Esparza Amerco Sohn

8/17/2019 Esparza Amerco Sohn

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UHAL

AMERCO— An Undervalued $7Billion CompHidden in Plain Sight

Long Investment IdeaPrice Target: $502/share

Alexandra EsparzaMBA Candidate at the Yale School of Management,May 4, 2016


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Company Background

• Staying Power: Founded by Schoen family in 1945

• Largest DIY mover in the US, with ~ 50% market share; one ostorage players nationally as well

• High brand recognition; name synonymous with moving

• Focused on improving core DIY business and track record of e


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Business Segments

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Moving and Storage: comprised of AMERCO, U-Haul, Estate and the subsidiaries of U- Haul and Real Estate

• Property and Casualty Insurance/ Repwest

• Life Insurance, comprised of Oxford and its subsidiarie


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Key Metrics

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Value Creation, but Under the Rad

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Virtually uncovered by the Street – only one sell-side analyst covers•

Orphaned company, doesn’t fall into a distinct coverage bucket

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Thin volumes and limited institutional interest• Market sees a company in the unattractive “Moving Industry” – in reality it is a differentiated DIY co

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 LTmargin ~14% in LTM

• Founding family has ~50% stake, speaks to skin in the game, have been able to exec

•

Relatively clean balance sheet, and a special dividend every year since 2011


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The Best at What They Do-

The most storage coverage share in otherwise fragmentspace

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Competitive moat from largeof-breed product, entrencheand goodwill.

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Ryder and Penske now focunot B2B, U-Haul continues t

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High barriers to entry given and largest fleet of trucks of

- Not just another moving comDIY ecosystem, lots of profit

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Innovating on secular trendsindustry (i.e. Pick-up U-Boxe

W8;#>%*Q!3X(Y


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Millennial Engagement Drives Gro•

Millennials are now the largest US demographic segment, with ~75mm, and a median

•

Millennials increasingly moving in cities; evidence that they delayed marriage but mayto suburbs, potential great market for DIY movers that is underappreciated. Set to cauptick in family formation or moving in this demographic as there is pessimism around

• High affinity for DIY, and can be expected to prefer U-Haul’s lower prices relative to fumovers

• Evidence suggests this generation is more willing to take on DIY projects vs. previous generation•

DIY makes sense for anyone with fewer positions, smaller apartments, no need for a full service m

•

U-Haul especially practical for short-distance moves in in urban environments, wheretend 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, stroreassuring to this demographic – first in Google search for moving truck


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#UHAULFAMOUS: >7,200 Posts


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U-Haul Positioned to Take Advantof Demographic Shifts

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Building out tech presence: app UX is strong and easy to use

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Implemented marketplace for moving helpers, with room for tech integration

• Can continue to consolidate fragmented DIY space which is appropriate for this large demograp

•

Seamless moving experience (cited as one of the most stressful life experiences)•

Storage units delivered to customer’s door

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Scheduling via app•

All supplies and add-ons available at U-Haul point of sale

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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 w

a best of breed consumer interface, fleet utilization tech pretty commoditized

• Engaging millennial users with Instagram truck graphics campaign; improves the user experiencbrand awareness in a very effective and clever way


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UI is Easy to Use and Differentiatin


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High Brand Awareness is ExtremeValuable

• Convenience:•

Consumers are generally ignorant about the moving industry, too many optionsscams, 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 che

service movers•

Still, U-Haul can afford a high markup on supplies

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Real Competitive Differentiation:•

Penske and Ryder mostly focuses on business rentals; U-Haul is the only largethe DIY space.

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Storage centers also act as rental centers/creates an integrated solution, only fchain solution for the consumer


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Other Businesses

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Oxford Life Insurance – caters to aging boomer demog

• AMERCO Real Estate Company – manages the storag

• Repwest - Property and Casualty Insurance– serves mconsumers

• Strong cross-selling platform at point-of-sale


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Valuation and Upside

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Limited direct comps, but industry analysis suggests opportunity for m

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 estimate

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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 ocorporate actions

*Ending 3/15/17


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Catalysts

• Additional Wall Street coverage, re-rating, greater visibilit

company

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Potential opportunity to spin-off real estate assets or insubusinesses

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Spin-real estate into REIT, but maintain operating benefits (poteanalogous to recent DRI/FCPT spin)

• Uptick in dynamism and increased moving activity in the Canada


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Risks

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Slowdown in moving or homebuilding generally

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Americans overall may be moving for jobs less, and Mimay not ultimately move out of cities as they form hous

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Disruptive tech-driven innovation in the logistics space competitors

• High concentration of family ownership and thin volume

Esparza Amerco Sohn

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