SECTOR: INDUSTRIALS
COMPANY: BELDEN, INC.
SR. ANALYSTS: HELENE SAJER
JR. ANALYSTS: MALCOLM ANGUS, RAYMOND CHEN, TYRONE
CHEUNG, SHIRIN KRALL, DEREK LOREN, JOHN SAAD, XIAO YANG
Investment Recommendation
1
2
3
2
Company
Belden, Inc.
Recommendation
BUY
Current Price
$36.70
1yr Target Price
$46.17
% Upside
25.8%
• Infrastructure investments in emerging markets
• Raw materials cost management and industry demand
• Growing market share through acquisitions
The Communications Equipment Industry
Consists of small cap companies who manufacture copper
and fiber optic cable, networking, and connectivity
products. Customers include OEM’s and Distributors, and
their products are used in Industrial automation,
transportation, infrastructure, consumer electronics, and
enterprises.
3
Industry Snapshot
$6.1 billion in industry revenue in 2010
Market Share by Revenue
314 MM, 5%
BDC Belden, Inc.
BGC General Cable Corp.
1.6 B, 24%
4.8 B, 71%
PLPC Preformed Line
Products Co.
Ticker
Company Name
BDC
Belden, Inc.
General Cable
Corp.
BGC
PLPC
4/13/2015
Preformed Line
Products Co.
Market Cap ($M) Revenue ($M) Sales Growth
EPS ($)
1700
4800
14%
2.32
2200
1600
11%
1.33
362
314
22%
5.31
BU Finance & Investment Club
4
Company Definition
•
Belden manufactures cable, networking, and connectivity solutions for
a variety of markets including enterprise, industrial, and broadband
•
Belden offers thousands of wire and cable products such as multiconductor, paired, coaxial, flat and optical fiber cables, plus portable
cordage, molded cable assemblies, hook-up and lead wire
Product offerings also includes a complete selection of data network
connectivity products and structured cabling systems and services,
enclosures and racks, surface raceway systems, and cable management
accessories
•
4/13/2015
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Belden, Inc.
Revenue
Revenue ($ millions)
2500
2000
CAGR 5.3%
1500
1000
500
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Revenue by Product
Networking
12%
Connectivity
12%
Cable 76%
6
Revenue Breakdown:
by Segment & Product
2010
2009
2008
0%
20%
Cable
40%
Networking
60%
80%
Connectivity
100%
Supply Chain
4/13/2015
BU Finance & Investment Club
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Products and Applications
Product Platforms
Networking
Connectivity
Cable
Customer Industries by Revenue
Broadcast
12%
Consumer
Electronics
11%
Applications
Data
Sound
Video
Industrials
50%
Enterprise
27%
Vertical Markets
Industrial
4/13/2015
Enterprise
Broadcast
Consumer
Electronics
BU Finance & Investment Club
9
Trend: Developing Infrastructure in Asia
• Currently 23% of families have internet access in China
• China Telecom plans to increase number of optical fiber broadband
from 30 million to 100 million in five years
• China plans to invest $300 billion over 5 years in infrastructure, 80%
will be in broadband
• Indian government plans to spend 150 billion rupees ($3.3 Billion)
on infrastructure over the next few years
Belden Acquired LTK
Wiring Based in Hong
Kong
4/13/2015
BU Finance & Investment Club
10
Belden in Emerging Markets
• 25% of Belden’s portfolio benefits from E.M
• Rev from Brazil, India, China have 6-10%
growth rates over 2010
• On 4 April 2011 Belden Acquired Poliron
Cabos Electricos Especiais Ltda in Brazil for
$30 mil.
• "This acquisition allows us to be a legitimate
player in one of the more attractive emerging
markets”
Belden in Asia Pacific
• 16% growth Year over Year, 6% of this is organic
growth
• Asia has grown from 5% of Belden’s business to
21%, and is expected to increase another 1% by
2013
• The Networking Segment in Asia has grown 34%
organically in 2010
• In 2007 Belden Acquires Hirschmann
Automation And Control with three
manufacturing joint ventures in China
Belden In Asia Pacific
4/13/2015
BU Finance & Investment Club
13
Trend / Opportunities: Raw Materials Costs
• The cost of copper, BDC’s principal raw material grew by 129% in 2010
• Copper demand expected to increase by 6.4%
• China to increase copper imports by 17%
• Belden has historically shown its ability to pass on rising
costs of raw materials to their consumers
Copper Prices vs. Revenue and Gross Margin
1
0.8
% Change
0.6
Copper Prices
0.4
Revenue
0.2
Gross Margin
0
2005
-0.2
-0.4
14
2006
2007
2008
2009
2010
100%
80%
60%
40%
20%
0%
Korea (*)
Iceland
Sweden
Norway (*)
Netherlands
Denmark
Finland
Luxembourg (*)
United Kingdom
Canada (2008)(*)
Germany
United States
Belgium
Switzerland (2007)
New Zealand (*)
Australia (2008) (*)
Estonia
Japan (*)
Austria
France
Slovenia
EU27
Ireland
Spain
Poland
Hungary
Czech Republic (*)
Portugal
Slovak Republic
Italy
Greece
Turkey (2007)
Chile (2006)
Mexico (*)
Trend: Fiber Optics
Percentage of Homes with Broadband
Access
4/13/2015
BU Finance & Investment Club
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Belden: Signal Transmission
• Positioned as the technology leader in signal
transmission, with the capability of solving
customers’ end-to-end requirements for
high-bandwidth solutions
• Broad casting: 25% growth last quarter Coax
Connectivity Solutions acquisition
• Brand most trusted and used for all Olympics
and major sporting events
Belden: Increasing Market Share
through Acquisitions
• Feb 2007: Acquired Hong Kong Based LTK Wiring for $195 million
(revenue of $220 Million)
• March 2007: Acquired Hirschmann Automation and control for
$260 Million
• April 2007: Acquired Lumberg Automation Components in
Germany for $75 million
• June 2008: Acquired Trapeze Networks for 133 million, and sold
Trapeze in 2010 for a $20 million profit
• November 2010: Acquired GarretCom for $52 million and Tomas
& Betts for $78 Million
• April 2011: Acquired Poliron Cabos Electricos Especiais in Brazil
for $30 million, and expects the acquisition to break even in 2011
4/13/2015
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Financials & Stock Performance
Company
M. Cap
($m)
Revenue
($m)
Sales
Growth
EBITDA
($m)
EPS ($)
Inventory
Turnover
Belden Inc.
1700
4800
14%
200
2.32
7.1x
Belden, Inc.
Total Debt ($m)
551
Debt / Equity
0.86x
Current Ratio
2.4x
Quick Ratio
1.8x
4/13/2015
BU Finance & Investment Club
18
Valuation
Year
FCF ($MM)
2011-e
2012-e
2013-e
2014-e
2015-e
$ 191.48
$ 236.31
$ 280.45
$ 298.71
$ 313.65
Comps – TEV/EBITDA 30%
P/S 20%
DCF – 50%
WACC
10.84%
TEV/EBITDA
9.5x
Growth Rate
2%
1yr Target Price
$ 40.49
DCF EV
$ 2,369.58
1yr Target Price
$ 51.01
P/S
1.1x
1yr Target Price
$42.58
1yr Target Price
$46.17
+25.8%
Risks & Sensitivities
Forecasted
Current
Future Acquisitions
Economic Downturn
$29.50
$16.30
Restructuring Costs
$33.05
Currency Exchange
$34.50
Weighted Risks
$10.00
$31.72
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
Price per Share
4/13/2015
BU Finance & Investment Club
20
Company Analysis
 Increasing market share through two new acquisitions
in 2010 and one in April 2011
 Increasing revenue by developing manufacturing
facilities abroad, focusing on growth in Asia segment
and emerging markets
 Managing the cost of raw materials as copper prices
reach all time highs
Investment Recommendation
Company
Recommendation
21
Belden, Inc.
BUY
Current Price
$36.70
1yr Target Price
$46.17
% Upside
25.8%
Questions?
4/13/2015
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22
Backup Slides
4/13/2015
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Time Series
1 Yr Revenue Growth vs. P/S
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