AGX-Final-Report

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University of Oregon Investment Group

Covering Analyst: Charles Pontrelli

[email protected]

February 12, 2016

IME

Investment Thesis

With oil prices falling significantly in the past couple months, investors have

overreacted. With a large cash balance and a huge contract backlog of $1.2

billion, Argan is poised for great top-line and bottom-line growth and is

currently at a steep discount

With technological advancements in fracking and an aging natural gas

production infrastructure, there is huge demand for the construction,

maintenance, and operation of natural gas-fired power plants, which Argan, Inc.

specializes in

Argan’s selective and opportunistic acquisitions, such as the recent acquisition of

The Roberts Company in December, will add synergies to its current operating

segments as well as diversify its revenue streams and assist in top-line growth

Argan, Inc.

Ticker: AGX

Current Price: $29.59

Recommendation: Outperform

Price Target: $44.62

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Key Statistics

52 Week Price Range $28.03 - $42.50

50-Day Moving Average $30.71

Estimated Beta 1.29

Dividend Yield 2.30%

Market Capitalization (M) $443,846

3-Year Revenue CAGR 11.20%

Trading Statistics

Industry EV/EBITDA 2016E 6.07x

AGX EV/EBITDA 2016E 2.25x

Industry EV/EBITDA 2017E 5.50x

AGX EV/EBITDA 2017E 1.82x

Diluted Shares Outstanding (M) 15,495

Average Volume (3-Month) 170,252

Margins and Ratios

Gross Margin (2016E) 22.74%

EBITDA Margin (2016E) 17.34%

Net Margin (2016E) 11.84%

Debt to Enterprise Value -

UOIG 2

University of Oregon Investment Group February 12, 2016

Business Overview

Argan, Inc. (“Argan”) was incorporated in Delaware in May, 1961. They are a

holding company that conducts operations through its subsidiaries Gemma Power

Systems, LLC and affiliates (“GPS”) and Southern Maryland Cable, Inc. Argan

employees approximately 870 employees. They currently trade on the New York

Stock Exchange under the ticker AGX. Their headquarters are in Rockville, MD,

and conducts various projects across the United States. Management intends to

expand Argan through strategic acquisitions and/or investments in other

companies that work well with their current subsidiaries with great potential for

profitable growth.

Business Segments

Power Industry Services—98.32%

The majority of Argan’s business is composed of its Power Industry Services

segment. Gemma Power Systems, LLC (“GPS”) makes up almost all of this

segment, and is a full service engineering, procurement, and construction (“EPC”)

contractor which designs, builds, and commissions large-scale energy projects.

GPS has completed projects for more than 76 different facilities that represent

over 11,000 megawatts of power-generating capacity. The previously mentioned

projects include simple-cycle peaking plants, boiler plant construction and

renovation, and base-load combined-cycle facilities. Argan has also expanded into

the renewable energy industry by providing contracting services for biomass

plants, wind farms, and solar fields. Projects usually last between 1 and 3 years.

Additionally, Argan also procures materials for installation on their energy

projects.

In the past three years, Argan has completed six large energy projects, including

wind-energy farms in the states of Illinois and Pennsylvania, an 800 MW simple-

cycle quick start peaking power plant in Desert Hot Springs, CA, and two large

solar energy fields in Massachusetts including the installation of over 40,000

ground-mounted photovoltaic panels on capped and closed landfills. They also

completed a biomass-fired project for a 49.9 MW power plant in Woodville, TX

and currently have the contract for the operation and maintenance of the power

plant for 3 years.

Argan is currently working on two major projects in the Marcellus Shale region

of Pennsylvania and is building two natural gas-fired plants, each of which will

generate approximately 800 MW of power. Both are expected to complete around

the middle of 2016. Argan is also working on a natural gas-fired plant that began

in Late 2016 and is expected to finish in 2018. The plant will generate 1040 MW

of power on completion. They also have various other projects ongoing, many of

which will be finished in 2018. GPS receives revenues based on the percentage

completion of these projects, and then receives success fees when the projects are

completed. They currently have $1.2 billion of contract backlog.

Telecommunications Infrastructure Services—1.68%

Argan also conducts business through its subsidiary Southern Maryland Cable,

Inc. SMC provides technology wiring and utility construction solutions to

customers in the mid-Atlantic region. They perform structuring, cabling,

terminations, and connectivity for data, voice, video, and security networks inside

and outside plants.

Figure 3: Industry Market Share

Source: IBIS World

Figure 1: Argan Revenue Growth

Source: Argan 10-K and UOIG Spreads

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Bechtel Group, Inc. 15.40%

URS Corp. 6.60%

Fluor Corp. 5.50%

Jacobs Engineering Group, Inc. 5.80%

Other 70.70%

UOIG 3


For customers in need of services outside plants, SMC provides trench-less

directional boring and excavation for underground communication and power

networks, aerial cabling, services, and the installation of buried cables, electric

lines, and lighting systems. The range of inside plant and premises wiring services

include cable installation, AutoCAD design, equipment room buildout, data rack

installation, and cable system labelling and documentation.

In these telecommunications projects the customers supply most or all of the

materials required for the job while SMC provides the tools and personnel for the

services. Their contract backlog is currently valued at approximately $570,000.

Industry

Overview

Argan, Inc. operates in the Industrial, Materials, and Energy sector and the Heavy

Engineering Construction industry in the United States. Businesses in this

industry provide power plant construction, mass transit construction, marine

construction, tunnel construction, conservation and development construction,

harbor and port facilities construction, and other various development projects

and services. There are approximately 19,600 business in this industry. It is not

an enormous industry and competition is moderate. Currently, approximately a

quarter of the market share is held by 4 companies with Bechtel Group, Inc.

having 8.5%, URS Corp. holding 8.1%, Fluor Corp. 6.9%, and Jacobs

Engineering Group, Inc. with 5.8%. These companies operate both domestically

and internationally.

Competition is moderate in the industry due to much of the activity undertaken

by businesses being very complex. Competitive pressures are steady in the long

run due to many of the largest players in the space forming strategic alliances with

other businesses to complete projects on time within budgetary constraints,

procure the appropriate materials, and maintain a consistent share of the market.

Being able to complete a project within the time and budget constraints is of the

utmost importance, as contracts are usually awarded on the basis of a proven

reputation. Companies try to expand their market share through geographic

expansion, and acquisitions are very common in this space. Because most

competitors concentrate on very specialized segments, acquisitions are a very

common business strategy.

Market concentration in this industry is low due to how fragmented and

specialized the competition is. Many of these companies only have about 5

employees because they only focus on the repair and maintenance of facilities,

while larger operators secure the majority of construction projects. Many of these

larger operators use subcontractors to complete projects in different regions and

varying sizes. In the past couple years industry concentration has increased

slightly as the frequency of acquisitions has picked up in order to obtain market

share in high growth areas.

Capital intensity in the Heavy Engineering Construction industry is relatively low,

with it being estimated that for every $1.00 spent on wages $0.12 is spent on

capital investments. Even though the cost of purchases is high (industry average

is about 32% of revenue) most of these costs are largely related to materials,

components, and supplies that are used in the construction of facilities. Labor

costs make up on average 34.9% of revenue in the industry.

Figure 4: Industry Structure

Source: IBIS World

Figure 5: Sector vs. Industry Costs

Source: IBIS World

Life Cycle Stage Mature

Revenue Volatility Medium

Capital Intensity Low

Industry Assistance Low

Concentration Level Low

Regulation Level Heavy

Technology Change High

Barriers to Entry High

Industry Globalization Low

Competition Level Medium

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Depreciation Marketing Profit

UOIG 4


The Heavy Engineering Construction industry is subject to a high amount of

technological change because of the evolving technologies in downstream

markets, such as petrochemical manufacturing and electricity generation.

Downstream operators are constantly looking to maximize the efficiency of their

production through research and development, and much of these efficiency

improvements come from having newer infrastructure. To remain successful in

the industry, players try to obtain a good reputation for a specialized segment of

the market and try to stay up to date with the rapid technological changes.

However, many of these changes are generated in downstream markets and not

the Heavy Engineering Construction industry. Technological advancements in

the materials and the components used in construction projects make a large

impact on the ease of construction and how quick these projects can be completed,

so many companies try to stay as up to date as possible with the components they

use.

Regulation in this space is very high and is expected to stay high in the near future.

Regulation is very complex and involves many different levels of government.

There are many planning guidelines and construction standards that guide

construction activity. Compliance with state licensing, building codes, pollution

controls, and occupational health and safety regulations can add many costs, but

these are usually insignificant in the long run compared to litigation costs

associated with not following said regulations.

Macro factors

United States Economic Growth

US economic growth plays a huge factor in this industry as many businesses only

hire construction companies and undertake large projects when they know there

will be future growth in their operations. Many indicators, such as unemployment

rates, corporate profits, and private and public spending reflect economic health.

Currently, many people are uncertain on global economic health, but the US is

currently doing well and is expected to maintain its health, which is very good for

Argan who does almost all of their business in the US.

Natural Gas Demand

While Argan completes many different projects, they have a large exposure to

natural gas prices as many of their projects pertain to the construction and

procurement of natural gas-fired plants. Natural gas prices have declined in the

past year due to an overall fall in prices across the broad energy market. However,

more and more electric utilities are turning to natural gas for fuel, and exports

have picked up as investments in export terminals and shipping infrastructure has

increased. Additionally, many natural gas-fired plants are quite old, and many

need to be replaced or renovated, which provides ample opportunity for Argan.

Similarly, many coal-fired facilities are being retired because of their inefficiency

and are being replaced with new gas-fired facilities. This, coupled with new

standards under the Clean Power Plan which require reduced carbon emission

power generation options (which natural gas is one), we should see increased

demand going forward, which would be very beneficial for Argan.

US Electrical Energy Consumption US electrical energy consumption plays an important role in Argan’s operations.

Electricity demand can drive a lot of the contract supply. When the recession

occurred, energy consumption retreated, but has been steadily climbing since

2012. Energy consumption is expected to steadily climb as the economy expands

and manufacturers and industrial producers increase the productivity of their

Figure 6: Industry Segmentation

Source: IBIS World

Figure 7: US Natural Gas Consumption

Source: US Energy Information Administration

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Mass Transit Construction Power Plant Construction

Marine Construction Other

Tunnel Construction Conservation and Development Construction

Harbor and Port Facilities Construction

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Figure 8: Business Concentration Heat Map

Source: IBIS World

UOIG 5


operations. Additionally, households are starting to relax their restrictions on

energy usage as consumers become more confident in the overall economic

conditions in the US.

Competition

As mentioned above, competition in the Heavy Engineering Construction industry

is relatively moderate due to the fragmentation of the industry. Even though

Argan faces some large competitors, there is a large room for specialization in the

industry and many successful players depend on joint ventures to maintain market

share. Most of the competitors in Argan’s space are much larger than Argan.

However, Argan and its competitors can both provide services to the same client

due to the different services that are required by customers. If Argan is going to

be successful, they must win long term contracts that not only entail the

construction of the energy production plants, but also the operation and

maintenance of the plants when the construction projects are finished.

The companies that are able to succeed in the space either specialize in a certain

area of the industry, or are highly adaptable and scalable. These companies must

be able to complete their projects on time and within the budget constraints given

to them in the contracts, as reputation plays a huge part in successfully obtaining

contracts. They must also have highly skilled engineers and contractors in order

to plan the complex projects and make sure they are carried out efficiently.

Argan faces stiff competition in both of its segments. In its power industry

services segment, GPS faces competes with many large and well capitalized firms,

such as Bechtel Corp., Fluor Corp., SNC-Lavalin Group Inc., Chicago Bridge &

Iron Company N.V., Skanska AB, and Kiewet Corp. Argan is able to compete

with these companies because of its cost-effective choice for the design, build and

commissioning of natural gas-fired and alternative power energy systems. With

extensive experience, efficiency, and robust product offerings make it extremely

successful in the space, regardless of competition. The same can be said for

Argan’s telecommunications infrastructure segment, which has a proven track

record, great customer retention, and a highly-motivated workforce. Additionally,

Argan invests annually in new vehicles and equipment.

Strategic Positioning

Over the past couple years, Argan has been focusing on developing its power

industry services business through aggressively pursuing new contracts and

projects. Additionally, they have been acquiring smaller companies that either

provide synergies and fill gaps in its current business operations or provide strong

standalone investments. Additionally, they have been divesting from its business

operations that do not fall in line with their business plan (i.e. the divestiture from

its vitamin supplement segment a few years earlier). Argan has also been

diversifying its geographical locations through various acquisitions, such as its

recent acquisition of The Roberts Company which is based in Ireland and should

provide some synergies to its GPS subsidiary. Even with the large amount of

growth they have realized in the past few years, Argan has been able to keep its

margins high and reduce costs through its management’s effective leadership.

Argan has seen the shift in the energy markets to a greater utilization of natural

gas-fired power plants instead of coal, and is quickly demonstrating they can be a

competitive player in the space. However, they have also been expanding into

alternative energy plant construction with the recent push for a greater percentage

of energy come from renewable sources. Argan is uniquely positioned in the

Figure 9: Natural Gas Spot Prices

Source: US Energy Information Administration

Figure 10: Cost of Revenues


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Figure 11: Argan, Inc. Subsidiaries

Source: Argan Website

UOIG 6


space as a specialist in the construction of natural gas-fired plants, is large enough

to outbid its competitors, and still small enough that it can achieve large growth.

Because of its proven track record of completing projects on time, staying at or

below its budget constraints, and providing high quality work, Argan has

established a large and very loyal customer base. Because of its relationship with

local governments, Argan is able to fully comply with all regulations without

delays. Additionally, its positive reputation has allowed it to secure many

contracts recently. Argan currently has $1.2 billion in backlog, which solidifies

many future revenue streams for Argan and proves its ability to win significant

contracts.

Business Growth Strategies

Being a holding company, one of Argan’s main growth strategies is acquiring

businesses that either add to their current business operations and help improve

the business or act as good standalone investments. For example, Argan’s recent

acquisition of The Roberts Company, which is a fabricator and construction

company, will diversify Argan’s current portfolio and add some synergies to its

GPS subsidiary. Management is committed to making strategic and opportunistic

acquisitions every couple years in order to progress the business. On top of that,

their enormous cash balance gives them the purchasing power of a large firm even

though they are a small-cap company.

Argan’s power industry services is poised for huge growth in the next couple years

with its expansion from the east coast into other areas of the US and its backlog

of $1.2 billion. This is perfect since two of Argan’s major projects will be

wrapping up in the next couple months. With new projects consisting of not only

natural gas-fired plants, but all so biomass-fired plants, Argan is diversifying its

operations and reducing risk. With the increase of energy consumption, aging

coal and nuclear power plants, and the movement to cleaner energy alternatives.

Argan has set itself up for success in the next few years to come.

Additionally, Argan’s expansion into other areas of the US, and the possibility

that they will expand their international work, would be extremely beneficial in

driving revenue growth. Argan will be able to capitalize on the long-term

relationships they have established throughout the industry to aggressively build

their backlog of projects in the US, as well as around the globe.

Management and Employee Relations

Rainer Bosselmann – Chairman and CEO

Rainer Bosselmann is the current Chairman and CEO of Argan, Inc. Mr.

Bosselmann has been the Chairman since May 2009 and CEO since October 2003.

Previously, Mr. Bosselmann served as the Chairman and CEO of Arguss

Communications, Inc. from 1996 through 2002. From 1991 through 1995, Mr.

Bosselmann was Vice Chairman and President of Jupiter National, Inc.

David Watson—CFO and Senior Vice President

David Watson is the current CFO and Senior Vice President of Argan, Inc. Mr.

Watson was most recently the CFO and Treasurer of Gladstone Investment

Corporation and Gladstone Capital Corporation. Mr. Watson received his MBA

from the University of Maryland Robert H. Smith School of Business and is also

Figure 12: Capital Expenditures Projections


Figure 13: EBITDA Projections


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Figure 14: Historical Gemma Backlog


UOIG 7


a CPA. He has held many senior financial positions within public and private

companies for over 15 years.

Management Guidance

Management does not provide any guidance on their future financial performance.

They do provide current contractual backlog at the end of each financial period.

Portfolio Strategy

Argan is not currently held in any of the University of Oregon Investment Group’s

portfolios. At the moment, the Tall Firs portfolio is extremely underweight in

IME and in-line for small cap. While we are in-line small cap, Tall Firs currently

holds a lot of cash, which would be best deployed by adding Argan to its holdings.

The DADCO portfolio currently has a considerable amount of energy exposure

with its holdings of MasTec, Alcoa, and SolarCity, but all of these have been

performing very poorly on the year. Argan’s large undervaluation would provide

the positive return the portfolio so desperately needs. Finally, the Alumni

portfolio only has two holdings, which make up 8% of the portfolio with the rest

being cash/tracker. Because the Alumni portfolio is looking for small-cap

companies that are highly undervalued, Argan would be a great addition with its

high future revenue growth, its huge cash balance, and the current undervaluation

from the overall market decline.

Recent News

Argan, Inc. Reports Third Quarter Results – Business Wire–

December 10, 2015 Argan recently reported third quarter results for their fiscal year ending January

31, 2016. They posted revenues of $114 million, implying a growth of 17% from

the previous quarter. Gross profit decreased $2.2 million to $26.3 million

compared to the second quarter mostly due to lower margins on the four new GPS

projects. Management also announced a backlog of $1.2 billion.

Catalysts

Upside

Increased demand for cleaner energy production plants will lead to a

greater number of plant construction projects, driving Argan’s revenue

growth and contractual backlog levels.

An aging United States energy production infrastructure will call for the

renovation or phasing out of current energy production plants, which will

lead to many new and consistent project opportunities for the company

and its subsidiaries.

Argan will be able to continue its market position in the Marcellus Shale

Region and receive large revenue streams through the maintenance and

operation of finished projects, as well as the construction and

procurement of new facilities.

As oil and natural gas prices begin to rebound in the first half of the year

Argan will see a huge improvement in their already strong revenue

streams.

Figure 15: AGX One-Year Stock Chart


Figure 17: MYRG One-Year Stock Chart


One-Year Stock Chart

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Figure 16: Competitive Landscape

Source: Argan Website

UOIG 8


Downside

If Argan is unable to secure the necessary contracts in the near future to

sustain its revenue levels it could prove to be extremely detrimental.

With very few projects making up the majority of Argan’s revenue,

Argan is in a very sensitive predicament.

If oil and gas prices fall even more, energy production companies may

not be able to afford the capital expenditures to fund these construction

projects, lowering Argan’s overall revenues significantly.

Lower-than-expected electrical energy demand throughout the United

States may cause some deterioration of Argan’s future financial

performance.

Increases in environment and/or construction regulations could hinder

Argan’s business operations and slow project development.

If future acquisitions or investments do not prove to be successful this

could limit Argan’s future business growth, as this is one of their main

growth strategies.

Comparable Analysis—25%

In order to find Argan’s relative value a comparable universe was constructed in

order to capture Argan’s high growth and large margins. Various heavy

construction and general contracting companies within the industrial goods sector

were screened for size, growth rates, operating segments, and margins that were

similar to those of Argan. Ultimately, seven companies were chosen and

weighted using a weighted average of metric similarity and importance.

The metrics that were used in order to determine weightings included the

companies’ operating segments, revenue growth, gross margins, EBITDA

growth, EBITDA margins, EPS growth, net margin, capital structure, and market

cap. Because of Argan’s unique positioning with high revenue growth and wide

margins, multiple metrics had to be used to accurately find its valuation in the

space. Forward comparable analysis was done for the fiscal years ending January

31, 2016 and January 31, 2017, where 2016 comparables 75% and 2017

comparables were weighted 25%. Using the EV/EBITDA for each year, a final

price target of $45.99 was achieved, suggesting the market is currently

undervaluing the company by 55.43%.

MYR Group, Inc. (MYRG)—26.01% and 24.78%

“MYR Group Inc., incorporated on January 15, 1982, is a holding company. The

Company through its subsidiaries provides specialty electrical construction

services. The Company performs construction services in two business segments:

Transmission and Distribution (T&D), and Commercial and Industrial (C&I).

T&D segment provides solutions to customers in the electric utility industry and

the renewable energy industry. The Company also provides C&I electrical

contracting services to property owners and general contractors in the western

United States”—Google Finance

Qualitatively, MYR Group Inc. specializes in a different area of construction and

contracting. While Argan specializes in building energy production plants, MYR

Group focuses on the transmission and distribution of energy as well as

Figure 20: Argan Gross Margin Projection

Source: UOIG Spreads

Figure 19: AEGN One-Year Stock Chart



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EV/Revenue 2016E $29.54 0.00%

EV/Gross Profit 2016E $39.44 0.00%

EV/EBIT 2016E $67.91 0.00%

EV/EBITDA 2016E $46.54 100.00%

EV/(EBITDA-Capex) 2016E $59.57 0.00%

Market Cap/Net Income = P/E 2016E $38.49 0.00%

Price Target $46.54

Current Price 29.59

Undervalued 57.27%

Figure 18: 2016 Multiples


UOIG 9


commercial and industrial wiring. However, it is a holding company like Argan

and operates through its multiple subsidiaries.

Quantitatively, MYRG is of a similar size, has zero debt like Argan, and has

similar 2016 revenue expected growth rates. However, it has lower margins than

Argan. Still, it is the most comparable to Argan by the metric weightings, so it

was weighted 26.01% and 24.78% for 2016 and 2017, respectively.

Aegion Corp. (AEGN)—17.78% and 17.49%

“Aegion Corporation (Aegion), incorporated on August 17, 2011, is engaged in

providing infrastructure protection and maintenance. The Company operates

through three segments: Infrastructure Solutions, Corrosion Protection and

Energy Services. The Company is engaged in providing technologies and services

to protect against the corrosion of industrial pipelines; rehabilitate and strengthen

water, wastewater, energy and mining piping systems and buildings, bridges,

tunnels and waterfront structures, and utilize integrated professional services in

engineering, procurement, construction, maintenance, and turnaround services for

a range of energy related industries. The Company's business activities include

manufacturing, distribution, maintenance, construction, installation, coating and

insulation, cathodic protection, research and development and licensing.”—

Google Finance

Qualitatively, Aegion has an energy services segment that is very similar to

Argan’s power industry services segment, but Aegion’s operations only make up

about a third of their total revenue. Additionally, it operates in the same industry

as Argan and primarily operates in the United States, much like Argan.

Quantitatively, Aegion has similar gross margins, similar market cap, as well as

an almost identical beta. However, it has a much higher D/E ratio than Argan,

and has lower expected revenue growth. Still, because of its growth levels,

margins, and business operations, it was weighted 17.78% and 17.49% for 2016

and 2017, respectively, based on the metric weightings.

EMCOR Group, Inc. (EME)—14.33% and 13.67%

“EMCOR Group, Inc. (EMCOR), incorporated on March 31, 1987, is an electrical

and mechanical construction and facilities services firm in the United States. The

Company provides a number of building services and industrial services. Its

services are provided to a range of commercial, industrial, utility and institutional

customers through approximately 70 operating subsidiaries and joint venture

entities. It specializes in providing construction services relating to electrical and

mechanical systems in all types of non-residential and certain residential facilities

and in providing various services relating to the operation, maintenance and

management of facilities, including refineries and petrochemical plants. The

Company operates in segments: United States electrical construction and facilities

services; United States mechanical construction and facilities services; United

States building services; United States industrial services, and United Kingdom

building services.”—Google Finance

EMCOR Group, Inc. (EME) was chosen as a comparable to Argan because of its

gross margin size, a relatively similar beta, and similar net income growth.

However, it has more exposure the distribution and transmission of electrical

power instead of the generation of power. However, they also have exposure to

the procurement of lighting systems, much like Argan’s telecommunications

segment run by SMC. The majority of their business occurs in the United States.

They used to have operations within the United Kingdom, but recently withdrew

Figure 22: EME One-Year Stock Chart



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Figure 23: CBI One-Year Stock Chart


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Multiple Implied Price Discounted Price Weight

EV/Revenue 2017E $33.90 $30.08 0.00%

EV/Gross Profit 2017E $44.02 $39.05 0.00%

EV/EBIT 2017E $56.87 $50.46 0.00%

EV/EBITDA 2017E $50.00 $44.36 100.00%

EV/(EBITDA-Capex) 2017E $58.68 $52.06 0.00%

Market Cap/Net Income = P/E 2017E $46.01 $40.82 0.00%

Price Target $44.36

Current Price 29.59

Undervalued 49.92%

Figure 21: 2017 Multiples


UOIG 10


from the area due to poor profitability. Because of the above reasons, EMCOR

Group, Inc. was weighted 14.33% and 13.67% based on the metric weightings.

Chicago Bridge & Iron Co. (CBI)—12.96% and 10.57%

Chicago Bridge & Iron Company N.V. (CB&I), incorporated in 1889, provides a

range of services to customers in the energy infrastructure market across the

world. The Company provides various services, such as conceptual design,

technology, engineering, procurement, fabrication, modularization, construction,

commissioning, maintenance, program management and environmental services,

and also various Government services. The Company operates through four

segments: Engineering, Construction and Maintenance, which provides

engineering, procurement and construction (EPC) services for energy

infrastructure facilities, as well as integrated maintenance services; Fabrication

Services, Technology, and Environmental Solutions.”—Google Finance

Chicago Bridge & Iron Co. (CBI) was added as a comparable company because

it is one of Argan’s largest competitors. Additionally, about 50% of its business

is made up of the planning, engineering, and construction of nuclear, fossil, and

renewable energy plant project services. Like Argan, they also do the

maintenance and operation of the plants once the project is done. However, their

margins are about half of those of Argan’s, and it has negative growth rates in

2017. Finally, it has a D/E of .41, which is much higher than Argan’s D/E of 0.

Therefore, from the metric weightings Chicago Bridge & Iron Co. was given

weightings of 12.96% and 10.57% for 2016 and 2017, respectively.

Tutor Perini Corp. (TPC)—12.07% and 10.61%

“Tutor Perini Corporation, incorporated on January 5, 1918, is a construction

company engaged in providing general contracting, construction management and

design-build services to private customers and public agencies around the world.

The Company offers general contracting, pre-construction planning and project

management services, including the planning and scheduling of the manpower,

equipment, materials and subcontractors required for a project. It also offers self-

performed construction services, including site work, concrete forming and

placement, steel erection, electrical, mechanical, plumbing, and heating,

ventilation and air conditioning (HVAC). The Company operates through three

segments: Civil, Building, and Specialty Contractors.”—Google Finance

Tutor Perini Corp. (TPC) was added from the comparable universe because of its

similar market cap and revenue growth, as well as it being in the same industry as

Argan. However, it has a very high level of debt with a D/E ratio of .63, and its

beta is about 21% larger than Argan’s estimated beta. Additionally, it primarily

focuses on the construction and engineering of roads, bridges, and water treatment

facilities. Much of their work comes from government contracts. Because of this,

Tutor Perini Corp. was given a weighting of 12.07% and 10.61%.

MasTec, Inc. (MTZ)—8.83% and 13.16%

“The Company builds infrastructure projects for customers across a range of

industries. It specializes in building natural gas, crude oil and refined product

transport pipelines; underground and overhead distribution systems, including

trenches, conduits, cable and power lines, which provide wireless and wireline

communications; electrical power generation, transmission and distribution

systems; renewable energy infrastructure, including wind and solar farms, and

Figure 25: TPC One-Year Stock Chart



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Figure 26: MTZ One-Year Stock Chart



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Comparables Analysis Implied Price Weight

2016 Comparables 46.54 75.00%

2017 Comparables 44.36 25.00%

Price Target $45.99

Current Price 29.59

Undervalued 55.43%

Figure 24: Comparable Analysis Implied Price


UOIG 11


compressor and pump stations and treatment plants and heavy industrial plants.

The Company installs buried and aerial fiber optic cables, coaxial cables, copper

lines, electrical and other energy distribution systems, transmission systems and

satellite dishes in a variety of environments for its customers. In connection with

its installation work, it deploys and manages network connections that involve its

customers’ hardware, software and network equipment.”—Google Finance

MasTec, Inc. (MTZ) was used as a comparable to Argan primarily to reflect the

combined exposure to oil and natural gas as well as telecommunications.

However, most of their exposure comes from the construct of oil and gas pipelines

instead of power generation. While it has somewhat similar gross margins, it has

much low er EBIT, EBITDA, and net margins. Additionally, it has much lower

growth rates for 2016E because of the fall in gas prices. Finally, it has a large

debt level and a much higher beta. From the metric weightings, MasTec was

given weightings of 8.83% and 13.16% for 2016 and 2017, respectively.

Fluor Corp. (FLR)—8.02% and 9.73%

“Fluor Corporation (Fluor), incorporated on September 11, 2000, is a holding

company. The Company, through its subsidiaries, provides professional services.

The Company provides engineering, procurement, construction, fabrication and

modularization, commissioning and maintenance, as well as project management

services. The Company is an integrated solutions provider for various industries,

including oil and gas, chemicals and petrochemicals, transportation, mining and

metals, power, life sciences and manufacturing. The Company is also a service

provider to the United States Federal Government, and it performs operations and

maintenance activities around the world for its industrial clients. The Company

operates its business in five segments: Oil & Gas, Industrial & Infrastructure,

Government, Global Services and Power.”—Google Finance

Qualitatively, Fluor Corp. was used because it is another of Argan’s main

competitors, it is in the same industry, and about 50% of its revenue comes from

oil and gas construction and maintenance services. Quantitatively, it has a similar

beta, but it has different growth rates, lower margins, and a D/E ratio of .18.

Additionally, it is much larger than Argan. For this and the reasons stated above,

Fluor Corp. was given a weighting of 8.02% and 9.73%.

Discounted Cash Flow Analysis—75%

Revenue Model

Argan, Inc. breaks their revenue out into their two segments, Power Industry

Services and Telecommunications Infrastructure. Much of their historical revenue

is very sporadic due to the contractual nature of their business operations. Argan

does not provide any color on their future operations, but does provide the current

backlog at the end of each financial term for their Power Industry Services

segment. This provides a little help on how to project their revenue streams. The

fourth quarter of 2016E was based off of the performance of the prior three

quarters, as well as some analyst expectations. 2017E was based off of the huge

backlog that Argan currently has, as well as the expected completion of two of

Argan’s major projects in the first half of 2017E, as well as the initiation of

Figure 28: Beta Table


Figure 27: FLR One-Year Stock Chart



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Beta SE Weighting

1-Year Daily 0.89 0.13 0.00%

3-Year Daily 1.11 0.10 50.00%

5-Year Daily 1.46 0.07 50.00%

3 Year Weekly 1.18 0.19 0.00%

5 Year Weekly 1.17 0.15 0.00%

3 Year Monthly 1.04 0.57 0.00%

5 Year Monthly 1.27 0.36 0.00%

Vasicek - Comps 0.70 0.00%

Vasicek - ETF 0.57 0.00%

Hamada - Comps 0.48 0.00%

Hamada - ETF 0.37 0.00%

Argan, Inc. Beta 1.29

Implied Price Undervalued/(Overvalued)

Terminal Growth Rate Terminal Growth Rate

44 2.3% 2.8% 3.3% 3.8% 4.3%

1.25 43.99 44.69 45.47 46.32 47.26

1.27 43.57 44.25 45.00 45.82 46.74

1.29 43.17 43.82 44.55 45.34 46.22

1.31 42.77 43.40 44.10 44.87 45.72

1.33 42.38 42.99 43.67 44.41 45.23Ad

just

ed

Beta

Figure 29: Beta Sensitivity Table


UOIG 12


multiple new projects. From there, revenue growth is expected to drop down to

15%, then 10%, then smooth down to 3% growth in the terminal year. The

revenue was smoothed out instead of projected in a cyclical fashion because it is

very difficult to project contract wins. Factors that will influence revenue growth

in the future will be strategic acquisitions, geographical expansion within the

United States and globally, and an increased demand for natural gas-fired plants.

The earlier forecasted years are based on the expected completion of projects and

current backlog.

Cost of Revenues Model

Cost of revenue is made up of the tools and labor needed in the engineering and

construction of the power industry services projects as well as the materials for

the telecommunications services projects. Most of the materials used in the

projects that Argan conducts are provided by the customer, however in some cases

Argan will provide the materials. Cost of revenue is divided into power industry

services and telecommunications services. Each of these segments of the cost of

revenue were projected as a percentage of their respective revenue segments. The

specific percentages used were smoothed out through terminal year, where a value

slightly higher than historical averages was used. As power plants become more

efficient and technologically advanced, Argan’s projects will become more

expensive and will require more experienced workers and better tools. Therefore,

it is fair to expect that the cost of revenues will increase slowly to historical levels.

Beta

Argan’s beta calculations provided a strong collection of values that had low

standard errors. All of the weighting for the beta fell on the three and five year

daily beta calculations because they had the lowest standard errors. Therefore, a

final beta calculation of 1.29 used.

Depreciation and Amortization and PP&E

Seen from historical values, PP&E has stayed at relatively constant levels, so

PP&E purchases were projected to trend towards historical averages. D&A was

projected off a percentage of revenue instead of beginning PP&E because of the

large increases in capital expenditures and acquisitions going into the terminal

year would cause a huge increase in D&A if projected off of beginning PP&E.

Net Working Capital

Almost all current assets and liabilities were trended towards historical averages

through days outstanding. Costs and Estimated Earnings in Excess of Billings

was projected as a percentage of revenue towards historical averages, as were

Prepaid Expenses, and Accrued Expenses. Accounts payable were trended down,

as seen by recent historical trends. Billings in Excess of Costs and Estimated

Earnings was trended down to historical averages.

Capital Expenditures and Acquisitions

Capital expenditures were projected as a percentage of revenue towards historical

averages, while being able to support the growth that is currently projected.

Acquisitions were projected as a percentage of revenue. The company expects to

make strategic and opportunistic acquisitions every three years, however

acquisitions were smoothed into the terminal year to prevent large disruptions in

the cash flows as many of the costs associated with acquisitions are spread across

0%

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Figure 30: SG&A Expense


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Figure 31: Historical D&A

Source: Argan 10-K



44 2.0% 2.5% 3.0% 3.5% 4.0%

5.45% 47.24 48.12 49.09 50.17 51.38

5.95% 44.92 45.66 46.47 47.37 48.37

6.45% 42.85 43.47 44.16 44.92 45.75

6.95% 40.99 41.52 42.11 42.75 43.45

7.45% 39.31 39.77 40.27 40.81 41.41

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Figure 32: Market Risk Premium Sensitivity Table


UOIG 13


multiple years. Argan is very experienced with strategic acquisitions and has a

large cash balance to allow them to make these without taking out debt.

Recommendation

Based upon the future demand natural gas, the phasing out of dated coal and

nuclear plants, and the expansion of renewable energies, Argan will continue to

expand their industrial and energy production construction across the United

States. With their proven management team, Argan will continue to make

strategic acquisitions that offer complimentary services to its current business

operations and provide great standalone investments to boost topline revenue.

Finally, with a consistent annual dividend, a huge cash balance, and great future

revenue growth, Argan is currently at a steep discount. Weighting the discounted

cash flow analysis 75% and the comparable analysis 25%, a final price target of

$44.62 was reached and a strong BUY is recommended for all portfolios.

Figure 33: Final Implied Price Target


Source Implied Price Weighting

Discounted Cash Flow Analysis $44.16 75%

Comparable Analysis 45.99 25%

Weighted Implied Price $44.62

Current Price $29.59

Undervalued 50.79%

UOIG 14


Appendix 1 – Comparable Analysis

2017 WeightingsMultiple Implied Price Discounted Price Weight

EV/Revenue 2017E $33.90 $30.08 0.00%

EV/Gross Profit 2017E $44.02 $39.05 0.00%

EV/EBIT 2017E $56.87 $50.46 0.00%

EV/EBITDA 2017E $50.00 $44.36 100.00%

EV/(EBITDA-Capex) 2017E $58.68 $52.06 0.00%

Market Cap/Net Income = P/E 2017E $46.01 $40.82 0.00%

Price Target $44.36

Current Price 29.59

Undervalued 49.92%

2016 WeightingsMultiple Implied Price Weight

EV/Revenue 2016E $29.54 0.00%

EV/Gross Profit 2016E $39.44 0.00%

EV/EBIT 2016E $67.91 0.00%

EV/EBITDA 2016E $46.54 100.00%

EV/(EBITDA-Capex) 2016E $59.57 0.00%

Market Cap/Net Income = P/E 2016E $38.49 0.00%

Price Target $46.54

Current Price 29.59

Undervalued 57.27%

Comparables Analysis Implied Price Weight

2016 Comparables 46.54 75.00%

2017 Comparables 44.36 25.00%

Price Target $45.99

Current Price 29.59

Undervalued 55.43%

Comparables Analysis AGX MTZ EME AEGN TPC MYRG FLR CBI

($ in thousands) Argan, Inc. MasTec, Inc.

EMCOR Group,

Inc. Aegion Corp.

Tutor Perini

Corp.

MYR Group,

Inc. Fluor Corp.

Chicago Bridge

& Iron Co.

2016 Weighting 8.83% 14.33% 17.78% 12.07% 26.01% 8.02% 12.96%

2017 Weighting 13.16% 13.67% 17.49% 10.61% 24.78% 9.73% 10.57%

Stock Characteristics Max Min Median Weight Avg.

Current Price $44.84 $12.92 $18.82 $25.51 $29.59 $14.89 $43.48 $17.56 $12.92 $18.82 $44.84 $36.96

Beta 1.60 0.89 1.33 0.00 1.29 1.44 1.10 1.25 1.57 0.89 1.33 1.60

Size

Short-Term Debt 646,646.00 - 28,586.00 108,889.26 - 78,827.00 18,712.00 28,586.00 85,897.00 - - 646,646.00

Long-Term Debt 1,872,030.00 - 746,283.00 611,025.60 - 1,098,585.00 303,040.00 327,931.00 746,283.00 - 992,689.00 1,872,030.00

Cash and Cash Equivalent 2,027,151.00 7,150.00 167,584.00 336,013.79 280,935.00 7,150.00 445,400.00 167,584.00 135,466.00 30,429.00 2,027,151.00 423,900.00

Non-Controlling Interest 161,484.00 - 4,000.00 34,023.28 907.00 4,000.00 3,857.00 17,187.00 219.00 - 113,602.00 161,484.00

Preferred Stock - - - - - - - - - - - -

Diluted Basic Shares 141,612.49 15,495.37 62,723.97 59,009.14 15,495.37 80,112.70 62,723.97 36,245.00 49,072.71 21,656.33 141,612.49 104,864.53

Market Capitalization 6,349,903.87 396,390.91 1,190,091.73 1,800,183.67 443,845.68 1,190,091.73 2,727,238.04 636,462.20 634,019.41 396,390.91 6,349,903.87 3,875,792.84

Enterprise Value 6,132,052.84 163,817.68 2,364,353.73 2,218,108.02 163,817.68 2,364,353.73 2,607,447.04 842,582.20 1,330,952.41 365,961.91 5,429,043.87 6,132,052.84

Growth Expectations

% Revenue Growth 2016E 12.50% (14.99%) 1.38% 3.53% 9.47% (10.34%) 3.84% 1.38% 12.11% 12.50% (14.99%) 1.03%

% Revenue Growth 2017E 39.25% (4.21%) 4.56% 2.96% 39.25% 9.93% 4.56% (2.82%) 5.24% 4.71% 2.50% (4.21%)

% EBITDA Growth 2016E 11.98% (38.89%) (9.78%) (10.84%) 11.98% (29.88%) 1.70% (.54%) (38.89%) (9.78%) (18.25%) 2.72%

% EBITDA Growth 2017E 50.57% (9.35%) 4.82% 11.81% 23.79% 38.26% 8.66% 4.17% 50.57% 4.82% (7.30%) (9.35%)

% EPS Growth 2016E 14.25% (64.97%) (8.48%) (16.10%) 14.25% (64.97%) 8.43% (3.17%) (48.64%) (22.49%) (8.48%) 10.75%

% EPS Growth 2017E 147.27% (12.13%) 5.34% 29.62% 19.52% 147.27% 12.59% 5.28% 79.65% 5.34% (9.27%) (12.13%)

Profitability Margins

Gross Margin 2016E 22.74% 6.17% 11.32% 12.66% 22.74% 12.08% 14.12% 21.03% 7.68% 11.32% 6.17% 11.30%

Gross Margin 2017E 21.56% 5.96% 11.43% 13.17% 20.88% 14.35% 14.15% 21.56% 9.28% 11.43% 5.96% 11.13%

EBIT Margin 2016E 17.10% 1.74% 4.26% 4.64% 17.10% 1.74% 4.26% 5.50% 2.62% 4.23% 5.34% 8.13%

EBIT Margin 2017E 15.16% 4.15% 4.82% 5.09% 15.16% 5.14% 4.52% 5.96% 4.15% 4.23% 4.82% 7.53%

EBITDA Margin 2016E 17.34% 3.49% 7.20% 7.18% 17.34% 7.20% 5.37% 8.92% 3.49% 7.86% 6.29% 9.43%

EBITDA Margin 2017E 15.41% 5.00% 7.83% 7.59% 15.41% 9.06% 5.58% 9.56% 5.00% 7.83% 5.69% 8.93%

Net Margin 2016E 11.84% .07% 2.62% 2.53% 11.84% 0.07% 2.56% 2.75% 0.89% 2.62% 3.29% 4.72%

Net Margin 2017E 10.16% 1.96% 2.71% 2.82% 10.16% 2.31% 2.71% 3.29% 1.96% 2.63% 2.81% 4.19%

Credit Metrics

Interest Expense 2016E $91,000.00 $0.00 $41,000.00 $30,051.71 - $48,000.00 $9,000.00 $13,000.00 $44,000.00 $7,000.00 $41,000.00 $91,000.00

Interest Expense 2017E 93,100.00 0.00 39,000.00 30,525.56 - $48,000.00 $9,000.00 $14,000.00 $39,000.00 $8,000.00 $47,000.00 $93,100.00

Debt/EV 2016E 0.63 0.00 0.41 0.28 - 0.50 0.12 0.42 0.63 0.00 0.18 0.41

Debt/EV 2017E 0.63 0.00 0.41 0.28 - 0.50 0.12 0.42 0.63 0.00 0.18 0.41

Leverage Ratio 2016E $4.73 $0.00 $2.04 $1.91 - 3.95 0.90 2.97 4.73 0.00 0.86 2.04

Leverage Ratio 2017E 3.14 0.00 2.25 1.65 - 2.86 0.83 2.85 3.14 0.00 0.93 2.25

Interest Coverage Ratio 2016E 39.78 0.00 11.93 15.49 - 6.21 39.78 9.23 4.00 11.93 28.07 13.59

Interest Coverage Ratio 2017E 43.22 0.00 10.89 15.50 - 8.58 43.22 8.93 6.79 10.89 22.70 12.04

Operating Results

Revenue 2016E $18,304,900.00 $419,399.82 $5,036,000.00 $5,611,698.02 $419,399.82 $4,138,000.00 $6,672,000 $1,346,000.00 $5,036,000.00 $1,062,400.00 $18,304,900.00 $13,108,700.00

Revenue 2017E $18,761,800.00 $584,002.54 $5,300,000.00 $5,770,480.22 $584,002.54 $4,549,000.00 $6,976,000 $1,308,000.00 $5,300,000.00 $1,112,300.00 $18,761,800.00 $12,557,400.00

Gross Profit 2016E $1,481,500.00 $95,366.02 $500,000.00 $590,089.76 $95,366.02 $500,000.00 $942,000 $283,000.00 $387,000.00 $120,300.00 $1,130,100.00 $1,481,500.00

Gross Profit 2017E $1,397,300.00 $121,952.22 $653,000.00 $610,245.88 $121,952.22 $653,000.00 $987,000 $282,000.00 $492,000.00 $127,100.00 $1,118,000.00 $1,397,300.00

EBIT 2016E $1,065,300.00 $44,900.00 $132,000.00 $304,218.56 $71,718.37 $72,000.00 $284,000 $74,000.00 $132,000.00 $44,900.00 $977,000.00 $1,065,300.00

EBIT 2017E $945,600.00 $47,000.00 $234,000.00 $310,319.43 $88,523.57 $234,000.00 $315,000 $78,000.00 $220,000.00 $47,000.00 $904,000.00 $945,600.00

EBITDA 2016E $1,236,800.00 $72,706.67 $298,000.00 $394,485.99 $72,706.67 $298,000.00 $358,000 $120,000.00 $176,000.00 $83,500.00 $1,151,000.00 $1,236,800.00

EBITDA 2017E $1,121,200.00 $87,100.00 $389,000.00 $401,203.31 $90,003.41 $412,000.00 $389,000 $125,000.00 $265,000.00 $87,100.00 $1,067,000.00 $1,121,200.00

Net Income 2016E $619,300.00 $3,000.00 $45,000.00 $172,537.41 $49,649.48 $3,000.00 $171,000 $37,000.00 $45,000.00 $27,800.00 $602,000.00 $619,300.00

Net Income 2017E $527,000.00 $29,200.00 $105,000.00 $172,276.17 $59,341.18 $105,000.00 $189,000 $43,000.00 $104,000.00 $29,200.00 $527,000.00 $526,000.00

Capital Expenditures 2016E $218,000.00 $4,202.39 $52,800.00 $72,907.75 $4,202.39 $91,000.00 $33,000 $32,000.00 $46,000.00 $52,800.00 $218,000.00 $136,500.00

Capital Expenditures 2017E $279,000.00 $5,791.08 $66,000.00 $81,842.47 $5,791.08 $107,000.00 $34,000 $32,000.00 $66,000.00 $37,500.00 $279,000.00 $133,300.00

Multiples

EV/Revenue 2016E 0.63x 0.26x 0.39x 0.42x 0.39x 0.57x 0.39x 0.63x 0.26x 0.34x 0.30x 0.47x

EV/Revenue 2017E 0.64 0.25 0.37 0.42 0.28 0.52 0.37 0.64 0.25 0.33 0.29 0.49

EV/Gross Profit 2016E 4.80 1.72 3.44 3.47 1.72 4.73 2.77 2.98 3.44 3.04 4.80 4.14

EV/Gross Profit 2017E 4.86 1.34 2.99 3.30 1.34 3.62 2.64 2.99 2.71 2.88 4.86 4.39

EV/EBIT 2016E 32.84 2.28 9.18 10.77 2.28 32.84 9.18 11.39 10.08 8.15 5.56 5.76

EV/EBIT 2017E 8.66 2.88 7.02 6.79 5.01 5.09 8.66 8.16 2.88 8.43 7.02 4.10

EV/EBITDA 2016E 7.93x 2.25x 7.02x 6.07x 2.25 7.93 7.28 7.02 7.56 4.38 4.72 4.96

EV/EBITDA 2017E 6.74 1.82 5.47 5.50 1.82 5.74 6.70 6.74 5.02 4.20 5.09 5.47

EV/(EBITDA-Capex) 2016E 11.92 2.39 9.57 9.39 2.39 11.42 8.02 9.57 10.24 11.92 5.82 5.57

EV/(EBITDA-Capex) 2017E 9.06 1.95 7.34 7.47 1.95 7.75 7.34 9.06 6.69 7.38 6.89 6.21

Market Cap/Net Income = P/E 2016E 396.70 6.26 14.26 47.44 8.94 396.70 15.95 17.20 14.09 14.26 10.55 6.26

Market Cap/Net Income = P/E 2017E 14.80 6.10 12.05 12.01 7.48 11.33 14.43 14.80 6.10 13.58 12.05 7.37

UOIG 15


Appendix 2 – Comparable Analysis Weighting Calculations

Weightings Calculation 2016E 2017E AGX MTZ EME AEGN TPC MYRG FLR CBI

Fiscal Year End Date 1/31/2016 12/31/2015 12/31/2015 12/31/2015 12/31/2015 1/31/2016 12/31/2015 12/31/2015

Operating Segments 10.00% 10.00% 10 6 7 3 1 2 7 5

Similarity to: Argan, Inc. 0.25 0.33 0.14 0.11 0.13 0.33 0.20

2016 Score 1.67% 2.23% 0.96% 0.74% 0.84% 2.23% 1.34%

2017 Score 1.67% 2.23% 0.96% 0.74% 0.84% 2.23% 1.34%

2016 Revenue Growth 20.00% 5.00% 9.47% (10.34%) 3.84% 1.38% 12.11% 12.50% (14.99%) 1.03%


2016 Score 0.83% 2.91% 2.02% 6.21% 5.41% 0.67% 1.94%

2017 Score 0.21% 0.73% 0.51% 1.55% 1.35% 0.17% 0.49%

2017 Revenue Growth 5.00% 20.00% 39.25% 9.93% 4.56% (2.82%) 5.24% 4.71% 2.50% (4.21%)


2016 Score 0.87% 0.74% 0.61% 0.75% 0.74% 0.70% 0.59%

2017 Score 3.49% 2.95% 2.43% 3.01% 2.97% 2.79% 2.36%

2016 Gross Margin 5.00% 5.00% 22.74% 12.08% 14.12% 21.03% 7.68% 11.32% 6.17% 11.30%


2016 Score 0.43% 0.53% 2.66% 0.30% 0.40% 0.28% 0.40%

2017 Score 0.43% 0.53% 2.66% 0.30% 0.40% 0.28% 0.40%

2017 Gross Margin 5.00% 5.00% 20.88% 14.35% 14.15% 21.56% 9.28% 11.43% 5.96% 11.13%


2016 Score 0.36% 0.35% 3.45% 0.20% 0.25% 0.16% 0.24%

2017 Score 0.36% 0.35% 3.45% 0.20% 0.25% 0.16% 0.24%

2016 EBITDA Growth 20.00% 5.00% 11.98% (29.88%) 1.70% (.54%) (38.89%) (9.78%) (18.25%) 2.72%


2016 Score 1.17% 4.77% 3.92% 0.96% 2.25% 1.62% 5.30%

2017 Score 0.29% 1.19% 0.98% 0.24% 0.56% 0.41% 1.32%

2017 EBITDA Growth 5.00% 20.00% 23.79% 38.26% 8.66% 4.17% 50.57% 4.82% (7.30%) (9.35%)


2016 Score 1.02% 0.98% 0.75% 0.55% 0.78% 0.48% 0.45%

2017 Score 4.08% 3.90% 3.01% 2.21% 3.11% 1.90% 1.78%

2016 EBITDA Margin 10.00% 5.00% 17.34% 7.20% 5.37% 8.92% 3.49% 7.86% 6.29% 9.43%


2016 Score 1.42% 1.20% 1.71% 1.04% 1.52% 1.30% 1.82%

2017 Score 0.71% 0.60% 0.85% 0.52% 0.76% 0.65% 0.91%

2017 EBITDA Margin 5.00% 10.00% 15.41% 9.06% 5.58% 9.56% 5.00% 7.83% 5.69% 8.93%


2016 Score 0.86% 0.56% 0.93% 0.52% 0.72% 0.56% 0.84%

2017 Score 1.72% 1.11% 1.87% 1.05% 1.44% 1.12% 1.69%

2016 Net Margin 0.00% 0.00% 11.84% 0.07% 2.56% 2.75% 0.89% 2.62% 3.29% 4.72%


2016 Score 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

2017 Score 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Debt/EV 10.00% 10.00% 0.00 0.50 0.12 0.42 0.63 0.00 0.18 0.41

Similarity to: Argan, Inc. 2.01 8.10 2.36 1.60 10,000 5.47 2.43

2016 Score 0.00% 0.01% 0.00% 0.00% 9.98% 0.01% 0.00%

2017 Score 0.00% 0.01% 0.00% 0.00% 9.98% 0.01% 0.00%

Market Cap 5.00% 5.00% 443,846 1,190,092 2,727,238 636,462 634,019 396,391 6,349,904 3,875,793


2016 Score 0.20% 0.06% 0.77% 0.78% 3.12% 0.03% 0.04%

2017 Score 0.20% 0.06% 0.77% 0.78% 3.12% 0.03% 0.04%

UOIG 16


Appendix 3 – Discounted Cash Flows Valuation

Discounted Cash Flow Analysis

($ in thousands) 2010A 2011A 2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E

Total Revenue $218,331.00 $182,592.00 $141,850.00 $278,635.00 $227,455.00 $383,110.00 $419,399.82 $584,002.54 $670,922.81 $737,794.02 $802,766.39 $864,140.51 $920,172.81 $969,152.34 $1,009,483.22 $1,039,767.72

% YoY Growth 3.55% (16.37%) (22.31%) 96.43% (18.37%) 68.43% 9.47% 39.25% 14.88% 9.97% 8.81% 7.65% 6.48% 5.32% 4.16% 3.00%

Cost of Revenues 194,641.00 152,477.00 117,959.00 227,735.00 147,815.00 $298,713.00 $324,033.80 462,050.33 533,291.61 589,128.52 643,925.16 696,291.04 744,775.45 787,929.08 824,371.98 837,584.15

% Revenue 89.15% 83.51% 83.16% 81.73% 64.99% 77.97% 77.26% 79.12% 79.49% 79.85% 80.21% 80.58% 80.94% 81.30% 81.66% 80.55%

Gross Profit $23,690.00 $30,115.00 $23,891.00 $50,900.00 $79,640.00 $84,397.00 $95,366.02 $121,952.22 $137,631.20 $148,665.50 $158,841.23 $167,849.47 $175,397.36 $181,223.27 $185,111.25 $202,183.57

Gross Margin 10.85% 16.49% 16.84% 18.27% 35.01% 22.03% 22.74% 20.88% 20.51% 20.15% 19.79% 19.42% 19.06% 18.70% 18.34% 19.45%

Selling, General, and Administrative 11,999.00 12,129.00 11,186.00 14,755.00 12,918.00 19,470.00 22,659.35 31,948.81 37,159.20 41,363.53 45,550.87 49,619.77 53,461.62 56,964.95 60,020.55 62,526.73

% Revenue 5.50% 6.64% 7.89% 5.30% 5.68% 5.08% 5.40% 5.47% 5.54% 5.61% 5.67% 5.74% 5.81% 5.88% 5.95% 6.01%

Depreciation and Amortization 971.00 992.00 789.00 765.00 792.00 794.00 988.29 1,479.84 1,819.18 2,131.47 2,461.67 2,803.27 3,148.37 3,487.99 3,812.34 4,111.27

% of Beginning PP&E 79.98% 64.42% 53.38% 27.71% 8.37% 18.98% 15.63% 6.45% 5.50% 4.78% 4.32% 3.99% 3.73% 3.52% 3.34% 3.17%

% Revenue .44% .54% .56% .27% .35% .21% .24% .25% .27% .29% .31% .32% .34% .36% .38% .40%

Earnings Before Interest & Taxes $10,720.00 $16,994.00 $11,916.00 $35,380.00 $65,930.00 $64,133.00 $71,718.37 $88,523.57 $98,652.82 $105,170.50 $110,828.69 $115,426.43 $118,787.37 $120,770.32 $121,278.37 $135,545.57

% Revenue 4.91% 9.31% 8.40% 12.70% 28.99% 16.74% 17.10% 15.16% 14.70% 14.25% 13.81% 13.36% 12.91% 12.46% 12.01% 13.04%

Other Expense (Income) (2,089.00) (50.00) (48.00) 43.00 (3,405.00) (234.00) (2,014.63) (2,770.55) (3,142.96) (3,412.30) (3,665.00) (3,893.76) (4,091.45) (4,251.53) (4,368.36) (4,437.51)

% of Revenue (.96%) (.03%) (.03%) .02% (1.50%) (.06%) (.48%) (.47%) (.47%) (.46%) (.46%) (.45%) (.44%) (.44%) (.43%) (.43%)

Earnings Before Taxes 12,809.00 17,044.00 11,964.00 35,337.00 69,335.00 64,367.00 73,733.00 91,294.12 101,795.78 108,582.80 114,493.69 119,320.18 122,878.82 125,021.85 125,646.73 139,983.07

% Revenue 5.87% 9.33% 8.43% 12.68% 30.48% 16.80% 17.58% 15.63% 15.17% 14.72% 14.26% 13.81% 13.35% 12.90% 12.45% 13.46%

Less Taxes (Benefits) 4508.00 7037.00 4556.00 13520.00 25991.00 20,912.00 24,083.52 31,952.94 35,628.52 38,003.98 40,072.79 41,762.06 43,007.59 43,757.65 43,976.35 48,994.08

Tax Rate 35.19% 41.29% 38.08% 38.26% 37.49% 32.49% 32.66% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00%

Net Income $8,301.00 $10,007.00 $7,408.00 $21,817.00 $43,344.00 $43,455.00 $49,649.48 $59,341.18 $66,167.26 $70,578.82 $74,420.90 $77,558.12 $79,871.23 $81,264.21 $81,670.37 $90,989.00

Net Margin 3.80% 5.48% 5.22% 7.83% 19.06% 11.34% 11.84% 10.16% 9.86% 9.57% 9.27% 8.98% 8.68% 8.39% 8.09% 8.75%

Add Back: Depreciation and Amortization 971.00 992.00 789.00 765.00 792.00 794.00 988.29 1,479.84 1,819.18 2,131.47 2,461.67 2,803.27 3,148.37 3,487.99 3,812.34 4,111.27

Add Back: Interest Expense*(1-Tax Rate) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Operating Cash Flow $9,272.00 $10,999.00 $8,197.00 $22,582.00 $44,136.00 $44,249.00 $50,637.78 $60,821.01 $67,986.44 $72,710.29 $76,882.57 $80,361.38 $83,019.61 $84,752.20 $85,482.71 $95,100.27

% Revenue 4.25% 6.02% 5.78% 8.10% 19.40% 11.55% 12.07% 10.41% 10.13% 9.86% 9.58% 9.30% 9.02% 8.74% 8.47% 9.15%

Current Assets 24,076.00 21,507.00 24,053.00 28,966.00 26,350.00 30,663.00 57,769.39 74,941.15 86,214.26 94,713.19 102,951.55 110,451.09 117,773.77 123,919.11 128,947.22 132,371.71

% Revenue 11.03% 11.78% 16.96% 10.40% 11.58% 8.00% 13.77% 12.83% 12.85% 12.84% 12.82% 12.78% 12.80% 12.79% 12.77% 12.73%

Current Liabilities 28,566.00 31,506.00 104,279.00 115,546.00 165,237.00 215,432.00 228,283.16 309,647.27 345,796.21 369,088.89 389,406.48 405,811.01 418,324.92 425,777.80 428,030.38 423,220.19

% Revenue 13.08% 17.25% 73.51% 41.47% 72.65% 56.23% 54.43% 53.02% 51.54% 50.03% 48.51% 46.96% 45.46% 43.93% 42.40% 40.70%

Net Working Capital ($4,490.00) ($9,999.00) ($80,226.00) ($86,580.00) ($138,887.00) ($184,769.00) ($170,513.77) ($234,706.13) ($259,581.95) ($274,375.70) ($286,454.93) ($295,359.91) ($300,551.16) ($301,858.69) ($299,083.16) ($290,848.48)

% Revenue (2.06%) (5.48%) (56.56%) (31.07%) (61.06%) (48.23%) (40.66%) (40.19%) (38.69%) (37.19%) (35.68%) (34.18%) (32.66%) (31.15%) (29.63%) (27.97%)

Change in Working Capital - ($5,509.00) ($70,227.00) ($6,354.00) ($52,307.00) ($45,882.00) $14,255.23 ($64,192.36) ($24,875.82) ($14,793.75) ($12,079.23) ($8,904.98) ($5,191.25) ($1,307.53) $2,775.53 $8,234.68

Capital Expenditures 190.00 487.00 1,738.00 7,263.00 1,136.00 2,936.00 4,202.39 5,791.08 6,583.34 7,162.92 7,710.37 8,210.14 8,646.98 9,006.63 9,276.64 9,447.00

% Revenue 0.09% .27% 1.23% 2.61% .50% .77% 1.00% .99% .98% .97% .96% .95% .94% .93% .92% .91%

Acquisitions 5981.00 0.00 0.00 0.00 0.00 0.00 (20710.00) (5840.03) (6709.23) (7377.94) (8027.66) (8641.41) (9201.73) (9691.52) (10094.83) (10397.68)

% Revenue 2.74% 0.00% 0.00% 0.00% 0.00% 0.00% (4.94%) (1.00%) (1.00%) (1.00%) (1.00%) (1.00%) (1.00%) (1.00%) (1.00%) (1.00%)

Unlevered Free Cash Flow $15,063.00 $16,021.00 $76,686.00 $21,673.00 $95,307.00 $87,195.00 $11,470.16 $113,382.27 $79,569.69 $72,963.18 $73,223.77 $72,414.82 $70,362.15 $67,361.57 $63,335.70 $67,020.91

Discounted Free Cash Flow 97,626.79 60,784.18 49,449.94 44,028.43 38,630.26 33,301.08 28,284.63 23,594.24 22,150.67

6.36% 378.66% (71.74%) 339.75% (8.51%) (86.85%) 888.50% (29.82%) (8.30%) .36% (1.10%) (2.83%) (4.26%) (5.98%) 5.82%

Discount Period 1.25 2.25 3.25 4.25 5.25 6.25 7.25 8.25 9.25

EBITDA $11,691.00 $17,986.00 $12,705.00 $36,145.00 $66,722.00 $64,927.00 $72,706.67 $90,003.41 $100,472.00 $107,301.97 $113,290.36 $118,229.69 $121,935.74 $124,258.31 $125,090.70 $139,656.84

EBITDA Margin 5.35% 9.85% 8.96% 12.97% 29.33% 16.95% 17.34% 15.41% 14.98% 14.54% 14.11% 13.68% 13.25% 12.82% 12.39% 13.43%

EBITDA Growth 53.84% (29.36%) 184.49% 84.60% (2.69%) 11.98% 23.79% 11.63% 6.80% 5.58% 4.36% 3.13% 1.90% .67% 11.64%

UOIG 17


Appendix 4 – Revenue and Cost of Revenues Model

Revenue Model


Power Industry Services $209,814.00 $174,938.00 $132,519.00 $261,327.00 $218,649.00 $376,676.00 $408,875.80 $572,426.12 $658,290.04 $724,119.04 $788,082.89 $848,502.58 $903,655.25 $951,850.19 $991,510.62 $1,021,255.94

% Growth 103.72% (16.62%) (24.25%) 97.20% (16.33%) 72.27% 8.55% 40.00% 15.00% 10.00% 8.83% 7.67% 6.50% 5.33% 4.17% 3.00%

% of Total Revenue 96.10% 95.81% 93.42% 93.79% 96.13% 98.32% 97.49% 98.02% 98.12% 98.15% 98.17% 98.19% 98.20% 98.21% 98.22% 98.22%

Telecommunications Infrastructure $8,517.00 $7,654.00 $9,331.00 $17,308.00 $8,806.00 $6,434.00 $10,524 $11,576.42 $12,633 $13,675 $14,684 $15,638 $16,518 $17,302 $17,973 $18,512

% Growth (.42%) (10.13%) 21.91% 85.49% (49.12%) (26.94%) 63.57% 10.00% 9.13% 8.25% 7.38% 6.50% 5.63% 4.75% 3.88% 3.00%

% of Total Revenue 3.90% 4.19% 6.58% 6.21% 3.87% 1.68% 2.51% 1.98% 1.88% 1.85% 1.83% 1.81% 1.80% 1.79% 1.78% 1.78%

Total Revenue $218,331.00 $182,592.00 $141,850.00 $278,635.00 $227,455.00 $383,110.00 $419,399.82 $584,002.54 $670,922.81 $737,794.02 $802,766.39 $864,140.51 $920,172.81 $969,152.34 $1,009,483.22 $1,039,767.72

% Growth 3.55% (16.37%) (22.31%) 96.43% (18.37%) 68.43% 9.47% 39.25% 14.88% 9.97% 8.81% 7.65% 6.48% 5.32% 4.16% 3.00%

102325.00

Cost of Revenues Model


Power Industry Services $188,983.00 $146,976.00 $111,193.00 $214,817.00 $141,807.00 $294,643.00 $317,407.48 $455,078.77 $525,806.01 $581,098.59 $635,380.50 $687,270.82 $735,327.80 $778,110.16 $814,244.82 $827,217.31

% Growth 11.79% (22.23%) (24.35%) 93.19% (33.99%) 107.78% 7.73% 43.37% 15.54% 10.52% 9.34% 8.17% 6.99% 5.82% 4.64% 1.59%

% of Power Industry Services Revenue 90.07% 84.02% 83.91% 82.20% 64.86% 78.22% 77.63% 79.50% 79.87% 80.25% 80.62% 81.00% 81.37% 81.75% 82.12% 81.00%

% of Total Cost of Revenues 96.61% 95.77% 93.64% 94.01% 95.42% 98.38% 97.66% 98.18% 98.26% 98.28% 98.30% 98.31% 98.32% 98.32% 98.32% 98.28%

Telecommunications Infrastructure $6,629.00 $6,493.00 $7,555.00 $13,683.00 $6,800.00 $4,864.00 $7,615 $8,451 $9,305 $10,161 $11,006 $11,823 $12,596 $13,307 $13,939 $14,478

% Growth (6.99%) (24.09%) (11.67%) 59.98% (20.50%) (43.13%) (10.97%) (1.19%) 8.79% 18.81% 28.68% 38.24% 47.27% 55.58% 62.98% 69.28%

% of Telecommunications Infrastructure Revenue 77.83% 84.83% 80.97% 79.06% 77.22% 75.60% 72.35% 73.01% 73.66% 74.31% 74.96% 75.61% 76.26% 76.91% 77.56% 78.21%

% of Total Cost of Revenues 3.39% 4.23% 6.36% 5.99% 4.58% 1.62% 2.34% 1.82% 1.74% 1.72% 1.70% 1.69% 1.68% 1.68% 1.68% 1.72%

Total Cost of Revenues $195,612.00 $153,469.00 $118,748.00 $228,500.00 $148,607.00 $299,507.00 $325,022.10 $463,530.16 $535,110.79 $591,259.98 $646,386.83 $699,094.31 $747,923.83 $791,417.07 $828,184.31 $841,695.42

% Growth 11.03% (21.54%) (22.62%) 92.42% (34.96%) 101.54% 8.52% 42.61% 15.44% 10.49% 9.32% 8.15% 6.98% 5.82% 4.65% 1.63%

% of Total Revenue 89.59% 84.05% 83.71% 82.01% 65.33% 78.18% 77.50% 79.37% 79.76% 80.14% 80.52% 80.90% 81.28% 81.66% 82.04% 80.95%

UOIG 18


Appendix 5 – Working Capital Model

Working Capital Model


Total Revenue $218,331.00 $182,592.00 $141,850.00 $278,635.00 $227,455.00 $383,110.00 $419,399.82 $584,002.54 $670,922.81 $737,794.02 $802,766.39 $864,140.51 $920,172.81 $969,152.34 $1,009,483.22 $1,039,767.72

Current Assets

Accounts Receivable 2,698.00 13,099.00 16,053.00 24,879.00 23,687.00 27,330.00 46,961.65 65,059.81 74,770.04 82,026.94 89,037.80 95,354.85 101,572.21 106,722.00 110,895.75 113,635.82

Days Sales Outstanding A/R 4.51 26.18 41.31 32.68 38.01 26.04 40.87 40.77 40.68 40.58 40.48 40.39 40.29 40.19 40.10 40.00

% of Revenue 1.24% 7.17% 11.32% 8.93% 10.41% 7.13% 11.20% 11.14% 11.14% 11.12% 11.09% 11.03% 11.04% 11.01% 10.99% 10.93%

Costs and Estimated Earnings in Excess of Billings 12,931.00 1,443.00 2,781.00 1,178.00 527.00 455.00 2,795.13 1,505.24 1,729.27 1,901.63 2,069.09 2,227.28 2,371.70 2,497.94 2,601.89 2,679.95

% of Revenue 5.92% .79% 1.96% .42% .23% .12% .67% .26% .26% .26% .26% .26% .26% .26% .26% .26%

Prepaid Expenses 2,064.00 520.00 4,528.00 1,606.00 1,754.00 1,092.00 4,337.29 3,178.06 3,651.07 4,014.97 4,368.54 4,702.53 5,007.45 5,273.99 5,493.47 5,658.27

% of Revenue .95% .28% 3.19% .58% .77% .29% 1.03% .54% .54% .54% .54% .54% .54% .54% .54% .54%

Notes Receivable and Accrued Interest 0.00 0.00 0.00 0.00 204.00 1,786.00 3,675.32 5,198.04 6,063.88 6,769.65 7,476.12 8,166.43 8,822.40 9,425.18 9,956.12 10,397.68

% of Revenue 0.00% 0.00% 0.00% 0.00% .09% .47% .88% .89% .90% .92% .93% .95% .96% .97% .99% 1.00%

Deferred Income Tax Assets 598.00 91.00 691.00 1,303.00 178.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

% of Revenue .27% .05% .49% .47% .08% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Assets Held for Sale 5,785.00 6,354.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

% of Revenue 2.65% 3.48% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Total Current Assets $24,076.00 $21,507.00 $24,053.00 $28,966.00 $26,350.00 $30,663.00 $57,769.39 $74,941.15 $86,214.26 $94,713.19 $102,951.55 $110,451.09 $117,773.77 $123,919.11 $128,947.22 $132,371.71

% of Revenue 11.03% 11.78% 16.96% 10.40% 11.58% 8.00% 13.77% 12.83% 12.85% 12.84% 12.82% 12.78% 12.80% 12.79% 12.77% 12.73%

Long Term Assets

Net PP&E Beginning 1,214.00 1,540.00 1,478.00 2,761.00 9,468.00 4,183.00 6,325.00 22,947.09 33,098.36 44,571.75 56,981.14 70,257.50 84,305.79 99,006.12 114,216.28 129,775.42

Capital Expenditures 190.00 487.00 1,738.00 7,263.00 1,136.00 2,936.00 4,202.39 5,791.08 6,583.34 7,162.92 7,710.37 8,210.14 8,646.98 9,006.63 9,276.64 9,447.00

Acquisitions 5,981.00 0.00 0.00 0.00 0.00 0.00 20,710.00 5,840.03 6,709.23 7,377.94 8,027.66 8,641.41 9,201.73 9,691.52 10,094.83 10,397.68


Net PP&E Ending 1,540.00 1,478.00 2,761.00 9,468.00 4,183.00 6,325.00 22,947.09 33,098.36 44,571.75 56,981.14 70,257.50 84,305.79 99,006.12 114,216.28 129,775.42 145,508.83

Total Current Assets & Net PP&E $25,616.00 $22,985.00 $26,814.00 $38,434.00 $30,533.00 $36,988.00 $80,716.48 $108,039.51 $130,786.01 $151,694.33 $173,209.06 $194,756.88 $216,779.88 $238,135.40 $258,722.65 $277,880.54

% of Revenue 11.73% 12.59% 18.90% 13.79% 13.42% 9.65% 19.25% 18.50% 19.49% 20.56% 21.58% 22.54% 23.56% 24.57% 25.63% 26.73%

Current Liabilities

Accounts Payable 17,083.00 8,555.00 29,524.00 32,699.00 22,589.00 37,691.00 45,127.74 61,952.39 69,130.07 73,528.67 77,264.20 79,972.47 82,185.83 83,150.17 83,022.68 80,096.84

Days Payable Outstanding 32.03 20.48 91.36 52.55 55.78 46.05 50.83 49.07 47.31 45.56 43.80 42.04 40.28 38.52 36.76 35.00

% of Revenue 7.82% 4.69% 20.81% 11.74% 9.93% 9.84% 10.76% 10.61% 10.30% 9.97% 9.62% 9.25% 8.93% 8.58% 8.22% 7.70%

Accrued Expenses 9,609.00 13,035.00 6,751.00 9,488.00 7,912.00 15,976.00 26,469.65 34,709.56 37,407.09 38,420.95 38,850.85 38,641.74 37,761.80 36,206.06 33,998.63 31,193.03

% of Revenue 4.40% 7.14% 4.76% 3.41% 3.48% 4.17% 6.31% 5.94% 5.58% 5.21% 4.84% 4.47% 4.10% 3.74% 3.37% 3.00%

Billings in Excess of Costs and Estimated Earnings 1874.00 9916.00 68004.00 73359.00 134736.00 161564.00 156346.68 212985.32 239259.05 257139.27 273291.43 287196.80 298377.30 306421.57 311009.08 311930.32

% of Revenue .86% 5.43% 47.94% 26.33% 59.24% 42.17% 37.28% 36.47% 35.66% 34.85% 34.04% 33.23% 32.43% 31.62% 30.81% 30.00%

Deferred Income Tax Liabilities 0.00 0.00 0.00 0.00 0.00 201.00 339.08 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

% of Revenue 0.00% 0.00% 0.00% 0.00% 0.00% .05% .08% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Current Portion of Long-Term Debt 1833.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

% of Revenue .84% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Other Current Liabilities 1,468.00 1,362.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

% of Revenue .67% 5201.49% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Total Current Liabilities $28,566.00 $31,506.00 $104,279.00 $115,546.00 $165,237.00 $215,432.00 $228,283.16 $309,647.27 $345,796.21 $369,088.89 $389,406.48 $405,811.01 $418,324.92 $425,777.80 $428,030.38 $423,220.19

% of Revenue 13.08% 17.25% 73.51% 41.47% 72.65% 56.23% 54.43% 53.02% 51.54% 50.03% 48.51% 46.96% 45.46% 43.93% 42.40% 40.70%

UOIG 19


Appendix 6 – Income Statement

Income Statement


Sales 218,331.00$ 182,592.00$ 141,850.00$ 278,635.00$ 227,455.00$ 383,110.00$ 419,399.82$ 584,002.54$ 670,922.81$ 737,794.02$ 802,766.39$ 864,140.51$ 920,172.81$ 969,152.34$ 1,009,483.22$ 1,039,767.72$

Operating Expenses:

Cost of Revenues Excluding D&A 194,641.00 152,477.00 117,959.00 227,735.00 147,815.00 298,713.00 324,033.80 462,050.33 533,291.61 589,128.52 643,925.16 696,291.04 744,775.45 787,929.08 824,371.98 837,584.15

Selling, General, and Adminstrative 11,999.00 12,129.00 11,186.00 14,755.00 12,918.00 19,470.00 22,659.35 31,948.81 37,159.20 41,363.53 45,550.87 49,619.77 53,461.62 56,964.95 60,020.55 62,526.73


Operating Profit 10,720.00 16,994.00 11,916.00 35,380.00 65,930.00 64,133.00 71,718.37 88,523.57 98,652.82 105,170.50 110,828.69 115,426.43 118,787.37 120,770.32 121,278.37 135,545.57

Non-Operating Expense:

Other Expense (Income) (2,089.00) (50.00) (48.00) 43.00 (3,405.00) (234.00) (2,014.63) (2,770.55) (3,142.96) (3,412.30) (3,665.00) (3,893.76) (4,091.45) (4,251.53) (4,368.36) (4,437.51)

Earnings Before Interest and Taxes 12,809.00 17,044.00 11,964.00 35,337.00 69,335.00 64,367.00 73,733.00 91,294.12 101,795.78 108,582.80 114,493.69 119,320.18 122,878.82 125,021.85 125,646.73 139,983.07

Income Tax Expense 4,508.00 7,037.00 4,556.00 13,520.00 25,991.00 20,912.00 24,083.52 31,952.94 35,628.52 38,003.98 40,072.79 41,762.06 43,007.59 43,757.65 43,976.35 48,994.08

Net Earnings Including Non-Controlling Interest 8,301.00 10,007.00 7,408.00 21,817.00 43,344.00 43,455.00 49,649.48 59,341.18 66,167.26 70,578.82 74,420.90 77,558.12 79,871.23 81,264.21 81,670.37 90,989.00

Discontinued Operations

Income (loss) from Discontinued Operations (1,261.00) (3,557.00) 282.00 - - - - - - - - - - - - -

Income Tax Benefit - 1,324.00 1,280.00 - - - - - - - - - - - - -

Net Earnings (Loss) Attributable to Non-Controlling Interests - - (302.00) (1,448.00) 3,219.00 13,010.00 16,196.45 20,975.43 22,284.83 22,512.83 22,326.72 21,699.21 20,620.39 19,099.83 17,167.56 14,873.67

Net Earnings Attributable to Stockholders of Argan, Inc. 7,040.00$ 7,774.00$ 9,272.00$ 23,265.00$ 40,125.00$ 30,445.00$ 33,453.03$ 38,365.75$ 43,882.43$ 48,065.99$ 52,094.18$ 55,858.91$ 59,250.85$ 62,164.37$ 64,502.81$ 76,115.33$

UOIG 20


Appendix 7 – Balance Sheet

Balance Sheet


Assets

Current Assets

Cash and Cash Equivalents 66,153.00$ 83,292.00$ 156,524.00$ 175,142.00$ 272,209.00$ 333,691.00$ $206,966.34 226,612.92$ 260,727.36$ 301,913.89$ 346,405.46$ 394,474.62$ 444,389.64$ 497,220.44$ 552,041.21$ 620,562.48$

Restricted Cash 5,002.00$ 1,243.00$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Accounts Receivable, Net of Allowance for Doubtful Accounts 2,698.00 13,099.00 16,053.00 24,879.00 23,687.00 27,330.00 46,961.65 65,059.81 74,770.04 82,026.94 89,037.80 95,354.85 101,572.21 106,722.00 110,895.75 113,635.82

Costs and Estimated Earnings in Excess of Billings 12,931.00 1,443.00 2,781.00 1,178.00 527.00 455.00 2,795.13 1,505.24 1,729.27 1,901.63 2,069.09 2,227.28 2,371.70 2,497.94 2,601.89 2,679.95

Prepaid Expenses 2,064.00 520.00 4,528.00 1,606.00 1,754.00 1,092.00 4,337.29 3,178.06 3,651.07 4,014.97 4,368.54 4,702.53 5,007.45 5,273.99 5,493.47 5,658.27

Notes Receivable and Accrued Interest - - - - 204.00 1,786.00 3,675.32 5,198.04 6,063.88 6,769.65 7,476.12 8,166.43 8,822.40 9,425.18 9,956.12 10,397.68

Deferred Income Tax Assets 598.00 91.00 691.00 1,303.00 178.00 - - - - - - - - - - -

Assets Held for Sale 5,785.00 6,354.00 - - - - - - - - - - - - - -

Total Current Assets 95,231.00 106,042.00 180,577.00 204,108.00 298,559.00 364,354.00 264,735.73 301,554.07 346,941.62 396,627.08 449,357.01 504,925.71 562,163.40 621,139.55 680,988.43 752,934.19

Long-Term Assets

Property, Planet and Equipment, net 1,540.00 1,478.00 2,761.00 9,468.00 4,183.00 6,518.00 22,947.09 33,098.36 44,571.75 56,981.14 70,257.50 84,305.79 99,006.12 114,216.28 129,775.42 145,508.83

Goodwill 18,476.00 18,476.00 18,476.00 18,476.00 18,476.00 18,476.00 154,525.27 245,766.65 289,389.74 319,478.13 346,422.71 368,955.23 387,550.03 400,295.11 407,124.09 404,121.73

Intangible Assets, net 3,258.00 2,908.00 2,574.00 2,331.00 2,088.00 1,845.00 2,277.08 3,454.83 4,550.78 5,632.45 6,810.49 8,044.85 9,365.39 10,682.34 11,977.66 13,180.51

Other Assets 1,768.00 1,638.00 864.00 341.00 - - - - - - - - - - - -

Total Long-Term Assets 25,042.00 24,500.00 24,675.00 30,616.00 24,747.00 26,839.00 179,749.44 282,319.84 338,512.27 382,091.72 423,490.70 461,305.86 495,921.55 525,193.73 548,877.17 562,811.07

289,959.90 338,107.26 396,064.15 459,240.67 526,425.01 597,276.35 670,534.92 746,038.17 822,741.51 911,623.54

Total Assets 120,273.00$ 130,542.00$ 205,252.00$ 234,724.00$ 323,306.00$ 391,193.00$ 444,485.17$ 583,873.91$ 685,453.89$ 778,718.80$ 872,847.71$ 966,231.57$ 1,058,084.95$ 1,146,333.28$ 1,229,865.60$ 1,315,745.27$

Liabilities

Current Liabilities

Accounts Payable 17,083.00$ 8,555.00$ 29,524.00$ 32,699.00$ 22,589.00$ 37,691.00$ 45,127.74$ 61,952.39$ 69,130.07$ 73,528.67$ 77,264.20$ 79,972.47$ 82,185.83$ 83,150.17$ 83,022.68$ 80,096.84$

Accrued Expenses 9,609.00 13,035.00 6,751.00 9,488.00 7,912.00 15,976.00 26,469.65 34,709.56 37,407.09 38,420.95 38,850.85 38,641.74 37,761.80 36,206.06 33,998.63 31,193.03

Billings in Excess of Costs and Estimated Earnings 1,874.00 9,916.00 68,004.00 73,359.00 134,736.00 161,564.00 156,346.68 212,985.32 239,259.05 257,139.27 273,291.43 287,196.80 298,377.30 306,421.57 311,009.08 311,930.32

Deferred Income Tax Liabilities - - - - - 201.00 339.08 - - - - - - - - -

Current Portion of Long-Term Debt 1,833.00 - - - - - - - - - - - - - - -

Other Current Liabilities 1,468.00 1,362.00 - - - - - - - - - - - - - -

Total Current Liabilities 31,867.00 32,868.00 104,279.00 115,546.00 165,237.00 215,432.00 228,283.16 309,647.27 345,796.21 369,088.89 389,406.48 405,811.01 418,324.92 425,777.80 428,030.38 423,220.19

Long-Term Liabilities

Deferred Income Taxes and Other Liabilities 38.00 29.00 10.00 10.00 293.00 809.00 71.63 407.00 539.99 602.11 642.25 677.21 705.76 726.81 739.49 743.18

Total Long-Term Liabilities 38.00 29.00 10.00 10.00 293.00 809.00 71.63 407.00 539.99 602.11 642.25 677.21 705.76 726.81 739.49 743.18

Total Liabilities 31,905.00$ 32,897.00$ 104,289.00$ 115,556.00$ 165,530.00$ 216,241.00$ 228,354.78$ 310,054.27$ 346,336.20$ 369,691.00$ 390,048.74$ 406,488.22$ 419,030.69$ 426,504.61$ 428,769.87$ 423,963.37$

Shareowner's Equity

Common Stock $2,038.00 $2,040.00 $2,049.00 $2,096.00 $2,143.00 $2,195.00 $2,224.00 $2,224.00 $2,224.00 $2,224.00 $2,224.00 $2,224.00 $2,224.00 $2,224.00 $2,224.00 $2,224.00

Warrants Outstanding 613.00 601.00 590.00 - - - - - - - - - - - - -

Additional Paid-In Capital 87,048.00 88,561.00 89,714.00 95,004.00 100,863.00 109,696.00 116,669.00 116,669.00 116,669.00 116,669.00 116,669.00 116,669.00 116,669.00 116,669.00 116,669.00 116,669.00

Retained Earnings (1,298.00) 6,476.00 8,944.00 23,850.00 53,335.00 73,614.00 101,458.48 160,799.66 226,966.92 297,545.74 371,966.64 449,524.76 529,395.99 610,660.20 692,330.57 783,319.57

Accumulated Other Comprehensive Loss - - - - - - - - - - - - - - - -

Treasury Stock (33.00) (33.00) (33.00) (33.00) (33.00) (33.00) (33.00) (33.00) (33.00) (33.00) (33.00) (33.00) (33.00) (33.00) (33.00) (33.00)

Total Shareowner's Equity -- The Kroger Co. 88,368.00 97,645.00 101,264.00 120,917.00 156,308.00 185,472.00 220,318.48 279,659.66 345,826.92 416,405.74 490,826.64 568,384.76 648,255.99 729,520.20 811,190.57 902,179.57

Noncontrolling Interests - - (301.00) (1,749.00) 1,469.00 (10,520.00) (4,188.10) (5,840.03) (6,709.23) (7,377.94) (8,027.66) (8,641.41) (9,201.73) (9,691.52) (10,094.83) (10,397.68)

Total Equity 88,368.00$ 97,645.00$ 100,963.00$ 119,168.00$ 157,777.00$ 174,952.00$ 216,130.39$ 273,819.64$ 339,117.69$ 409,027.80$ 482,798.98$ 559,743.35$ 639,054.26$ 719,828.67$ 801,095.74$ 891,781.89$

Total Liabilities and Equity 120,273.00$ 130,542.00$ 205,252.00$ 234,724.00$ 323,307.00$ 391,193.00$ 444,485.17$ 583,873.91$ 685,453.89$ 778,718.80$ 872,847.71$ 966,231.57$ 1,058,084.95$ 1,146,333.28$ 1,229,865.60$ 1,315,745.27$

UOIG 21


Appendix 8 – Statement of Cash Flows

Statement of Cash Flows


Cash Flow From Operating Activities

Net Income Including Noncontrolling Interests $8,301.00 $10,007.00 $7,408.00 $21,817.00 $43,344.00 $43,455.00 $49,649.48 $59,341.18 $66,167.26 $70,578.82 $74,420.90 $77,558.12 $79,871.23 $81,264.21 $81,670.37 $90,989.00

Adjustments to Reconcile:

Gains on the Deconsolidation of Variable Interest Entities - - - - (2,444.00) - - - - - - - - - - -

Non-Cash Stock Compensation Expense 1,040.00 1,502.00 637.00 1,316.00 1,536.00 2,017.00 2,381.81 3,316.61 3,810.23 4,190.00 4,558.99 4,907.53 5,225.75 5,503.91 5,732.95 5,904.94

% of Total Revenue 0.48% 0.82% 0.45% 0.47% 0.68% 0.53% 0.57% 0.57% 0.57% 0.57% 0.57% 0.57% 0.57% 0.57% 0.57% 0.57%

Depreciation 617.00 642.00 455.00 522.00 549.00 551.00 625.75 939.72 1,158.14 1,359.97 1,573.72 1,795.22 2,019.37 2,240.34 2,451.77 2,647.07

% of Beginning PP&E 50.82% 41.69% 30.78% 18.91% 5.80% 13.17% 9.89% 4.10% 3.50% 3.05% 2.76% 2.56% 2.40% 2.26% 2.15% 2.04%

% of Total Revenue 0.28% 0.35% 0.32% 0.19% 0.24% 0.14% 0.15% .16% .17% .18% .20% .21% .22% .23% .24% .25%

Amortization of Purchased Intangible Assets 350.00 350.00 334.00 243.00 243.00 243.00 362.54 540.11 661.04 771.50 887.95 1,008.04 1,129.00 1,247.66 1,360.57 1,464.21

% of Beginning PP&E 28.83% 22.73% 22.60% 8.80% 2.57% 5.81% 5.73% 2.35% 2.00% 1.73% 1.56% 1.43% 1.34% 1.26% 1.19% 1.13%

% of Total Revenue 0.16% 0.19% 0.24% 0.09% 0.11% 0.06% 0.09% 0.09% 0.10% 0.10% 0.11% 0.12% 0.12% 0.13% 0.13% 0.14%

Deferred Income Tax Expense (Benefit) 308.00 410.00 (51.00) (259.00) 1,701.00 896.00 1,345.72 1,873.87 2,152.77 2,367.34 2,575.81 2,772.74 2,952.53 3,109.69 3,239.10 3,336.27

% of Total Revenue .14% .22% (.04%) (.09%) .75% .23% .32% .32% .32% .32% .32% .32% .32% .32% .32% .32%

Other (2,165.00) - - - - - - - - - - - - - - -

Changes in Operating Assets and Liabilities:

Accounts Receivable 8,715.00 (10,359.00) (2,976.00) (8,826.00) 1,294.00 (3,879.00) (19,631.65) (18,098.17) (9,710.23) (7,256.90) (7,010.86) (6,317.04) (6,217.37) (5,149.79) (4,173.75) (2,740.07)

Restricted Cash 4,998.00 3,759.00 1,243.00 - - - - - - - - - - - - -

Costs and Estimated Earnings in Excess of Billings (6,606.00) 11,488.00 (1,338.00) 1,603.00 722.00 72.00 (2,340.13) 1,289.89 (224.03) (172.36) (167.46) (158.19) (144.42) (126.24) (103.95) (78.06)

Prepaid Expenses and Other Assets (1,128.00) 1,554.00 (4,020.00) 2,943.00 598.00 501.00 (3,245.29) 1,159.23 (473.01) (363.90) (353.57) (333.99) (304.92) (266.54) (219.48) (164.80)

Accounts Payable and Accrued Expenses (21,725.00) (5,097.00) 20,267.00 6,086.00 (9,937.00) 22,645.00 (7,436.74) (16,824.65) (7,177.68) (4,398.60) (3,735.54) (2,708.26) (2,213.36) (964.33) 127.49 2,925.83

Billings in Excess of Costs and Estimated Earnings (3,449.00) 8,042.00 58,088.00 5,389.00 61,377.00 26,828.00 (10,493.65) 8,239.91 2,697.53 1,013.86 429.89 (209.11) (879.94) (1,555.74) (2,207.43) (2,805.60)

Other, Net 87.00 (64.00) 3.00 - - - - - - - - - - - - -

Net Cash Provided by Continuing Operating Activities (10,657.00) 22,234.00 80,050.00 30,834.00 98,983.00 93,329.00 11,217.85 41,777.71 59,062.02 68,089.73 73,179.83 78,315.07 81,437.87 85,303.16 87,877.64 101,478.79

Net Cash Used in Discontinued Operating Activities (2,153.00) (2,897.00) (1,335.00) - - - - - - - - - - - - -

Net Cash Provided by Operating Activities ($12,810.00) $19,337.00 $78,715.00 $30,834.00 $98,983.00 $93,329.00 $11,217.85 $41,777.71 $59,062.02 $68,089.73 $73,179.83 $78,315.07 $81,437.87 $85,303.16 $87,877.64 $101,478.79

Cash Flow From Investing Activities

Purchases of Property and Equipment, Net ($190.00) ($487.00) ($1,738.00) ($7,263.00) ($1,136.00) ($2,936.00) ($4,202.39) ($5,791.08) ($6,583.34) ($7,162.92) ($7,710.37) ($8,210.14) ($8,646.98) ($9,006.63) ($9,276.64) ($9,447.00)

Net Proceeds Provided from Sale of Assets - - 2,528.00 - - - - - - - - - - - - -

Net Cash Provided in Acquisitions 5,981.00 - - - - - (20,710.00) (5,840.03) (6,709.23) (7,377.94) (8,027.66) (8,641.41) (9,201.73) (9,691.52) (10,094.83) (10,397.68)

Maturities (Purchases) of Short-term Investments, Net - - - - - - (103,921.00) - - - - - - - - -

Loans to Energy Project Developers - - - - - - (931.00) - - - - - - - - -

Increase in Notes Receivable - - - - - - (386.00) - - - - - - - - -

Net Cash Provided by Discontinued Investing Activities 70.00 4.00 - - - - - - - - - - - - - -

Net Cash Used by Investing Activities $5,861.00 ($483.00) $790.00 ($7,263.00) ($1,136.00) ($2,936.00) ($130,150.39) ($11,631.10) ($13,292.57) ($14,540.86) ($15,738.03) ($16,851.55) ($17,848.71) ($18,698.16) ($19,371.48) ($19,844.68)

Cash Flow From Financing Activities

Cash Distributions to Joint Venture Partner - - - - - (25,000.00) - - - - - - - - - -

Proceeds from the Exercise of Stock Options and Warrants 737.00 118.00 531.00 2,676.00 3,794.00 5,389.00 2,405.06 3,482.42 4,154.02 4,736.62 5,337.15 5,942.63 6,538.20 7,107.65 7,634.08 8,338.22

Excess Income Tax Benefits on Exercised Stock Options and Warrants - - - 730.00 576.00 1,480.00 182 324.13 459.33 606.65 776.97 969.12 1,180.67 1,407.89 1,645.77 1,943.49

Loans to Project Development Entities - - - - (2,450.00) (614.00) - - - - - - - - - -

Payments Received on Loans - - - - 8,915.00 - - - - - - - - - - -

Deconsolidation of the Cash of Variable Interest Entities - - - - (399.00) - - - - - - - - - - -

Dividends - - (6,804.00) (8,359.00) (10,640.00) (10,166.00) (10,379.00) (14,306.64) (16,268.45) (17,705.71) (19,064.48) (20,306.25) (21,393.18) (22,289.92) (22,965.44) (23,394.77)

Other (2,301.00) (1,833.00) - - - - - - - - - - - - - -

Net Cash Provided (Used) by Financing Activities ($1,564.00) ($1,715.00) ($6,273.00) ($4,953.00) ($204.00) ($28,911.00) ($7,792.12) ($10,500.03) ($11,655.01) ($12,362.33) ($12,950.23) ($13,394.36) ($13,674.15) ($13,774.20) ($13,685.40) ($13,112.84)

Change in Cash and Cash Equivalents ($8,513.00) $17,139.00 $73,232.00 $18,618.00 $97,643.00 $61,482.00 ($126,724.66) $19,646.58 $34,114.44 $41,186.53 $44,491.57 $48,069.16 $49,915.02 $52,830.80 $54,820.77 $68,521.27

Cash and Cash Equivalents at Beginning of Year $74,666.00 $66,153.00 $83,292.00 $156,524.00 $175,142.00 $272,209.00 $333,691.00 $206,966.34 $226,612.92 $260,727.36 $301,913.89 $346,405.46 $394,474.62 $444,389.64 $497,220.44 $552,041.21

Cash Equivlanets at End of Period $66,153.00 $83,292.00 $156,524.00 $175,142.00 $272,785.00 $333,691.00 $206,966.34 $226,612.92 $260,727.36 $301,913.89 $346,405.46 $394,474.62 $444,389.64 $497,220.44 $552,041.21 $620,562.48

UOIG 22


Appendix 9 – Discounted Cash Flow Assumptions

Discounted Free Cash Flow Assumptions Considerations Implied Price

Tax Rate 35.00% Terminal Growth Rate 3.00% Terminal Growth Rate

Risk Free Rate 1.92% Terminal Value 649,721 Avg. Industry Debt / Equity 54.09%

Beta 1.29 PV of Terminal Value 214,735 Avg. Industry Tax Rate 32.09%

Market Risk Premium 6.45% Sum of PV Free Cash Flows 470,471 Current Reinvestment Rate (101.39%)

% Equity 100.00% Firm Value 685,206 Reinvestment Rate in Year 2025E 23.93%

% Debt 0.00% Cash & Cash Equivalents 333,691 Implied Return on Capital in Perpetuity 12.54%

Small Cap Risk Premium 2.50% Non-Controlling Interest 907 Terminal Value as a % of Total 31.3%

CAPM 12.71% Market Capitalization 684,299 Implied 2016E EBITDA Multiple 9.4x

WACC 12.71% Fully Diluted Shares 15,495 Implied Multiple in Year 2025E 1.5x

Terminal Risk Free Rate 2.83% Implied Price $44.16 Free Cash Flow Growth Rate in Year 2025E 5.82%

Terminal CAPM 13.62% Current Price $29.59

Terminal WACC 13.62% Undervalued 49.24%

Source Implied Price Weighting

Discounted Cash Flow Analysis $44.16 75%

Comparable Analysis 45.99 25%

Weighted Implied Price $44.62 Implied Price

Current Price $29.59 Terminal Growth Rate

Undervalued 50.79%

UOIG 23


Appendix 10 – Sensitivity Tables



44 2.0% 2.5% 3.0% 3.5% 4.0% 0 2.0% 2.5% 3.0% 3.5% 4.0%

1.25 43.65 44.32 45.05 45.86 46.76 1.25 47.52% 49.78% 52.26% 55.00% 58.02%

1.27 43.24 43.89 44.60 45.38 46.25 1.27 46.14% 48.34% 50.74% 53.38% 56.30%

1.29 42.85 43.47 44.16 44.92 45.75 1.29 44.80% 46.92% 49.24% 51.80% 54.61%

1.31 42.46 43.07 43.73 44.46 45.26 1.31 43.49% 45.54% 47.79% 50.25% 52.97%

1.33 42.08 42.67 43.31 44.01 44.79 1.33 42.20% 44.19% 46.36% 48.75% 51.37%



44 2.0% 2.5% 3.0% 3.5% 4.0% 0 2.0% 2.5% 3.0% 3.5% 4.0%

11.71% 44.89 45.57 46.32 47.14 48.04 11.71% 51.71% 54.02% 56.54% 59.31% 62.37%

12.21% 43.85 44.50 45.22 46.01 46.87 12.21% 48.19% 50.40% 52.82% 55.48% 58.41%

12.71% 42.85 43.47 44.16 44.92 45.75 12.71% 44.80% 46.92% 49.24% 51.80% 54.61%

13.21% 41.88 42.48 43.14 43.87 44.67 13.21% 41.54% 43.57% 45.80% 48.25% 50.95%

13.71% 40.95 41.53 42.16 42.86 43.63 13.71% 38.39% 40.35% 42.49% 44.84% 47.43%



44 2.0% 2.5% 3.0% 3.5% 4.0% 0 2.0% 2.5% 3.0% 3.5% 4.0%

5.45% 47.24 48.12 49.09 50.17 51.38 5.45% 59.65% 62.62% 65.90% 69.56% 73.65%

5.95% 44.92 45.66 46.47 47.37 48.37 5.95% 51.80% 54.30% 57.05% 60.09% 63.47%

6.45% 42.85 43.47 44.16 44.92 45.75 6.45% 44.80% 46.92% 49.24% 51.80% 54.61%

6.95% 40.99 41.52 42.11 42.75 43.45 6.95% 38.52% 40.33% 42.31% 44.46% 46.83%

7.45% 39.31 39.77 40.27 40.81 41.41 7.45% 32.84% 34.40% 36.09% 37.93% 39.94%

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UOIG 24


Appendix 10 – Sensitivity Tables Continued



44 2.0% 2.5% 3.0% 3.5% 4.0% 0 2.0% 2.5% 3.0% 3.5% 4.0%

25% 49.12 49.88 50.71 51.62 52.63 25% 66.00% 68.57% 71.37% 74.46% 77.86%

30% 45.98 46.68 47.44 48.27 49.19 30% 55.40% 57.75% 60.31% 63.13% 66.24%

35% 42.85 43.47 44.16 44.92 45.75 35% 44.80% 46.92% 49.24% 51.80% 54.61%

40% 39.71 40.27 40.89 41.56 42.31 40% 34.20% 36.10% 38.18% 40.46% 42.99%

45% 36.57 37.07 37.61 38.21 38.87 45% 23.60% 25.28% 27.11% 29.13% 31.36%



44 2.0% 2.5% 3.0% 3.5% 4.0% 0 2.0% 2.5% 3.0% 3.5% 4.0%

1.72% 43.24 43.88 44.58 45.35 46.19 1.72% 46.14% 48.30% 50.66% 53.25% 56.12%

1.82% 43.04 43.68 44.37 45.13 45.97 1.82% 45.47% 47.61% 49.95% 52.52% 55.36%

1.92% 42.85 43.47 44.16 44.92 45.75 1.92% 44.80% 46.92% 49.24% 51.80% 54.61%

2.02% 42.65 43.27 43.95 44.70 45.53 2.02% 44.14% 46.24% 48.55% 51.08% 53.87%

2.12% 42.46 43.07 43.75 44.49 45.31 2.12% 43.48% 45.57% 47.85% 50.36% 53.13%

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UOIG 25


Appendix 11 - Sources

Argan 10-K

Argan 10-K

Argan Q3 2016 Earnings Presentation

Argan Investor Relations

Argan Website

Business Wire

FactSet

Financial Visualizations Website

Google Finance

IBIS World

Morningstar

Seeking Alpha

US Energy Information Administration

United States Census Bureau

Wall Street Journal

Yahoo Finance

Documents

AGX-Final-Report