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-company opened a new factory in india

-It has also increased its ownership of an Indian subsidiary from 49% to 75%. The company is
called Triveni and is specializing in the hard metal machining of the areostructure and aero
engine components
-gellan the opportunity to expand and to further develop Triveni's capabilities and business processes to
support Magellan's customers in India

--This shows that megellan is taking part in diversifying its operations. In tmes lke today when
Europe is not doing too well this will diversify revenues and also potentially benefit from lower
labor etc
-The Q3 earings miss was mostly because of weakness in Europe (from Airbus slowing down
some of its production) the Long term production plans still stand tho.
-Recent contracts signed revenue will mostly come in Q2 2019 and after – Check which
contracts

Company Description
Competitive advantage : n 2018 the Corporation has committed to establishing a zero defect, 100%
schedule compliance culture.
Corporation supplies both the commercial and defence sectors of the Aerospace segment. In the commercial sector, the
Corporation is active in the large commercial jet, business jet, regional aircraft, and helicopter markets. On the defence
side, the Corporation provides parts and services for major military aircraft

that Magellan’s dedication to technological innovation combined with low cost sourcing from emerging markets will
position the Corporation to capture targeted complex assembly programs.

Trends: boeing and airbus and trying to squeeze suppliers and improving margins. Magellan
has done a good job of this

Investment Attributes
-Stable revenues: Has long term supply contracts with boeing, Lockheed martin and airbus.
Companies with solid balance sheet and strong brand recognition are likely to secure long-term
big contracts as OEMs are reducing the number of suppliers and moving towards those who are
able to share financial risks and have more capabilities. A strong U.S. economy and shrinking
used aircraft inventories is building optimism in the business jet market. A growing demand for
high-end jets is helping boost sales while light jet outlook looks to be on an upward trend.
Output in this segment for 2017 was the highest since 2010. Boeing and Airbus continue to fufil
record orders with increasing monthly build rates. According to industry experts the
unprecedented commercial jetliner production supercycle will continue through to the end of
the decade.
-Increased defense spending: The major trend is that Canadian defense spending is expected to
increase by $62 billion. Therefore we expected this trend to be a main advantage to the
company as currently 1/4th of its revenues comes from defense contracts. Us-Global defense
markets are growing. Forecast International quoted USAF officials as saying that large defense budgets are back and that
“we’ve returned to an era of great power competition” (in the world) which requires the U.S. to focus on readiness of the force.
The USAF budget requests are aimed at restoring fleets after years of fiscal uncertainty. The Fiscal Year 19 budget request is
6.6% higher than the Fiscal Year 18 budget. The USN is also requesting more as they are committed to sustaining the 4 th
generation fighters for aviation readiness. This will benefit F18 Super Hornets with a FY19 request for 110 more

-Strong Past performance: It has outperformed its competitors as far as net, operating and
gross margins are concerenec. the company has strong operating metrics; ROE 16% to the
industry average of 12.3% and ROA of 11.3% compared to the sector average of 6.1%.
The company has increased divdends year of year over the past 5 years and is currently paying
out 2.1% and we expect this trend to continue as the company will generate strong future cash
flows in the coming years from the expected increase in contracts.
-Dividend increases.

Valuation
Risks
-Forex: A significant portion of Magellan’s revenues are denominated in U.S. dollars (some in
GBP). While some expenses are also denominated in U.S. dollar/GBP, they are not enough to
offset the entire revenue exposure. Therefore, any depreciation in the Canadian dollar could lift
the company’s revenues, as well as its profitability,

-Control premium:
-aluminium and
-Vertical integration is a growing trend in the aerospace market as Boeing and Safran recently announced the forming of a joint
venture to design and manufacture auxiliary power units (APU’s). This is a significant supply chain disruptor within the APU
market, especially for suppliers such as UTAS and Honeywell. In 2017 Boeing also formed Boeing Avionics, in direct competition
to traditional avionics suppliers, Rockwell, Thales and General Electric.

-oil price: increased fuel prices cud cause the margins of aircraft companies to decrease thus dampening their capital
expenditure growth in funding new aircrafts.

Conclusion
Financial

-Revenues split roughly b/w Us, Can and Europe. Can and EU revenus down. US up. Gain in US
dollar caused some reduction in margin.
Effective income tax of 21.2%
-The Corporation reported its highest net income in the first quarter of 2017 mainly driven by
the recognition of the gain on the sale of the land and building of its Mississauga facility. In the
third quarter of 2017, the Corporation recorded a gain of $2.2 million on the disposition of an
investment property.
-prod facilities in Poland india EU and NA (Manitoba, Ohio, Quebec)
- they extended contract with boing worth upto 170 mil to supply crown modules
-Contract with airbus to manufacture exhaust systems for the a320 starts in 2022. With just
first 10 yrs of contract worth over 100 mil 2017 10k p4
-credit gfacility:

- further growth market. Opening up of the chinese civil helicopter market.

-Overall aerospace industry looks very attratvice to megelland considering its diverse capabilities. The
commercial are maitiaining record levels of production and defense markets are beginning to rebound.
The US defense spending is also set to increase with congress recently wanting to fund 90 new f-35 and
also for fleet modernization and repair.

-increased integration.- cud lead to possible reduction in outsourcing in the future.

\--Magellan announced a contract award from Public Services and Procurement Canada (“PSPC”) for
engine repair and overhaul and fleet management services on the F404 engine that powers Canada’s fleet of CF-188
Hornet aircraft. The contract commenced in January 2017 and work will be carried out until the terms expire at the end
of March 2021. A preliminary funding amount of $45 million where it will maitian the royal Canadian air force f404
engines