University of Illinois at Urbana-Champaign Applied Portfolio Management Methode Electronics Cindy Anggraini Lu Han Rahul Gohil Vanditha R Zhi Cheng (Nicole) Low December 1, 2015

ANALYSTS Cindy Anggraini Lu Han Rahul Gohil Vanditha R. M Zhi Cheng (Nicole) Low

Holding 100 shares on Apr 13, 2015 Purchase Price = $46.61 Current Price = $36.08 at Nov 30, 2015 Return = % Source: Yahoo Finance

AGENDA Company Overview Macro-economic Overview Financial Analysis Technical Analysis Projection & Valuation Recommendation

Company Overview Macro- economic Overview Financial Analysis Technical Analysis Projection & Valuation Recomm endation

Company Overview: Introduction Automotive Interface Power Products Other Business Description Manufacturer of component and subsystem devices Year Founded 1946 Market Cap $1.4 billion TTM P/E Primary Industry Electronic Manufacturing Services Source: Yahoo Finance

Company Overview: Operating Coverage USAEuropeAsia The company is operating globally, with mostly in USA, Europe, and Asia The biggest facilities are in Mexico and Malta

Company Overview: Revenue Breakdown (2015) ProductGeographic Source: Investor Presentation

Company Overview: Automotive Segment Integrated Center Console Ford General Motors Renault Fiat Aston Martin Transmission Solutions General Motors Ford VW Torque Sensor BMW Hidden & Ergonomic Switches Global Market Share of 18% European Union Market Share of 35% Source: Investor Presentation

Company Overview: Interface Segment Consumer Touch Panels High resolution LCD touchscreens Over 30% of commercial/industrial solid state touch interfaces in North America Industrial User Interfaces Radio Remote Control Solutions Data Center Infrastructure Solutions Fiber Optic & copper cable assemblies Uninterruptable Power Supply Main Clients Coca Cola, John Deere, Whirlpool, Kitchen Aid, Maytag, Hitachi Source: Investor Presentation

Company Overview: Power Products Segment Braided flexible cables EV bus bar assemblies Nissan Leaf North America & Europe Each vehicle requires 48 battery modules Three Methode assemblies utilized on each battery module Tesla S PowerRail Power distribution system Currently shipping to “Big Data” customer Source: Investor Presentation

Company Overview: Future Projects SmartCenter Stack Wireless cell phone connection, Vehicle touchscreens HighPerTouch Enhanced touch performance 10G Copper Transceiver Modules More cost effective than optical counterparts Dabir Surfaces New technology for pressure ulcer prevention Source: Investor Presentation

Company Overview: SWOT Strengths Distribution and sales network Tax advantages due to global locations Low debt financing Weakness High exposure to automotive sector, esp. Ford and GM Lengthy sales cycle Price of raw materials Highly competitive market environment Exchange rate Opportunities Engagement in M&A activity Diversifying product portfolio Threats Changes in technology Continued pressure to lower prices SWOT

Company Overview: Porter 5 Forces Bargaining Power of Buyers: High Bargaining Power of Suppliers: Moderate Threats of New Entrants: Low Threats of Substitutes: Moderate Rivalry: Moderate Porter 5 Forces Bargaining Power of Buyers – High Continued pressure to lower prices to avoid competition Bargaining Power of Suppliers – Moderate Availability of raw materials from different suppliers Threat of new entrants – Low High initial investments Threat of substitutes – Moderate Customized products for each manufacturer Rivalry among existing competitors – Moderate Competition on Price and Technological advancements

Company Overview Macro- economic Overview Financial Analysis Technical Analysis Projection & Valuation Recomm endation

Macro-economic Overview Automotive Industry US vehicle sales will rise to record peak in 2017 Tesla S and Nissan leaf among top 5 electric car models Electronic Industry Rapidly-increasing data traffic is driving the demand for data storage Global power electronics market growth rate to fall post 2018 Heavy Equipment Industry Agriculture equipment demand to fall in US, offset by Asia Heavy construction equipment market driven by emerging markets Source: KPMG’s Global Automotive Executive Survey 2015, Clean Technica, DatacenterDynamics, HIS Technology, PR Newswire, Freedonia Group

Macro-economic Overview Automotive Outlook Based on Sales Volume Long-term Touch Module Shipment Forecast Source: IHS, KPMG Global Automotive Survey GM & Ford will hold their position by sales volumes in 2020 Touch Panel Module shipments to rise but at lower growth rates

Company Overview Macro- economic Overview Financial Analysis Technical Analysis Projection & Valuation Recomm endation

Financial Analysis: Agenda Financial Highlights Liquidity and Leverage Ratio Profitability and Activity Ratio Greenblatt and Dupont Ratio

Financial Highlights: Revenue Breakdown (2015) AutomotiveInterfacePower Products Source: 10-k 2015

Financial Analysis: Liquidity & Leverage Ratio Liquidity Ratio Leverage Ratio Source: 10-k 2015

Financial Analysis: Profitability & Activity Ratio Profitability Ratio Activity Ratio Source: 10-k 2015

Financial Analysis: Greenblatt & Dupont Ratio Greenblatt Ratio Dupont Analysis Tax Burden134.48%73.68%107.39%126.61%83.69% Interest Burden90.63%100.00%96.68%103.13%107.66% Operating Profit Margin3.74%2.45%7.54%9.52%12.73% Asset Turnover1.26x1.24x1.53x1.49x Leverage1.44x1.54x1.48x1.39x ROE 3.27%14.95%28.21%23.77% Source: 10-k 2015

Company Overview Macro- economic Overview Financial Analysis Technical Analysis Projection & Valuation Recomm endation

Technical Analysis Methode Electronics Big drop (around 30%) on June 25, 2015 because company’s financial results were not able to meet the investor expectations. Source: Yahoo Finance

Company Overview Macro- economic Overview Financial Analysis Technical Analysis Projection & Valuation Recomm endation

Projection and Valuation: Agenda Assumptions Revenue Projection Valuation : DCF and Comparable 1 2 3

Projection and Valuation: Assumptions Management guidance for 2016 Sales - $830-$865mm Operating Income - $108-$119mm Continue to invest in core business and grow Maintaining strong and flexible balance sheet with ample liquidity Targeting 5 year EBITDA CAGR of 9-10% Auto sales to peak in 2017 and drop after that Source: Investor Presentation

Projection: Revenue Revenue ProjectionRevenue Projection per Segment

Projection: Revenue per Segment Interface Power Products Automotive

Valuation: DCF

Valuation: Sensitivity Analysis

Valuation: Comparable Methodology Industry: Electronic Manufacturing Services Sector: TechnologySimilar Product MixSimilar End Markets International Exposure CTS Designs and manufactures sensors and actuators, and electronic components worldwide. Amphenol Designs and manufactures electrical, electronic, and fiber optic connectors worldwide. AVX Designs and manufactures electronic passive components and interconnect solutions worldwide.

Valuation: Comparable Valuation Result LTM EV/RevenueLTM EV/EBITDALTM P/ELTM P/BV CTS Corp. (CTS) 1.4x8.4x22.8x2.7x Amphenol Corp. (APH) 3.3x14.1x22.9x80.5x AVX Corp. (AVX) 1.1x5.9x11.0x1.2x Median 1.4x8.4x22.8x2.7x Implied Price Equally weighted average price per share: $41.3

Valuation: Background of Comparison MEI is a unique company Most of its revenue comes from automotive Market treats MEI similar to its customers 1 2 3

Valuation: Comparable Valuation Result (Cont.) Equally weighted average price per share: $32.2 LTM EV/RevenueLTM EV/EBITDALTM P/ELTM P/BV Whirlpool Corp. (WHR)0.8x8.7x19.0x2.7x General Motors Company (GM)0.6x6.0x13.3x1.7x Ford Motor Co. (F)1.1x10.8x12.0x2.1x Deere & Company (DE)2.1x13.8x 3.8x Median1.0x9.8x13.6x2.4x Implied Price

Company Overview Macro- economic Overview Financial Analysis Technical Analysis Projection & Valuation Recomm endation

SELL Comparable Valuation DCF Valuation Revenue Projection Industry Factor Sell 100 price

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