Vincent L.

Why I'm Not Buying Allegheny Technologies, Titanium Metals, or RTI International Metals, Just Yet

"undiscovered" is no longer true, but it is still at least 30% undervalued (PEG=0.68) and under-owned...

Titanium Metals Corp. (NYSE:TIE) will replace Bausch & Lomb Inc. (NYSE:BOL) in the S&P 500...
www2.standardandpoors....

Why I'm Not Buying Allegheny Technologies, Titanium Metals, or RTI International Metals, Just Yet

Everyone has missed it last week, during Alcoa CC Q&A; Kuni (Bank of America analyst) asked Belda if AA would consider diversifying into other metals (making an acquisition). Belda said that they look forward to it (if the price is right).

Kuni: “Do you think at some point you will consider more diversified metals portfolio approach?”

Belda: “Over the years, we have looked at diversified portfolio that includes metals like titanium, a product with similar markets that we operate in. We haven’t found anything (a titanium company) that would add market value to the shareholders; therefore, we didn’t do anything (we didn’t do any acquisitions) at those times. But it doesn’t mean we do not look forward to it…”

Kuni: “Ok, thanks a lot”

The answer suggests that Alcoa was shopping for a titanium company but Belda did not want to pay a premium for it. I bet that Simmons did not want to sell TIE cheap and Belda was a stingy Scrooge. I am sure that Belda will reconsider Simmons' price in the near future, because Alcoa needs diversification to boost its poor growth, and Belda wants to keep his job.

Why I'm Not Buying Allegheny Technologies, Titanium Metals, or RTI International Metals, Just Yet

Addendum: ATI is overvalued for a steel company (only 20% of ATI business is titanium).

Why I'm Not Buying Allegheny Technologies, Titanium Metals, or RTI International Metals, Just Yet

Bank of America Securities called the delay a "non-event" for titanium producers, noting that the 787's full production schedule remains "intact though 2011," and significant growth in titanium volume continues to be expected for 2008.

P.S. The charts will not tell you that TIE stock is 30% undervalued (PEG=0.68), under-owned, and largely undiscovered by the Wall Street. In addition, the charts will not tell you that the Wall Street’s darling ATI is overhyped, overrated and over-owned secondary to its unjustified Brad Pitt like status. (Courtesy of constant Jim Cramer hype). Moreover, the charts will not tell you that TIE is a takeover target…

Why I'm Not Buying Allegheny Technologies, Titanium Metals, or RTI International Metals, Just Yet

Delays.... Delays.... The Sky Is Falling... Or A Buying Opportunity

Delays..., delays..., the sky is falling..., hysterically screamed Chicken
Little and sold his TIMET shares to Foxy Loxy, after the Boeing
announced today that 787 Dreamliner delivery will be delayed by six
months.

Lets examine the facts and see if the sky is really falling...

1. Boeing Conference Call Transcript:

"(Robert Stallard - Banc of America Securities - Analyst)
- James, I'd just like to follow up on your comment about the supply
chain. To clarify, you're basically saying that you're telling your
suppliers to stick to the previously stated production schedule,
right?

(James Bell - Boeing Co. - CFO)
- That's correct."

Ok, Boeing will keep supply chain on its current production schedule,
meaning the suppliers will not be impacted by the delay, meaning it is
business as usual for TIMET.

2. "Boeing says the problems with the 787 are different from those
with the A380 because they don't point to a fundamental flaw in its
design, but rather involve difficulties in the supply chain."

Contrarily to the Airbus delays (by 2 yrs), the Boeing delivery delays
will not negatively affect titanium demand. The Boeing will continue
building the airplanes. They plan to have 40 airplanes ready by the
end of 2008, meaning TIMET will continue shipping titanium products to
the Boeing according to the previous production schedule - nothing has
changed.

3. "Boeing officials said they expect to have about 40 Dreamliners
completed and on the ramp when the Federal Aviation Administration
declares the airplane ready for delivery in 2008."

In other words, instead of delivering five airplanes each month (May
to December 2008; 5 x 8 = 40 airplanes); the Boeing will deliver 40
airplanes in December of 2008. In addition, they plan to deliver 109
airplanes in 2009 (only three airplanes short of the original
schedule). You can see that this is mostly the delivery delay and not
the production delay (as it was with Airbus). Again, there is NO
impact on TIMET.

online.wsj.com/article...

The evidence shows that the irrational panic and fear driven selling
by Chicken Little was a buying opportunity for Foxy Loxy.

Why I'm Not Buying Allegheny Technologies, Titanium Metals, or RTI International Metals, Just Yet

TIE Raw Materials 2006 - from TIE 2006 Annual Report (before 4,000 VDP
metric tons addition that will be operational in 3Q07, source)

Internally produced sponge.....24%
Purchased sponge.....29%
Titanium scrap.....40%
Alloys.....7%

Latest (Sep07) Finished Titanium (Aerospace Grade-5 [6-4 titanium])
Product Prices and Raw Materials (per pound)

6-4 Plate.....$39/lb (number one TIE product)
6-4 Bar.....$36/lb (number two TIE product )
6-4 Ingot.....$20-22/lb
6-4 Sponge.....$12/lb (grade-5 TIE produced titanium sponge, aerospace
and defense markets use primarily aerospace grade titanium products
made using this sponge)
6-4 Scrap.....$7.50/lb (raw material)

A-380 activity is expected to pick up over the next year, while
history's largest aircraft consumer of titanium, Boeing Co.'s 787
Dreamliner-the first of which is due to be delivered in May next year-
continues to move toward full production.

Moreover, judging by TIMET's continuing strong average realized prices
this year, titanium sold under long-term supply agreements, which
account for most of the material shipped by TIMET, has not shown the
kind of decline that's plagued the spot market and titanium scrap. On
the contrarily, lower titanium scrap and sponge prices this year (raw
material) help to increase TIE profits. (6-4 Titanium Scrap - $7.50
per pound, it was $9-10 in May)

TIE Sales by End Market 2007
Commercial Aerospace.....57%
Military/ Defense.....16%
Industrial/ Consumer Applications.....17%
Other (Ti Fabrications, Ti Scrap, Ti Tetrachloride).....10%

Vs.

RTI Sales by End Market 2007
Commercial Aerospace.....45%
Military/ Defense.....32%
Industrial/ Consumer Applications.....23%

Vs.

ATI Sales by End Market 2007
Aerospace/Defense........
Chemical Process/ Oil & Gas.....19%
Electrical Energy.....11%
Medical.....3%
Other.....37%

57% of Titanium Metals end market is commercial aerospace. Industry
estimates put the buy weight of titanium in the B-787 at 225,000 to
250,000 pounds and A380 involves some 150,000 to 200,000 pounds of
titanium (buy weight) per plane.

In addition, TIMET is the primary supplier of Rolls Royce's titanium
requirements for its gas turbine engines:

Trent 900(R) for A-380
Trent 1000(R) for B-787
Trent 1000(R) for A-350XWB

It is clear that TIE will benefit the most (vs. ATI and RTI) from the
coming explosive commercial aerospace demand (A-380, A-350XWB, and
B-787).

Titanium Metals Is Going Down

More bad news for Alan Brochstein...


Titanium Supply Will be Tight Through 2010

Capacity expansions won't help supply until next decade

By Tom Stundza
Purchasing
September 26, 2007

Buyers are correct in worrying about supply of titanium and titanium
alloys through 2010. That's the admission from Dawne Hickton, vice
president and CEO of titanium producer RTI International Metals in
Niles, Ohio, even though producers are dusting off expansion
blueprints for titanium sponge and mill product capacity.
Buyers will have to blend long-term acquisition plans with risk
management programs because "supply still will be the issue for some
time to some," she says, since major jetliner makers already have a
six-year backlog for new aircraft designs that call for three to four
times as much titanium as older models.

Various buyer surveys by Purchasing have found concern about future
availability of titanium-from sponge, the raw material, to final
fabricated parts, which already take as long as 18 months for delivery
these days. "Mill product tightness will continue through 2010,"
Hickton tells the Basic Industries Group's Aerospace Materials Cost
Outlook and Forecast 2007 meeting in Philadelphia this week. "Final
finished product tightness will continue as well."

Reason: One key factor is the time it takes to get new capacity on
line. Hickton says 30-36 months are needed before a new sponge plant
goes in operation and even longer for downstream capacity of mill
products and finished fabricated parts-since production has to be
certified to meet aerospace and medical industry quality requirements.

John Mothersole, an economist with Global Insight in Eddystone, Pa.,
tells the conference that global sponge capacity will increase by 14%
annually between 2006 and 2010 to 220,000 metric tons-based on
expansions announced by RTI, Allegheny Technologies of Pittsburgh,
Russian producer VSMPO-AVISMA, Kobe Steel of Japan and several Chinese
firms. However, some of the Chinese expansions now are in doubt-yet
world demand will surge by as much as 40% in the same timeframe,
keeping pressure on supply and prices.

And there's also a chance that aerospace demand for high-grade
titanium and titanium alloy mill products could grow by as much as 22%
annually next decade- if and when the Boeing 787 and Airbus A350 and
A380 programs really take off. These future-model planes will switch
from traditional aluminum-lithium skins to composite materials to
reduce weight and cut maintenance costs. These planes will require 20%
of their weight to be titanium, as compared with 5% in previous
generations. That means that the Boeing 787 Dreamliner will have
250,000 lb of titanium per plane while the A380 will have 200,000.

© 2007, Reed Business Information, a division of Reed Elsevier Inc.
All Rights Reserved.

www.purchasing.com/art...

Why I'm Not Buying Allegheny Technologies, Titanium Metals, or RTI International Metals, Just Yet

Titanium Supply Will be Tight Through 2010

Capacity expansions won't help supply until next decade

By Tom Stundza
Purchasing
September 26, 2007

Buyers are correct in worrying about supply of titanium and titanium
alloys through 2010. That's the admission from Dawne Hickton, vice
president and CEO of titanium producer RTI International Metals in
Niles, Ohio, even though producers are dusting off expansion
blueprints for titanium sponge and mill product capacity.
Buyers will have to blend long-term acquisition plans with risk
management programs because "supply still will be the issue for some
time to some," she says, since major jetliner makers already have a
six-year backlog for new aircraft designs that call for three to four
times as much titanium as older models.

Various buyer surveys by Purchasing have found concern about future
availability of titanium-from sponge, the raw material, to final
fabricated parts, which already take as long as 18 months for delivery
these days. "Mill product tightness will continue through 2010,"
Hickton tells the Basic Industries Group's Aerospace Materials Cost
Outlook and Forecast 2007 meeting in Philadelphia this week. "Final
finished product tightness will continue as well."

Reason: One key factor is the time it takes to get new capacity on
line. Hickton says 30-36 months are needed before a new sponge plant
goes in operation and even longer for downstream capacity of mill
products and finished fabricated parts-since production has to be
certified to meet aerospace and medical industry quality requirements.

John Mothersole, an economist with Global Insight in Eddystone, Pa.,
tells the conference that global sponge capacity will increase by 14%
annually between 2006 and 2010 to 220,000 metric tons-based on
expansions announced by RTI, Allegheny Technologies of Pittsburgh,
Russian producer VSMPO-AVISMA, Kobe Steel of Japan and several Chinese
firms. However, some of the Chinese expansions now are in doubt-yet
world demand will surge by as much as 40% in the same timeframe,
keeping pressure on supply and prices.

And there's also a chance that aerospace demand for high-grade
titanium and titanium alloy mill products could grow by as much as 22%
annually next decade- if and when the Boeing 787 and Airbus A350 and
A380 programs really take off. These future-model planes will switch
from traditional aluminum-lithium skins to composite materials to
reduce weight and cut maintenance costs. These planes will require 20%
of their weight to be titanium, as compared with 5% in previous
generations. That means that the Boeing 787 Dreamliner will have
250,000 lb of titanium per plane while the A380 will have 200,000.

© 2007, Reed Business Information, a division of Reed Elsevier Inc.
All Rights Reserved.

www.purchasing.com/art...

Why I'm Not Buying Allegheny Technologies, Titanium Metals, or RTI International Metals, Just Yet

Titanium Metals Continues To Be Primary Supplier For UTC's Aircraft

The deal includes United Technologies' Pratt & Whitney, Pratt and Whitney Canada, Sikorsky Aircraft Corp. and Hamilton Sundstrand operating units.

The agreement, effective as of Jan. 1, 2007, provides for Titanium Metal's supply of titanium products to United Technologies Corp. for commercial and military aircraft and aircraft engines.

Why I'm Not Buying Allegheny Technologies, Titanium Metals, or RTI International Metals, Just Yet

"However, the test flights for the Dreamliner have been pushed back (twice now), and this might be having some damage to the near term prospects to ATI."

From American Metal Market (9/7/2007)

News last week that the first test flight of the Boeing 787 Dreamliner has been postponed from September to November-December raised the possibility to some outsiders that it might signal a possible stretch-out in supplier deliveries.

But Boeing Co. says it isn't putting on the brakes. The test flight postponement has been one of the few delays for an aircraft whose production so far has been relatively glitch-free in terms of program schedules, especially for its huge scope. Not only is the 787 important to the aerospace industry around the world, it's particularly critical for titanium producers, for whom the aircraft is the largest in history in terms of potential business. The 787 contains an estimated buy weight of a record 225,000 to 250,000 pounds of titanium, and with 684 firm orders as of last week the plane may be getting the largest liftoff, in market terms, in the history of commercial transports. Delays in the Airbus A380 program--itself a large user of titanium but probably still far less than the 787 over the life of both programs--resulted in a discernable buildup of titanium inventories and probably contributed in part to an eventual reduction in mill lead times as well as to a softening in spot prices. But Boeing Commercial Airplanes, Seattle, said in response to an AMM query that the first flight's postponement "won't impact manufacturer delivery schedules." The Boeing unit pointed out that the flight "involves airplane No. 1, and we continue to produce the follow-on airplanes."

Why I'm Not Buying Allegheny Technologies, Titanium Metals, or RTI International Metals, Just Yet

"Lastly, Allegheny Technologies (ATI) which is the only name of the 3 that I hold in the fund. However, pending a better chart, I am down to a tiny holding position of 0.2% of the fund. When I started the fund in early August, this was the only name of the 3 whose stock price was still holding above the 200 day moving average, so it's relative strength compared to the two others was the best in the group"

The reason ATI was holding above the 200-day moving average was secondary to constant weekly hype by Cramer, not because of ATI fundamentals.

Why I'm Not Buying Allegheny Technologies, Titanium Metals, or RTI International Metals, Just Yet

"My favoritism towards Allegheny Technologies, aside from its superior chart in August was its direct tie to the Boeing (BA)"


Not only ATI has LTA with the Boeing.
Titanium Metals Corp: "We have LTAs with certain major customers, including, among others, The Boeing Company (“Boeing”), Rolls-Royce plc and its German and U.S. affiliates (“Rolls-Royce”), United Technologies Corporation (“UTC,” Pratt & Whitney and related companies), Société Nationale d´Etude et de Construction de Moteurs d´Aviation (“Snecma”), Wyman-Gordon Company (“Wyman-Gordon,” a unit of Precision Castparts Corporation (“PCC”)) and VALTIMET SAS (“VALTIMET”)."
www.timet.com/pdfs/06a...


I agree with Jessica, ATI is a steel and specialty metals company rather than a titanium company. You need to compare apples to apples (not oranges to apples), should compare ATI to X or CRS (same sector), rather than to companies from another sector (TIE and RTI)

80% of ATI business is not titanium.
Nickel-based Alloys
Cobalt-based Alloys
Stainless Steel
Zirconium Alloys
Hafnium Alloys
Niobium Alloys
Tantalum Alloys
Tungsten Materials

20% of ATI business is titanium

Titanium Metals Is Going Down

A little bit more for a self-serving day-trader pretending to be an analyst about margins (by the way when an analysts evaluates a company they compare the company margins to the industry, not to "cell-phones" )


The Operating Margin shows us how much of each sales dollar is left over after subtracting direct costs of generating the sales and indirect costs, such as corporate overhead.

TIE Operating Margin (TTM) - 33.51%
Industry Operating Margin (TTM) - 34.99%


Net Profit Margin that tells us what percent of each sales dollar has been brought to the bottom line after subtracting all costs of any kind.

TIE Net Profit Margin (TTM) - 25.86%
Industry Net Profit Margin (TTM) - 22.89%


Again, Alan Brochstein has made cherry-picking the data pseudo-analysis (omitted comparing Operating and Profit Margins to the industry) with the intention to reduce the stock's price that he had sold short one day prior to posting this pseudo analysis article.

Titanium Metals Is Going Down

Inventory - Work In Progress q/q (2006/2007) is 28% because TIE has added new capacity in Q2-2007 and has higher orders-in-progress volume that will translate into higher revenue and EPS next quarter.

Inventory - Raw Materials q/q (2006/2007) is 14% because again TIE has added new capacity in Q2-2007 and has higher orders-in-progress volume that will translate into higher revenue and EPS next quarter.

You are getting confused in your distorting the facts pseudo-analysis because you keep comparing cell phones with airplanes.

Titanium Metals Is Going Down

Addendum: TIE Gross Margin (TTM) – 38.36% vs. RTI Gross Margin (TTM) – 35.01%

(I know it will be your next question so I will answer it before you make another silly statement)

Because TIE holds multiple titanium alloy patens, Rolls Royce have signed a 10-year agreement with TIE for titanium engine parts used exclusively in Rolls Royce energy efficient new engines (Rolls Royce Trent 1000). TIE has a pricing power because only TIE can make this titanium alloy, no other titanium company in the world can produce this alloy; hence TIE higher margins.