UHAL

AMERCOAn 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, doesnt 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-Hauls 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 isnt 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 customers 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 dont 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