Presented By: Adam Hall,

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• Presented By Adam Hall,
• Alex Harbin, Dan Krejci

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Investment Thesis

• Beacon is selling for 19.97 a 31 discount to
  52-week High of 28.97.
• Market Negativity about Residential Housing
  Starts.
• Only 13 of Revenues at Risk.
• From March to July Housing starts down 10 and
  Beacon price down 32.
• Increasing branches increases market value.

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What Beacon Does

• Roofing Supply and Building Material Supply
  Distributor
• Operates 155 Branches in 31 states and 3 Canadian
  provinces
• Grows through acquisition

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Beacon Roofing is a Value Investment
3 Reasons to Invest

• 1. Market Negativity Has Created a Great Price
• 2. Growth and Market Share are both increasing.
• 3. Fits well in APM Portfolio

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Price Sensitive But Revenues Are Not

• .922 Correlation Coefficient with Housing starts
  since March.

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Re-Roofing will Prosper
Age of US Houses
Median House Age 30
Date Built
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Growing Revenue Free Cash Flow
Discounted Cash Flow Analysis 32.44 Relative
Valuation 33.27 Todays Price 19.97
Refer to handout for models
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Historical Performance

• ROE20.46 ttm

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Past Growth Future

• Beacon has completed 15 Acquisitions since 1997
• Will Continue to Grow Through Acquisition
• Has Established Relationships with Clients
• Revenues Have Grown by 30.6 Annually from
  2000-2005
• EPS Have Grown 57.9 Annually Over Same Period

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Competition

• 38 of Market Divided among 4 firms ABC(13.7),
  Bradco(9.4), Beacon(7.8) and Allied(7.4)
• Other 62 Divided Between 1500 Independent
  Distributors
• Market Has Recently Been Entered By Building
  Supply Stores Such as Home Depot

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The Bear Story

• Dependency on acquisitions
• Too much leverage
• Cyclical nature of the industry
• Continued market irrationality

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A Good Fit APM Criteria

• Learning Experience- Sell July 07 22.50 Puts to
  have more options in the portfolio.
• Mentor Keeps up with stock- Adam loves APM class
• Not Too many names (25-30), sell WGO or JOSB if
  necessary
• Adequate return- 6,000 instant cash
• International diversification- No Domestic
  Building Materials in Portfolio.

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APM Portfolio
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Execution and Value

• Sell 15 contracts of 22.50 July 07 Puts for
  4.00/share.
• This will increase our cash position 6,000.
• Share Now 19.97----18.50 Break-even.
• Market paying a 1.47 premium for these puts due
  to negative market sentiment.

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Questions?