1/8/2011
I was given this suggestion as a growth & dividend option, something you rarely find together. Hillenbrand until April of 2010 simply was a casket & funeral services company. It was pitched to me as a stable and steady earner with a good dividend (perhaps like a Coke) but also with excellent global growth potential following it's acquisition of K-Tron which produces industrial equipment.
Hillenbrand, Inc. is actually a holding company of its wholly owned subsidiaries, Batesville Services, Inc. and K-Tron International, Inc. (K-Tron) and their respective wholly owned subsidiaries. For more than 100 years Batesville has been designing, manufacturing, distributing and selling funeral service products to licensed funeral homes. K-Tron designs, produces, markets, and services material handling equipment and systems, it's equipment is used in the plastics, food, chemical, pharmaceutical, power generation, coal mining, pulp and paper, wood and forest products, and biomass energy generation industries. Primarily through sizing equipment (which reduces objects to smaller sizes in the a fore mentioned industries), and conveying equipment (like conveyor belts, suction tubes, etc, to move the products along in the mentioned industries).
Price at time of evaluation: 21.69
Valuation Ratios
Price/Earnings (TTM) . . . . . 14.54x
Price/Sales (TTM) . . . . . . . 1.8x
Price/Book (MRQ) . . . . . . . 3.63x
Price/Cash Flow (TTM) . . . . 11.21x
Held By Institutions (MRQ) 71.96%
Benjamim . . . . . 3/5
Thomas . . . . . 3/5: 10moAv 21.65
Marcel . . . . . . 2.8 from 1.5: consider covering shorts, consider trade, watch for resistance at 22
Saxon . . . . . . . 3.4/5
Vicker's . . . . . . . . Lots of insider buys mostly direct buys, fewer options and non open market
What I most like about Hillenbrand is that Kenneth Camp (CEO) has stated that diversification was the right move for the company and I hope with the two companies consistent cash flows they will continue to grow the K-Tron arm and consider adding other diverse industries to the company with similar positive cash flows and growth potential.
K-Tron is really what I like here which is itself somewhat diversified in the industries it sells to despite essentially making the same & similar products for all of them. Through feeders (which take an item such as powder, sludge, goo, etc) and feed them into another process in a controlled manner. High speed, volume, and long distance pneumatic conveyance for transferring industrial items from storage, near transport, or logistics. K-Tron has recently expanded into China, Jiangsu province (60 miles from Shanghai), by acquiring a company that did what it does but specializing in the plastics compounding and injection molding process. I feel that this gives them the opportunity to bring over equipment from other wholly owned subsidiaries, Pennsylvania Crusher Corporation & Gundlach Equipment corp, which produce sizing equipment for Coal power plants & Coal mining respectively. Based on this, I would've bough K-Tron too given the rate at which China is expanding Coal consumption & production.
However K-Tron will only represent 25% of Hillenbrand's revenue, the rest comes from funeral products, mostly caskets which it can produce within 24 hours and ship to the ordering funeral home, giving it a significant competitive advantage. Clearly illustrated in Batesville's 50% share of the North American Casket Market (a $1.3 billion/yr industry), however caskets have been on the decline. Recently Urns have reached 30% market share, and while Hillenbrand makes those as well, their manufacture is less involved and the margins lest significant. Not to mention deaths have gone down due to the gap in the birth rate between WWI & the baby boomers, the death rate will start to pick up again in about 5 years with a peak around 2034-2044 while it will generally be nowhere close to previous levels I expect for at least a few years it'll reach 9+deaths per 1000, countered by the fact that I expect the casket market to continually be on the decline. So I really like Kenneth Camp's decision to expand the business, since Batesvill's is clearly dieing. . . however Camp is 67 and has been at the company for 30 years. Most of the senior executive staff is quite aged, from 65 to 75 but well experienced as well. I believe that Joe A. Raver would be next to take over as CEO of Hillenbrand (currently he's Senior VP of it and COO of Batesville) he's worked at Hill-rom as a GM as well as VP of Strategy and at only 44 might not make a bad CEO though I'm sure Cynthia Lucchese is also in the running there (50).
Death isn't going away, as I'm sure all the executives know, and they're taking measures to ensure they will continue to profit from it. But the profits are going to continue to decline and to compete they're going to have to expand to places other than North America, I hope they reduce their dependence on death and expand their industrial lines through K-Tron. I'm not sure this is what they'll do, but they seem to be leaning toward diversification at the very least. In fact, I think the executives saw the Batesville company circling the drain and bought K-Tron as a means to stay relevant. If that's the case, then I'm very encouraged about their future. Batesville's covered sectors are totally unsexy, but should provide the revenue stream to cover the debt of the purchase of K-Tron as well as help to expedite it's expansion which is where I see Hillenbrand's real future.
The company also has a track record of rewarding it's executives for long term growth of investor capital, which is good for anyone who holds stock. . . like them, who continually pick up more stock on their own dime, which is also good.
With excellent operating income and yield (especially relative to size), no real stock price growth prospects for a while, but expansion prospects not far a field I hate them for less than 2 years and will probably love them for 5 to 10 years or more. With that in mind if you allocated a total of 2.5% of your portfolio toward this stock with buy prices of: under $22 (which is probably close to a fair value), ~$19.50, ~$18.00 and plan to hold it for at least 5 or more years you should do pretty well. In the near term I expect the stock to dip due to increased debt, decreased earnings per share, and the relative value of it's cash cow (death) declining. Personally to protect myself from a bit of uncertainty, I'd like to pick it up at around $20.50, so I might pick up a 0.5% allocation around $21.00, 0.5% to 1% at $20 and 1% at $18.00 to $19.50.
This one should be a pretty steady earner with good growth prospects and is currently undervalued (but likely to remain so for a while). It's not the best you could do, it's not meant to be, but it's another way to do it.
I was given this suggestion as a growth & dividend option, something you rarely find together. Hillenbrand until April of 2010 simply was a casket & funeral services company. It was pitched to me as a stable and steady earner with a good dividend (perhaps like a Coke) but also with excellent global growth potential following it's acquisition of K-Tron which produces industrial equipment.
Hillenbrand, Inc. is actually a holding company of its wholly owned subsidiaries, Batesville Services, Inc. and K-Tron International, Inc. (K-Tron) and their respective wholly owned subsidiaries. For more than 100 years Batesville has been designing, manufacturing, distributing and selling funeral service products to licensed funeral homes. K-Tron designs, produces, markets, and services material handling equipment and systems, it's equipment is used in the plastics, food, chemical, pharmaceutical, power generation, coal mining, pulp and paper, wood and forest products, and biomass energy generation industries. Primarily through sizing equipment (which reduces objects to smaller sizes in the a fore mentioned industries), and conveying equipment (like conveyor belts, suction tubes, etc, to move the products along in the mentioned industries).
Price at time of evaluation: 21.69
Valuation Ratios
Price/Earnings (TTM) . . . . . 14.54x
Price/Sales (TTM) . . . . . . . 1.8x
Price/Book (MRQ) . . . . . . . 3.63x
Price/Cash Flow (TTM) . . . . 11.21x
Held By Institutions (MRQ) 71.96%
Benjamim . . . . . 3/5
Thomas . . . . . 3/5: 10moAv 21.65
Marcel . . . . . . 2.8 from 1.5: consider covering shorts, consider trade, watch for resistance at 22
Saxon . . . . . . . 3.4/5
Vicker's . . . . . . . . Lots of insider buys mostly direct buys, fewer options and non open market
What I most like about Hillenbrand is that Kenneth Camp (CEO) has stated that diversification was the right move for the company and I hope with the two companies consistent cash flows they will continue to grow the K-Tron arm and consider adding other diverse industries to the company with similar positive cash flows and growth potential.
K-Tron is really what I like here which is itself somewhat diversified in the industries it sells to despite essentially making the same & similar products for all of them. Through feeders (which take an item such as powder, sludge, goo, etc) and feed them into another process in a controlled manner. High speed, volume, and long distance pneumatic conveyance for transferring industrial items from storage, near transport, or logistics. K-Tron has recently expanded into China, Jiangsu province (60 miles from Shanghai), by acquiring a company that did what it does but specializing in the plastics compounding and injection molding process. I feel that this gives them the opportunity to bring over equipment from other wholly owned subsidiaries, Pennsylvania Crusher Corporation & Gundlach Equipment corp, which produce sizing equipment for Coal power plants & Coal mining respectively. Based on this, I would've bough K-Tron too given the rate at which China is expanding Coal consumption & production.
However K-Tron will only represent 25% of Hillenbrand's revenue, the rest comes from funeral products, mostly caskets which it can produce within 24 hours and ship to the ordering funeral home, giving it a significant competitive advantage. Clearly illustrated in Batesville's 50% share of the North American Casket Market (a $1.3 billion/yr industry), however caskets have been on the decline. Recently Urns have reached 30% market share, and while Hillenbrand makes those as well, their manufacture is less involved and the margins lest significant. Not to mention deaths have gone down due to the gap in the birth rate between WWI & the baby boomers, the death rate will start to pick up again in about 5 years with a peak around 2034-2044 while it will generally be nowhere close to previous levels I expect for at least a few years it'll reach 9+deaths per 1000, countered by the fact that I expect the casket market to continually be on the decline. So I really like Kenneth Camp's decision to expand the business, since Batesvill's is clearly dieing. . . however Camp is 67 and has been at the company for 30 years. Most of the senior executive staff is quite aged, from 65 to 75 but well experienced as well. I believe that Joe A. Raver would be next to take over as CEO of Hillenbrand (currently he's Senior VP of it and COO of Batesville) he's worked at Hill-rom as a GM as well as VP of Strategy and at only 44 might not make a bad CEO though I'm sure Cynthia Lucchese is also in the running there (50).
Death isn't going away, as I'm sure all the executives know, and they're taking measures to ensure they will continue to profit from it. But the profits are going to continue to decline and to compete they're going to have to expand to places other than North America, I hope they reduce their dependence on death and expand their industrial lines through K-Tron. I'm not sure this is what they'll do, but they seem to be leaning toward diversification at the very least. In fact, I think the executives saw the Batesville company circling the drain and bought K-Tron as a means to stay relevant. If that's the case, then I'm very encouraged about their future. Batesville's covered sectors are totally unsexy, but should provide the revenue stream to cover the debt of the purchase of K-Tron as well as help to expedite it's expansion which is where I see Hillenbrand's real future.
The company also has a track record of rewarding it's executives for long term growth of investor capital, which is good for anyone who holds stock. . . like them, who continually pick up more stock on their own dime, which is also good.
With excellent operating income and yield (especially relative to size), no real stock price growth prospects for a while, but expansion prospects not far a field I hate them for less than 2 years and will probably love them for 5 to 10 years or more. With that in mind if you allocated a total of 2.5% of your portfolio toward this stock with buy prices of: under $22 (which is probably close to a fair value), ~$19.50, ~$18.00 and plan to hold it for at least 5 or more years you should do pretty well. In the near term I expect the stock to dip due to increased debt, decreased earnings per share, and the relative value of it's cash cow (death) declining. Personally to protect myself from a bit of uncertainty, I'd like to pick it up at around $20.50, so I might pick up a 0.5% allocation around $21.00, 0.5% to 1% at $20 and 1% at $18.00 to $19.50.
This one should be a pretty steady earner with good growth prospects and is currently undervalued (but likely to remain so for a while). It's not the best you could do, it's not meant to be, but it's another way to do it.