TRANSPORTATION & LOGISTICS INDUSTRY UPDATE | OCTOBER 2017 www.harriswilliams.de Harris Williams & Co. Ltd is a private limited company authorised and regulated by the Financial Conduct Authority, incorporated under English law with its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales under company number 7078852. Directors: Mr. Ned Valentine, Mr. Paul Poggi, Mr. Thierry Monjauze and Mr. Aadil Khan. Harris Williams & Co. Ltd Niederlassung Frankfurt (German branch) is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main, Germany, under registration number HRB 96687, having its business address at Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany. Permanent Representative (Ständiger Vertreter) of the Branch Niederlassung: Mr. Jeffery H. Perkins.
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TRANSPORTATION & LOGISTICS
0
INDUSTRY UPDATE | OCTOBER 2017
www.harriswilliams.de
Harris Williams & Co. Ltd is a private limited company authorised and regulated by the Financial Conduct Authority, incorporated under English law with its registered office at 5th Floor, 6St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales under company number 7078852. Directors: Mr. Ned Valentine, Mr. PaulPoggi, Mr. Thierry Monjauze and Mr. Aadil Khan.
Harris Williams & Co. Ltd Niederlassung Frankfurt (German branch) is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main,Germany, under registration number HRB 96687, having its business address at Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany. Permanent Representative(Ständiger Vertreter) of the Branch Niederlassung: Mr. Jeffery H. Perkins.
Jeffery PerkinsManaging Director [email protected]+49 (0) 69 3650638 00
TRANSPORTATION & LOGISTICS
INDUSTRY UPDATE │ OCTOBER 2017
WHAT WE’RE READING
TRUCKING | EVOLUTION OF THE TRUCKING & TRANSPORTATION INDUSTRY
Innovative minds are continually dreaming up innovations that transform howtrucking companies and others in the industry operate. The ongoing and futuretransformation in the industry will not only benefit the carriers, truckers, andshippers but also the controlling authorities as well as positively impact otherindustries in the market and the economy at large. Here are some technologieswhich will play a primary role in the anticipated evolution of the trucking industry:(1) Telematics and GPS fleet tracking systems, (2) ELDs and trucking softwareapplications, and (3) Self-driving trucks and platooning technology.
FreightWaves
AIR | DEMAND FOR AIR CARGO SOARS
IATA is hopeful that cargo yields could be set to improve as demand growthoutstrips capacity supply. In its latest market wrap up, the airline association saidthat air cargo demand in freight tonne km terms increased by 12.1% in August,well ahead of the five-year average growth rate of 4.4% and the year-to-date rateof 10.5%. IATA said that the pace of capacity growth had slowed, which should begood news for yields. “Demand for air cargo grew at a double-digit rate for thefourth month in a row — outperforming demand for passenger travel for the fourthconsecutive month,” said Alexandre de Juniac, IATA director general and chiefexecutive.
Air Cargo
RAIL | INTERMODAL TRAFFIC HITS DOUBLE DIGITS
The Association of American Railroads said total U.S. rail traffic for the week endingOctober 7 was 554,826 carloads and intermodal units, up 6.3% compared with thesame week in 2016. Traffic included 269,336 carloads, up 2%, while intermodalvolume was 285,490 containers and trailers, up 10.8%. Seven of the 10 carloadcommodity groups posted an increase compared with the same week in 2016.They included nonmetallic minerals, 14.3%; chemicals, 10.7%, and metallic oresand metals, 8.6%. For the first 40 weeks of 2017, U.S. railroads reported cumulativevolume of 10,375,996 carloads, up 3.7% on-year, and 10,718,042 intermodal units,up 3.6%. Total combined traffic was 21,094,038 carloads and intermodal units, anincrease of 3.7%.
Railway Age
MARINE | ANOTHER RECORD-BREAKING MONTH FOR PORTS
For August, the most recent month of data available, U.S.-based retail containerports covered in the report handled 1.8 million TEU. This now stands as the highest-volume import month recorded since the NRF started tracking imports in 2000 andtops the previous record set one month earlier in July of 1.78 million TEU. Prior to thelast two months of recorded data, the previous high was 1.73 million TEU fromMarch 2015. On an annual basis, August volumes were up 5.6%. Port Trackerestimated that September will hit 1.65 million TEU for a 3.7% annual increase, withOctober pegged for 1.72 million for a 2.8% annual gain.
Logistics Management
LOGISTICS | FREIGHT AND WAREHOUSING FIRMS ADD JOBS IN SEPTEMBER
The freight transport and warehousing sector defied the national downturn in hiringlast month, adding 12,400 jobs as warehouse operators and package-deliverycompanies boosted payrolls rapidly. The gains extended strong growth in sectorstied to e-commerce as companies get workers and goods in place for anotherexpected online holiday sales surge. Courier and messenger firms, including theparcel carriers that deliver online orders, added 3,600 jobs last month, giving thesector 32,000 more jobs than the same month last year. The expansion came asBLS reported that the U.S. overall shed 33,000 jobs last month.
10/2/2017 Trucking Xpress Group Operates as a van and flatbed carrier, prov iding logistics solutions
and reliable freight transportation serv ices
Titanium Transportation
Group
9/25/2017 Logistics California Cartage Co. Owns and operates multiple highly-specialized logistics div isions and
drayage operations
National Freight Industries
9/18/2017 Trucking Celadon Group (Flatbed
Trucking Div ision)
Operates as a dry van truckload carrier PS Logistics
9/18/2017* Marine Maritime World LLC
(Dubai Maritime City) &
Drydocks World
Provides maritime serv ices DP World Ltd.
9/11/2017 Logistics Cargoguide Develops software on rate management solutions for freight
forwarders and logistics prov iders
WiseTech Global Limited
9/11/2017 Marine RH Marine B.V. Prov ides serv ices for the maritime sector Pon Holdings
9/7/2017 Trucking Haney Truck Line Provides high quality heavy haul and truckload transportation on the
West Coast
Wilson Logistics, Inc.
9/6/2017 Logistics Newgistics, Inc. Prov ides technology-enabled parcel logistics to the e-commerce
and direct-to-consumer retail industry
Pitney Bowes Inc.
9/5/2017 Rail / Marine Diversified Port Holdings Operates an integrated maritime port logistics business Patriot Rail Company
9/5/2017 Logistics Sandifer Valley
Transportation &
Logistics Ltd.
Prov ides freight forwarding serv ices Radiant Logistics, Inc.
9/5/2017 Trucking R&R Trucking, Inc. Prov ides freight and cargo serv ices, specializing in truckload
transportation of military freight and hazardous waste materials
Daseke, Inc.
9/5/2017 Logistics United Road Serv ices,
Inc.
Prov ides vehicle transport and logistics The Carlyle Group
9/5/2017 Trucking Rolling Big Power (RBP) Premium truck accessories lifestyle brand Pilot Inc.
9/4/2017* Marine TCP Participações S.A Brazil based container port terminal operator China Merchants Port
Holdings Co., Ltd.
M&A TRANSACTIONS(1,2,3)
2
RECENT M&A TRANSACTIONS
TRANSPORTATION & LOGISTICS
*Denotes pending transaction
INDUSTRY UPDATE │ OCTOBER 2017
PAGE |
PUBLIC MARKETS OVERVIEW(1)
3
TRANSPORTATION & LOGISTICS
TEV / LTM EBITDA TEV / 2017E EBITDA
AVERAGE REVENUE GROWTH (2013 – 2016) AVERAGE REVENUE GROWTH (2016 – 2018P)
AVERAGE EBITDA GROWTH (2013 – 2016) AVERAGE EBITDA GROWTH (2016 – 2018P)
INDUSTRY UPDATE │ OCTOBER 2017
8.4x
9.2x
9.7x
11.2x
11.8x
Transportation
Equipment
Trucking
Marine
Rail & Rail Services
Logistics Providers
8.0x
8.2x
10.3x
10.9x
11.0x
Transportation
Equipment
Trucking
Marine
Rail & Rail Services
Logistics Providers
(4.3%)
2.1%
2.6%
4.0%
4.7%
Marine
Rail & Rail Services
Trucking
Logistics Providers
Transportation Equipment
0.9%
4.5%
7.5%
8.7%
14.2%
Rail & Rail Services
Marine
Transportation
Equipment
Logistics Providers
Trucking
(0.8%)
4.4%
5.1%
6.0%
19.4%
Marine
Trucking
Logistics Providers
Rail & Rail Services
Transportation
Equipment
(2.3%)
(2.2%)
12.6%
16.3%
22.4%
Marine
Rail & Rail Services
Logistics Providers
Trucking
Transportation
Equipment
PAGE |
STOCK PRICE PERFORMANCE(1)
4
TRANSPORTATION & LOGISTICS
(Indexed to October 18th, 2016)
TRAILING TWELVE MONTHS
MEDIAN % CHANGE (1 MONTH) MEDIAN % CHANGE (12 MONTH)
INDUSTRY UPDATE │ OCTOBER 2017
(20%)
0%
20%
40%
60%
80%
100%
Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17
Logistics Providers Trucking Rail and Rail Services
Marine Transportation Equipment S&P 500 Index
2.4%
3.1%
3.3%
3.3%
5.0%
9.3%
S&P 500
Logistics Providers
Rail & Rail Services
Marine
Trucking
Transportation
Equipment
(16.1%)
18.2%
19.7%
30.2%
55.9%
66.4%
Marine
Rail & Rail Services
S&P 500
Logistics Providers
Trucking
Transportation
Equipment
PAGE |
OUR GROUP
Harris Williams & Co. is a leading advisor to the transportation and logistics M&A market. Our Transportation & LogisticsGroup serves companies in a broad range of attractive niches, including third-party logistics (3PL), truck, rail, marineand air transportation, transportation equipment, and the automotive and heavy duty vehicle market.
Harris Williams & Co. has a broad range of industry expertise, which creates powerful opportunities. Our clients benefit from our deep-sector experience, integrated industry intelligence and collaboration across the firm, and our commitment to learning what makes them unique. For more information, visit our website.
OUR FIRM
TRANSPORTATION & LOGISTICS
INDUSTRY UPDATE │ OCTOBER 2017
6
PAGE |
PUBLIC COMPARABLES(1)
7
TRANSPORTATION & LOGISTICS
INDUSTRY UPDATE │ OCTOBER 2017
Stock Performance
Stock Price Change from 52-Week TEV / EBITDA EBITDA
($ in millions except per share data) TEV Current Prior Month Prior Year High % of High Oct-16 Apr-17 Current 2017E 2018P
Transportation & Logistics
TEV / LTM EBITDA as of
Logistics Providers
Agility Public Warehousing Co. K.S.C. $4,357 $2.81 (12.1%) 101.4% $3.27 86.1% 6.5x 7.5x 11.8x NA NA
Air Transport Services Group, Inc. 1,910 24.48 4.0% 68.1% 25.91 94.5% 6.3x 7.7x 8.8x 7.3x 6.0x
Atlas Air Worldwide Holdings, Inc. 3,530 62.50 (4.9%) 48.8% 68.70 91.0% 14.8x 9.4x 9.6x 8.1x 7.1x
Harris Williams & Co. (www.harriswilliams.de) is a preeminent middle market investment bank focused on the advisory needs of clients worldwide. The firm has deep industry knowledge, global transaction expertise, and an unwavering commitment to excellence. Harris Williams & Co. provides sell-side and acquisition advisory, restructuring advisory, board advisory, private placements, and capital markets advisory services.
Harris Williams & Co. Ltd is a private limited company authorised and regulated by the Financial Conduct Authority, incorporated under English law with its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales under company number 7078852. Directors: Mr. Ned Valentine, Mr. Paul Poggi, Mr. Thierry Monjauze and Mr. Aadil Khan.
Harris Williams & Co. Ltd Niederlassung Frankfurt (German branch) is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main, Germany, under registration number HRB 96687, having its business address at Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany. Permanent Representative (Ständiger Vertreter) of the Branch Niederlassung: Mr. Jeffery H. Perkins.
THIS REPORT MAY CONTAIN REFERENCES TO REGISTERED TRADEMARKS, SERVICE MARKS AND COPYRIGHTS OWNED BY THIRD-PARTY INFORMATION PROVIDERS. NONE OF THE THIRD-PARTY INFORMATION PROVIDERS IS ENDORSING THE OFFERING OF, AND SHALL NOT IN ANY WAY BE DEEMED AN ISSUER OR UNDERWRITER OF, THE SECURITIES, FINANCIAL INSTRUMENTS OR OTHER INVESTMENTS DISCUSSED IN THIS REPORT, AND SHALL NOT HAVE ANY LIABILITY OR RESPONSIBILITY FOR ANY STATEMENTS MADE IN THE REPORT OR FOR ANY FINANCIAL STATEMENTS, FINANCIAL PROJECTIONS OR OTHER FINANCIAL INFORMATION CONTAINED OR ATTACHED AS AN EXHIBIT TO THE REPORT. FOR MORE INFORMATION ABOUT THE MATERIALS PROVIDED BY SUCH THIRD PARTIES, PLEASE CONTACT US.
The information and views contained in this report were prepared by Harris Williams & Co. (“Harris Williams”). It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable, but Harris Williams makes no representation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams’ judgment and are subject to change without notice. The financial instruments discussed in this report may not be suitable for all investors, and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams’ prior written consent.