Description

Rinker Group is predominantly an American company that through chance and circumstances currently trades on the Australian stock exchange. Led by a strong management team, with industry leading assets that generate significant levels of free cash flow, there is an exceptional opportunity to own this company as management proactively increases shareholder value and works towards a U.S. domicile.

First, some of the basic facts:

ADR Price: $55.37
Shares Outstanding: 94.5MM
Revenue in U.S. Dollars Fiscal 3-31-05: $4.0 Billion
EBITDA in U.S. Dollars Fiscal 3-31-05: $808MM
EBIT in U.S. Dollars Fiscal 3-31-05: $559MM
Free Cash Flow in U.S. Dollars Fiscal 3-31-05: $461MM, net of maintenance cap ex

So, what does Rinker do? They produce construction aggregates, cement, ready mix concrete, concrete block, etc. Florida is their largest market accounting for approximately half of U.S. EBITDA, where they dominate with market shares ranging from 40-50%. Arizona is also a large market and Australia is around 20%.

How do they compare to others in the U.S.? Using the forecasts for a large sell-side firm, the comps look something like this:

Rinker: 12.7X EV/FCF; 13.3 P/E (cash EPS); 7.2X EV/EBITDA
Florida Rock: 23.7X EV/FCF; 18.2 P/E; 8.5X EV/EBITDA
Martin Marietta: 23.9X EV/FCF; 20.0 P/E; 8.4X EV/EBITDA

The company’s assets are tops in the industry, generating the highest RONA and ROE of the publicly traded peers. Furthermore, Rinker is in 9 of the top 10 population growth states, which generate over 75% of their EBIT. Management has a successful operating record and sees long term opportunities to grow through bolt on acquisitions. In addition, Rinker also announced a 10% share buyback to opportunistically purchase shares at well below their intrinsic value.

As we are all very busy, this is just a brief summary. More facts are available, just let me know.

Catalyst

Large stock buyback, U.S. redomicile