Insituform Technologies, Inc.

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Insituform Technologies, Inc. (INSU)
Current Price 18.75 as of 12/05/2008
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• Insituform Company Overview
• Through the use of trenchless technology the
  company provides rehabilitation, replacement,
  maintenance, and installation services for water
  and waste-water systems.
• Primary customers are municipalities, but the
  company also serves industrial companies, oil and
  gas companies, and federal governments.
• International operations accounted for 34 of
  revenue in FY2007.

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• Investment Thesis
• We recommend a BUY for Insituform based on the
  following
• Piping systems are built to last 50-75 years and
  with 30-40 of US pipes over 50 years old, a
  major water based infrastructure spending spree
  is inevitable.
• Fiscally, for municipalities, it makes more
  sense to employ the use of trenchless piping
  technology rather than demolishing roads and
  excavating existing pipes.
• There is an inverse correlation with population
  growth and water resources. Therefore, water
  transportation efficiency is vital. In terms of
  cost and supply, municipalities cannot afford to
  be inefficient.

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• Investment Thesis (continued)
• We recommend a BUY for Insituform based on the
  following
• Insituform is the market leader and the majority
  of their competitors are smaller regional
  companies. Given their large pool of resources,
  we expect the company to continue to employ new
  technology-based water system solutions.
• Insituforms capital structure weighs heavily
  towards equity. Their outstanding debt isnt due
  until 2013. Refinancing and default risk isnt
  an issue.
• A Democrat majority is more likely to pass a
  large infrastructure spending bill. Also,
  President-Elect Obama has mentioned his desire to
  increase infrastructure spending.

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• Industry Strengths
• Water Sector, 3rd largest area of governmental
  expenditure
• CIPP technology rehabilitates pipes with
  virtually no digging
• Water infrastructure is a lifeline for health
  and prosperity in communities
• New CEO, J. Joseph Burgess, and management
  reorganization
• Recent Contracts India gt 35 million
• Hong Kong gt 13 million
• United Kingdom gt 15 million

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• Industry Opportunities
• 1.5 million miles of water and waste-water pipes
  are passed their useful lives
• EPA reported 350-500 million needed from
  2000-2019 to meet clean water requirements
• 2 Billion in trenchless projects over the next
  5
• years in the Asia-Pacific region
• Obamas plan to create 2.5 million jobs through
• mainly infrastructure
• American Society of Civil Engineers rate the
• Industrys current condition a D
• 2nd best positioned company to benefit from
  infrastructure spending

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• Bear
• Municipal Debt
• Exposure to Cost Underestimation
• Local and Private Competition
• Improvement of Profitability in U.S.

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Financial Data
Revenue Operating Margin
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• Market Performance
• Market Cap 530 million
• Total Enterprise Value 504 million
• EBITDA (2008E) 48 million
• P/E Ratio (ttm) 23.5
• Forward P/E (2009E) 11.4
• All direct competitors are small, privately
  held, regional companies.

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• Capital Structure
• 65 million LT Debt
• due 2013
• 1.5 million ST Debt
• 530 million in
• Total Equity

Weights Debt 11 Equity 89
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Everyday we bust up the street and excavate
several city lines. What we are doing
temporarily fixes the problem. I cant tell you
how many times we have had to dig up a different
section of the same spot a short-time later.
Band-aides arent the solution. The whole-system
needs to be overhauled. We have taken several
videos to City Hall. Fixing the underlining
problem is a must, but funding is the problem.

• Jim Danburry
• Assistant Director
• City of St. Joseph Sanitation Dept.

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• Fit In Portfolio
• Insituform strays away from energy, commodity,
  and consumer spending based companies.
• An investment would provide a student learning
  experience through government/private sector
  relationship and the infrastructure industry.
• Diversification through infrastructure sector.

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• Fit In Portfolio (Cont.)
• Insituform is headquartered in St. Louis.
  Therefore, we may have an opportunity to invite a
  company representative to class.
• In terms of market capitalization Insituform is
  fairly small, which may increase APMs access to
  company representatives.

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Insituform Technologies, Inc. http//www.youtube
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