[PPT] - Argan Inc. (NYSE: AGX) $29.97 Table of Contents Recommendation PowerPoint Presentation

SLIDE 1

Argan Inc. (NYSE: AGX) $29.97

SLIDE 2

Recommendation

Ø Purchase Argan Inc.’s equity at $30.00

Ø This would provide a 38.6% discount to going concern value Ø This price would make the shares trading bellow their P/B of 1.8x (excluding Costs/Billings in Excess).

SLIDE 4

Business Overview

Argan, Inc. ("Argan")

Ø conducts operations through its wholly- owned subsidiaries

Gemma Power Systems, LLC ("GPS") Southern Maryland Cable, Inc. ("SMC”)

¡

SLIDE 5

Gemma Power Systems

Ø Provides a full range of development, consulting, engineering, procurement, construction, commissioning, operations and maintenance services to the power generation and renewable energy markets . Ø Accounted for 98% of revenue in most recent 10-Q

Ø 95% of revenues in 2013

Ø (December 8, 2006) Acquired for $31.1 million, consisting of $10.9 million in cash and $20.2 million in common stock

SLIDE 6

Gemma Power Systems

Type of System Number of Projects Total MWs Average MWs per System Type Combined Cycle 10 5006 501 Peaking of Simple Cycle 13 4618 355 Pollution Control 2 1065 533 Ethanol 1 100 100 Bio-Diesel 3 250 83 Biomass 1 50 50 Wind 4 224 56 Solar 3 18 6 Projects

SLIDE 7

Gemma Power Systems

Ø Current Projects

Ø Panda Liberty LLC Ø Panda Patriot Power Project

Ø Both 800 MW Combined Cycle Ø All of backlog amount of $520 (10/31/2014)

Ø East Texas Electric Cooperative Inc.

Ø 49.9 MW Biomass-fired power plant (Completed 3 months early)

SLIDE 8

Southern Maryland Cable

Ø Provides inside premise wiring services to the federal government as part of the federal government commitment to Homeland Security improvements. Ø Provides underground and aerial construction services and splicing to major telecommunications and utilities customers. Ø Generated 6.2% and 6.6% of revenues in 2013 and 2012. Ø (July 17th, 2003) Acquired for $4 million in cash, plus approximately $971,000 in debt. Ø Argan suffered an impairment loss of $1,942,000 after making the acquisition

SLIDE 9

Management

Bosselmann ¡was ¡CEO ¡of ¡Arguss, ¡a ¡telecommunica7on ¡company ¡from ¡ 1966 ¡to ¡2002 ¡before ¡coming ¡to ¡Argan ¡Inc. ¡ ¡ ¡ Arthur ¡Trudel ¡(former ¡CFO) ¡was ¡replaced ¡by ¡Cynthia ¡Flanders ¡(Board ¡ Member) ¡ ¡

Trudel ¡is ¡going ¡to ¡stay ¡and ¡advise ¡the ¡CEO ¡

¡ Cynthia ¡Flanders ¡had ¡many ¡different ¡posi7ons ¡within ¡Bank ¡of ¡ America ¡from ¡1975 ¡to ¡2009 ¡

Salary Earned Bonus Earned Stock Option Awards All Other Compensation Rainer H. Bosselmann 2014 $225,000.00 $200,000.00 $83,750.00 $1,200.00 Chief Executive Officer 2013 200,000 150,000 60,300 1,200 2012 200,000 125,000 49,000 1,200 Cynthia Flanders 2015* $225,000.00 $200,000.00 $67,000.00 $1,600.00 Senior Vice President, Chief Financial Officer and Corporate Secretary William F. Griffin, Jr 2014 $602,308.00 $2,500,000.00 $- $37,150.00 Vice Chairman and Chief 2013 600,000 900,000 65,900 18,000 Executive Officer, Gemma 2012 533,333 500,000

18,000

Daniel L. Martin 2014 $286,097.00 $500,000.00 $46,800.00 $37,150.00 President, Gemma 2013 282,653 425,000 76,950 16,500 2012 275,000 225,000 111,300 12,000 Executive Officers Name and Principal Position Fiscal Year

SLIDE 10

Recent Events

Ø JP Morgan Asset Management Holdings reported to now owning 5.8% of the common

utstanding

Ø Moxie Freedom Project (900 MW Natural Gas Plant)

Ø Loaned $6 million to Moxie for development Ø Conditions are present for Gemma to do the EPC for project Ø Projected start: 2016 (Panda Projects expected to be complete)

Ø Management and Boards have redeemed options. Increasing shares outstanding from 14,439,701 (Q2) to 14,529,201 (Q3) Ø Their fiscal year ended January 31, 2015 (Have 75 days to file 10K)

SLIDE 11

Financials

Income Statement (LTM)
Revenue = $340.3
COGS = $257.7
Gross margin = 24.3%
EBITDA margin = 19.3%
Balance Sheet (7/31/2014)
PP&E = $5.6 million
Total Assets = $414.4 million ($361 cash)

!(100)!!! !0!! !100!! !200!! !300!! !400!! 2008! 2009! 2010! 2011! 2012! 2013! LTM!

Dollar!Amount!(Mil)! Fiscal!Year!

Cash!PosiAon!

Cash! Free!Cash!Flow!

SLIDE 12

Safe

Ø Argan has upside of $48.85 a share, on a going concern basis (Zero growth and 12% Cost of Equity)

Ø They have no debt Ø Around $361 million in cash ($209.9 held by joint ventures) Ø Management within Argan and Gemma Power Systems

Name Position Years in Industry William F. Griffin Jr. CEO 37 Daniel L. Martin President 32 William G. Carter CDO 30+ Joel W. Canino Sr VP 25+ Bruce M. Davis Sr VP 35 John S. Gorzkow ski Jr. Sr VP 30 Ronald W. Polaske Sr VP 30+ Christopher J. Kollmer VP 30 Gemma Management

SLIDE 13

Valuation

Ø According to our SDCF, Argan is currently trading at a 33% discount. At $30 it would be at a 38.6% discount

EBITDA*x Multiple(for(n(periods(((((((Term(I) 2.24x PV(of(Terminal(Multiple(((Term(II) 3.04x Leverage(Multiple(((((((((((((Term(III) 0.00x Estimated0Multiple:0M_ed 5.28x Price(per(share(at(M_ed((GC): 23.96 $ Surplus(Cash(per(share((((RC): 24.90 $ Total(value(per(share 48.85 $ Discount((Premium) 33.8% Number0of0growth0years 5 Unlevered0cost0of0equity 12.00% Input0Growth0in0EBITDA 0.00% Estimated(Multiple(based(on(Growth(and(Unlevered( cost(of(equity(assumptions(below CAPEX&+&NWC 2.10 $ D&A 0.80 $ Sales 340.30 $ EBITDA 65.8 $ EBIT 65.00 $ Ajusted&LT&Debt

$

LT&Debt

$

Surplus&Cash 361.0 $ Mkt&Cap 469.1 $ EV 108.1 $ Interest

$

Annual&Rent

$

Capitalized&Leases

$

EBITDAR&Analysis? No (Ebitda&G&Capex)/EV 58.94% WACC LTM$(October$31,$2014)

SLIDE 14

Valuation

Ø On a public company comparable basis, AGX is trading slightly above its low

f $27.38

EV#/#Revenues EV#/#EBITDA EV#/#EBIT P/E# MasTec, Inc. 0.6x 6.7x 10.5x 11.4x Primoris Services Corporation 0.7x 7.8x 11.0x 19.3x Chicago Bridge & Iron Company 0.5x 5.7x 6.8x 6.9x

Argan#Inc.

0.4x 2.0x 2.0x 13.5x

High 0.7x 7.8x 11.0x 19.3x Low 0.6x 6.7x 10.5x 11.4x Median 0.6x 7.2x 10.7x 12.5x Mean 0.5x 5.5x 7.6x 15.4x

Share Price Based on Median Multiple 37.75 $ 50.00 $ 58.84 $ 27.38 $ High 58.84 $ Low 27.38 $ Current 31.61 $ Comparable Analysis

SLIDE 15

Valuation

Year Book ¡value Dividends BV ¡Growth BV+Div ¡ Growth BVPS BVPS ¡ Growth BVPS ¡+ ¡Div ¡ Growth Price/sh Share ¡ Price ¡ ¡ Growth Div/Sh Sh+Div ¡ Growth P/B Shares ¡OUT

2007

41.9

‑

$ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ 3.8 $ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ 11.34 $ 3.0x 11.4 2008

79.1

‑

$ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ 89% 89% 5.9 $ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ 56.58% 57% 11.24 $

0.9%
$
0.9%

1.9x 13.4 2009

88.4

‑

$ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ 12% 12% 6.5 $ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ 10.11% 10% 14.20 $ 26.3%

$

26.3% 2.2x 13.6 2010

97.6

‑

$ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ 10% 10% 7.2 $ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ 10.41% 10% 9.27 $

34.7%
$
34.7%

1.3x 13.6 2011

101.3

6.80 $ ¡ ¡ ¡ ¡ ¡ ¡ ¡ 4% 11% 7.4 $ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ 3.03% 10% 14.50 $ 56.4% 0.50 $ 61.8% 2.0x 13.7 2012

120.9

8.40 $ ¡ ¡ ¡ ¡ ¡ ¡ ¡ 19% 28% 8.6 $ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ 16.79% 25% 18.80 $ 29.7% 0.60 $ 33.8% 2.2x 14 2013

156.3

10.60 $ ¡ ¡ ¡ ¡ ¡ 29% 38% 10.9 $ ¡ ¡ ¡ ¡ ¡ ¡ ¡ 26.57% 35% 28.41 $ 51.1% 0.74 $ 55.1% 2.6x 14.3 Average

2.16x

ACGR 14.59% 19.22% 13.11% 17.68% 20.38% 22.58% TR 97.60% 85.16% 152.76% 169.11% 2008 2009 2010 2011 2012 2013 EOY ¡CE 79 $ 156 $ 60 $ 139 $ OIAIT 6 $ 10 $ 7 $ 24 $ 39 $ DIVs ¡Paid ¡in

$
$

(7) $ (8) $ (11) $ #N/A Total ¡Wealth Retained ¡Wealth 86 $ GC 60 $ 17 $ RC 17 $ 103 $ TOTAL 77 $ Argan ¡Inc. ¡

SLIDE 16

Valuation

Year Book(value Dividends BV(Growth BV+Div( Growth BVPS BVPS( Growth BVPS(+(Div( Growth Price/sh Share(Price(( Growth Div/Sh Sh+Div( Growth P/B Shares(OUT

2007

93.96

A $((((((((( 3.8 $(((((((((( 11.34 $ 3.0x 11.4 2008

77.87

A $(((((((((

17%
17%

5.8 $(((((((((( 54.14% 54% 11.24 $

0.9%
$
0.9%

1.9x 13.4 2009

77.31

A $(((((((((

1%
1%

5.7 $((((((((((

2.18%
2%

14.20 $ 26.3%

$

26.3% 2.5x 13.6 2010

106.12

A $((((((((( 37% 37% 7.8 $(((((((((( 37.27% 37% 9.27 $

34.7%
$
34.7%

1.2x 13.6 2011

166.48

6.80 $(((((((( 57% 63% 12.2 $(((((((( 55.73% 62% 14.50 $ 56.4% 0.50 $ 61.8% 1.2x 13.7 2012

193.08

8.40 $(((((((( 16% 21% 13.8 $(((((((( 13.49% 18% 18.80 $ 29.7% 0.60 $ 33.8% 1.4x 14 2013

290.52

10.60 $(((((( 50% 56% 20.3 $(((((((( 47.31% 53% 28.41 $ 51.1% 0.74 $ 55.1% 1.4x 14.3 Average

1.80x

ACGR 30.12% 33.24% 28.44% 31.52% 20.38% 22.58% TR 273.08% 249.60% 152.76% 169.11% 2008 2009 2010 2011 2012 2013 EOY(CE 78 $ 291 $ 60 $ 138 $ OIAIT 6 $ 10 $ 7 $ 24 $ 39 $ DIVs(Paid(in

$
$

(7) $ (8) $ (11) $ #N/A Total(Wealth Retained(Wealth 86 $ GC 60 $ 153 $ RC 153 $ 238 $ TOTAL 213 $ Argan&Inc.&(Minus&Cost/Billings&in&Excess)

Costs ¡and ¡es7mated ¡earnings ¡in ¡excess ¡of ¡billings ¡– ¡Asset ¡ Billings ¡in ¡excess ¡of ¡costs ¡and ¡es7mated ¡earnings ¡– ¡Liability ¡ ¡

SLIDE 17

Catalysts

Ø Panda Projects: 800MW combined cycle generating systems

Ø Accounts for $520 million of the company’s backlog. Ø Expected to be complete in middle and early 2016.

Ø Argan has paid special dividends:

Ø $.50, $.60, $.75 in 2011, 2012 and 2013. Ø The recently announced a $.70 dividend payable to holders of record as of October 15th.

Ø These dividends have provided a yield of around 2.00%

Ø Company Strategy:

Ø “To make additional acquisitions and/or investments by identifying companies with significant potential for profitable growth.”

Ø With so much cash on hand management can execute this strategy once prices start to deflate.

Ø Gemma Power System’s Management Ø New Moxie Freedom Project

SLIDE 18

Risks

Ø The company could “go dark” Ø As of January 31, 2014 they only had 119 holders of record Ø Company management and board members have an incentive to keep the company listed.

Ø The board and officer of the company own around 10.96% of the total dilutive shares outstanding.

Ø They do not hold quarterly calls on their earnings. Ø Potentially dilutive company as they have issued shares to acquire companies. Ø Southern Maryland Cable (SMC): 1,303,974 shares of common stock at $7.75 per share. Ø Vitarich Laboratories (VLI): 825,000 shares and issued another 760,000 to pay Kevin Thomas,

wner of VLI, on a subordinated note.

Ø Gemma Power Systems (GPS): 3,666,667 shares of common stock at $5.50 per share and issued 2,853,335 shares privately to raise the cash funds for the transaction. Ø We believe they will slow down the issuing of shares for companies because the board and executives own 10.96% of shares outstanding.

SLIDE 19

Risks (cont.)

Ø Management’s deal making ability: Ø $5,810,000 impairment loss from Vitarich and another $1,942,000 impairment from Southern Maryland Cable Ø Gemma is limited on the number of projects they can work on. Ø Always have had a backlog of fewer than six projects. Ø Their current backlog consists of two projects

Ø Both Panda Projects

Ø A new Financial Accounting Standard, “ASU 2014-09”

Ø Argan will have to follow new revenue recognition standards

Ø Goes into effect December 15, 2016

Ø There is one outstanding litigation against the company: Altra Matters Ø a lawsuit that Gemma filed against ALTRA Nebraska to obtain money from the portion of the project that they completed before Altra went bankrupt.

Ø The lawsuit began in 2008

Ø The lawsuit looks to be ending soon

SLIDE 20

Recommendation

Ø Purchase Argan Inc.’s equity at $30.00

Ø This would provide a 38.6% discount to going concern value Ø This price would make the shares trading bellow their P/B of 1.8x (excluding Costs/Billings in Excess).

SLIDE 21