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POOL CORPORATION (NASDAQ: POOL)

POOL CORPORATION (NASDAQ: POOL). Rakesh Venkatayogi Guanrong (Rachel) Fu Presented: April 24, 2014. agenda. Business Overview Macro-Economic & Industry Overview Technical Analysis Financial Ratios Valuation Recommendation. Company business overview. Manufacturers.

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POOL CORPORATION (NASDAQ: POOL)

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  1. POOL CORPORATION (NASDAQ: POOL) Rakesh Venkatayogi Guanrong (Rachel) Fu Presented: April 24, 2014

  2. agenda Business Overview Macro-Economic & Industry Overview Technical Analysis Financial Ratios Valuation Recommendation

  3. Company business overview • Manufacturers • Remodelers and builders • contractors • Incorporated in 1993, in the States of Delaware • 3600 employees • Market Cap : $2.7bn • 321 Sales Centers in North America, South America and Europe • Industry Classification: Distributor • Business : • Pool: Distributes swimming pool supplies, equipment and related leisure products • Irrigation and Landscape: Distributes irrigation and landscape products Source: POOL 10-K Report

  4. Product Overview • Pool Maintenance Products: • Chemicals • Supplies • Pool accessories • Pool Replacement /Refurbishment Products: • Cleaners • Filters • Heaters & Pumps • Lights Offers more than 160,000 national brand and Pool Corp branded products to 80,000 customers • Pool Construction Products: • Concrete • Plumbing • Electrical components • Pool decking materials • Irrigation and Landscape: • Irrigation system components • Lawn care equipment and supplies Source: POOL 10-K Report

  5. Sales Network • SCP / Superior (253 Centers): • Distributes swimming pool supplies, equipment and related leisure products • Horizon (59): Distributes irrigation and landscape products Source: Pool Investor Presentation

  6. Financial Overview Net Sales Minimum Rent Expense Schedule Included in SG&A • Leases 308 sales centers of 312 • Majority of the leases have 3 to 7 year terms • Consistent growth of sales • Improving operating margins Source: POOL 10-K Report

  7. Management Guidance Source: Pool Investor Presentation

  8. MACRO-ECONOMIC & INDUSTRY OVERVIEW

  9. External Factors Forecast Value for 2018: $37,249 2013-2018 Compound Growth: 2.5% Housing Starts • Housing Starts: • Demand for swimming pool equipment partly relates to the number of swimming pools installed • Increasing trend is a potential opportunity for the industry • Per Capita Spending: • Greater number of people returning to work and improved housing will mean consumers are willing to spend on purchases delayed due to recession • So rising per capita disposable income is positively correlated with higher demand for swimming pool products Source: IBIS World Pool Equipment Stores Industry Report

  10. Industry Forecast • US new pool construction poised to recover to “normalized” levels through 2020 CAGR ‘14-’20: ~13% Source: Pool Investor Presentation

  11. Industry Forecast • Demand for pool equipment and accessories expected to increase because of increasing demand for construction and refurbishment Source: Pool Investor Presentation and IBIS World Pool Equipment Stores Industry Report

  12. Industry Life Cycle Decline Maturity Introduction Growth Total Industry Revenue Time • Early Maturity • Industry value added is experiencing moderate growth • a high degree of public acceptance of swimming pools and related equipment • stable demand for industry products

  13. Porter’s Five forces for POOL

  14. Largest distributor of swimming pool, one of the three largest distributors of irrigation • Serve roughly 80,000 customers, none of which account for more than 1% of our sales • Few threats from substitutes • Stable demand for products • Highly related to the swimming pool market • Have three big suppliers • Low entry barriers • Competition from local small companies • Expansion into the international market, such as Europe and South America • Economy is recovering • Increasing demands for new houses • Expansion into irrigation and landscape • New competitors • Possible bad weather condition • Compliance with environmental, health, transportation and safety regulations

  15. Financials

  16. Technical Analysis Source: finance.yahoo.com

  17. Financial Analysis –Ratios Source: POOL 10K_2013

  18. Financial Analysis –Ratios Source: POOL 10K_2013

  19. Industry Comparables Source: Capital IQ and POOL 10K_2013

  20. Comparable Valuation

  21. Cost to capital Source: Yahoo Finance and POOL 10K 2013

  22. Forecast Assumptions Source: POOL 10K 2013

  23. Discounted Cash FLOW Valuation

  24. Implied Share Price and Drivers Key Drivers • Strong Fundamentals • Market leader • Positive external drivers • Expansion into irrigation and landscape

  25. Recommendation: Watch List

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