摩根大通：美国商业与教育服务行业研究报告2008年12月

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All Dressed Up And At Your
Service
Extension of Business Services Research: Initiating
Coverage of Uniform Services Sector
Business & Education Services
Andrew C. SteinermanAC
(1-212) 622-2527
andrew.steinerman@jpmorgan.com
William W. Lee
(1-212) 622-2596
wlee2@jpmorgan.com
Jeffrey Y. Volshteyn
(1-212) 622-2940
jvolshteyn@jpmorgan.com
J.P. Morgan Securities Inc.
See page 53 for analyst certification and important disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision. Customers of J.P. Morgan in the United States can receive independent, third-party research on the company or companies
covered in this report, at no cost to them, where such research is available. Customers can access this independent research at
www.morganmarkets.com or can call 1-800-477-0406 toll free to request a copy of this research.
Building on our long-established research of employment services and outsourcing, we
analyze uniform services from both a cyclical and secular perspective. Through either
rental or purchase, ~35% of the U.S. workforce wears a uniform. During this
recession, uniform rental revenues should be down only modestly, since a large
portion of revenues are recurring. Still, the current recession, which has been worse
than the 2001 downturn, caused rather rapid flattening of revenues and earnings misses
recently. Moreover, the sector has normally lagged in its fundamental rebound when
the economy recovers. Secular growth for uniform services has been moderating for a
long period. The recent decline in energy costs yields a partial buffer to the revenue
slowdown in the near term. In summary, we think that investors should bide their
time with uniform services stocks. For Business Services investors looking for an
early-cycle vehicle, we believe that staffing stocks are more appropriate, although
investing in the growth-cyclical staffing sector is arguably somewhat early as
well.
• Uniform services companies have a cash-rich, scalable business model with
recurring revenues and favorable cross-selling opportunities. By our
observation, the vendors’ route service/sales networks provide frequent customer
touch, which facilitates both high client retention and cross-selling. The three
publicly traded uniform firms currently sport an average free cash flow yield of 13%.
The scalable nature of the business, combined with increased automation, has
provided a competitive advantage to the largest vendors over the last decade and
could drive further acquisition activity. Also, the most recent industry slowdown has
sparked top vendors, Cintas in particular, to look internally for further efficiencies.
• In the next economic cycle, the uniform services industry growth rate should
rebound back to ~4%, but below the almost 7% growth rate of the 1990s. Since
the early 1990s, the top four players expanded their market share from 31% to 75%
currently. During the late 1990s, the industry showed signs of maturation, concurrent
with more intense pricing and larger acquisitions (some of which were challenging).
During the recent economic expansion (2002–07), the industry experienced a more
measured revenue growth of ~4%. As sector growth became harder to extract, the
top providers have been investing in sales and marketing efforts, which has dragged
margins modestly. The industry seeks increased participation in new verticals and
the female worker demographic. Even with changes to sales strategy, we expect that
the uniform services growth in the next cycle will only return to ~4% on average.
• Sector valuations appear inexpensive but hard to gauge due to cyclical and
secular factors. Uniform services stocks are down approximately (38)% from their
September 2008 levels. By broad measures, the current sector valuation is at or near
long-time lows. However, we would not compare current valuation or cycle timing
to the 2001 recession as higher recovery growth had been expected at that time but
subsequently was not realized. We rate Cintas (CTAS) an Overweight due to its
dominant market share and its renewed initiatives to enhance efficiencies. We are
Neutral on UniFirst (UNF), and Underweight on G&K Services (GKSR).

Table of Contents
Key Investment Points .............................................................6
Investment Risks......................................................................8
Uniform Services Industry Overview......................................9
History of the Uniform Rental and Sale Industry ........................................................9
Overview of the Uniform Rental and Sale Industry...................................................10
Uniform Sale Marketplace.........................................................................................11
Reasons for Uniforms: Mutual Benefits for Employee and Employer ......................12
The End Markets of Uniforms ...................................................................................12
International Uniform Markets: More Likely a Direct Sale Opportunity for the U.S.
Vendors, Except Canada............................................................................................13
Examining Growth, Margins, and Returns of Uniform
Services and the Expansion into Other Business Services
.................................................................................................14
Measuring Growth of the Uniform Services Industry................................................14
Decomposing the Four Components of Organic Growth...........................................16
Operating Margins of the Uniform Services Industry................................................17
Triangular constraint among margins, revenue acceleration, and selling investments
..................................................................................................................................18
Expansions into Other Business Services ..................................................................18
Net Favorable Characteristics of the Uniform Services Industry...............................19
Uniform Services Stock Performance Muddled Through the
Last Cycle ...............................................................................19
Uniform Services Valuation...................................................21
Cintas: Preparing for Worsening External Environment
Sparks Lasting Efficiencies...................................................24
Initiating Coverage with Overweight Rating .............................................................24
Key Investment Points ...............................................................................................24
Investment Risks........................................................................................................26
Earnings Outlook .......................................................................................................26
Stock Performance and Valuation..............................................................................27
G&K Services: Harder to Balance Margins as Revenues Dip
Before Peers ...........................................................................33
Initiating Coverage with Underweight Rating ...........................................................33
Key Investment Points ...............................................................................................33
Investment Risks........................................................................................................34
Earnings Outlook .......................................................................................................35
Stock Performance and Valuation..............................................................................35
UniFirst: Leading Industry Organic Growth Potential Points
to Strong Sales Productivity .................................................41
Initiating Coverage with Neutral Rating ....................................................................41
Key Investment Points ...............................................................................................41

Investment Risks........................................................................................................42
Earnings Outlook .......................................................................................................43
Stock Performance and Valuation..............................................................................44
Tables
Table 1: The Major Uniform Vendors’ Revenues Attributed to Canada (as a % of
total revenues in fiscal 2008) .....................................................................................14
Table 2: U.S. Uniform/Ancillary Services Rental Market Size Projections/Growth
Rates vs. U.S. Real GDP: Calendar –2002 – 2007 ....................................................15
Table 3: Organic Rental Revenue Growth Rates of the Top Uniform Services
Vendors vs. U.S. Real GDP: Calendar 2002 – 2007..................................................16
Table 4: Average Uniform Rental Costs Breakdown.................................................17
Table 5: Key Metrics of the Top Uniform Services Vendors: Fiscal 2008................19
Table 6: Price/Earnings (NTM) Valuation Multiples: Cintas, G&K Services, and
UniFirst vs S&P 500: 2002 – 2007 and Current ........................................................21
Table 7: Comparative Valuation of Uniform Services Companies............................22
Table 8: Cintas Timeline............................................................................................29
Table 9: Cintas Earnings Model, FY2007 – FY2010E (May) ...................................30
Table 10: Cintas Balance Sheet, FY2006 – 2QF09 (Nov).........................................31
Table 11: Cintas Cash Flow Statement, FY 2006 – 1QF09 (Aug).............................32
Table 12: G&K Services Timeline.............................................................................37
Table 13: G&K Services Earnings Model, FY2007 – FY2010E (June) ....................38
Table 14: G&K Services Balance Sheet, FY2006 – 1QF09 (September)..................39
Table 15: G&K Services Cash Flow Statement, FY2006 – 1QF09 (September) ......40
Table 16: UniFirst Timeline.......................................................................................46
Table 17: UniFirst Earnings Model, FY2007 – FY2010E (August) ..........................47
Table 18: UniFirst Balance Sheet, FY2006 – FY2008 (August) ...............................48
Table 19: UniFirst Cash Flow Statement, FY2006 – FY2008 (August)....................49
Figures
Figure 1: U.S. Market Size of the Broader Uniform/Ancillary Services Sector: 2008
..................................................................................................................................10
Figure 2: Consolidating Market Shares of the Major Uniform/Ancillary Rental
Vendors: 1992 vs. 2008 (market share in % of market size) .....................................11
Figure 3: Uniform Penetration of the U.S. Employment Market: Uniform Workers as
a % of Non-Farm Payroll: 2007.................................................................................13
Figure 4: Uniform Rentals’ Key End Markets (as a % of industry revenues)............13
Figure 5: U.S. Uniform/Ancillary Services Growth Evolution vs. U.S. Real GDP:
1972 – 2007 (Measured with Serial Five-year Compound Annual Growth Rates) ...15
Figure 6: Uniform Vendor Operating Margin Comparison: Cintas, G&K, and
UniFirst: 1994 – 2008 ................................................................................................17
Figure 7: Indexed Stock Performance: J.P. Morgan Uniform Services Stock Index vs.
Uniform Services Average Organic Growth: Calendar 1999 – 2008.........................20
Figure 8: Stock Performance: J.P. Morgan Uniform Services Stock Index vs. J.P.
Morgan Staffing Stock Index and S&P 500:..............................................................21

1990 – 2000 (Left Figure) and 2001 – 2008 (Right Figure) ......................................21
Figure 9: J.P. Morgan Uniform Services Stock Index P/E (NTM) vs. S&P 500: 1999
– 2008 ........................................................................................................................22
Figure 10: Cintas Revenue Profile .............................................................................24
Figure 11: Indexed Stock Price Performance: Cintas: 1990 – 2008 ..........................27
Figure 12: Cintas P/E (NTM) Valuation: 1999 – 2008..............................................28
Figure 13: G&K Revenue Profile ..............................................................................33
Figure 14: Indexed Stock Price Performance: G&K Services: 1990 – 2008 .............36
Figure 15: GKSR P/E (NTM) Valuation: 1999 – 2008 .............................................36
Figure 16: UniFirst Revenue Profile..........................................................................41
Figure 17: Indexed Stock Price Performance: UniFirst: 1990 – 2008 .......................44
Figure 18: UNF P/E (NTM) Valuation: 2000 – 2008 ................................................45

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