MTW - Valens Credit Report - 2019 06 17
Credit markets are grossly overstating MTW's credit risk with a cash bond YTW of 9.296%, relative to an Intrinsic CDS of 330bps and Intrinsic YTW of 5.216%. Furthermore, Moody's is grossly overstating the firm's fundamental credit risk, with their highly speculative, high-yield B2 credit rating 10 notches lower than Valens' IG3+ (A1) credit rating.Fundamental analysis highlights that MTW's cash flows should exceed all obligations, including debt maturities, in each year through 2025. In addition, MTW boasts a robust 130% recovery rate on unsecured debt, indicating they should be able to access credit markets to refinance, if necessary.
Incentives Dictate Behaviorâ„¢ analysis highlights positive signals for credit holders. MTW's compensation framework should drive management to focus on all three value drivers: sales, margins, and asset utilization, leading to Uniform ROA expansion and increased cash flows available for servicing obligations. In addition, most management members are not well compensated in a change-in-control, indicating they are not incentivized to pursue a sale or accept a buyout of the firm, reducing event risk.
MTW currently trades below recent averages based on UAFRS-based (Uniform) Earnings, with a 12.9x Uniform P/E (V/E'). However, even at these levels, the market is pricing in expectations for Uniform ROA to expand from 4% in 2018 to 6% in 2023, accompanied by 2% Uniform Asset shrinkage going forward.
Manitowoc is a provider of engineered lifting solutions. The company designs, manufactures and distributes a line of crawler-mounted lattice-boom cranes, which it sells under the Manitowoc brand name. The company also designs and manufactures top-slewing and self-erecting tower cranes, which it sells under the Potain brand name. The company designs and manufactures mobile telescopic cranes, which it sells under the Grove, Shuttlelift and National Crane brand names. The company provides crane product parts and services and crane rebuilding, remanufacturing and training services, which are delivered under the Manitowoc Crane Care brand name. The company's segments are: Americas, Europe and Africa, and Middle East and Asia Pacific.
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