Description

Base case 77% upside, bull case 130% upside, bear case <10% downside

Company

-    Rexel is a B2B distributor of low and ultra-low voltage electrical equipment. The company distributes over 1mn products ranging from cables, circuit breakers and switches to lighting and access control devises. Think of Rexel as the place to go for industrial companies, builders and large construction companies who need anything electric. They order whatever they need for the following day in the evening, and pick up the supplies in the morning at one of Rexel’s 2,300 branches, or have everything delivered directly to the construction site.

-    58% of Rexel’s customers are contractors, 22% are industrial companies, 9% are commercial customers and 11% fall in the ‘other’ category.

-    Per end business, 44% of sales come from the commercial world, 33% from the industrial world and 23% from the residential world.

-    55% of sales are generated in Europe (42% commercial, 33% residential, 24% industrial), 34% in North America (50% commercial, 45% industrial, 5 residential), 9% in Asia Pacific and 3% in Latam. Thanks to the higher margin, Europe generates 70% of EBITA.

Investment case summary

-    Apart from a short-lived bounce in ’09, we have seen little in terms of a global capex recovery since the recession. However, the different drivers of a recovery in corporate spending all seem to move in the right direction – corporate profitability is high, balance sheets are strong, credit availability is rising, business confidence has improved a lot, end demand is rising and capacity utilisation rates are moving to the crucial 80%.

-    2 years of negative earnings revisions on the back of a double dip recession in Europe, a slow recovery in the US and a slowdown in emerging markets, have left expectations depressed. Rexel’s organic growth has declined by 25% since the peak in ’07 and analyst model a 5% recovery over the coming 3 years.

-    Additionally, analysts seem to have overlooked the fact that Rexel’s margins and returns have been trending upwards on the back of industry consolidation. Therefore an eventual recovery in capex spending should come with higher operating leverage than the market currently assumes.

-    Investors are equally complacent, with the stock trading on a trailing 9% EV FCF yield, a FY1 P/E of 14.3 and a dividend yield of 4%.

-    Timing the exact turnaround in the global capex cycle is impossible, but Rexel’s risk/reward seems attractive at current levels with 77% upside in a moderate recovery (8% organic growth over 3 years), 130% upside in a stronger recovery (12% organic growth over 3 years, still nowhere near the capex recovery in ’03-’07), and <10% downside in an ongoing muddle through scenario (4% organic growth over 3 years).

Growth rate

Organic growth

-    Organic growth is cyclical. Rexel generated up to 11% organic sales growth per year in the ’03-’07 cycle, fell 25% in the recession, and have hardly recovered since (-2% in recent years).

-    Looking forward, Rexel seems exposed to all the right end markets if we do get some recovery in capex spending (early cyclical in Europe, later cyclical in the US, little exposure to weak markets such as EM and mining).

High European exposure

• With 55% of sales and 70% of profits coming from Europe, Rexel should be a key beneficiary of an improving European economy. Again, it’s difficult to time the exact turnaround, but following the improvements in the US and UK, Europe should be the next region that turns around.
• The different drivers of a recovery in corporate spending all seem to move in the right direction – corporate profitability is high, balance sheets are strong, credit availability is rising, business confidence has improved a lot, end demand is rising and capacity utilisation rates are moving the crucial 80%. And we’ve seen some initial movements in employment numbers and US residential spending.
• Residential is Rexel’s early cycle business, and the highest margin one. The bulk of Rexel’s residential exposure is in Europe, so a turnaround of the region would be highly accretive.

High US exposure

• Thanks to the 34% of sales coming from the US (and the lack of EM exposure), Rexel ranks high on both screens looking for stocks geared into a European recovery, and European industrials geared towards a US recovery.
• Only 5% of the US business is residential, with the bulk of sales coming from industrial and commercial investments. So Rexel should be well positioned for the next steps in the cycle.

Avoiding some negatives

• China is pure industrial exposure rather than construction, and therefore growing at a high-SD rate.
• Latam is weak, but less than 3% of sales and around 0% of profits
• Mining only drives 1.4% of sales. The Australian economy is weak on the back of a weaker mining/AUD cycle, and the main driver of the poor Asia-Pacific results. But Asia-Pacific is less than 5% of profits.
• And Rexel is one of the few European industrials who’s business is not at risk from increasing EM competition. EM companies are focused on becoming competitive producers rather than coming to developed markets to build distribution networks (they actually use Rexel instead).

Acquisition growth

-    The electrical distribution industry is consolidating, with Rexel one of the key consolidators. Acquisitions have added 7% to the top-line on average per year over the past 8 years and management is guiding for €500mn in M&A per year going forward. At an EV/Sales multiple of 0.7x this implies 5% revenue growth per year from M&A.

-    Acquisitions make sense for distributors (at the right price) because they are usually easy to implement, synergies tend to be quite reliable, and scale does make a difference.

-    Rexel’s board and management have shown good financial discipline and have a strong execution track record in bolt-on acquisitions. The only criticism would be the Hagemeyer acquisition, which was transformational in nature rather than bolt-on. The deal made sense strategically (multi-billion deal with fast tracked the European consolidation), but maybe less so from a financial point of view (done in ’08 at the peak of the cycle. It took until 2012 to reduce the leverage to acceptable levels and fully integrate the entire business as regulators required quite a few divestments along the way).

-    Guidance going forward is for bolt-on acquisitions only and the company targets either market share leaders in their respective countries/regions, or distributors that add exposure to key growth markets such as energy efficiency. Financially, management targets and IRR over 10%, synergies of at least 1.5% of sales (mostly costs), and EPS accretion within 18 months.

-    Looking at the returns on investments, the CFROI track record for the company as a whole is strong and upward sloping. Historical troughs/peaks were around 10/15% in a downcycle/upcycle, with the ’09 cycle bottoming at 12% and the current level being at the high end of the historical range (15%) despite the fact that the cycle still needs to turn upward.

Added together

-   Organic growth has been improving every quarter and should turn positive in FY14. Add M&A and strong operating leverage in the mix (distribution businesses have a high fixed cost base, and even 75% of variable costs can be regarded as fixed – leases on the branches, French labour costs, etc) and Rexel should grow earnings and cash flows at a double-digit pace over the coming years.

Competitive position

-    75% of electrical products globally are sold through distributors. Electrical manufacturers like Legrand and Schneider are not set up to deal with tens of thousands of construction companies (logistics, billing, etc) and are therefore happy to use external distributors.

-    Legrand is known for the fact that they have never reduced product prices, usually increasing them by 1% per year. Contractors don’t really care about pricing, they can pass it through to the end customer and are more interested in having access to products and getting them delivered on time. Therefore scale and efficient logistics are key competitive advantages that both work in Rexel’s favour. And manufacturing inflation is easily passed on with Rexel’s gross margins very stable over time.

-    Rexel is the #2 distributor globally. #1 is privately held Sonepar, with the other large players being Consolidated Electrical Distributors, Anixter, Graybar, Grainger, WESCO, Solar and Ahlsell. Combined they have a market share of 25%, with the remaining 75% spread over thousands of smaller players. Rexel’s market share is 8%.

-    The industry has been consolidating over the past 10 years, with Rexel and Sonepar initiating the trend. Both companies are French and started by rolling up the French market, then moving on to Europe and now gradually consolidating the rest of the world. Rexel has a #1 or #2 position in each of its European markets and a #3 position in the US. Competition for deals is benign with 75% for the market still up for grabs – Rexel and Sonepar bought and dismantled Hagemeyer together in 2008.

-    The combination of cooperative suppliers, a price insensitive and scattered client base, and market consolidation translates into 6% EBITDA margins. That is impressive for a distributor, with IT distributors such as Ingram Micro and Tech Data generating 1.5% margins.

What is consensus missing?

Market consolidation

-    Everything points towards further market consolidation. Most analysts do not include future M&A in their models and the ones that do include at most half of the €500mn company guidance per year. This offers up to 5% upside on the top-line versus current consensus numbers.

-    Equally important, market consolidation tends to lead to higher margins and higher returns. Rexel generates double-digit EBITA margins in Switzerland (>50% market share), has 8-10% margins in France and 7% margins in the more consolidated European market (Rexel and Sonepar have 35% market share) versus 4% in the less consolidated US market.

-    The company’s current (total) EBITA margin of 5.5% is close to the previous cycle peak (6%), despite the fact that the current cycle still has to start.

-    Although consolidation probably explains the bulk of the upward margin trajectory, margins have also benefited from ongoing cost/efficiency initiatives by a margin-focused management. These include a reduction in the number of brands, more streamlined logistics and a simplified IT platform, and are estimated to have lifted margins by 50bp in recent years. Additionally, margins benefited from an improvement in mix away from retail branches towards more e-commerce. Rexel is taking a leaf out of the WW Grainger book here, and has established specialised sales teams in specific verticals (eg targeting hospitals with specialist sales instead of only having generalist commercial sales) to improve the e-commerce penetration.

-    Consensus is modelling a gradual recovery in global margins from 5.5% to the previous cycle peak of 6% over the coming years, thereby overlooking the improvements on the back of consolidation, improved efficiency and mix. Rexel should easily beat that, even in a moderate capex cycle.

Economic recovery

-    It is hard to forecast exactly when the global capex cycle will turn, and how strong any recovery will be. I like the fact that the different drivers of capex spending are moving in the right directions, and that Rexel is well positioned for an upturn. But what I like above all is that analysts are modelling very little in terms of a recovery.

-    2 years of negative revisions on the back of a double dip recession in Europe, a slow recovery in the US and a slowdown in emerging markets have left expectations depressed. Rexel’s organic growth has declined by 25% since the peak in ’07 and analyst model a 5% recovery over the coming 3 years (0.3% in FY14, 1.5% in FY15 and 2.7% in FY16). Some of the 25% decline will be permanently lost and the current cycle will no doubt be more muted than the ’03-’07 one. But consensus expectations expect hardly any growth over inflation and point towards deer in the headlight syndrome following the false start of ’09-10.

-    A top-line recovery will come with OP leverage. Rexel guides for a 10bp increase in OP margins per 1% in SSS. The initial effect should be higher (UBS estimates up to 25bp per 1%) and fall below 10bp as move further in the cycle. Analysts model a 50bp recovery in-line with their 5% organic growth, which seems conservative, even excluding any benefits from further consolidation / efficiency / mix effects.

Therefore are my numbers substantially different from consensus?

Scenario 1 – muddle through

-    An ongoing subdued economic recovery in-line with consensus estimates: 0.3%, 1.5% and 2.7% organic revenue growth in FY14, FY15 and FY16, with Europe lagging the US by 2 years.

-    Half the acquisition guidance of management (€250mn per year, ahead of consensus).

-    EBITA margins expanding from 5.3% in FY13 to 5.9% in FY16 (13bp margin expansion per 1% organic sales growth, marginally ahead of consensus).

-    This leads to EBITA growth of 6.4%, 8.2% and 9.4% over the coming 3 years and revenue/EBITA numbers that are 2.1%/2.2% ahead of consensus this year and 2.8/3.4% ahead of consensus in FY16.

Scenario 2 – gradual recovery

-    A gradual economic recovery: 0.8%, 2.6% and 4.6% organic revenue growth in FY14, FY15 and FY16, Europe continues to lag the US by 2 years.

-    Half the acquisition guidance of management for this year (€250mn), the full guidance as of next year (€500mn).

-    EBITA margins expanding from 5.3% in FY13 to 6.3% in FY16 (similar 13bp margin expansion per 1% organic sales growth)

-    This leads to 47% EBITA growth over the coming 3 years and revenue/EBITA numbers that are 11%/21% ahead of consensus in FY16.

Scenario 3 – stronger recovery

-    A stronger economic recovery, but still nowhere near what we saw in the ’03-’07 cycle: 0.8%, 4.0% and 7.0% organic revenue growth in FY14, FY15 and FY16. Basically we recover less than half of the lost organic growth.

-    Half the acquisition guidance of management for this year (€250mn), the full guidance as of next year (€500mn).

-    EBITA margins expanding from 5.3% in FY13 to 6.8% in FY16 (similar 13bp margin expansion per 1% organic sales growth)

-    This leads to 62% EBITA growth over the coming 3 years and revenue/EBITA numbers that are 15%/34% ahead of consensus in FY16.

Below the EBITA level

-    Things get a bit more complicated below the EBITA level. There are substantial non-operating expenses which are accounted for differently be different analysts. Most exclude everything, some add back the copper impact on top of that (20% of revenues are from copper cables, see risks), and some just exclude the non-cash non-operating expenses. The earnings dispersion amongst analyst is therefore.

-    Most of the non-operating expenses are related to acquisitions and therefore in some way one-offs, but they become recurring thanks to the recurring nature of the acquisitions. The restructuring costs usually relate to removing corporate overhead costs of the acquired distributors (closing head office) as well as the closure of selective branches. The goodwill impairments are traditionally driven by divesting parts of acquired businesses over time.

-    Charges have been somewhat higher than usual in recent years on the back of the poor economy / real estate cycle. Amongst others, Rexel has closed 50% of its branches in Spain and 30% of its branches in the US (mainly former real estate hotspots like Florida). The company also had some additional goodwill impairments related to legislation changes in the Netherland (the government is phasing out the tax deduction of mortgage interest rate payments, which is causing exceptional weakness in real estate. Rexel acquired Netherlands exposure through Hagemeyer).

-    My earnings include €55mn restructuring charges and €45mn non-cash goodwill impairments for each of the coming years (the company is guiding for €55mn restructuring charges in FY14, no guidance on goodwill). That could very well prove too conservative if the capex cycle turns, but it doesn’t really matter as the market focuses on adjusted earnings and I exclude all non-operating expenses in my adjusted earnings.

Balance sheet

-    Rexel was brought to the market with substantial leverage by a private equity consortium in ’07 (Ray Investments). The company has worked hard on maximizing cash flows and reducing the net-debt / EBITDA ratio from 6x to 2.8x today. The big deleverage push is over now, with management indicating that they feel comfortable with a 2.5-3.0x ratio going forward.

-    So there is reasonable financial leverage on top of the operating leverage, but that doesn’t really worry me. Rexel managed to get through the financial crisis with 2x the current debt levels without tapping into the equity market, mainly thanks to its ability to generate cash.

-    The current debt has been refinanced last year (which added another €24mn exceptional cost) and now expires between 2018 and 2020.

-    In my model, the net-debt / EBITDA ratio gradually comes down to 2x, and that includes M&A and the assumption that future dividends will be paid out in cash rather than shares.

-    Rexel has defined benefit plans in Canada, the UK, Switzerland and the Netherlands. The deficit is manageable at €243.4mn and return/discount expectations are reasonable.

Free Cash Flow

-    The combination of an asset-light distribution business and a management focused on cash generation translates into strong free cash flows and a trailing 2013 EV / FCF yield of 8.9%. Rexel has not had a year yet with negative FCF, not even in the recession..

-    The EV / FCF yield stays comfortably in the high single digits going forward even after modelling acquisitions, restructuring costs that are most likely too high, and a dividend pay-out in cash rather than shares.

-    Capex and working capital have been fairly stable as a % of revenue (0.7% and 10% respectively) and I model similar levels going forward. You could argue that there is some room to improve working capital, but I don’t expect this to happen. Rexel’s largest competitor Sonepar is a privately owned and takes advantage of its the lack of public pressure to maximise FCF and WC. They often do suppliers a favour by taking some extra inventory on the books (in return for better pricing) and equally sometimes try to please clients by allowing them to pay a bit later. Given this competitive position, it doesn’t make sense for Rexel to try to squeeze the last drop out of working capital.

How will cash be deployed?

-    Management has guided for €500mn in bolt-on acquisitions per year going forward. Historically, acquisitions have been accretive within 18 months from an earnings point-of-view and as discussed, consolidation has helped to increase margins and returns.

-    Additionally, Rexel is committed to paying-out at least 40% of recurring profits through dividends. This should easily be covered by the cash flow generation after M&A, and therefore I don’t see any risk to the current 4% dividend yield.

-    CFROIs tend to improve throughout the upcycle on the back of rising margins, rising sales and improving asset turns. The trend is not different this time and the current CFROI levels are already similar to the ’07 ones, despite the cycle still really needing to kick off.

-    I assume that the CFROI will increase to 16% in FY15 and 18% in FY17.

Valuation

-    Despite the appalling EEG chart, Rexel has performed quite well over the past 1-2 years. The stock re-rated on the back of a strong equity market, decent cash flow generation, and a substantial improvement liquidity as private equity partners sold down their stake to now less than 10%.

-    However, the +/-40% performance since the ’12 summer correction is only in-line with the market. And current valuation levels remain quite reasonable thanks to the very low starting base (mainly due to the limited free float) and the fact that we haven’t seen a big recovery in capex yet. On consensus numbers, Rexel is currently trading on a 10.6x FY1 EV/EBITA, 14.3x adjusted FY1 P/E and 7% FY1 EV / FCF yield.

-    Unfortunately there are no listed distributor peers in Europe. The current valuation represents a 10-20% discount to US peers and a 20%+ discount to the European manufacturers. However, you could argue that European stocks always trade at a discount to US stocks, and that distributors should trade at a discount to their higher-margin manufacturers.

-    Roughly keeping the current multiples 3 years out seems reasonable as a base case. Rexel’s valuation history is limited and impacted by the poor historical liquidity. Looking at US peers Wesco and Anixter shows that the stocks traded at higher multiples in previous mid- to late-cycle periods, despite the sector being less consolidated then.

Base case – scenario 2

-    Using the moderate recovery scenario (8% organic growth spread over the coming 3 years)

-    10.5x EV/EBITA on FY16 EBITA of €1,009mn gives a target price of €29 (66% upside from today’s €17.5)

-    14.5x P/E on FY16 adjusted EPS of €1.98 gives a target price of €28.7

-    The €29 target implies a FY16 EV FCF Yield of 6.5%

-    On top of the capital gains we should roughly get 10% worth of dividends over the coming 3 years.

Bull case – scenario 3

-    Using the stronger recovery scenario, but still nowhere near what we saw in ’03-’07 (I assume 12% organic growth spread over the coming 3 years, so recovering less than 50% of what has been lost).

-    12x EV/EBITA on FY16 EBITA of €1,116mn gives a target price of €39 (123% upside)

-    16x P/E on FY16 adjusted EPS of €2.24 gives a target price of €36 (90% upside)

-    A €39 target price implies a FY16 EV FCF Yield of 5.3%.

-    Steeper capital gains imply a somewhat lower dividend contribution, although dividend growth should be higher. I anticipate a combined 8% contribution over 3 years.

Bear case – scenario 1

-    Using the muddle through scenario (4.5% organic growth spread over the coming 3 years)

-    8x EV/EBITA on FY16 EBITA of €864 gives a target price of €16 (9% downside)

-    9x P/E on FY16 adjusted EPS of €1.63 gives a target price of €15 (14% downside)

-    A €16 target price implies an FY16 EV FCF Yield of 8.9% on scenario 1 numbers.

-    The dividend contribution over the coming 3 years in a muddle through environment should be around 12%. Adding this to the capital gains means that the downside should be limited on a 3 year horizon in a non-recessionary environment.

Bear case – recession

-    Rexel, Wesco and Anixter all traded at a 5x P/E during the ’09 recession, so there should be significant downside in a recessionary environment. The beta could easily rise from the current <1 to >1.5+.

Risks

Timing

-    For Rexel to outperform the market, we need a recovery in global capex spending. Most indicators are pointing in the right direction, and even a small recovery would be enough for Rexel to beat depressed consensus expectations. But timing the exact inflection point is impossible.

-    That worries me because we are approaching a traditionally poor period of the year for risky assets. Rexel corrected 43% in the 2011 summer correction (the market was down 24%), and the combination of a capex recovery being postponed further and a new summer correction could lead to similar underperformance in the short-term. Then again, we might not get a summer correction as US activity accelerates from a soft winter, fund flows continue to move towards equities, and we might even get some quantitative easing in Europe. And expectations are a lot lower today for Rexel compared to when we went into the 2012 correction.

-    So timing is difficult and the stock could show typical cyclical behaviour short-term. Therefore I would compare the Rexel investment case to other cyclical names in the portfolio, and average in.

Anixter

-    American billionaire Sam Zell, who owns 14.7% of Anixter, has engaged an investment bank to find a buyer for the company. Anixter is the number 5 electrical distributor in the US and would be a good strategic fit for Rexel. The company is exposed to attractive end markets (big player in electric cabling, which benefits from the increasing technology content in houses) and would double Rexel’s US market share to 10%.

-    The problem is that Anixter is trading at a premium to Rexel, and that this would be a multi-billion deal (Anixter generates $3bn in sales). So hardly the bolt-on acquisition that management has guided for, and it would imply that the company either comes to the equity market for financing, or gears up and spends the next few years building down debt. Neither of these scenarios would be met with much enthusiasm from investors.

-    The private equity shareholders of Rexel have already said that they are opposed to a deal, the board has said off the record that they are not interested because they can’t make the financial side work, management has said to analysts that they have walked away but asked not to mention this in research, and Bloomberg has written up stories saying that Rexel is no longer interested. Other bidders and private equity have apparently also walked away, so the rumour is now that Sam Zell is no longer selling.

-    I still mention this as a risk because there is a small chance that Rexel revisits the deal once the private equity holders have sold the final stake (this summer) and give up their 2 board seats. Although I’m not too worried because Anixter can easily double their market share through 2 or 3 smaller transactions, and apparently there are quite a few private players for sale. So Anixter is not a unique opportunity.

-    As an aside, the 3 investors that have been building a big stake in the company over the past year as private equity sold down are Blackrock (17%), Capital (10%) and Wellington (6%).

Weak end markets

-    As discussed before, I believe that Rexel is one of the better positioned industrials for the coming years (European exposure, US non-residential exposure, no competition from EM, mining only 1.4% of the group). However, if the market wants to be bearish, there will always be some weaker markets to focus on. The most likely are France, Australia and Canada.

-    France is the sick child of Europe and one of the larger exposures of Rexel (20% of sales). Australia and Canada generate 7% and 9% of sales respectively. The direct mining exposure is small, but the poor cycle is weighing on the overall economy and on the respective currencies.

-    Of course there is also the risk of a global recession.

Copper / short-term earnings revisions

-    20% of sales are generated by cables with a 60% copper content. Weaker copper prices lead to lower sales, lower gross profit dollars but higher gross profit margins (copper cables generate 13% gross margins versus 25% for the company overall), and lower EBITA dollars but higher EBITA margins (sales incentives are based on total EBITA sales, so lower copper prices lead to lower bonuses). The actual impact on sales and profits is not that straight forward to calculate as depends on the timing of sales within the quarter, and different countries have different copper costs. But the direction of the impact is fairly easy (lower copper is bad) and there are some short-cut calculations: sales x 20% x 60% x Euro change in copper price on the revenue level, and €14mn EBITA impact per $500/t change in the copper price.

-    Most analyst do not take the copper price into account when modelling sales and margins. The fact that the copper price has continue to come down therefore implies that consensus numbers for FY14 are still somewhat too high (I calculate a 2% impact on EBITA for FY14).

-    Additionally, the FY14 consensus might have to come down on the back of weaker FX, weather (the North American business is mainly located on the East Coast and in Canada) and the fact that we have only seen €50mn worth of M&A so far this year. The latter doesn’t mean that the company can’t make up for this later in the year (I suspect that they have been distracted by the potential Axiter deal so far), and a lot of the analysts do not even model M&A. But the ones that do have told me that they might have to take down their assumptions after the Q1 results.

-    Next to the poor economic momentum worldwide and the double dip in Europe, the poor historical EEG chart has also been impacted by higher restructuring charges and goodwill impairments. And by FX, lower copper prices, lower inflation, and the fact that there was a change in CFO (nobody was accountable for the guidance set by the previous CFO during the transition process, which led to awkward and frequent downward revisions as opposed to 1 or 2 bigger adjustments to guidance).

Conclusion

-    Apart from a short-lived bounce in ’09, we have seen little in terms of a global capex recovery since the recession. However, the different drivers of a recovery in corporate spending all seem to move in the right direction – corporate profitability is high, balance sheets are strong, credit availability is rising, business confidence has improved a lot, end demand is rising and capacity utilisation rates are moving the crucial 80%.

-    2 years of negative revisions on the back of a double dip recession in Europe, a slow recovery in the US and a slowdown in emerging markets have left expectations depressed. Rexel’s organic growth has declined by 25% since the peak in ’07 and analyst model a 5% recovery over the coming 3 years.

-    Additionally, analysts seem to have overlooked the fact that Rexel’s margins and returns have been trending upwards on the back of industry consolidation. Therefore an eventual recovery in capex spending should come with higher operating leverage than the market currently assumes.

-    Investors are equally complacent, with the stock trading on a trailing 9% EV FCF yield, a FY1 P/E of 14.3 and a dividend yield of 4%.

-    Timing the exact turnaround in the global capex cycle is impossible, but Rexel’s risk/reward seems attractive at current levels with 77% upside in a moderate recovery (8% organic growth over 3 years), 130% upside in a stronger recovery (12% organic growth over 3 years, still nowhere near the capex recovery in ’03-’07), and <10% downside in an ongoing muddle through scenario (4% organic growth over 3 years).

Disclaimer

Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise. Data is for illustrative purposes only. This information does not constitute an offer, solicitation or recommendation for the purchase or sale of securities or other financial instruments, nor does the information constitute advice or an expression of my view as to whether a particular security or financial instrument is appropriate. I, my employer and/or others we advise hold a material investment in the issuer's securities.

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