MTW - Valens Credit Report - 2020 03 26
Credit markets are grossly overstating MTW's credit risk with a cash bond YTW of 11.080%, relative to an Intrinsic YTW of 5.440% and an Intrinsic CDS of 495bps. Furthermore, Moody's is materially overstating the firm's fundamental credit risk, with their highly speculative B2 credit rating seven notches lower than Valens' IG4+ (Baa1) credit ratingFundamental analysis highlights that MTW's cash flows should comfortably exceed operating obligations in each year going forward. In addition, the combination of the firm's cash flows and expected cash build should be sufficient to service all obligations, including a material $300mn debt maturity in 2026. Furthermore, MTW boasts a robust 140% recovery rate on unsecured debt, indicating the firm should be able to access credit markets to refinance, if necessary
Earnings Call Forensicsâ„¢ of the firm's Q4 2019 earnings call (2/7) highlights that management generated an excitement marker when saying their aftermarket revenue grew by 2%, with overall margin improvement. In addition, they are confident their Q4 adjusted operating cash flow performance was outstanding and that their competitors have a lot of stored inventory
Incentives Dictate Behaviorâ„¢ analysis highlights mostly 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 12.6x Uniform P/E (V/E'). At these levels, the market is pricing in expectations for Uniform ROA to remain at current 6% levels through 2024, accompanied by 3% 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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