UHAL - Sohn Conference Foundation

UHAL
AMERCO—An Undervalued $7Billion Company
Hidden in Plain Sight
Long Investment Idea
Price Target: $502/share
Alexandra Esparza
MBA Candidate at the Yale School of Management,
May 4, 2016
Company Background
•  Staying Power: Founded by Schoen family in 1945
•  Largest DIY mover in the US, with ~ 50% market share; one of the largest
storage players nationally as well
•  High brand recognition; name synonymous with moving
•  Focused on improving core DIY business and track record of execution
Business Segments
•  Moving and Storage: comprised of AMERCO, U-Haul, and Real
Estate and the subsidiaries of U- Haul and Real Estate
•  Property and Casualty Insurance/ Repwest
•  Life Insurance, comprised of Oxford and its subsidiaries
Key Metrics
•  Market Cap: $6.90B •  P/E ~14x on Consensus Fiscal Year 16 •  Generated $22.74 in the 12 months ending 12/31/2015, trailing PE of 15.61 •  LTM EV/EBITDA of 0.24 •  Thinly traded (average 3 month volume is 60k shares per day) *Fiscal year ends 3/31/16 , FY 15 denotes full year ending on 12/31/15 Based on Closing Values as of 5/02/2016 Value Creation, but Under the Radar
•  Virtually uncovered by the Street – only one sell-side analyst covers
•  Orphaned company, doesn’t fall into a distinct coverage bucket
•  Thin volumes and limited institutional interest
•  Market sees a company in the unattractive “Moving Industry” – in reality it is a differentiated DIY company with
other optionality attracting a different customer
•  3 year CAGR of 7%
•  Earnings in 9 months ended 12/31/15 up 25.6% y/y
•  Margin Expansion since 2010 and ongoing: EBITDA Margin +33% in 2015, +36% in LTM; Profit
margin ~14% in LTM
•  Founding family has ~50% stake, speaks to skin in the game, have been able to execute
•  Relatively clean balance sheet, and a special dividend every year since 2011
The Best at What They Do
Source:AMERCO
- 
The most storage coverage in NA, 50% market
share in otherwise fragmented DIY moving
space
- 
Competitive moat from largest network, bestof-breed product, entrenched brand awareness
and goodwill.
- 
Ryder and Penske now focused on B2B space
not B2B, U-Haul continues to dominate
- 
High barriers to entry given real estate portfolio
and largest fleet of trucks of any mover
- 
Not just another moving company : owns the
DIY ecosystem, lots of profitable add-ons
- 
Innovating on secular trends in the moving
industry (i.e. Pick-up U-Boxes)
Millennial Engagement Drives Growth
•  Millennials are now the largest US demographic segment, with ~75mm, and a median age of 25
•  Millennials increasingly moving in cities; evidence that they delayed marriage but may follow Gen Z
to suburbs, potential great market for DIY movers that is underappreciated. Set to capture any
uptick in family formation or moving in this demographic as there is pessimism around this group.
•  High affinity for DIY, and can be expected to prefer U-Haul’s lower prices relative to full service
movers
•  Evidence suggests this generation is more willing to take on DIY projects vs. previous generations
•  DIY makes sense for anyone with fewer positions, smaller apartments, no need for a full service mover
•  U-Haul especially practical for short-distance moves in in urban environments, where millennials
tend to live.
•  Way for the consumer to save money, but brand isn’t just a “low-end” solution
•  Ongoing negative customer perception of big moving companies/brokers/carriers, strong brand is
reassuring to this demographic – first in Google search for moving truck
#UHAULFAMOUS: >7,200 Posts
U-Haul Positioned to Take Advantage
of Demographic Shifts
•  Building out tech presence: app UX is strong and easy to use
•  Implemented marketplace for moving helpers, with room for tech integration
•  Can continue to consolidate fragmented DIY space which is appropriate for this large demographic
•  Seamless moving experience (cited as one of the most stressful life experiences)
•  Storage units delivered to customer’s door
•  Scheduling via app
•  All supplies and add-ons available at U-Haul point of sale
•  Limited opportunity for “Uberization” of this need in sharing economy:
•  I don’t have a truck, a hitch and a storage box lying around and neither do any of my friends, company working on having
a best of breed consumer interface, fleet utilization tech pretty commoditized
•  Engaging millennial users with Instagram truck graphics campaign; improves the user experience and promotes
brand awareness in a very effective and clever way UI is Easy to Use and Differentiating
High Brand Awareness is Extremely
Valuable
•  Convenience:
•  Consumers are generally ignorant about the moving industry, too many options, lots of
scams, unwilling to do research
•  Preference for known, safe brand
•  Moving is a huge pain-point, and the most seamless experience wins
•  Point of Sale supply purchases; one-stop experience
•  Pricing:
•  Packing supplies are cheaper vs. competitors, and experience significantly cheaper vs. fullservice movers
•  Still, U-Haul can afford a high markup on supplies
•  Real Competitive Differentiation:
•  Penske and Ryder mostly focuses on business rentals; U-Haul is the only large player in
the DIY space.
•  Storage centers also act as rental centers/creates an integrated solution, only full supply
chain solution for the consumer
Other Businesses
•  Oxford Life Insurance – caters to aging boomer demographic
•  AMERCO Real Estate Company – manages the storage units
•  Repwest - Property and Casualty Insurance– serves moving
consumers
•  Strong cross-selling platform at point-of-sale
Revenue Growth By Segment
Self Moving Equipment Rentals Self-­‐Storage Revenues 2012 8.48% 11.33% 2013 5.32% 13.61% 2014 10.63% 19.08% Self-­‐Moving and Self-­‐Storage Products Property Management Fees Life Insurance Property and Casualty Insurance Investment and Interest Income 4.03% 5.12% 34.09% 6.28% 17.22% 3.40% 4.78% -­‐35.83% 5.24% 12.71% 5.91% 0.47% -­‐11.34% 19.54% -­‐4.00% Other Revenue Totals 41.49% 11.58% 24.22% 1.85% 64.83% 10.81% 2015 9.77% 16.14% 4.27% 3.46% -­‐1.15% 13.16% 6.45% -­‐0.37% 8.44% Valuation and Upside
•  Limited direct comps, but industry analysis suggests opportunity for multiple
expansion by 4+ turns
•  Rental providers such as MINI trading at ~21x FY16 estimates
•  Storage peers such as CUBE trading at 23.34x EV/EBITDA estimates
•  Current discount valuation:
•  14x FY16 street P/E estimates
•  12x FY17* estimates of $29.55/share
•  17x on FY17 yields price target of $502/share, plus potential for other
corporate actions
*Ending 3/15/17
Catalysts
•  Additional Wall Street coverage, re-rating, greater visibility of the
company
•  Potential opportunity to spin-off real estate assets or insurance
businesses
•  Spin-real estate into REIT, but maintain operating benefits (potentially
analogous to recent DRI/FCPT spin)
•  Uptick in dynamism and increased moving activity in the US and
Canada
Risks
•  Slowdown in moving or homebuilding generally
•  Americans overall may be moving for jobs less, and Millennials
may not ultimately move out of cities as they form households
•  Disruptive tech-driven innovation in the logistics space by
competitors
•  High concentration of family ownership and thin volume