Monday, January 27, 2014

GE Plans Partial IPO of Consumer Finance Unit in 2014- 11/21/2013

http://www.bloomberg.com/news/2013-11-15/ge-plans-partial-ipo-of-consumer-finance-unit-in-2014.html

7 comments:

  1. Company overview:
    Total revenue $145 billion, Segments: Energy Infrastructure 49 billion, 33.8%, GE Capital 45 billion, 31%, Aviation 19 billion, 13%, Health, Home& Business solution, Transportation together 31.8 billion, 21%. GE capital: Commercial lending and leasing $16.9 billion 11.6%, Consumer $15.6 billion 10.7%
    Operating income: Energy 32.2%, GE capital 32%, Consumer 14%, Commercial lending and leasing 10.5%.
    GE Capital:
    From 2010-2012: CLL revenue decreased 8%, from 18.4 billion to 16.9 billion, OI increased 50%, from 1.6 billion to 2.4 billion. Consumer revenue decreased 9% from 17.2 billion to 15.6 billion. OI increased 28% from 2.5 billion to 3.2 billion. Capital Unit OM: 2011 11.5%, 2012 16%, 2013E 18%, Trend: ``

    GE capital "fit":
    - Provide financing to the parent company, Consumer finance unit do not fit the rest?
    - Strong Industrial performance: GE orders received from 80.7 M to 96.2 M from 2010 to 2012, (6% CAGR) Order backlog 175 M to 210 M from 2010 to 2012. ( 6.3% CAGR)
    - CDS lowest in 5 yrs. High credit rating, lower fin. rates
    - Price over Earning multiples: GE 17 DFS 10.9, AXP 17.6, COF 9.3
    - 18- 19 billion for GE consumer lending, P/E 8-9 - Con. discount
    - Industry trend in credit and debt: recovering from financial crisis, global volume grew: 9.3 T to 11.5 T (7.3% CAGR), Outside US: (5.1 T to 6.7 T) (global.)
    - Spin-off- better allocation of resources

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  2. Geographic Breakdown-

    US: 70.40 B; -0.84% (3Yr Gr.)
    Europe: 27.4 B; -9.45%
    Pacific Basin: 24.50 B; 5.78%
    Americas: 13.20 B; 5.01%
    Middle East and Africa: 11.90 B; 5.97%


    Revenue Breakdown-

    Energy Infrastructure: 49.03 B (33.78%)
    GE Capital: 45.00 B (31%)
    Aviation: 19.32 B (13.31%)
    Healthcare: 18.25 B (12.57%)
    Other: 13.54 B (9.34%)

    Operating Business Segments-

    Power & Water (19.2%, 17.4% and 16.6% of consolidated revenues in 2012, 2011 and 2010, respectively)
    Oil & Gas (10.3%, 9.2% and 6.3% of consolidated revenues in 2012, 2011 and 2010, respectively)
    Energy Management (5.0%, 4.4% and 3.5% of consolidated revenues in 2012, 2011 and 2010, respectively)
    Aviation (13.6%, 12.8% and 11.8% of consolidated revenues in 2012, 2011 and 2010, respectively)
    Healthcare (12.4%, 12.3% and 11.3% of consolidated revenues in 2012, 2011 and 2010, respectively)
    Transportation (3.8%, 3.3% and 2.3% of consolidated revenues in 2012, 2011 and 2010, respectively)
    Home & Business Solutions (5.4%, 5.2% and 5.3% of consolidated revenues in 2012, 2011 and 2010, respectively)
    GE Capital (31.2%, 33.3% and 33.3% of consolidated revenues in 2012, 2011 and 2010, respectively)


    Industrial Performance: (Positioned to sustain double-digit growth)
    1) Big backlog of equipment & services
    2) Pipeline of NPI & new service offerings
    3) Positioned in growth markets
    4) Expanding margins, continue the momentum into 2013


    GE supply chain-
    1) Ethical Supply Chain Program:
    2) Supplier Resource Efficiency
    3) Metric
    4) Capacity-Building

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  3. Industry overlook:
    GE operates as a technology and financial services company.

    Business Segment:2012
    Energy Infrastructure 34.23%
    Power & water 19.01% 10 % growth compared 2011, driven by an increase in sales of equipment at wind
    Oil & Gas 10.24% 12% growth driven by acquisitions and increase in both equipment and service
    Energy Management 4.98% 15.42% growth

    Aviation 13.43% 6.02%growth driven by increased commercial and military engine sales

    Healthcare 12.29% 1.14%growth by higher equipment sales, is attributable to international markets with the strongest growth in emerging markets.

    Transportation 3.77% 14.8% growth driven by an increase in U.S. locomotive sales and growth in our global mining equipment business. The increase in service revenue was due to higher overhauls and increased service productivity.

    Home & Business Solutions 5.35% 3.56% growth increased primarily as a result of higher prices ($0.3 billion) principally at Appliances

    GE Capital 30.93% -6.17% growth

    GE Capital is most interesting part I really want to mention. After Financial crisis, since 2009 GE capital is shrinking by their revenue decrease almost 4-5% every year. But their profit is increasing 111% in 2011 2011 and 12.4%. The biggest reason why this is happen that I found that in 2010 and 2011 the real Estate profit is both negative which are -1741, 2010 , -928 2011. But in 2012 their real Estate is positive 803

    Another aspect GE capital commercial lending and Leasing is shrinking. The asset is decreasing 6%


    Question: The Real Estate asset is shirking from 61 billion to 46 billion, why this part still makes money in 2012?

    Positive:
    1. the announced split-off transaction strategy to efficiently and quickly retire hundreds of millions of GE shares
    2. Cost savings are ramping higher and are now expected to drive industrial SG&A to sales.

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  4. -Segments based on 2012 data
    Oil & gas: 10% of total revenues, 8% of total operating profits
    Power & water: 19%, 24%
    Aviation: 14%, 16%
    Healthcare: 12%, 13%
    Energy management: 5%, 0.6%
    Transportation: 4%, 5%
    Home & Business Solutions: 5%, 1.4%
    GE capital: 31%, 32%

    -Geographic revenues in 2012
    U.S.: 48%
    Europe: 18%
    Pacific Basin 17%
    Americas 9%
    Middle East and Africa 8%

    -GE capital:
    Commercial landing and leasing (CLL): 37% of GE capital revenue, 33% of GE capital profits
    Consumer: 34%, 44%
    Real Estate: 8%, 11%
    Energy financial service: 3%, 6%
    CE capital aviation service: 11%, 16%

    -Q3 2013
    Industrial segment profit +11% compared to last year
    GE Capital earnings $1.9B, +13%
    Operating profits margin: 15.4% from 14.2% compared to last year.

    -Five points that drive the future:
    1. Rebuild GE as an Infrastructure Leader with a smaller financial services division.
    GE capital assets: $600B in 2008 ->$500 B in 2012--> $300–$400 billion in the future
    -In 2012, Profit at GE’s industrial divisions is account for 55% of profits. That number will about 65% by 2015.
    2.Allocate capital in a balanced and disciplined way
    -The top priority remains growing the dividend
    -Since 2000, GE have paid out $106 billion in dividends. In 2011, the amount GE paid out in dividends is $6.45 billion, returning 17 million to shareholders every day.
    3. Significantly increased investment on R&D and global expansion. GE is making a major investment in software and analytics.
    -Over the past decade, annual R&D investment doubled, increasing $2–$3 billion to 5%–6% of revenue.
    4. Built deep customer relationships based on an outcomes-oriented model.
    -Grown service revenue from $21 billion to $43 billion over the past decade
    5. Lead in the big productivity drivers of this era.
    -Lead in the shale
 gas revolution

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  5. General Electric Co.

    Business Structure
    • Industrial Total ;69.1%;15.1%(margin)
    • GE Capital; 30.9%;16.1%(margin)
    • Power & Water (control systems) ;19.0%;19.2% (margin)
    • Oil & Gas (drilling devices);10.2%;12.6% (margin)
    • Energy Management (lighting and power devices) ;5.0%;1.8% (margin)
    • Aviation (aviation engines) ;13.4%;18.7%(margin)
    • Healthcare (healthcare equipment) ;12.3%;16.0%(margin)
    • Transportation (railroad, mining, drilling and marine); 3.8%;18.4%(margin)
    • Home & Business Solutions (appliances); 5.4% ;3.9%(margin)
    • Product Services (contractual service agreements) ; 42%;29% (margin)
    • Total ;15.4%(margin)

    GE Capital
    • Commercial Lending and Leasing 39.3% -7.3% (growth) 14.4%(margin)
    • Consumer 36.3% -7.1% (growth) 20.8%(margin)
    • Real Estate 8.5% -1.6% (growth) 22.0%(margin)
    • Energy Financial Services 3.5% 23.3% (growth) 28.6%(margin)
    • GE Capital Aviation Services (GECAS) 12.3% 0.6% (growth) 23.0%(margin)
    • Previously generated 55% revenues; 2Q 2013 generates 30% of revenues
    • Shrunk its Capital Corporation Unit / using the proceeds to support infrastructure business

    Industrial Internet
    • Announced partnerships with AT&T (T), Cisco (CSCO) and Intel (INTC) / allow customers to analyze data and predict outcomes.
    • Leading company / Launched software platform “Predix” / industrial-scale analytics for operations optimization.
    • Industrial Internet value / increased equipment efficiency/cost savings/cost avoidance
    • Market volume could exceed $500bn by 2020, up from just over $20bn today

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  6. CORPORATE OVERVIEW
    - General Electric, a multi-industry, healry-equipment and financing giant
    - Sales by region in 2012: U.S. 48%, Europe l8%, Pacific Basin 17o/o, Americas 9% Middle East and AfricaSoh.
    - Revenue 147 Billion, Net earnings 13.6 Billion 2012
    GE Business through eight segments: (Revenues and operating profit 2012)
    1) Industrial Segment 102.8 billion (68.8%)
    Energy Infrastructure (34%o) (Core Business)
    -Power &Water (power generation equipment) 28b (9o/o),5.4b (24%)
    -Oil & Gas (oil drilling and production systems and equipment) 15b (10%), 1.9 b (8%)
    -Energy Management (electrical distribution and control products) 7.4b(5%),0.13b (1%)
    Aviation (et engines and related services) 20b (14%), 3.7b (16%)
    Healthcare (medical equipment) I 8b(14%), 2.9b(16%)
    Transportation, (drive technology to the mining" transit, and marine industries) 5.6b(14%), 1.03b(16%)
    Home & Business Solutions (consumer appliances) 7.9b (5%),0.311b(l%)
    2) GE Capital (GE's finance units) 46b(31%),7 .4b (32o/o)
    GE Capital: (Revenues and operating profit 2012)
    Commercial Lending &Leasing: (equipment leases & loans, leveraged loans, and factoring services ) l6b (40%1, 2.4 b (30o/i)
    Real Estate (equity investmeht and commercial real estate) 3.6 b (8.5%) 0.803 (10%)
    Aviation Services (GECAS) (commercial aircraft leasing and finance) 5.3 b (12.3o/o), 1.2b 05%)
    Energy Financial Services (commercial financing to energy and water industries) l.5b (3.5%), 0.432b (5%)
    Consumer Finance 15.6b (36%) 3.2b (40%)
    --U.S. Retail Consumer Finance (RCF) private label credit cards,
    Sales Finance personal loans, bankcards, auto loans and leases
    ---Non U.S. consumer mortgages and global banking
    Financial Analysis:
    - We have consolidated cash and equivalclts ol $77 .4 billion at Decembcr 31, 2012
    - GE cash and equivalents nere $15.5 billion at December 31,2012, comparcd u'ith $8.4 billion at December' 3i, 201 I
    - Net profit margin: GE 13.52% (2012) 14.89o/o (2011) - Industry, Industrials 8.46%o9.61%o; low operating and financing cost
    - ROE: GE 11.09%, 12.15%- Industry, Industrials 17.58%o,20.20o/o
    - Total Debt/ Total Equity 300.74l Current Ratio 2.67
    - On April 3, 2012, Moody's doungraded dre seniol unsecurcd debt rating of Gll by one trotch liom Aa2 L<r Aa3 and the senior
    unsecured debt r:ating of GITCC by trvo notches liorn Aa2 to A1
    - lncome from continuing operations declinedS.6Yo and EPS declined 8.87o over last five years (comparing 2012 to 2008 data)
    - GE cut its quarterly dividend in the second halfof2009 to $0.10 a share, from $0.31, to preserve cash. Since then, GE has raised its
    dividend five times, to a current quarterly rate of $0. 1 9 per share.

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  7. GE Overview:
    - Eight business segments.
    - Total revenue in 2012: $145 b,
    • Industrial segment revenues totaled 100 b, energy infrastructure $49 b -34% of 2012 total revenue; industrial segment organic revenue growth 8%, earnings growth 10%
    • GE Capital 45 b- 31% of 2012 total revenue, revenues decreased 6% and net earnings increased 12%

    Business Segments Overview:
    - Power & Water (18% and 27% of consolidated three-year revenues and total segment profit, respectively)
    - Oil & Gas (9% and 8%)
    - Energy Management (4% and 1%)
    - Aviation (13% and 17%);
    - Healthcare (12% and 14%);
    - Transportation (3% and 3%)
    - Home & Business Solutions (5% and 2% )
    - GE Capital (33% and 28%)

    GE Capital business:
    - Commercial Lending and Leasing (CLL): 37% of segment revenue and 33% of segment profit;
    - Consumer: 34% of segment revenue & 44% of segment profit;
    - Real estate: 8% of segment revenue &11% of segment profit;
    - Energy Financial Services: 3% of segment revenue & 6% of segment profit;
    - GE Capital Aviation Services (GECAS): 11% of segment revenue & 16% of segment profit;
    Of all the five businesses, only energy financial services and GECAS have an increase in revenue; Real estate and GECAS have an increase in profit

    Financial Overview last quarter:
    - Revenue declined 1% year over year to $35.7 billion. Overall Industrial segment revenue increased 2% to $25.3 billion, GE Capital revenue declined 5% year over year to $10.7 billion.
    - Operating margin in the Industrial segment increased 120 basis points with cost productivity.
    - Total segment profit for Q3 increased 12% year over year
    - Cash generated from operating activities for the reported quarter was $7.8 billion. Cash and marketable securities ended Q3 $130.4b

    Positives:
    - GE financial division was squeezed during the 2008 financial crisis ; Spin-off: more focused on core industrial businesses
    - Competitive edge over peers, especially aviation segment. GE's various industrial segments had a total order backlog of about $229B as of Q3 2013

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