$0.24
$0.25
$0.23
$0.25
$0.99
$1.09
FD EPS (ex-unusuals)
393
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2013 Current
$15.4A
$18.1A
$24.4A
$36.8A
$94.7A
2014 Current
$19.7A
$27.0A
$25.7A
$35.0A
$107.4A
2015 Prior
$25.0E
$27.8E
$25.4E
$33.3E
$111.4E
2015 Current
$31.4A
$30.3E
$28.9E
$30.2E
$122.2E
2016 Prior
--
--
--
--
$119.4E
2016 Current
--
--
--
--
$124.7E
394
IMPORTANT DISCLOSURES:
Analyst Certification: Each CIBC World Markets research analyst named on the front page of this research report, or
at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein
accurately reflect such research analyst's personal views about the company and securities that are the subject of this
report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii)
no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or views expressed by such research analyst in this report.
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revenues generated by various CIBC World Markets businesses, including the CIBC World Markets Investment Banking
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In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report,
CIBC World Markets may have a long position of less than 1% or a short position or deal as principal in the securities
discussed herein, related securities or in options, futures or other derivative instruments based thereon.
Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures
set forth below, may at times give rise to potential conflicts of interest.
Companies Mentioned in this Report that Are Not Covered by CIBC World Markets Inc.:
Stock Prices as of 05/07/2015:
Volvo AB (VOLVB-ST, [SEK]109.20, Not Rated)
395
Rating
Description
SO
Sector Outperformer
Stock is expected to outperform the sector during the next 12-18 months.
SP
Sector Performer
Stock is expected to perform in line with the sector during the next 12-18 months.
SU
Sector Underperformer
Stock is expected to underperform the sector during the next 12-18 months.
NR
Not Rated
CIBC World Markets does not maintain an investment recommendation on the stock.
Restricted
CIBC World Markets is restricted (due to potential conflict of interest) from rating the stock.
Stock Ratings
Sector Weightings (note: Broader market averages refer to S&P 500 in the U.S. and S&P/TSX Composite in Canada.)
O
Overweight
Market Weight
Underweight
NA
None
"Speculative" indicates that an investment in this security involves a high amount of risk due to volatility and/or liquidity issues.
Count
Percent
152
41.6%
165
45.2%
38
10.4%
2.5%
Count
Percent
146
96.1%
161
97.6%
Restricted
34
89.5%
100.0%
Count
Percent
0.0%
100.0%
0.0%
Restricted
0.0%
Count
Percent
0.0%
100.0%
0.0%
Restricted
0.0%
Important disclosures required by IIROC Rule 3400, can be obtained by visiting CIBC World Markets Inc. on the web at
http://researchcentral.cibcwm.com. Important disclosures for each issuer can be found using the "Coverage" tab on the
top left of the Research Central home page. Access to the system for rating investment opportunities and our
dissemination policy, can be found under 'Quick Links' on bottom right side of the Research Central homepage. These
important disclosures can also be obtained by writing to CIBC World Markets Inc., Brookfield Place, 161 Bay Street, 4th
Floor, Toronto, Ontario M5J 2S8, Attention: Research Disclosures Request
396
HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS INC. RECOMMENDATIONS FOR NEW FLYER
INDUSTRIES INC. (NFI)
Date
12/13/2012
01/10/2013
01/25/2013
02/05/2013
03/01/2013
05/10/2013
06/21/2013
07/15/2013
08/07/2013
10/15/2013
11/08/2013
04/15/2014
05/11/2014
07/16/2014
08/06/2014
03/19/2015
Change Type
Closing Price
8.38
8.80
9.95
9.72
10.30
9.86
10.30
11.13
11.54
11.07
10.94
11.20
11.82
12.85
13.17
13.92
Rating
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
Price Target
8.50
8.75
10.00
10.50
11.00
10.00
11.00
11.50
12.00
12.50
12.00
12.25
12.50
13.00
14.00
15.00
Coverage
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
397
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be reliable, but CIBC World Markets does not represent that any such information, opinion or statistical data is accurate
or complete (with the exception of information contained in the Important Disclosures section of this report provided by
CIBC World Markets or individual research analysts), and they should not be relied upon as such. All estimates, opinions
and recommendations expressed herein constitute judgments as of the date of this report
10
398
11
399
Canada Edition
Thursday, April 30, 2015
www.BuySellSignals.com
Stock Summary
52-Week Range
CAD11.20-CAD14.90
Sector
Auto
Market Cap
Shares Outstanding
55,505,604
ISIN
CA64438T4019
68
Financial Summary
Year ended
Dec 2014
Dec 2013
Dec 2012
Sales (USD)
1.4B
1.2B
867.9M
33.5
10
Net (USD M)
25.4
25.9
9.3
EPS (CAD)
0.5303
0.5398
0.2169
Last Traded
May 01
14.3
653.9 million
1 Year ago
11.3
521.9 million
2 Years ago
9.4
469.5 million
3 Years ago
7.3
337.2 million
Page 1
400
Canada Edition
Analysis
Bullish Signals
The 3.9% discount to 12-month high of CAD14.90 against
the 27.9% premium to 12-month low of CAD11.20
suggests the stock continues to push for new highs.
Rises to Falls: In the last three months the number of rises
outnumbered falls 34:26 or 1.3:1.
In the Canadian market of 2,004 stocks and 87 units
traded today, the stock has a 6-month relative strength
of 73 indicating it has outperformed 73% of the market.
The Moving Average Convergence Divergence (MACD)
indicator of 12-day Exponential Moving Average (EMA)
of 14.3 minus the 26-day EMA of 14.24 is positive
suggesting a bullish signal. Both the 12-day EMA as well
as the 26-day EMA are rising, another bullish signal.
The Price/MAP of 1.08 for NFI is higher than the
Price/MAP for the S&P/TSX 60 Index of 0.4.
In the last three months the stock has hit a new 52-week
high seven times, pointing to a significant uptrend.
The price to 200-day MAP ratio is 1.08, a bullish indicator.
In the past 200 days this ratio has exceeded 1.08, 99
times suggesting further upside. The stock is trading
above both its MAPs and the 50-day MAP of CAD14.05 is
higher than the 200-day MAP of CAD13.21, a bullish
indicator. The 200-day MAP has increased to CAD13.21.
An increase is another bullish indicator.
The present value of CAD1,000 (PV1000) invested three
years ago in New Flyer Industries is CAD2,077, including a
capital gain of CAD1,017 and dividend reinvested of
CAD59.
Undervaluation:
The earnings yield of 3.7% is 2.3 times the 10-year bond
yield of 1.58%.
Price/Sales of 0.5 versus sector average of 0.6 and
market average of 0.8. We estimate the shares are
trading at a current year Price/Sales of 0.4 and a
forward year Price/Sales of 0.3.
The Q Ratio, defined by James Tobin as MCap divided
by Total Assets, is 0.6. Compared with the rest of the
market the stock is undervalued.
www.BuySellSignals.com
Page 2
401
Canada Edition
Analysis (continued)
Other Bullish Signals:
Note
Bearish Signals:
Also, the following criteria set by Benjamin Graham:
"An earnings-to-price yield of at least twice the triple-A
bond"; the stock's earning yield of 3.7% is 2.3 times the
triple-A bond yield of 1.6%.
"A dividend yield of at least two-thirds the triple-A bond
yield"; the stock's dividend yield is 1.7 times the tripe-A
bond yield of 1.6%.
"Total debt equal or less than twice the net quick
liquidation value"; total debt of CAD288.5 Million is 1
times the net liquidation value of CAD276.53 Million.
The stock has a score of 5 out of 9 set by Joseph Piotroski
[pass mark >=5 ]:
Positive net income; positive operating cashflow; good
quality of earnings [operating cashflow exceeds net
income]; improvement in current ratio from 1.3 to 1.4;
improvement in asset turnover [growth in revenue of 29.7%
exceeded growth in assets of 9%].
Value
Rank In Market
Annual Revenue
CAD1.6 billion
(US$1.3 billion)
In Top Quartile
Turnover in Quarter
CAD71 million
In Top Quartile
US$656.3 million
In Top Quartile
Price/MAP200
1.08
In Top Quartile
Price/MAP50
1.02
In Top Quartile
Price to Sales
0.5
In Top Quartile
Volatility %
1.3
In Top Quartile
MCap
www.BuySellSignals.com
Overvaluation:
Price/Earnings of 26.9 versus sector average of 12.9 and
market average of 15.3. We estimate the shares are
trading at a current year P/E of 17.8 and a forward year
P/E of 11.8.
Page 3
402
Canada Edition
Analysis (continued)
ROE
Profit
Margin
Asset
Turnover
Equity
Multiplier
Current
Year
5.7
1.8
1.2
2.5
Previous
Year
5.8
2.2
1.0
2.5
Value
Rank In Market
Return on Assets
[ROA] %
2.2
In Bottom Quartile
Price Earnings
26.9
In Bottom Quartile
EBITDA Margin %
6.4
In Bottom Quartile
1.8
In Bottom Quartile
0.3
In Bottom 7%
Trailing 3 months
Turnover
US$58.6 million
Volume
5,026,467
1.2
www.BuySellSignals.com
Page 4
403
Canada Edition
Analysis (continued)
Slipping Relative Strength
www.BuySellSignals.com
Page 5
404
Canada Edition
2014
2013
2012
14.32
11.28
9.37
7.28
% Price Change
26.9
20.4
28.7
Av Daily Volume
70,276
58,916
49,160
46,162
VWP (CAD)
13.21
10.88
8.61
6.47
Turnover Period
4 months
3 months
3 months
11.2 - 14.9
9.27 - 11.51
6.03 - 10.2
Index Change %
5.8
17.9
1.6
21.1
2.6
27.1
5.05 - 8.09
Last Price
Relative
strength
(6-months)
Revenue
(USD)
Net Profit
(USD)
Total Assets
(USD)
Martinrea
International
CAD12.05
65
853.2M
1,053
3B
58.6M
1.7B
AutoCanada
CAD39.95
18
808.5M
621
1.8B
43.7M
1.1B
Uni-Select
CAD42.0
90
741M
1,307
1.8B
50.1M
1.2B
CAD14.32
73
656.3M
1,208
1.3B
24.3M
1.1B
Exco Technologies
CAD15.35
89
535.3M
1,616
302.8M
25.2M
239M
Airboss of America
CAD15.64
92
297M
1,994
304.8M
13.7M
188.9M
Westport
Innovations
CAD5.46
29
289M
366
130.6M
(149.6M)
337.7M
www.BuySellSignals.com
Page 6
405
Canada Edition
Brokerage
Action
Past Rating
Current Rating
20-Mar-2015
Market Perform
20-Mar-2015
Canaccord Genuity
Upgrade
Hold
Buy
19-Mar-2015
Outperform
www.BuySellSignals.com
Page 7
406
Canada Edition
Tuesday, May 05, 2015
Company Overview
Activities
New Flyer Industries Inc is a manufacturer of the heavy duty
transit buses. It also includes aftermarket parts and support,
including the sale of bus parts. The Company operates in two
segments namely Bus Operations and Aftermarket
Operation.
Further details can be found at
http://www.newflyer.com.
Business Sector
Utilities
Economic Sector
Utilities
Ranking
New Flyer Industries is placed 264/2250 in BSS News Bites's
ranking of Canadian performers in the past year, a percentile
ranking of 87%.
Regulatory Announcements
Key Developments
May 01: New York provides New Flyer award for an
additional 72 heavy-duty transit buses
[News Story]WINNIPEG, May 1, 2015 /CNW/ - (TSX: NFI) (TSX:
NFI.DB.U) New Flyer of America Inc., a subsidiary of New Flyer
Industries Inc. ("New Flyer" or the "Company"), the leading
manufacturer of heavy-duty transit buses in North America,
announced today that New York City Transit Authority
("NYCT") granted New Flyer an award for an additional 72
heavy-duty, 40-foot, low floor, Xcelsior(Registered) buses (72
equivalent units or "EUs").
This award is supplementary to the January 2014 contract
announcement for 276 heavy-duty 40-foot
Xcelsior(Registered) clean diesel powered buses and will
replace vehicles that have reached the end of their useful
life.
NYCT and MTA Bus Company (together, "MTA") comprise the
largest transit agency in North America with over 5,700 transit
buses in their fleet of which approximately 1,000 or 17% are
New Flyer buses.
For more details click here.
Financial Results
April 14: New Flyer Announces First Quarter 2015 Orders
and Backlog
[News Story]
<link>http://tmx.quotemedia.com/article.php?newsid=74749
342&qm_symbol=NFI</link>
Source: TMX Group
For more details click here.
Key Developments
April 10: Milwaukee awards New Flyer a contract for up
to 75 Xcelsior(Registered) buses
[News Story] WINNIPEG, April 9, 2015 /CNW/ - (TSX: NFI) (TSX:
NFI.DB.U) New Flyer of America Inc., a subsidiary of New Flyer
Industries Inc. ("New Flyer" or the "Company"), the leading
manufacturer of heavy-duty transit buses in the United States
and Canada, announced today that the Milwaukee County
Transit System ("MCTS") awarded New Flyer a contract for up
to 75 heavy-duty 40 foot Xcelsior(Registered) clean diesel
buses.
The contract contains a firm order for 28 XD40 buses with
options for an additional 47 over the next three years.
For more details click here.
AGM date
May 01: New Flyer Industries announces AGM
New Flyer Industries has announced its Annual General
Meeting will take place on May 07, 2015.
Dividend
April 15: New Flyer Industries announces dividend
New Flyer Industries today announced a monthly dividend of
4.88c per share. The record date is April 30, 2015 and it is
payable on May 15, 2015.
www.BuySellSignals.com
Page 9
407
Canada Edition
Stock BUZZ
To view the Stock BUZZ on New-Flyer-Industries, click
here
Sector Sorting
For Company searches, or for sorting by stocks and
variables, an interactive version of today's Table is
available here
Issued Capital
Based on 55,505,604 issued equity shares the market
capitalisation is CAD794.8 million (US$656.3 million). It is
Canada's 6th largest Auto company by total revenue.
www.BuySellSignals.com
Page 10
408
Canada Edition
Tuesday, May 05, 2015
www.BuySellSignals.com
Page 11
409
Canada Edition
Disclaimer: While this document is based on information sources which are considered reliable, it has been
prepared without consideration of your specific investment objectives, financial situation or needs, so you should
carry out your own analysis or seek professional investment advice before an investment deci-sion is made. The
document contains unbiased, independent equities data from BuySellSignals (AFS Licence 222756) and News Bites
Pty Ltd, who provide round the clock data on every Australian stock and sector. Neither BuySellSignals nor News
Bites are brokers, and neither have an executing, corporate advisory or investment banking function. BuySellSignals
and News Bites Pty Ltd, its directors, employees and consultants do not represent, warrant or guarantee, expressly
or impliedly, that the information contained in this document is complete or accurate.
The data is sourced from annual reports and company releases and may not be fully up to date. It should be used
as a guide only.
www.BuySellSignals.com
Page 12
410
COMPANY UPDATE
NFI | TSX
$14.52
Rating: Outperform
One Year Target: C$17.50
Total Return: 24.6%
Yield: 4.0%
April 15, 2015
C$14.90 / C$11.20
4.0%
Dividend Yield:
55.5 (basic)
55.5 (fd)
C$805.4
33.6
79.6
$229.0
$868.0
2014
Revenue ($mm)
2015e
2016e
EBITDA ($mm)
FD EPS
EBITDA ($m m )
Q1
$107.4
$121.8
$138.6
$0.65
$0.78
$1.02
Q2
Q3
Q4
2014
$19.7
$27.0
$25.7
$35.0
2015
$27.8e
$31.6e
$29.8e
$32.6e
2016
$34.5e
$34.4e
$33.8e
$35.9e
Q2
Q3
Q4
Adjusted FD EPS
Q1
2014
$0.10
$0.16
$0.15
$0.24
2015
$0.15e
$0.20e
$0.20e
$0.23e
2016
$0.25e
$0.25e
$0.25e
$0.27e
Volume ('000)
800
Last Sale Price
600
$10
$5
400
200
$0
0
Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15
Regulatory Disclosures and policy on the dissemination of research: last page or at www.altacorpcapital.com
411
I NSTITUTIONAL
EQUITY
R ESEARCH:
DIVERSIFIED
INDUSTRIES
INITIATING
COVERAGE
: DIVERSIFIED
INDUSTRIES
$14.52
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
11.2x
8.2x
7.2x
Peer Average
16.0x
13.3x
11.7x
8.0x
7.1x
6.2x
17.8x
14.9x
11.4x
2014
2015e
2016e
2015e
2016e
2013
Trend
Revenues
2013
2014
29,979
45,823
66,392 108,679
Bus Manufacturing
22,988
35,255
22,834
(8,960)
Aftermarket
214,999
52,967
81,078
89,226
99,719
(2,003)
(1,766)
(568)
(568)
Revenue
319,034
295,968
291,698
Aftermarket % of Total
17.9%
22.0%
18.8%
17.3%
56,776
57,374
73,812
89,036
5.8%
5.1%
5.8%
6.4%
31,036
49,991
47,968
14.4%
15.7%
79,110
6.6%
15,276
15,398
49,589
192
(154)
16.2%
17.0%
45,481
83,667
62,223
86,552
86,457
121,780
138,625
6.0%
7.7%
8.2%
47,334
92,972
75,168 103,853
94,685
107,365
121,780
138,625
per Share
$0.92
$1.68
$1.35
7.9%
7.4%
7.7%
8.2%
FCF Yield
Amortization
28,001
35,837
39,734
35,981
Operating Earnings
51,109
50,620
82,046
102,644
EBT
34,617
37,568
68,794
90,307
7,856
10,849
25,454
33,413
Net Income
26,761
26,719
43,340
56,893
Reported FD EPS
$0.52
$0.48
$0.78
$1.02
Adjusted FD EPS
$0.64
$0.65
Taxes
$0.78
$1.02
2013
2014
2015e
2016e
Revenue
38.6%
21.0%
8.7%
7.1%
55.7%
108.7%
2013
0.9714
0.9414
13.4%
2.7%
2014
0.9049
0.9050
13.4%
19.3%
2015e
0.8290
0.8264
13.8%
31.3%
2016e
0.8333
0.8403
Trend
2013
2014
2015e
2016e
Trend
226,479
229,034
215,997
145,345
2.4x
2.1x
1.8x
1.1x
33.2%
33.6%
31.5%
23.4%
Adjusted EBITDA
Adjusted FD EPS
FX Assum ptions
Average CAD/USD Rate
EOP CAD/USD Rate
Leverage
Net Debt (EOP)
Net Debt to Trailing EBITDA
Net Debt to Total Capitalization
6.3%
Grow th
Trend
108.3%
11.5%
$1.87
9.3%
12.9%
83.1% (19.2%)
38.2%
2013
2014
2015e
2016e
30,255
32,457
32,471
32,471
63.9%
$0.585
34.9%
$0.585
43.2%
$0.585
31.3%
4.0%
4.0%
4.0%
4.0%
2013
2014
2015e
2016e
2,191
2,437
2,554
2,653
449.3
25.9
43.8
1.2x
464.5
23.5
49.2
0.9x
501.7
28.9
51.1
1.0x
526.8
33.6
52.0
1.0x
18.8%
20.7%
0.0%
19.6%
Trend
$0.585
Cash Yield
Trend
Trend
Option
2020, 8%
2015, 18%
$4.0
2019, 21%
$3.0
2016, 11%
$2.0
$1.0
2017, 11%
$0.0
Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314 Q115 Q315
2018, 31%
412
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
Rating &
Target
TSX:NFI
OP (C$17.50)
BOVESPA:POMO4
NR
TSX: WJX
NR
TSX: AFN
NR
TSX: SPB
NR
GBX
NR
OSK
NR
SPAR
NR
WNC
NR
THO
NR
WGO
NR
NAV
NR
TSX: STB
NR
BLBD
NR
CUB
NR
Trading
Local
Currency Price
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
14.52
2.50
24.97
50.25
14.66
63.15
48.43
4.98
14.10
62.23
20.94
27.96
6.85
11.80
50.22
Market
Cap ($m m )
806.0
2,115.2
419.0
662.8
1,850.2
1,666.7
3,784.3
169.5
963.1
3,322.5
563.9
2,278.3
572.1
244.2
1,348.9
EPS
EV
Net
Debt
($m m )
2014
2015e
229.5
1,227.4
201.0
132.3
986.3
386.4
779.0
(23.3)
186.4
(248.3)
(7.9)
4,349.0
311.1
197.1
(114.7)
859.8
3,366.0
619.9
795.0
2,836.5
2,146.4
4,563.3
146.1
1,149.5
3,074.2
556.0
6,661.3
935.2
441.3
1,234.5
0.65
0.25
2.46
0.31
0.45
4.62
3.49
0.03
0.88
3.55
1.61
-5.07
0.03
0.00
2.82
0.78
0.23
2.26
3.26
1.01
6.28
4.13
0.11
1.13
3.92
1.60
1.75
0.07
0.00
3.06
P/E
EBITDA
17.8x
8.0x
10.2x
NM
32.5x
13.7x
13.9x
NM
16.1x
17.5x
13.0x
NM
NM
NM
17.8x
16.0x
14.9x
8.6x
11.0x
15.4x
14.5x
10.1x
11.7x
NM
12.5x
15.9x
13.1x
16.0x
NM
NM
16.4x
13.3x
11.4x
6.9x
9.8x
12.5x
12.3x
NM
11.1x
14.6x
11.7x
13.4x
11.3x
9.5x
NM
NM
15.4x
11.7x
EV/EBITDA
2014
2015e
2016e
2014
2015e
2016e
Price
to BV
107.4
268.8
82.4
63.4
282.4
257.4
591.2
9.4
160.7
298.8
65.8
331.0
69.0
25.9
128.8
121.8
313.3
88.7
99.8
304.9
433.3
640.4
15.9
188.4
341.7
69.3
761.6
91.2
0.0
142.0
138.6
400.1
96.0
117.8
327.5
0.0
657.8
28.5
193.1
0.0
79.8
922.6
94.1
0.0
155.7
8.0x
12.5x
7.5x
12.5x
10.0x
8.3x
7.7x
15.5x
7.2x
10.3x
8.5x
20.1x
13.5x
17.0x
9.6x
11.2x
7.1x
10.7x
7.0x
8.0x
9.3x
5.0x
7.1x
9.2x
6.1x
9.0x
8.0x
8.7x
10.3x
NM
8.7x
8.2x
6.2x
8.4x
6.5x
6.7x
8.7x
NM
6.9x
5.1x
6.0x
NM
7.0x
7.2x
9.9x
NM
7.9x
7.2x
1.5x
1.4x
1.7x
3.2x
3.4x
3.1x
2.0x
1.0x
2.5x
3.3x
2.8x
NM
3.5x
0.0x
1.7x
2.2x
413
Disclosure Requirements
C$14.52
Rating:
Outperform
12 Month Target:
C$17.50
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
Does any director, officer, employee of AltaCorp Capital or member of their household serve as a director or
officer or advisory capacity of the issuer? If yes, state name:
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
12 Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
13 Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
61%
27%
Sector Perform
25%
13%
Underperform
2%
0%
Speculative
1%
0%
Restricted
4%
20%
Not Rated
6%
0%
Tender
2%
0%
100%
20%
Total
TD Tower
66 Wellington Street West, Suite 3530
Toronto, Ontario M5K 1A1
Tel: 403 539 8600
www.altacorpcapital.com
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied
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415
(NFI-TSX)
Stock Rating:
Stock Price:
Target Price:
Market Perform
$14.52
$16.50
416-359-5301
416-359-6193
Q1/15 Deliveries Below Expectations; Recent Bus Orders Mainly Driven by Fleet
Replacement Plans
New Flyer Q1/15 deliveries were up 3% y/y to 572 equivalent units (EUs). New bus orders (firm & options) were 1,020
EUs, up from 559 EUs y/y. New firm orders declined 38% y/y to 235 EUs while option orders increased to 785 EUs from
179 EUs during the same period last year. The company also had options for 157 EUs converted into firm orders during the
quarter. Management expects the build rate of 51 EUs per week, which includes the production of MiDi buses, to remain
stable in 2015. New Flyer aftermarket parts shipment increased 22.6% relative to the same period last year.
Total backlog increased 5% quarter over quarter to $3.57 billion (7,193 EUs), driven by an increase in option orders. Total
backlog data doesnt include 494 EUs of new bus orders that are still pending as New Flyer awaits purchase documentation
from customers.
Q1/15 Results Conference Call: Wed. May 6, 2015, at 8:00 a.m.; Tel: 1.888.231.8191 or 1.647.427.7450.
Our View:
Bus deliveries during the quarter were 7% below expectations due to a lower production rate and higher-than-expected
work in progress inventory levels. Parts shipments were above expectations.
Based on lower-than-expected bus deliveries, we would expect Q1/14 EBITDA to be biased downward. We expect
Q1/15 adj. EBITDA to be around $25 million (6.9% EBITDA margin), while the Mean estimate is about $26 million.
Total backlog continues to increase while firm orders have declined 9% quarter over quarter. The book-to-bill ratio was
about 119% y/y, mainly driven by option orders.
The increase in bus orders has mainly been driven by customers fleet replacement plans. We havent yet seen a strong
catalyst that indicates strength in demand for heavy-duty transit buses for New Flyer.
We would expect New Flyer to improve margins as the expiring tax credits will be more than offset by operating
efficiencies and platform rationalization savings over the next two years.
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s) under
FINRA rules. For disclosure statements, including the Analyst's Certification, please refer to pages 2 to 5.
Flash Page 1
416
Quarterly Price
18
14
14
12
12
10
10
18
16
16
14
14
12
12
10
8
10
3) Mkt
6
2) NR
4 1) Mkt
NFI Relative to S&P/TSX Comp.
NFI Relative to Machinery
400
400
300
300
200
200
100
100
Revenue / Share
Price / Revenue
500
400
400
300
300
200
200
100
100
1.0
200
500
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
300
2012
2013
2014
200
200
0.5
100
-200
0.0
EPS (4 Qtr Trailing)
Price / Earnings
2012
2013
-200
2014
400
200
0
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
FYE
(Dec.)
EPS
$
2011
2012
2013
2014
0.81
0.22
0.49
0.48
Range*:
Current*
0.48
P/E
Hi - Lo
9.5
40.5
24.2
29.4
6.4
23.6
15.9
21.6
40.5
6.4
29.6
DPS
$
Yield%
Hi - Lo
Payout
%
BV
$
P/B
Hi - Lo
0.86
0.59
0.59
0.59
16.5 11.2
11.3 6.6
7.5 4.9
5.7 4.2
>100
>100
>100
>100
8.2
7.7
8.1
8.1
0.9
1.2
1.5
1.7
0.6
0.7
1.0
1.3
1.7
0.6
>100
10.3
16.5
0.59
4.2
4.2
1.4
ROE
%
3
6
6
1
2
3
Date
5-Jun-12
29-Oct-12
3-Jul-13
Rating Change
R to Mkt
Mkt to NR
NR to Mkt
Share Price
$6.59
$7.75
$11.14
Flash Page 2
417
IMPORTANT DISCLOSURES
Analyst's Certification
I, Bert Powell, CFA, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I
also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this
report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates,
which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and
in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA (exceptions:
Alex Arfaei and Brodie Woods). These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the
NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a
research analyst account.
Company Specific Disclosure
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past
12 months.
Disclosure 6: This issuer is a client (or was a client) of BMO NB, BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12 months:
Non-Securities Related Services.
Disclosure 13: A partner, director, officer, employee or agent of BMO Capital Markets is an officer, director, employee of, or serves in an advisory
capacity to, this issuer: Brian Tobin (Member of Board of Directors)
Methodology and Risks to Price Target/Valuation
Methodology: Our $16.50 target price is based on ~6.8x our 2016E EBITDA.
Risks: A significant portion of new transit bus purchases are funded from government sources. As long as federal, state/provincial and municipal budgets
remain under pressure, funding for new bus purchases could be reduced or eliminated. Other risks include: price volatility of raw materials, warranty costs
could be material, labour disruptions from its predominantly unionized workforce and customer contract issues (early termination, deferral, non-renewal).
Distribution of Ratings (March 31, 2015)
Rating
BMOCM US
BMOCM US
BMOCM US
BMOCM
BMOCM
Starmine
Category
BMO Rating
Universe*
IB Clients**
IB Clients***
Universe****
IB Clients*****
Universe
Buy
Outperform
43.7%
18.6%
58.2%
42.7%
55.5%
54.1%
Hold
Market Perform
51.4%
10.4%
38.5%
52.1%
41.9%
40.5%
Sell
Underperform
4.9%
9.4%
3.3%
5.2%
2.6%
5.5%
*
Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.
**
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services
as percentage within ratings category.
***
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking
services as percentage of Investment Banking clients.
****
Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.
*****
Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as
percentage of Investment Banking clients.
Flash Page 3
418
Flash Page 4
419
To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Conduct
Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in
matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the
Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant persons). The
contents hereof are not intended for the use of and may not be issued or passed on to retail clients.
Unauthorized reproduction, distribution, transmission or publication without the prior written consent of BMO Capital Markets is strictly prohibited.
Click here for data vendor disclosures when referenced within a BMO Capital Markets research document.
Financial Group
Flash Page 5
420
Company Update
BUY
unchanged
C$15.00
PRICE TARGET
unchanged
Price (15-Apr)
Ticker
C$14.70
NFI-TSX
11.20 - 14.90
0.08
816
0.59
4.0
62.0
6.0
227.8
www.newflyer.com
FYE Dec
FCF /Shr (C$)
Payout Ratio (x)
Sales (US$M)
ROIC (%)
2014A
1.18
0.5
1,451
6
2015E
1.37
0.4
1,460
8
2016E
1.46
0.4
1,450
9
2017E
1.55
0.4
1,479
0
Quarterly FCF /
Shr
2014A
2015E
2016E
2017E
Q1
Q2
Q3
Q4
0.19
0.34
0.39
0.41
0.29
0.38
0.40
0.42
0.32
0.32
0.34
0.36
0.38
0.34
0.33
0.36
15.5
15
14.5
14
13.5
13
12.5
12
11.5
11
Apr- 15
Mar- 15
Jan- 15
Feb- 15
Dec- 14
Oct- 14
Nov- 14
Sep- 14
Jul- 14
Aug- 14
Jun- 14
May- 14
10.5
NFI
Source: FactSet
Maintain BUY for solid dividend yield, potential value from surplus capital generation.
We continue to recommend that investors BUY NFI for a solid investment return from a
nice dividend yield and projected share price appreciation plus upside potential from
deployment of surplus capital.
We expect NFI to generate significant free cash ($3.96/share in the next 3 years), which
could be used to generate additional shareholder value.
We project a solid 6.0% and 23.6% one-year and two-year implied investment returns,
respectively, including a solid 4.0% annual dividend yield.
Q1/15 forecast benchmarked to actual/reported orders and backlog
We benchmarked our orders and backlog forecasts to the actual/reported data in the
quarter.
We lowered our Q1/15 deliveries by 10%, and reduced total firm backlog by 10% on
lower-than-expected new firm orders. However, we do not read too much into it as
deliveries and orders are volatile on quarterly basis. The rest of our forecast was little
changed.
2015 guidance suggests EBITDA improvement
NFI bus production guidance of 51 bus equivalent units (EUs) suggests a mid-single-digit
increase in bus deliveries in 2015. NFI guided to flat bus EBITDA/EU guidance, implying
an increase in bus manufacturing EBITDA in 2015.
The Aftermarket outlook is mixed, with core Aftermarket sales expected to increase
about 5%, but the one-off Chicago Transit Authority mid-life extension project is expected
to end in mid-2015. Net, we expect this to translate into slightly lower Aftermarket
EBITDA.
We expect the bus manufacturing and Aftermarket changes to net to a modest increase
in consolidated EBITDA.
FCF looks set to improve
We believe NFI may be positioned for better FCF in 2015 and beyond. We expect cash
from operations to remain quite positive. Capex is likely to increase on a temporary basis
in 2015 due to NFIs product rationalization program. But, working capital looks like it
may finally stop being a large use of cash.
Net, we think this combination positions NFI for strong FCF, which positions the company
for shareholder enhancement initiatives such as business growth and return of capital to
investors.
Unchanged valuation
We maintain our valuation at 7.5x EV/NTM EBITDA (or 7.5x Q4/16E EV / Q1/17E Q4/17E EBITDA), which is in line with the companys trading range in the past 60
months. Our target was unchanged due to the relatively unchanged forecast.
Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX | CF. : LSE)
The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all
the companies and securities that are the subject of this report discussed herein.
For important information, please see the Important Disclosures beginning on page 14 of this document.
421
Auto Components 2
422
Figure 1: Revised Canaccord Genuity forecast for New Flyer: limited changes
Yrs E n ded D ec . 31 ( $M )
Dividend/share (C$)
% change
Free cash flow/share (C$)
% change
Payout ratio
Revenue
% change
EBITDA
EBITDA margin
Investment in NCWC & capital assets
Q 1/15E
New
Old
Fc s t
Fc s t
0.146 0.146
0%
0%
2015E
New
Old
Fc s t
Fc s t
0.585 0.585
0%
0%
2016E
New
Old
Fc s t
Fc s t
0.585 0.585
0%
0%
2017E
New
Old
Fc s t
Fc s t
0.585 0.585
0%
0%
2018E
New
Old
Fc s t
Fc s t
0.585 0.585
0%
0%
2019E
New
Old
Fc s t
Fc s t
0.585 0.585
0%
0%
2014
0.59
n.m.
Q 4/14
0.15
0%
1.18
#N/A
0.38
34%
0.34
77%
0.36
90%
1.37
16%
1.37
16%
1.46
6%
1.46
7%
1.55
6%
1.55
6%
1.58
2%
1.58
2%
1.61
2%
1.61
2%
50%
38%
43%
40%
43%
43%
40%
40%
38%
38%
37%
37%
36%
36%
1,451
21%
420
11%
340
5%
369
14%
1,460
1%
1,460
1%
1,450
-1%
1,450
-1%
1,479
2%
1,479
2%
1,511
2%
1,511
2%
1,541
2%
1,541
2%
91
6.3%
26
6.3%
26
7.7%
28
7.6%
111
7.6%
111
7.6%
117
8.0%
117
8.0%
124
8.4%
124
8.4%
126
8.3%
126
8.3%
128
8.3%
128
8.3%
(9)
(11)
(6)
(3)
20
18
16
16
16
16
16
16
46
2,437
465
24
50
680
495
34
12
572
455
25
12
635
455
25
12
2,578
455
25
46
2,578
455
25
46
2,578
458
27
47
2,578
458
27
47
2,614
461
29
48
2,614
461
29
48
2,652
464
29
49
2,652
464
29
49
2,688
467
29
50
2,688
467
29
50
2,263
2,102
759
2,102
392
1,922
645
2,112
2,578
2,102
2,578
2,102
2,578
2,102
2,578
2,102
2,614
2,102
2,614
2,102
2,652
2,102
2,652
2,102
2,688
2,102
2,688
2,102
Return on capital
CAD / USD (period average)
1
5.2%
1.104
6.1%
1.136
6.2%
1.230
6.8%
1.230
6.8%
1.245
6.8%
1.245
7.7%
1.250
7.7%
1.250
8.7%
1.250
8.7%
1.250
9.2%
1.250
9.2%
1.250
9.8%
1.250
9.8%
1.250
NCWC means non-cash working capital. Positive number means NCWC generates cash.
Auto Components 3
423
Forecast outlook
We are projecting solid revenue and EBITDA growth over the next five years from a
combination of the modest growth from bus deliveries and margin expansion.
Auto Components 4
424
NFI emphasized that its focus is on its operational improvement projects this year
(Projects United and Convergence). However, management also noted that a
considerable part of its Q4/14 board meeting on March 19, 2015 was spent on
considering future value improvement actions.
NFI noted that value creation activities could include acquisitions or investments in
the bus industry or adjacent markets or direct shareholder value actions, which we
take to mean share buy backs and/or dividend increases.
Auto Components 5
425
VALUATION
NFIs yields (Figure 3) and valuation (Figure 4) appear to be settling into a new range.
The companys dividend yield seems to be settling into the 4-5% range (about 2.5%
over the 10-year Canada bond yield) and EV/EBITDA is stable in the 7-8x NTM EBITDA
range.
Figure 2: NFI distribution/dividend yields settling into the 4-5% range, or roughly 2.5% above the 10-year Canada bond yield
NFIs dividend yield also appears to have converged with other high-yield industrial
names (Figure 5).
Auto Components 6
426
Figure 4: We think a mid-point valuation multiple is reasonable versus industrial high yield companies
Ma r k e t
Cur .
Ne w F l y e r I nd ustr i e s
Eq ui ty Pr i ce :
Cur .
Y e a r A p r . 15, 2015
Di v .
2015
$14. 16
$0. 59
Co nse nsus A v e r a ge
Di v .
EB I TDA
Cur .
Pa y o ut
Ca p .
Cur .
Y i e l d F CF PS
r a ti o
($M)
EPS
4. 1%
$1. 37
4. 5%
42. 6%
De b t/
P/E
67. 7%
Gr o wth
Ca p ('15- '17)
5. 7%
17. 1 39. 0% #V A LU E!
Chorus Aviation
2015
$6.06
$0.48
7.9%
$1.01
47.5%
$731 $0.72
8.5
Davis + Henderson
2014
$39.69
$1.28
3.2%
$1.65
77.6%
$3,429 $2.71
14.7
88.4%
12.9%
Westshore Terminals
2014
$31.25
$1.32
4.2%
$1.65
80.0%
$2,320 $1.81
17.2
0.0%
2.6%
Cineplex Galaxy
2015
$49.29
$1.56
3.2%
$1.71
91.0%
$3,108 $2.14
23.0
32.1%
13.1%
41.2% #VALUE!
Note that the New Flyer dividend is the new sustainable dividend level
Source: Company reports, Bloomberg, Canaccord Genuity Research estimates
We maintain our valuation multiple at 7.5x EV/NTM EBITDA (or 7.5x Q4/15E EV /
Q1/16E - Q4/16E EBITDA), given that the stock has traded in this range for some time
(average of 7.5x over the past 60 months). We think our target multiple is well
supported by NFIs 4.0% dividend yield. We think the dividend upside potential from
forecasted stronger future free cash further strengthens the dividend yield support
argument.
Our target multiple generates a target dividend yield of 3.9% and a FCFPS yield of
9.7%, both of which seem reasonable relative to comparable companies and
appropriately better than in the past, reflecting NFIs improved risk profile.
Our valuation also translates into a reasonable to attractive 2.6% dividend yield and
8.4% FCFPS spreads over Government of Canada bond rates, which reflects the much
higher risk of NFI versus government bonds.
Auto Components 7
427
1-year
t arget
116.7
7.5
875.4
(111.1)
764.3
62.0
12.33
2-year
t arget
123.8
7.5
928.7
(81.4)
847.3
62.0
13.66
15.00
17.00
0.59
1.17
15.59
18.17
6.0%
23.6%
3.9%
9.7%
3.4%
9.1%
2.6%
8.4%
FCFPS C$
1.46
1.55
Auto Components 8
428
Figure 6: Canaccord Genuity Researchs forecast for New Flyer Industries Dividend payout analysis
Y ears ended Dec. 3 1 ($ m illions)
F ree cash
Cash from operations
Change in working capital
Interest paid
Interest expense
Income taxes paid
Current income tax expense
Principal portion of capital lease payments
Capital expenditures
Proceeds from sale of redundant assets
Business acquisition cost
Costs associated with strategic initiatives
Defined benefit funding
Defined benefit expense
Realized investment tax credits
Foreign exchange impact on cash
Free cash flow
Exchange rate
Free cash flow (CAD)
Declared dividends (CAD)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2 0 1 4 Q1 /1 5 E Q2 /1 5 E Q3 /1 5 E Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
5.5
24.0
17.1
(14.6)
6.5
(12.8)
(2.4)
(4.0)
0.7
7.3
(1.8)
2.2
27.8
0.001
27.8
33.1
30.0
23.0
10.9
(11.6)
19.0
(23.8)
(2.0)
(13.8)
1.2
6.0
8.7
(2.8)
(1.5)
0.2
43.4
1.039
45.1
30.7
17.5
(7.9)
3.8
(3.1)
4.4
(3.4)
(0.4)
(3.3)
0.4
2.1
(0.7)
0.0
9.5
1.109
10.6
8.1
1.1
18.9
3.8
(3.4)
4.4
(8.2)
(0.3)
(1.5)
0.2
0.1
(0.7)
0.4
14.7
1.085
15.9
8.1
0.5
21.8
1.8
(2.9)
1.6
(4.1)
(0.5)
(1.9)
0.0
0.2
0.8
(0.7)
(0.4)
16.3
1.097
17.9
8.1
26.9
2.5
2.2
(3.0)
1.5
(11.2)
(0.6)
(1.7)
2.8
0.5
(0.6)
(0.6)
(0.1)
18.6
1.136
21.1
8.1
45.8
35.3
11.6
(12.4)
12.0
(26.8)
(1.8)
(8.4)
0.6
3.1
3.5
(2.6)
(0.6)
(0.2)
59.1
1.104
65.5
32.5
32.6
(14.6)
3.0
(3.0)
5.4
(5.4)
(0.7)
(2.0)
0.5
(0.6)
15.2
1.230
18.7
8.1
30.2
(10.6)
3.0
(3.0)
6.3
(6.3)
(0.7)
(2.0)
0.5
(0.6)
16.8
1.250
21.0
8.1
22.8
(5.8)
2.9
(2.9)
7.5
(7.5)
(0.7)
(2.0)
0.5
(0.6)
14.2
1.250
17.8
8.1
14.2
3.5
2.9
(2.9)
7.9
(7.9)
(0.7)
(2.0)
0.5
(0.6)
15.0
1.250
18.7
8.1
99.7
(27.5)
11.8
(11.8)
27.2
(27.2)
(2.6)
(8.0)
2.0
(2.4)
61.2
1.245
76.2
32.5
67.6
8.3
11.5
(11.5)
29.7
(29.7)
(2.6)
(8.0)
2.0
(2.4)
64.9
1.250
81.1
32.5
75.6
4.4
11.1
(11.1)
33.1
(33.1)
(2.6)
(8.0)
2.0
(2.4)
69.0
1.250
86.2
32.5
77.6
3.5
10.7
(10.7)
34.5
(34.5)
(2.6)
(8.0)
2.0
(2.4)
70.1
1.250
87.6
32.5
78.8
3.5
10.4
(10.4)
35.7
(35.7)
(2.6)
(8.0)
2.0
(2.4)
71.3
1.250
89.1
32.5
44.4
51.9
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
55.5
0.63
0.75
0.87
0.58
0.19
0.15
0.29
0.15
0.32
0.15
0.38
0.15
1.18
0.59
0.34
0.15
0.38
0.15
0.32
0.15
0.34
0.15
1.37
0.59
1.46
0.59
1.55
0.59
1.58
0.59
1.61
0.59
Auto Components 9
429
Figure 7: Canaccord Genuity Researchs forecast for New Flyer Industries Income statement
Y ears ended Dec. 3 1 ($ m illions)
Incom e statem ent
Revenues
Cost of sales and SG&A
Foreign exchange gain (loss)
EBITDA
Depreciation & amortization
Unrealized FX gain (loss)
Fair value adjustments
Other
Operating profit (EBIT)
Interest expense on long-term debt
Other interest and bank charges
Fair value adjustment on int rate swaps
Other expenses
Distributions on B and C shares
Pre-tax income
Income taxes
Net Income (loss)
Div. per share/Dist. per unit (C$)
FCFPS/Dist. cash per IDS (C$)
FCFPS (CFO - Capex) (C$)
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
2 0 1 4 Q1 /1 5 E Q2 /1 5 E Q3 /1 5 E Q4 /1 5 E
865.3 1,199.4
(810.2) ######
2.8
(0.1)
57.8
79.1
(24.3)
(28.0)
(1.4)
(2.1)
(1.4)
0.0
(5.5)
0.0
25.2
49.0
(11.9)
(8.7)
(2.7)
(2.9)
0.8
(0.5)
(2.8)
(2.2)
0.0
0.0
10.0
34.6
(0.7)
(7.9)
9.3
26.8
323.9
(305.0)
(0.8)
18.1
(7.7)
(0.4)
0.0
0.0
10.0
(2.3)
(0.8)
0.3
(0.5)
0.0
6.7
(1.2)
5.5
346.5
(322.3)
(0.4)
23.8
(8.1)
1.0
0.0
(3.9)
12.8
(2.3)
(1.2)
(0.4)
(0.5)
0.0
8.4
(4.8)
3.6
360.8
(337.6)
(0.2)
22.9
(10.0)
(0.1)
0.0
0.0
12.8
(2.2)
(0.7)
0.8
(0.6)
0.0
10.1
0.2
10.2
420.0 1,451.1
(393.4) (1,358.3)
(0.1)
(1.5)
26.5
91.3
(10.0)
(35.8)
0.3
0.8
0.0
0.0
(0.9)
(4.8)
15.9
51.4
(2.2)
(8.9)
(0.8)
(3.5)
0.1
0.8
(0.6)
(2.2)
0.0
0.0
12.4
37.6
(5.0)
(10.8)
7.4
26.7
340.3
(314.0)
0.0
26.3
(9.9)
0.0
0.0
0.0
16.4
(2.3)
(0.7)
0.0
0.0
0.0
13.4
(3.4)
9.9
394.0
(365.2)
0.0
28.8
(10.0)
0.0
0.0
0.0
18.8
(2.3)
(0.6)
0.0
0.0
0.0
15.8
(4.3)
11.5
352.7
(325.4)
0.0
27.3
(10.1)
0.0
0.0
0.0
17.2
(2.3)
(0.6)
0.0
0.0
0.0
14.3
(5.5)
8.8
2015E
2016E
2017E
2018E
2019E
0.75
0.63
(0.10)
0.58
0.87
0.26
0.15
0.19
0.28
0.15
0.29
(0.01)
0.15
0.32
(0.04)
0.15
0.38
0.49
0.59
1.18
0.71
0.15
0.34
0.54
0.15
0.38
0.50
0.15
0.32
0.35
0.15
0.34
0.18
0.59
1.37
1.56
0.59
1.46
1.12
0.59
1.55
1.28
0.59
1.58
1.32
0.59
1.61
1.34
52.3
58.9
55.5
55.6
55.7
55.7
55.6
62.0
62.0
62.0
62.0
62.0
62.0
62.0
62.0
62.0
-6.6%
-0.4%
-30.6%
6.7%
38.6%
38.4%
-21.5%
6.6%
32.1%
26.8%
0.0%
5.6%
30.0%
56.0%
0.0%
6.9%
16.8%
36.0%
0.0%
6.4%
10.9%
34.4%
0.0%
6.3%
21.0%
36.0%
0.0%
6.3%
5.1%
76.7%
0.0%
7.7%
13.7%
31.8%
0.0%
7.3%
-2.2%
-0.5%
0.0%
7.7%
-11.2%
-11.5%
0.0%
7.6%
0.6%
16.3%
0.0%
7.6%
-0.7%
6.5%
0.0%
8.0%
2.0%
6.3%
0.0%
8.4%
2.1%
1.6%
0.0%
8.3%
2.0%
1.7%
0.0%
8.3%
3.9%
5.3%
3.9%
5.9%
4.8%
6.1%
5.2%
6.2%
7.3%
6.8%
7.2%
6.8%
7.7%
8.7%
9.2%
9.8%
Bus revenues
Bus EBITDA (excl. FX gains/losses)
Bus sales growth
Bus EBITDA % (excl. FX gains/losses)
Deliveries
Revenue/unit
EBITDA/unit
LTM EBITDA/unit
753.9
42.0
-7.0%
5.6%
1,656
455
25
25
984.4
63.6
30.6%
6.5%
2,191
449
29
29
250.9
7.8
20.7%
3.1%
554
453
14
27
265.8
13.9
23.5%
5.2%
582
457
24
28
278.7
12.6
11.2%
4.5%
621
449
20
26
336.6
23.2
7.5%
6.9%
680
495
34
24
1132.1
57.4
15.0%
5.1%
2,437
465
24
24
260.3
14.3
3.7%
5.5%
572
455
25
26
319.0
17.5
20.0%
5.5%
701
455
25
26
286.7
15.8
2.8%
5.5%
630
455
25
27
307.1
16.9
-8.8%
5.5%
675
455
25
25
1173.0
64.5
3.6%
5.5%
2,578
455
25
25
1180.7
69.6
0.7%
5.9%
2,578
458
27
27
1205.1
75.8
2.1%
6.3%
2,614
461
29
29
1230.5
76.9
2.1%
6.3%
2,652
464
29
29
1255.3
78.0
2.0%
6.2%
2,688
467
29
29
Aftermarket revenues
Aftermarket EBITDA (excl. FX)
Aftermarket sales growth
Aftermarket EBITDA % (excl. FX)
119.1
19.6
2.6%
16.4%
215.0
31.0
80.6%
14.4%
73.0
11.9
95.4%
16.3%
80.7
13.1
57.1%
16.2%
82.0
13.1
40.7%
16.0%
83.4
11.9
22.6%
14.2%
319.0
50.0
48.4%
15.7%
80.0
12.0
9.6%
15.0%
75.0
11.3
-7.0%
15.0%
66.0
11.6
-19.6%
17.5%
66.0
11.6
-20.8%
17.5%
287.0
46.4
-10.0%
16.1%
269.2
47.1
-6.2%
17.5%
274.4
48.0
1.9%
17.5%
280.0
49.0
2.0%
17.5%
285.6
50.0
2.0%
17.5%
Auto Components 10
430
Figure 8: Canaccord Genuity Researchs forecast for New Flyer Industries Balance sheet
Y ears ended Dec. 3 1 ($ m illio ns)
Balance sheet
Cash
Accounts receivable
Inventories
Prepaid expenses and deposits
Derivative financial instruments
Future income tax assets
Other
Total current assets
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
11.2
113.5
124.7
4.7
0.0
0.0
0.0
254.1
11.9
230.3
183.3
7.7
0.0
0.0
0.0
433.2
14.2
201.0
207.7
6.6
0.0
1.6
0.0
431.1
4.3
146.3
246.4
5.7
0.0
3.2
0.0
406.0
8.7
164.1
267.4
4.6
0.1
3.4
0.0
448.2
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
17.5
212.1
230.0
4.4
0.7
0.8
0.0
465.4
Capital assets
Deferred charges
Intangible assets
Future income tax assets
Derivative financial instruments
Accrued benefit asset
Total assets
42.0
0.0
528.5
72.6
0.0
0.0
897.2
64.8
0.0
568.9
68.9
0.0
0.0
1,135.9
65.5
0.0
564.1
67.6
0.0
1.1
1,129.4
65.4
0.0
556.1
65.7
0.0
0.5
1,093.7
65.2
0.0
550.7
65.0
0.0
0.0
1,129.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
63.8
0.0
544.5
62.4
0.0
0.0
1,136.1
Bank indebtedness
Accounts payable & accrued liabs
Due to parent company
Deferred revenue
Provision for warranty costs
Current portion of capital leases
Current portion of LTD
Other current liabilities
Total current liabilities
0.0
150.8
0.0
19.2
20.1
1.9
40.0
6.8
238.8
0.0
212.9
0.0
57.6
26.1
1.3
35.0
1.5
334.4
0.0
225.5
0.0
55.4
25.1
1.1
30.0
0.5
337.6
0.0
204.5
0.0
47.7
25.1
1.3
30.0
1.8
310.3
0.0
227.1
0.0
36.8
28.7
1.7
45.0
3.9
343.2
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
233.1
0.0
40.8
32.3
1.6
40.0
6.1
353.8
0.0
203.6
0.0
40.8
32.3
1.6
40.0
5.3
323.6
0.0
216.7
0.0
40.8
32.3
1.6
40.0
4.5
335.9
0.0
214.5
0.0
40.8
32.3
1.6
40.0
3.8
333.0
0.0
234.9
0.0
40.8
32.3
1.6
40.0
3.0
352.5
0.0
234.9
0.0
40.8
32.3
1.6
40.0
3.0
352.5
0.0
217.5
0.0
40.8
32.3
1.6
40.0
1.0
333.2
0.0
222.2
0.0
40.8
32.3
1.6
40.0
(0.0)
336.9
0.0
227.8
0.0
40.8
32.3
1.6
40.0
(1.0)
341.5
0.0
233.5
0.0
40.8
32.3
1.6
40.0
(2.0)
346.2
9.0
2.3
122.2
177.7
2.0
1.2
0.2
1.8
114.8
198.6
2.5
28.3
0.0
1.6
113.2
199.1
2.2
22.1
0.0
2.7
112.2
199.6
2.6
16.5
0.6
3.4
110.5
200.0
1.8
17.4
1.0
3.2
108.5
200.5
1.7
14.7
1.0
3.2
108.5
200.5
1.7
14.7
1.0
3.2
106.5
200.5
1.7
14.7
1.0
3.2
104.5
200.5
1.7
14.7
1.0
3.2
102.4
200.5
1.7
14.7
1.0
3.2
100.4
200.5
1.7
14.7
1.0
3.2
100.4
200.5
1.7
14.7
1.0
3.2
92.4
200.5
1.7
14.7
1.0
3.2
84.4
200.5
1.7
14.7
1.0
3.2
76.3
200.5
1.7
14.7
1.0
3.2
68.3
200.5
1.7
14.7
0.0
0.0
480.8
(136.8)
593.3
(138.2)
0.0
593.6
(140.0)
0.0
593.8
(143.9)
0.0
594.1
(141.8)
0.0
594.5
(141.8)
2 0 1 4 Q1 /1 5 E Q2 /1 5 E Q3 /1 5 E Q4 /1 5 E
0.0
594.5
(141.8)
37.9
179.5
218.6
3.6
0.7
0.8
0.0
441.0
56.1
190.5
208.8
4.1
0.7
0.8
0.0
461.0
66.9
182.1
208.8
3.7
0.7
0.8
0.0
463.0
69.1
205.0
208.8
3.9
0.7
0.8
0.0
488.3
2015E
2016E
2017E
2018E
2019E
69.1
205.0
208.8
3.9
0.7
0.8
0.0
488.3
98.8
191.0
212.0
3.6
0.7
0.8
0.0
506.9
136.3
195.7
215.2
3.7
0.7
0.8
0.0
552.5
175.7
200.6
218.4
3.8
0.7
0.8
0.0
600.0
216.2
205.5
221.6
3.9
0.7
0.8
0.0
648.7
64.8
65.7
66.6
67.4
67.4
61.4
56.9
53.7
51.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
539.0
533.6
528.2
522.8
522.8
501.1
479.4
457.7
436.0
62.4
62.4
62.4
62.4
62.4
62.4
62.4
62.4
62.4
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(0.1)
(0.2)
(0.3)
(0.4)
(0.4)
(0.8)
(1.2)
(1.6)
(2.0)
1,107.1 1,122.5 1,119.9 1,140.4 1,140.4 1,130.9 1,150.0 1,172.1 1,196.3
0.0
594.5
(138.5)
0.0
594.5
(133.5)
0.0
594.5
(131.2)
0.0
594.5
(128.2)
0.0
594.5
(128.2)
0.0
594.5
(110.3)
0.0
594.5
(86.9)
0.0
0.0
594.5
(61.3)
594.5
(33.8)
897.2
1,135.9
1,129.4
1,093.7
1,129.1
1,136.1
1,136.1
1,107.1
1,122.5
1,119.9
1,140.4
1,140.4
1,130.9
1,150.0
1,172.1
1,196.3
10.8
46.0
15.4
123.2
3.5
110.5
1.8
122.7
2.5
143.1
2.8
135.7
10.7
135.7
5.5
121.1
5.5
110.5
5.5
104.7
5.5
108.2
21.9
108.2
12.0
116.4
12.1
120.8
12.2
124.3
12.3
127.9
210.7
3.6x
7.75
21.8x
224.7
2.8x
8.77
22.4x
217.6
1.4x
8.18
19.9x
229.3
1.5x
8.11
21.2x
241.5
2.5x
8.15
22.1x
227.8
2.5x
8.15
26.0x
227.8
2.5x
8.16
22.6x
207.3
2.1x
8.21
21.2x
189.1
1.8x
8.30
24.2x
178.3
1.6x
8.35
21.3x
176.1
1.6x
8.40
22.3x
176.1
1.6x
8.40
22.3x
146.4
1.3x
8.72
22.5x
108.9
0.9x
9.14
25.0x
69.5
0.6x
9.60
27.3x
29.0
0.2x
10.10
29.4x
Auto Components 11
431
Figure 9: Canaccord Genuity Researchs forecast for New Flyer Industries Cash flow statement
Y ears ended Dec. 3 1 ($ m illio ns)
C ash flo w statem ent
Net income
Amortization of fixed assets
Amortization of intangibles
Amortization of deferred charges
Loss on disposition of PP&E
Future income taxes (recovery)
Unrealized gain on int rate swap
Unrealized FX gain (loss)
Fair value adjustments
Defined benefit expense
Defined benefit funding
Items not affecting cash
Other
Cash from operations before WC
Change in working capital
Cash from operations after WC
2012
2013
Q1 /1 4
Q2 /1 4
Q3 /1 4
Q4 /1 4
9.8
8.3
16.0
0.0
0.0
1.5
0.0
1.4
1.4
3.6
(7.3)
(2.2)
(2.9)
29.5
(24.0)
5.5
26.8
9.6
18.4
0.0
0.0
17.5
0.0
2.1
0.0
2.8
(8.7)
0.1
(15.6)
53.0
(23.0)
30.0
5.5
2.9
4.8
0.0
0.0
2.2
0.0
0.4
0.0
0.7
(2.1)
3.3
(8.0)
9.6
7.9
17.5
3.6
3.3
4.8
0.0
0.0
4.8
0.0
(1.0)
0.0
0.7
0.0
4.4
(0.6)
19.9
(18.9)
1.1
10.2
4.6
5.4
0.0
0.0
2.4
0.0
0.1
0.0
0.7
(0.8)
(3.4)
3.1
22.3
(21.8)
0.5
7.4
4.6
5.4
0.0
0.0
14.9
0.0
(0.3)
0.0
0.6
(0.5)
(3.4)
0.7
29.3
(2.5)
26.8
26.7
15.4
20.5
0.0
0.0
24.3
0.0
(0.8)
0.0
2.6
(3.5)
0.8
(4.9)
81.1
(35.3)
45.8
9.9
4.5
5.4
0.0
0.0
(2.0)
0.0
0.0
0.0
0.6
(0.5)
0.0
0.0
17.9
14.6
32.6
11.5
4.6
5.4
0.0
0.0
(2.0)
0.0
0.0
0.0
0.6
(0.5)
0.0
0.0
19.6
10.6
30.2
8.8
4.6
5.4
0.0
0.0
(2.0)
0.0
0.0
0.0
0.6
(0.5)
0.0
0.0
17.0
5.8
22.8
Investing
Additions to capital assets
Net funds used in investing
(10.8)
(11.0)
(15.4)
(122.5)
(3.5)
(3.6)
(1.8)
(1.8)
(2.5)
(2.6)
(2.8)
(2.9)
(10.7)
(10.9)
(5.5)
(5.5)
(5.5)
(5.5)
Financing
Bank indebtness, net
Proceeds from issue of long-term debt
Redemption of class B and C shares
Repayment of long-term debt
Repayment of capital leases
Deferred debt financing costs
Due to parent company
Share issuance
Dividends
Net funds from financing
0.0
103.2
0.0
(62.4)
(2.4)
0.0
0.0
0.0
(34.0)
4.3
0.0
12.6
0.0
0.0
(2.0)
0.0
0.0
111.7
(29.3)
93.0
0.0
(3.9)
0.0
0.0
(0.4)
0.0
0.0
0.0
(7.4)
(11.6)
0.0
(1.7)
0.0
0.0
(0.3)
0.0
0.0
0.0
(7.4)
(9.4)
0.0
15.0
0.0
0.0
(0.6)
0.0
0.0
0.0
(7.5)
6.9
0.0
(7.4)
0.0
0.0
(0.5)
0.0
0.0
0.0
(7.2)
(15.1)
0.0
2.1
0.0
0.0
(1.8)
0.0
0.0
0.0
(29.5)
(29.2)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(6.6)
(6.6)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(6.5)
(6.5)
2 0 1 4 Q1 /1 5 E Q2 /1 5 E Q3 /1 5 E Q4 /1 5 E
2015E
2016E
2017E
2018E
2019E
9.5
4.7
5.4
0.0
0.0
(2.0)
0.0
0.0
0.0
0.6
(0.5)
0.0
0.0
17.7
(3.5)
14.2
39.7
18.4
21.7
0.0
0.0
(8.0)
0.0
0.0
0.0
2.4
(2.0)
0.0
0.0
72.2
27.5
99.7
43.8
18.0
21.7
0.0
0.0
(8.0)
0.0
0.0
0.0
2.4
(2.0)
0.0
0.0
75.9
(8.3)
67.6
49.4
16.5
21.7
0.0
0.0
(8.0)
0.0
0.0
0.0
2.4
(2.0)
0.0
0.0
80.0
(4.4)
75.6
51.6
15.5
21.7
0.0
0.0
(8.0)
0.0
0.0
0.0
2.4
(2.0)
0.0
0.0
81.1
(3.5)
77.6
53.5
14.7
21.7
0.0
0.0
(8.0)
0.0
0.0
0.0
2.4
(2.0)
0.0
0.0
82.3
(3.5)
78.8
(5.5)
(5.5)
(5.5)
(5.5)
(21.9)
(21.9)
(12.0)
(12.0)
(12.1)
(12.1)
(12.2)
(12.2)
(12.3)
(12.3)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(6.5)
(6.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(6.5)
(6.5)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.1)
(26.1)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.0)
(26.0)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.0)
(26.0)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.0)
(26.0)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(26.0)
(26.0)
2.2
0.2
0.0
0.4
0.0
(0.5)
(0.2)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.0
10.1
11.2
0.7
11.2
11.9
2.3
11.9
14.2
(9.9)
14.2
4.3
4.7
4.3
9.1
8.4
9.1
17.5
5.6
11.9
17.5
20.5
17.5
37.9
18.2
37.9
56.1
10.8
56.1
66.9
2.2
66.9
69.1
51.7
17.5
69.1
29.7
69.1
98.8
37.5
98.8
136.3
39.4
136.3
175.7
40.5
175.7
216.2
(5.4)
(92.5)
13.9
(0.8)
(2.1)
24.0
34.9
27.1
24.7
17.3
8.7
77.8
55.6
63.5
65.4
66.5
Auto Components 12
432
Investment risks
Potential risks to our investment thesis and target price valuation methodology
include, but are not limited to, availability of government funding and company
execution of contracts.
Auto Components 13
433
Coverage Universe
IB Clients
#
%
%
Buy
578
58.32%
33.04%
Hold
326
32.90%
18.10%
Sell
40
4.04%
0%
Speculative Buy
47
4.74%
59.57%
991*
100.0%
*Total includes stocks that are Under Review
Canaccord Genuity Ratings System
BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.
HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.
SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.
NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.
Risk-adjusted return refers to the expected return in relation to the amount of risk associated with the designated investment or the
relevant issuer.
Risk Qualier
SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the
stock may result in material loss.
Canaccord Genuity Company-Specific Disclosures (as of date of this publication)
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Corporate Finance/
Investment Banking services from New Flyer Industries Inc. in the next six months.
Auto Components 14
434
B:C$7.25
06/05/12
H:C$7.25
08/13/12
H:C$8.00
09/19/12
H:C$8.25
11/14/12
H:C$8.75
01/11/13
H:C$9.25
01/29/13
H:C$9.75
02/06/13
H:C$10.00
03/25/13
H:C$10.25
04/18/13
B:C$11.25
06/24/13
H:C$11.75
08/07/13
H:C$11.25
11/07/13
16
14
12
10
8
6
B:C$12.00
01/15/14
Jul 2012
B:C$12.50
03/23/14
Oct 2012
H:C$11.50
05/11/14
Jan 2013
H:C$11.75
06/24/14
Apr 2013
H:C$12.00
07/16/14
Jul 2013
B:C$14.00
08/06/14
Oct 2013
H:C$14.00
11/09/14
Closing Price
Jan 2014
B:C$12.50
12/12/14
Apr 2014
H:C$14.00
01/12/15
Jul 2014
Oct 2014
Jan 2015
Apr 2015
B:C$15.00
03/19/15
Target Price
Buy (B); Speculative Buy (SB); Sell (S); Hold (H); Suspended (SU); Under Review (UR); Restricted (RE); Not Rated (NR)
General Disclosures
Canaccord Genuity is the business name used by certain wholly owned subsidiaries of Canaccord Genuity Group Inc., including
Canaccord Genuity Inc., Canaccord Genuity Limited, Canaccord Genuity Corp., and Canaccord Genuity (Australia) Limited, an affiliated
company that is 50%-owned by Canaccord Genuity Group Inc.
The authoring analysts who are responsible for the preparation of this research are employed by Canaccord Genuity Corp. a Canadian
broker-dealer with principal offices located in Vancouver, Calgary, Toronto, Montreal, or Canaccord Genuity Inc., a US broker-dealer
with principal offices located in New York, Boston, San Francisco and Houston, or Canaccord Genuity Limited., a UK broker-dealer with
principal offices located in London (UK) and Dublin (Ireland), or Canaccord Genuity (Australia) Limited, an Australian broker-dealer with
principal offices located in Sydney and Melbourne.
The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon
(among other factors) the Corporate Finance/Investment Banking revenues and general profits of Canaccord Genuity. However, such
authoring analysts have not received, and will not receive, compensation that is directly based upon or linked to one or more specific
Corporate Finance/Investment Banking activities, or to recommendations contained in the research.
Canaccord Genuity and its affiliated companies may have a Corporate Finance/Investment Banking or other relationship with the issuer
that is the subject of this research and may trade in any of the designated investments mentioned herein either for their own account
or the accounts of their customers, in good faith or in the normal course of market making. Accordingly, Canaccord Genuity or their
affiliated companies, principals or employees (other than the authoring analyst(s) who prepared this research) may at any time have
a long or short position in any such designated investments, related designated investments or in options, futures or other derivative
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Some regulators require that a firm must establish, implement and make available a policy for managing conflicts of interest arising as
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The information contained in this research has been compiled by Canaccord Genuity from sources believed to be reliable, but (with the
exception of the information about Canaccord Genuity) no representation or warranty, express or implied, is made by Canaccord Genuity,
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Canaccord Genuitys salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies
to our clients and our proprietary trading desk that reflect opinions that are contrary to the opinions expressed in this research.
Canaccord Genuitys affiliates, principal trading desk, and investing businesses may make investment decisions that are inconsistent
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This research is provided for information purposes only and does not constitute an offer or solicitation to buy or sell any designated
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circumstances should be construed as, a solicitation to act as a securities broker or dealer in any jurisdiction by any person or company
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general circulation to clients and does not have regard to the investment objectives, financial situation or particular needs of any
Buy unchanged Target Price C$15.00 unchanged | 15 April 2015
Auto Components 15
435
particular person. Investors should obtain advice based on their own individual circumstances before making an investment decision.
To the fullest extent permitted by law, none of Canaccord Genuity, its affiliated companies or any other person accepts any liability
whatsoever for any direct or consequential loss arising from or relating to any use of the information contained in this research.
For Canadian Residents:
This research has been approved by Canaccord Genuity Corp., which accepts sole responsibility for this research and its dissemination
in Canada. Canadian clients wishing to effect transactions in any designated investment discussed should do so through a qualified
salesperson of Canaccord Genuity Corp. in their particular province or territory.
For United States Residents:
Canaccord Genuity Inc., a US registered broker-dealer, accepts responsibility for this research and its dissemination in the United States.
This research is intended for distribution in the United States only to certain US institutional investors. US clients wishing to effect
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account.
For United Kingdom and European Residents:
This research is distributed in the United Kingdom and elsewhere Europe, as third party research by Canaccord Genuity Limited,
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This research is sent to you by Canaccord Genuity Wealth (International) Limited (CGWI) for information purposes and is not to be
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products discussed in the research should do so through a qualified representative of Canaccord Genuity (Australia) Limited. Canaccord
Genuity Wealth Management is a division of Canaccord Genuity (Australia) Limited.
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any matters arising from, or in connection with, the research.
Additional information is available on request.
Copyright Canaccord Genuity Corp. 2015 . Member IIROC/Canadian Investor Protection Fund
Buy unchanged Target Price C$15.00 unchanged | 15 April 2015
Auto Components 16
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Copyright Canaccord Genuity Limited 2015 . Member LSE, authorized and regulated by the Financial Conduct Authority.
Copyright Canaccord Genuity Inc. 2015 . Member FINRA/SIPC
Copyright Canaccord Genuity (Australia) Limited 2015 . Participant of ASX Group, Chi-x Australia and of the NSX. Authorized and
regulated by ASIC.
All rights reserved. All material presented in this document, unless specifically indicated otherwise, is under copyright to Canaccord
Genuity Corp., Canaccord Genuity Limited, Canaccord Genuity Inc or Canaccord Genuity Group Inc. None of the material, nor its content,
nor any copy of it, may be altered in any way, or transmitted to or distributed to any other party, without the prior express written
permission of the entities listed above.
Auto Components 17
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Khaled Omar
1 (416) 956-6807
Kevin.Chiang@cibc.com
Khaled.Omar@cibc.com
COMPANY UPDATE
j
SECTOR PERFORMER
MARKET WEIGHT
Stock Rating:
Sector Weighting:
Key Ratios and Statistics
12-18 mo. Price Target
NFI-TSX (4/14/15)
C$15.00
C$14.52
Key Indices:
3-5-Yr. EPS
Gr. Rate (E)
52-week
Range
Shares Outstanding
Float
Avg. Daily Trading Vol.
Market Capitalization
Dividend/Div Yield
Fiscal Year Ends
Book Value
2015 ROE (E)
LT Debt
Net AssetEquity
Value
Common
Convertible Available
EBITDA ($mln)
Current
Estimates (Dec.
(Dec. 31)
31)
Valuation
EV/EBITDA-Curr
Toronto
NM
C$11.20-C$14.90
55.5M
36.5M Shrs
38,000
C$805.9M
C$0.59 / 4.1%
December
$8.32 per Shr
9.0%
$140.7M
$462.0M
Yes
2013
$94.7A
2014
$107.4A
2015
$111.4E
2016
$119.4E
10.9x
9.6x
9.2x
8.6x
Company Description
New Flyer Industries Inc. is the largest North American manufacturer of
heavy-duty transit buses supplying transit authorities in Canada and the U.S.
www.newflyer.com
15-135425 2015
CIBC World Markets does and seeks to do business with companies covered in its research reports. As a result, investors
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
See "Important Disclosures" section at the end of this report for important required disclosures, including potential
conflicts of interest. See "Price Target Calculation" and "Key Risks to Price Target" sections at the end of this report,
where applicable.
Find CIBC research on Bloomberg, Reuters, firstcall.com
and ResearchCentral.cibcwm.com
CIBC World Markets Inc., P.O. Box 500, 161 Bay Street, Brookfield Place, Toronto, Canada M5J 2S8 (416) 594-7000
438
Q1/15 Orders In-line With Expectations But Aftermarkets Continues To Shine - April 14, 2015
Sector Performer
NFI-TSX
4/14/15
12- To 18- Month Price Target:
Capital Equipment
Sector Weighting:
All figures in US$ millions, except per share data.
EV/EBITDA Multiples
Consensus estimates except New Flyer
New Flyer Industries
High-Yielding Industrials
Commercial Vehicle & Parts
Manufacturers
P/E Multiples
Consensus estimates except New Flyer
New Flyer Industries
High-Yielding Industrials
Commercial Vehicle & Parts
Manufacturers
Key Financial Metrics
2013A
EBITDA Margin
Current Ratio
Debt/Equity
Debt/Total Capital
Income Statement
Bus Manufacturing Revenues
Aftermarket Revenues
Revenues - Consolidated
Cost of Sales
Gross Profit
EBITDA
EBIT
EBT
Net Income
Balance Sheet
C$14.52
C$15.00
Market Weight
2014A
2015E
2016E
9.6x
9.9x
11.0x
9.2x
8.3x
8.7x
8.6x
6.9x
7.8x
2014A
2015E
2016E
Investment Thesis
17.5x
20.6x
18.3x
16.6x
17.1x
13.7x
14.3x
12.6x
11.6x
Fundamentals for bus demand are improving due to rising U.S. state/municipal tax revenue, growing
bus ridership numbers (reflecting the cost advantage of taking bus transit versus driving and modestly
declining unemployment rate), and public transit being a more green option.
2014A
2015E
2016E
New Flyer is well positioned to take advantage of the improving heavy duty bus fundamentals given its
leading market share in both bus manufacturing and aftermarket services.
7.9%
1.1x
51.3%
33.9%
2013A
7.4%
1.1x
53.1%
34.7%
2014A
7.7%
1.3x
40.9%
29.0%
2015E
8.2%
1.3x
50.5%
33.6%
2016E
$991.2
$215.0
$1,199.4
$1,078.7
$120.8
$94.7
$49.0
$34.6
$26.8
$1,132.1
$319.0
$1,451.1
$1,312.8
$138.3
$107.4
$51.4
$37.6
$26.7
$1,127.6
$316.3
$1,443.9
$1,296.4
$147.5
$111.4
$82.1
$67.8
$48.6
$1,125.0
$328.7
$1,453.7
$1,298.0
$155.7
$119.4
$90.5
$76.2
$56.2
Q4/14A
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Shareholders' Equity
465
1,136
354
683
453
Company Profile
New Flyer Industries Inc. is the largest North American manufacturer of heavy-duty transit buses
supplying transit authorities in Canada and the U.S. with approximately one-third the market.
New Flyer is guiding towards 2014 production line rate of ~51 EUs/week, we view its $0.585/share
annual dividend as safe.
Canada
16%
$1,000,000
2,500
$300
$800,000
2,000
$250
$600,000
1,500
$200
$400,000
1,000
$200,000
500
$0
0
2009
2010
Revenues ($ Millions)
2011
2012
2013
Deliveries(EUs)
2014
$ Millions
3,000
2008
United States
84%
Bus Operations
78%
$1,200,000
2007
$319
$215
$150
$100
$83
$96
$108
$106
$116
$119
2009
2010
2011
2012
$50
$0
2007
2008
2013
2014
439
Q1/15 Orders In-line With Expectations But Aftermarkets Continues To Shine - April 14, 2015
Q4/F14A
Q1/F15E
Y/Y %
Q/Q %
554
680
572
3.2%
-15.9%
Total Revenue
$324
420.0
$339
4.5%
-19.4%
$251
336.6
$252
0.3%
-25.2%
$73
83.4
$87
18.9%
4.1%
$20
35.0
$25
27.3%
-28.5%
$8
23.2
$12
49.4%
-50.0%
$12
11.9
$13
13.0%
13.5%
Total EBITDA
440
Q1/15 Orders In-line With Expectations But Aftermarkets Continues To Shine - April 14, 2015
Q1/F14
Q2/F14
Q3/F14
Q4/F14
F2014
Q1/F15E
Q2/F15E
Q3/F15E
Q4/F15E
F2015E
F2016E
Revenue
$1,199,424
$323,865
$346,484
$360,762
$419,989
$1,451,100
$338,521
$352,266
$355,034
$398,070
$1,443,891
$1,453,745
Cost of Sales
$293,851
$309,256
$326,482
$383,228
$1,312,817
$305,021
$315,658
$320,806
$354,867
$1,296,351
$1,297,998
Gross Profit
$120,767
$30,014
$37,228
$34,280
$36,761
$138,283
$33,501
$36,608
$34,228
$43,203
$147,540
$155,747
SGA
$26,082
$10,348
$10,262
$8,583
$1,725
$30,918
$8,463
$8,807
$8,876
$9,952
$36,097
$36,344
EBITDA
$94,685
$19,666
$26,966
$25,697
$35,036
$107,365
$25,038
$27,802
$25,352
$33,252
$111,443
$119,403
Amortization
$28,001
$8,131
$10,012
$9,976
$35,837
$7,341
$29,337
$28,900
FX loss (gain)
$7,718
$7,274
$7,334
$7,389
$118
$802
$387
$226
$132
$0
$0
$0
$0
$0
$0
$0
Operating Earnings
$66,566
$11,146
$18,448
$15,459
$24,928
$69,981
$17,764
$20,468
$17,963
$25,911
$82,106
$90,504
Unrealized FX Loss
$2,146
$380
($1,000)
$117
($317)
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$15,457
$762
$6,685
$2,561
$9,353
$19,361
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
EBIT
$48,963
$10,004
$12,763
$12,781
$15,892
$51,440
$17,764
$20,468
$17,963
$25,911
$82,106
$90,504
$8,749
$2,257
$2,257
$2,203
$2,180
$8,897
$2,409
$2,409
$2,409
$2,409
$9,635
$9,673
$2,208
$540
$549
$565
$575
$2,229
$575
$575
$575
$575
$2,300
$2,300
$2,857
$823
$1,190
$713
$795
$3,521
$600
$600
$600
$600
$2,400
$2,400
$532
($314)
$377
($785)
($53)
($775)
$0
$0
$0
$0
$0
$0
Interest Expense
$14,346
$3,306
$4,373
$2,696
$3,497
$13,872
$3,584
$3,584
$3,584
$3,584
$14,335
$14,283
EBT
$34,617
$6,698
$8,390
$10,085
$12,395
$37,568
$14,180
$16,884
$14,379
$22,327
$67,771
$76,221
$7,856
$1,214
$4,827
($160)
$4,968
$10,849
$4,041
$4,823
$4,309
$5,968
$19,141
$20,024
Net Income
$26,761
$5,484
$3,563
$10,245
$7,427
$26,719
$10,139
$12,061
$10,070
$16,359
$48,630
$56,197
$0.81
$0.11
$0.18
$0.18
$0.30
$0.83
$0.18
$0.22
$0.18
$0.29
$0.88
$1.01
FD EPS (ex-unusuals)
441
Q1/15 Orders In-line With Expectations But Aftermarkets Continues To Shine - April 14, 2015
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2013 Current
$15.4A
$18.1A
$24.4A
$36.8A
$94.7A
2014 Current
$19.7A
$27.0A
$25.7A
$35.0A
$107.4A
2015 Current
$25.0E
$27.8E
$25.4E
$33.3E
$111.4E
2016 Current
--
--
--
--
$119.4E
442
Q1/15 Orders In-line With Expectations But Aftermarkets Continues To Shine - April 14, 2015
IMPORTANT DISCLOSURES:
Analyst Certification: Each CIBC World Markets research analyst named on the front page of this research report, or
at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein
accurately reflect such research analyst's personal views about the company and securities that are the subject of this
report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii)
no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific
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In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report,
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discussed herein, related securities or in options, futures or other derivative instruments based thereon.
Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures
set forth below, may at times give rise to potential conflicts of interest.
Companies Mentioned in this Report that Are Not Covered by CIBC World Markets Inc.:
Stock Prices as of 04/14/2015:
Volvo AB (VOLVB-ST, [SEK]87.00, Not Rated)
443
Q1/15 Orders In-line With Expectations But Aftermarkets Continues To Shine - April 14, 2015
Rating
Description
SO
Sector Outperformer
Stock is expected to outperform the sector during the next 12-18 months.
SP
Sector Performer
Stock is expected to perform in line with the sector during the next 12-18 months.
SU
Sector Underperformer
Stock is expected to underperform the sector during the next 12-18 months.
NR
Not Rated
CIBC World Markets does not maintain an investment recommendation on the stock.
Restricted
CIBC World Markets is restricted (due to potential conflict of interest) from rating the stock.
Stock Ratings
Sector Weightings (note: Broader market averages refer to S&P 500 in the U.S. and S&P/TSX Composite in Canada.)
O
Overweight
Market Weight
Underweight
NA
None
"Speculative" indicates that an investment in this security involves a high amount of risk due to volatility and/or liquidity issues.
Count
Percent
Count
Percent
151
41.8%
162
44.9%
146
96.7%
157
37
10.2%
34
96.9%
91.9%
Restricted
10
2.8%
Restricted
10
100.0%
Count
Percent
0.0%
100.0%
0.0%
Restricted
0.0%
Count
Percent
0.0%
100.0%
0.0%
Restricted
0.0%
Important disclosures required by IIROC Rule 3400, can be obtained by visiting CIBC World Markets Inc. on the web at
http://researchcentral.cibcwm.com. Important disclosures for each issuer can be found using the "Coverage" tab on the
top left of the Research Central home page. Access to the system for rating investment opportunities and our
dissemination policy, can be found under 'Quick Links' on bottom right side of the Research Central homepage. These
important disclosures can also be obtained by writing to CIBC World Markets Inc., Brookfield Place, 161 Bay Street, 4th
Floor, Toronto, Ontario M5J 2S8, Attention: Research Disclosures Request
444
Q1/15 Orders In-line With Expectations But Aftermarkets Continues To Shine - April 14, 2015
HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS INC. RECOMMENDATIONS FOR NEW FLYER
INDUSTRIES INC. (NFI)
Date
12/13/2012
01/10/2013
01/25/2013
02/05/2013
03/01/2013
05/10/2013
06/21/2013
07/15/2013
08/07/2013
10/15/2013
11/08/2013
04/15/2014
05/11/2014
07/16/2014
08/06/2014
03/19/2015
Change Type
Closing Price
8.38
8.80
9.95
9.72
10.30
9.86
10.30
11.13
11.54
11.07
10.94
11.20
11.82
12.85
13.17
13.92
Rating
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
Price Target
8.50
8.75
10.00
10.50
11.00
10.00
11.00
11.50
12.00
12.50
12.00
12.25
12.50
13.00
14.00
15.00
Coverage
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
Kevin Chiang, CFA
445
Q1/15 Orders In-line With Expectations But Aftermarkets Continues To Shine - April 14, 2015
Legal Disclaimer
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and recommendations expressed herein constitute judgments as of the date of this report
446
Q1/15 Orders In-line With Expectations But Aftermarkets Continues To Shine - April 14, 2015
10
447
COMPANY UPDATE
NFI | TSX
$14.11
Rating: Outperform
One Year Target: C$17.50
Total Return: 28.2%
Yield: 4.1%
April 2, 2015
C$14.44 / C$11.20
4.1%
Dividend Yield:
55.5 (basic)
55.5 (fd)
C$782.6
39.7
52.5
$229.0
$849.9
2014
Revenue ($mm)
2015e
2016e
EBITDA ($mm)
FD EPS
EBITDA ($m m )
Q1
$107.4
$121.8
$138.6
$0.65
$0.78
$1.02
Q2
Q3
Q4
2014
$19.7
$27.0
$25.7
$35.0
2015
$29.9e
$30.9e
$29.2e
$31.8e
2016
$34.5e
$34.4e
$33.8e
$35.9e
Q2
Q3
Q4
Adjusted FD EPS
Q1
2014
$0.10
$0.16
$0.15
$0.24
2015
$0.18e
$0.19e
$0.19e
$0.22e
2016
$0.25e
$0.25e
$0.25e
$0.27e
Volume ('000)
800
Last Sale Price
600
$10
$5
400
200
$0
0
Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15
Focus on Integration: Management continues to see the focus in 2015 being the
integration of the NABI facility in Anniston, Alabama and the transition to the Xcelsior
product line. The integration is expected to be complete in Q3/15, with the last of the
legacy NABI product delivered. Management expects to spend approximately $20mm
for the changeover with $3.1mm spent in 2014 and $7.0mm expected in Q1/15,
primarily in capital investments to complete the integration. Guidance is for annualized
savings from the streamlining of $11.9mm, or less than a 2 year payback on the
investment, which is an increase from a two to three year payback initially projected
when announced. Savings come from a variety of purchasing, inventory and overhead
synergies. We were left with the impression that savings above the identified $11.9mm
are likely as management continues to refine the integration plan. Similarly, the
aftermarket business remains in a period of transition as the company completes a
systems upgrade for the NFI parts business and adds the Orion parts database and
transitions NABIs parts aftermarket business to a common information system platform
with integration expected to be complete in Q1/16.
Still Considering Value Enhancing Activities: Management remains focused on
shareholder returns with a more stable outlook and solid financial position. Expectations
are the companys revolver will continue to be used to manage working capital
fluctuations, with operating cash flow used for minimal capital spending, dividends and
debt repayment. Management continues to review adjacent markets and vertical
integration opportunities as well as further acquisitions in aftermarket, although noted
that remaining opportunities would be smaller tuck-in transactions. Barring
acquisitions, management indicated the board would continue to review the dividend
policy on a regular basis as well as share repurchases.
Maintain Outperform; Target to C$17.50: Overall, we believe New Flyer will
continue to demonstrate improved margin and earnings generation in 2015 and 2016
through the combination of internal improvements, the conversion of the Anniston
facility to the Xcelsior platform, the integration of the aftermarket business to a common
IT infrastructure and an improved quality in backlog. We maintain our Outperform
rating and our 12-month target price of C$17.50. Our target price is based on a blend of
a 15.0x earnings and 7.0x EBITDA multiple of the four quarters ending Q4/16 reflecting
our 12-month forward valuation period as well as an exchange rate of C$1.25/$US.
647.776.8245
smodwal@altacorpcapital.com
Regulatory Disclosures and policy on the dissemination of research: last page or at www.altacorpcapital.com
448
I NSTITUTIONAL
EQUITY
R ESEARCH:
DIVERSIFIED
INDUSTRIES
INITIATING
COVERAGE
: DIVERSIFIED
INDUSTRIES
$14.11
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
New Flyer Industries Inc.
11.1x
7.8x
8.1x
6.8x
7.2x
6.0x
Peer Average
New Flyer Industries Inc.
15.7x
17.1x
13.2x
14.3x
11.6x
10.9x
2014
2015e
2016e
2014
2015e
2016e
Income Statement
Revenues
Bus Manufacturing
Aftermarket
Revenue
Aftermarket % of Total
EBITDA - Bus Manufacturing
Margin - Bus Manufacturing
EBITDA - Aftermarket Ops.
Margin - Aftermarket Ops.
Total EBITDA incl. Other
Margin
Adjusted EBITDA
Margin
Amortization
Operating Earnings
EBT
2013
2013
47,334
$0.92
6.5%
108.3%
Taxes
Net Income
7,856
26,761
10,849
26,719
25,449
43,332
33,413
56,893
Reported FD EPS
Adjusted FD EPS
$0.52
$0.64
$0.48
$0.65
$0.78
$0.78
$1.02
$1.02
Growth
Revenue
Adjusted EBITDA
Adjusted FD EPS
FX Assumptions
Average CAD/USD Rate
EOP CAD/USD Rate
Leverage
Net Debt (EOP)
Net Debt to Trailing EBITDA
Net Debt to Total Capitalization
2013
2014
2015e
2016e
38.6%
55.7%
108.7%
21.0%
13.4%
2.7%
8.8%
13.4%
19.2%
7.0%
13.8%
31.3%
2013
2014
2015e
2016e
0.9714
0.9414
0.9049
0.9050
0.8290
0.8264
0.8333
0.8403
Trend
2013
2014
2015e
2016e
226,479
2.4x
33.2%
229,034
2.1x
33.6%
208,384
1.7x
30.8%
139,597
1.1x
22.7%
Firm
Option
Trend
2013
2014
2015e
2016e
30,255
63.9%
32,457
34.9%
32,471
43.2%
32,471
31.3%
$0.585 $0.585
4.1%
4.1%
$0.585
4.1%
$0.585
4.1%
2013
2014
2015e
2016e
2,191
449.3
25.9
43.8
1.2x
18.8%
2,437
464.5
23.5
49.2
0.9x
20.7%
2,558
501.7
28.9
51.2
1.1x
12.9%
2,653
526.8
33.6
52.0
1.0x
17.4%
Trend
Trend
$4.0
$3.0
2016, 13%
$2.0
$1.0
2018, 35%
$0.0
Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314
2017, 12%
449
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
Management continues to see the focus in 2015 being the integration of the NABI facility
in Anniston, Alabama and the transition to the Xcelsior product line. The integration is
expected to be complete in Q3/15, with the last of the legacy NABI product delivered.
All production from Q4/15 forward is expected to be from the Xcelsior platform. Existing
customers either agreed to earlier delivery of the NABI product or in some cases agreed
to switch to the Xcelsior platform. Management expects to spend approximately $20mm
for the changeover with $3.1mm spent in 2014 and $7.0mm expected in Q1/15, primarily
in capital investments to complete the integration. Management displayed a number of
exhibits showing the progress made to date, which gives us some confidence on the state
of the initiative. Guidance is for annualized savings from the streamlining of $11.9mm, or
less than a 2 year payback on the investment, which is an increase from a two to three
year payback initially projected when announced. Savings come from a variety of
purchasing, inventory and overhead synergies. We were left with the impression that
savings above the identified $11.9mm are likely as management continues to refine the
integration plan.
For 2015, the company has approximately 83% of available slots sold out, holding some
slots open in order to facilitate option conversions and near-term sales from customers
with more urgent delivery needs. Management continues to see heathy demand as
measured by the bid universe which has continued to expand through 2014. Expected
annual demand is forecast to remain in the ~5,100 EU range through 2015 and 2016 with
management indicating that transit authorities continue to order in smaller more frequent
batches, leveling out industry variability. Management expects NFI likely retains an
approximate 50% market share over the coming years, similar to the 48% recorded in
2014.
450
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
The competitive dynamics of the industry are not expected to change significantly with
management continuing to indicate pricing is continuing to normalize. Both Nova Bus
and Gillig continue to be more rational actors, although management indicated they
continue to see price remaining one of the primary drivers of new wins. Gillig is currently
expanding its production facilities reducing some capacity constraints. Management
continues to actively work to improve its cost profile through the operational excellence
program and the integration of NABI, as it believes cost reduction is the more likely lever
of margin expansion in bus manufacturing margins than price increases.
The company continues to see demand for the all-electric bus design with a larger tender
this year expected from Long Beach, CA for with 10 to 15 EU of firm orders and
approximately 40 units in options. New competitors BYD and Proterra continue to
penetrate the space, however the market size to date is small. Current programs in
Winnipeg and Chicago are progressing well and have afforded a number of product
development opportunities. Management continues to believe having a standardized
design of chassis, with a range of propulsion options offers the best total value and
quality to operators.
US Federal funding for transit, which currently supports 80% of the capital cost of
acquisition under the 12-year/500,000 mile rule continues to be an area of discussion in
the US Congress. The US Administration released its new proposal for transit funding,
calling for a substantial increase in spending to approximately $17bn annually from the
current $10.7bn level. Both we and management remain sceptical that this proposal as it
stands is passed, expecting a new funding bill or an extension of existing legislation at
current levels plus inflation. The Administration bill is similar to one put forward last
fiscal year, which also called for an increase in US content to 100% over time. This level
of content remains an industry issue as major suppliers to the industry for major drive
train, propulsion, HVAC and other accessories all have global supply chains typically
supporting not just transit bus but also truck industries, which have demand orders of
magnitude larger than the transit bus industry making it unlikely that supplier could or
would change.
451
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
The company continues to have labour relations that management described as positive.
One concern that emerged during meetings was the expiry of the companys agreement
with its Union in Winnipeg as of March 31, 2015. Last evening, the company announced
a tentative three-year agreement with a ratification vote set for April 11, which we expect
should pass.
Overall, we believe New Flyer will continue to demonstrate improved margin and earnings
generation in 2015 and 2016 through the combination of internal improvements, the
conversion of the Anniston facility to the Xcelsior platform, the integration of the aftermarket
business to a common IT infrastructure and an improved quality in backlog. We maintain our
Outperform rating and our 12-month target price of C$17.50. Our target price is based on a
blend of a 15.0x earnings and 7.0x EBITDA multiple of the four quarters ending Q4/16
reflecting our 12-month forward valuation period as well as an exchange rate of C$1.25/$US.
Key risks to failing to achieve our price target include, but are not limited to changes in raw
material and component costs, foreign exchange risks, competition risk, changes in public
sector transportation spending, and failure by management to execute on disclosed strategies.
452
I NSTITUTIONAL EQUITYINITIATING
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
Rating &
Target
Trading Local
Market
Currency Price Cap ($mm)
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
14.11
2.37
23.87
51.23
14.22
58.65
48.34
4.93
14.13
62.97
20.94
28.81
6.84
9.93
51.27
783.2
1,932.5
400.5
675.3
1,794.7
1,553.2
3,812.5
167.8
970.3
3,362.0
563.9
2,347.6
571.3
205.5
1,445.0
Net
Debt
EV
($mm)
2014e
EPS
2015e
229.5
1,227.4
201.0
132.3
986.3
370.9
779.0
(23.3)
186.4
(248.3)
(7.9)
4,349.0
311.1
197.1
(114.7)
832.2
3,183.3
601.5
807.5
2,781.0
2,000.3
4,591.5
144.4
1,156.7
3,113.7
556.0
6,730.6
934.4
402.6
1,330.6
0.65
0.25
2.46
0.31
0.45
4.62
3.49
0.03
0.88
3.55
1.61
(5.07)
0.03
0.00
2.82
0.78
0.23
2.29
3.26
1.01
5.71
4.16
0.11
1.13
4.01
1.62
1.79
0.07
0.00
3.06
P/E
2016e 2014e 2015e 2016e
1.02
0.29
2.57
4.02
1.17
0.00
4.37
0.34
1.20
4.65
1.89
2.95
0.08
0.00
3.26
17.1x
7.5x
9.7x
NM
31.5x
12.7x
13.8x
NM
16.1x
17.7x
13.0x
NM
NM
NM
18.2x
15.7x
14.3x 10.9x
8.1x
6.5x
10.4x 9.3x
15.7x 12.8x
14.0x 12.1x
10.3x NM
11.6x 11.1x
NM
14.5x
12.5x 11.8x
15.7x 13.5x
13.0x 11.1x
16.1x 9.8x
NM
NM
NM
NM
16.8x 15.7x
13.2x 11.6x
2014e
EBITDA
2015e
2016e
2014e
EV/EBITDA
2015e
2016e
Price
to BV
ROIC
ROE
107.4
268.8
82.4
63.4
282.4
257.4
591.2
9.4
160.7
298.8
65.8
331.0
69.0
25.9
129.0
121.8
313.3
88.9
99.8
304.9
409.8
646.6
15.9
188.6
341.7
68.7
761.6
91.2
0.0
142.5
138.6
400.1
96.0
117.8
325.4
0.0
657.7
28.5
193.3
0.0
79.8
922.8
94.1
0.0
155.7
7.8x
11.8x
7.3x
12.7x
9.8x
7.8x
7.8x
15.3x
7.2x
10.4x
8.5x
20.3x
13.5x
15.5x
10.3x
11.1x
6.8x
10.2x
6.8x
8.1x
9.1x
4.9x
7.1x
9.1x
6.1x
9.1x
8.1x
8.8x
10.2x
NM
9.3x
8.1x
6.0x
8.0x
6.3x
6.9x
8.5x
NM
7.0x
5.1x
6.0x
NM
7.0x
7.3x
9.9x
NM
8.5x
7.2x
1.5x
1.3x
1.6x
3.2x
3.3x
3.0x
2.0x
1.0x
2.5x
3.3x
2.8x
NM
3.5x
0.0x
1.8x
2.2x
5.4%
4.0%
10.0%
8.4%
7.2%
13.6%
10.2%
0.4%
10.8%
17.9%
19.9%
9.2%
2.5%
NA
6.9%
9.0%
5.9%
14.0%
16.6%
2.0%
10.4%
30.2%
14.7%
0.6%
17.1%
20.2%
22.4%
NM
1.3%
NM
9.3%
12.7%
453
Disclosure Requirements
C$14.11
Rating:
Outperform
12 Month Target:
C$17.50
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
Does any director, officer, employee of AltaCorp Capital or member of their household serve as a director or
officer or advisory capacity of the issuer? If yes, state name:
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
12 Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
13 Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
65%
27%
Sector Perform
26%
12%
Underperform
2%
0%
Speculative
0%
0%
Restricted
2%
0%
Not Rated
2%
0%
Tender
2%
0%
100%
21%
Total
TD Tower
66 Wellington Street West, Suite 3530
Toronto, Ontario M5K 1A1
Tel: 403 539 8600
www.altacorpcapital.com
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied
upon, by any other person.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts
responsibility for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital
(USA) Inc. at 403-539-8600.
454
Direct
@altacorpcapital.com
__________________________________________________________________________________________________________
ATB Financial
Dave Mowat
President & CEO
780 408 7181
dmowat@atb.com
Ian Wild
Executive Vice President
403 974 5127
iwild@atb.com
E&P- Domestic
Jeremy McCrea, CFA, Analyst
Klazina van den Berg, Associate
Patrick J. ORourke, CFA, Analyst
Yasir Siddiqi, Associate
Nicholas Lupick, CFA, Analyst
Kate-Lynn Gordey, Associate
Thomas Matthews, P.Eng., Analyst
Christian Erana, Associate
jmccrea
kvandenberg
porourke
ysiddiqi
nlupick
kgordey
tmatthews
cerana
Energy Infrastructure
Dirk Lever, CA, Senior Analyst
dlever
Oilfield Services
Dana Benner, CFA, Senior Analyst
John Gibson, Associate
Jason Sawatzky, Analyst
Mark Westby, Associate
dbenner
jgibson
jsawatzky
mwestby
Diversified Industries
Chris Murray, P.Eng., CFA, Senior Analyst
Samarth Modwal, Associate
Wojtek Nowak, CFA, Analyst
Alex Athanasopoulos, Associate
cmurray
smodwal
wnowak
aathanasopoulos
Agriculture
John Chu, CFA, Senior Analyst
Stuart Pattillo, Associate
jchu
spattillo
All Sectors
Victoria Hoa, Research Assistant
vhoa
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
khilton
Toronto
Paul Sarachman, CFA, FCSI
Adam Carlson
Jamie Riff
Tim Miller
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Institutional Trading
Calgary
Tate Pinder
Shane Dungey
tpinder
sdungey
Toronto
Cheryl Polan
Jon Varley
Michael Capobianco
cpolan
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
1100, 888 - 3rd Street SW
Calgary AB Canada T2P 5C5
403 539 8600 Main
403 539 8575 Fax
TORONTO
66 Wellington Street West, Suite 3530
Toronto, ON Canada M5K 1A1
647 776 8230 Main
647 776 8248 Fax
George Gosbee
ggosbee
jcaldarelli
ggill
mreynolds
Oilfield Services
Matt Colucci
mcolucci
jfallows
All Sectors
Patrick Stables
Jesse Hardage
Greg Smiddy
Edward Otto
Yi Huang
Blake Eshleman
Tyler Press
pstables
jhardage
gsmiddy
eotto
yhuang
beshleman
tpress
__________________________________________________________________________________________________________
www.altacorpcapital.com
member CIPF IIROC FINRA SIPC
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
David Lush, Head of Private Wealth
Vojtech Krb, Investment Advisor
Tomasz Okuszko, Investment Advisor
Ellen McKane, Client and Market Coordinator
dlush
vkrb
tokuszko
emckane
455