CONSUMER DISCRETIONARY
STOCK PRESENTATION
Xiaotao An
Christian Bonner
Shuyu Chen
Michael Deffet
Sector Recap
Sector
Consumer
Discretionary
S&P 500 weight
SIM weight
+/-
12.07%
13.18%
Overweight
1.11%
Taking the SIM weight down from 13.18% to 12.18%
Service Corporation International
(SCI)
Company Overview
 The largest death-care
provider in North
America.
 Provides funeral goods
and services as well as
cemetery property and
other related services in
the United States, Canada
and Germany.
 Operates in 1,644 funeral
service locations, 514
cemeteries in 43 states
and 8 Canadian provinces
Basic data
 Market data:
Market cap
Financial data (TTM):
4.15B
Shares Outstanding 212.38M
Dividend Yield
Beta
52 week price
range
Revenue
2.56B
Revenue Growth
6.20%
Gross Margin
21.5%
Operating Margin
16.6%
P/E
28.84
EPS
0.67
1.7%
0.87
$15.27-19.59
One year price performance
Drivers:
Risks:
 Unparalleled network
• Insider Trading Alert
 Diversified-brand portfolio:
• Uncertainty factors in the U.S
Dignity Memorial®
 The Acquisition of Steward
gives SCI high synergies and
expand its service areas.
 Aging population in U.S.
economy
• Difference between current price
and target price is becoming
smaller
Peer Analysis
FY2013
SCI
CSV US
HI US
MATW US
Industry
Revenue Growth
6.05%
6.21%
54.53%
8.91%
10.52%
EBITDA Margin
22.97%
24.08%
13.36%
13.56%
19.46%
ROE
10.43%
13.41%
11.84%
10.31%
22%
Current ratio
0.61
0.69
1.37
2.35
1.2%
Debt/Assets
25.58%
36.38%
33.16%
30.76%
37.74%
DCF model
SCI
Analyst: Xiaotao An
Date: 4/4/14
Terminal Discount Rate =
Terminal FCF Growth =
Shares Outstanding
Current Price
Implied equity value/share
Upside/(Downside) to DCF
Debt
Cash
Cash/share
215,877
$
$
19.54
21.51
10.1%
2,257,103
182,592
0.85
9.2%
4.5%
Terminal Growth rate
Sensitivity Analysis
3.60%
3.90%
4.20%
4.50%
4.80%
5.10%
5.40%
$
$
$
$
$
$
$
8.30%
22.94
24.02
0.04
26.69
28.37
30.37
32.77
$
$
$
$
$
$
$
8.60%
21.52
22.45
23.50
24.71
26.11
27.75
29.70
$
$
$
$
$
$
$
Terminal Discount Rate
8.90% 9.20% 9.50%
20.27 $ 19.15 $ 18.14
21.07 $ 19.85 $ 18.76
21.97 $ 20.63 $ 19.44
23.00 $ 21.51 $ 20.20
24.18 $ 22.52 $ 21.06
25.55 $ 23.67 $ 22.04
27.15 $ 25.00 $ 23.16
$
$
$
$
$
$
$
9.80%
17.24
17.78
18.37
19.04
19.78
20.62
21.58
10.10%
$ 16.41
$ 16.89
$ 17.42
$ 18.00
$ 18.65
$ 19.38
$ 20.20
10.40%
$ 15.66
$ 16.09
$ 16.55
$ 17.07
$ 17.64
$ 18.27
$ 18.98
Multiple Valuation
SCI
Industry Average
S&P 500
Consumer discritionary
Relative to Industry
Relative to S&P 500
Relative to sector
P/FCF
14.88
20.35
9.18
N/A
0.73
1.62
N/A
P/B
P/S
2.87
4.41
2.60
4.25
0.65
1.10
0.67
1.58
2.35
1.68
1.44
0.67
0.94
1.10
P/E
20.97
20.71
17.15
20.75
1.01
1.22
1.01
Multiples Valuation
Current
Price
19.54
Date
2014/4/4
Current
Multiple(SCI) CSV
IVC
AU
HI
DTY
MATW LN
Target
Multiple
Target
Price
% chg from
current price
P/E
20.97
20.16 24.03 25.51 16.48 19.27
21.09
19.65
0.6%
P/S
1.58
1.48
3.05
1.22
1.12
3.05
1.98
24.54
25.6%
P/B
2.87
2.11
6.89
3.52
1.98
9.14
4.73
32.19
64.7%
average
25.46
30.3%
Recommendation
 Target Price
Target Price
Potential
Weight
DCF Target
Price
$ 21.51
10.1%
75%
Multiple
Target Price
$ 25.46
30.3%
25%
Weighted
Average Price
$ 22.50
15.13%
100%
 Projected Return including dividend: 16.83%
 Recommendation: BUY
Abercrombie & Fitch
(ANF)
Company Overview
 Retailer of casual clothing for young people
Basic data
 Market data:
Financial data (TTM):
Market cap
2.85B
Revenue
4.12B
Shares
Outstanding
78.7M
Revenue Growth
-8.7%
Gross Margin
62.6%
Dividend Yield
$0.80 (2.1%)
Operating Margin
2.0%
Beta
1.85
Net Profit Margin
1.3%
52 week price
range
$31.14-55.23
P/E
56.30
EPS
$1.91
One year price performance
Drivers:
• Strong brand recognition
• Strong increase in disposable
income, especially for teens
• Successful adoption of Fast
Fashion technique
• Strong sales internationally
Risks:
• Activist Investors
• Missing earning
expectations
Peer Analysis
DCF model
Sensitivity Analysis
Multiple Valuation
Multiples Valuation
Absolute
Multiple
(current)
ANF
AEO
P/E
56.20
28.65
P/S
0.70
0.71
P/CF
17.40
10.70
EV/EBITDA
5.84
5.50
Average target price
% change from current prices
GPS
14.66
1.10
11.30
6.68
Target
Target
Multiple Price
33.17
0.84
13.13
6.01
22.93
46.44
29.32
39.96
34.66
-10.78%
Recommendation
 Target Price
Target Price
Potential
Weight
DCF Target
Price
$43.08
10.8%
70%
Multiple
Target Price
$34.66
-10.78%
30%
Weighted
Average Price
$40.554
4.32%
100%
 Recommendation: SELL
DirecTV
(DTV)
Company Overview
• The largest US satellite TV company
• Transmit digital satellite television and audio to households in the US and
Latin America
• Three business segments: DirecTV U.S., DirecTV Latin America, Sports
Network, Eliminations and Other.
Operating Income Breakdown by Segment
Sales Breakdown by Segment
35000
6000
30000
5000
20000
DIRECTV Latin America
15000
10000
Operating Income (MM)
25000
Sales (MM)
Sports Networks,
Eliminations and
Other
Sports Networks,
Eliminations and Other
4000
3000
DIRECTV Latin
America
2000
1000
DIRECTV U.S
DIRECTV U.S
5000
0
2009
0
2009
2010
2011
2012
2013
-1000
2010
2011
2012
2013
Basic data
Market data:
Financial data (TTM):
Market cap
38.58B
Revenue
31.75B
Shares
Outstanding
553M
Revenue Growth
6.77%
Gross Margin
47.59%
Dividend Yield
0%
Operating Margin
16.22%
Beta
1.13
Net Profit Margin
9.0%
52 week price
range
53.50-80.77
P/E
12.75
EPS
5.17
One year price performance
Drivers:
Risks:
• Large share buyback launched since
• Volatility of Latin American market
2006
• Sports leader in the pay TV industry
• Mature and competitive US market
• Strong brand presence
•
Rising programming costs
• Underpenetrated pay TV market in
•
Lack of broadband pipe
•
High level of debt
•
Stock buyback might slow down
Latin America
• Low threat of US cable companies
potential entrants in Latin America
• Recovery of US economy
Peer Analysis
FY2013
DTV
DISH
CMCSA
TWC
Industry
Revenue
Growth
6.77%
5.5%
3.30%
3.4%
9.09%
EBITDA
Margin
25.12%
20.75%
23.48%
34.90%
30.89%
ROA
13.47%
6.20%
5.20%
6.00%
5.09%
Current ratio 0.91
2.70
0.74
0.4
0.74
Debt/Assets
66.99%
30.13%
85.61%
42.72%
89.20%
DCF Model
Terminal Discount Rate
10.75%
Terminal FCF Growth
3.0%
Shares Outstanding
553M
Current Price
$76.73
Implied equity value/share
$84.24
Upside to DCF
9.8%
Sensitivity Analysis
Multiple Valuation
Relative to
industry
high
P/E
median
current
19.1 15.06
5
0.89
0.74
P/S
1.17 0.67
0.88
P/CF
1.51 0.74
1.16
Relative
to S&P
high
low
low
median
Relative
to sector
high
low
median
current
P/E
3.22
0.61
1.04
0.68
0.74
P/S
2.48
0.83
1.68
0.94
0.82
P/CF
1.22
0.45
0.68
0.51
current
Absolute
Multiples
high
median
current
P/E
70.6 11.05
18.21
14.24
low
P/E
4.18
0.75
1.12
0.83
P/S
2.13 1.07
1.47
1.33
P/S
1.41
0.71
1.06
0.79
P/CF
7.08
6.59
P/CF
1.37
0.64
0.85
0.73
16.7 5.71
3
Multiples Valuation
Recommendation
 Target Price
Target Price
Potential
Weight
DCF Target
Price
84.24
9.79%
70%
Multiple Target
Price
80.94
5.50%
30%
Weighted
Average Price
83.25
8.50%
100%
 Recommendation: HOLD
Target Corporation
(TGT)
Company Overview
 Current Price: 61.14
 The second-largest discount retailer in the United States after
Wal-Mart Stores Inc.
 Upscale discounter with a strong emphasis on the high-quality,
on-trend merchandise guests want at a bargain.
 Currently ranked at 36 in the Fortune 500 as of 2013 and is a
component of the Standard & Poor's 500 index.
Basic data
Market data:
Financial data (TTM):
Market cap
38.71B
Revenue
72.60B
Shares
Outstanding
633.17
Revenue Growth
-0.96%
Gross Margin
29.53%
Dividend Yield
2.70%
Operating Margin
5.93%
Beta
0.8
Net Profit Margin
2.72%
52 week price
range
54.66 - 73.50
P/E
19.92
EPS
3.07
One year price performance
Drivers:
Risks:
 Moving to International Markets As  Credit and debit card security breach





The U.S. Market Is Saturated
REDcard Reward Program And
Innovative Approach Expected To
Continue Driving Traffic
Continued U.S economic growth
Increase in U.S housing market
performance
Increase in consumer disposable
income
Target product line expansion
 Stock market volatility
 Consumer confidence and spending
 Threat of self-cannibalization due to
massive size
 Weak macroeconomic conditions
 Canada losses
Peer Analysis
DCF model
Sensitivity Analysis
Multiple Valuation
Multiples Valuation
Current Price
Date
61.14
4/4/2014
Current Multiple Current Multiple WMT COST PSMT BIG FRED Target Multiple Target Price%change from current price
P/E
19.90 14.3 24.4 32.5 10.0 23.4
10.0
30.72
-59.8%
P/S
0.50 0.5 0.5 1.2 0.3 0.3
0.50
61.14
-20.0%
P/B
2.40 3.3 4.4 5.5 2.0 1.5
3.0
76.43
0.0%
average
56.10
-26.6%
Recommendation
 Target Price
Target Price
Potential
Weight
DCF Target
Price
53.73
-13.79%
75%
Multiple
Target Price
56.10
-8.98%
25%
Weighted
Average Price
54.33
-11.14%
100%
 Recommendation: NOT BUY
Conclusion
Stock
Ticker
Current%
of SIM
Potential
up/down
Recommen
dation
Proposed
% of SIM
Service
Corporation
International
SCI
0%
15.13%
BUY
1.0%
Abercrombi
e & Fitch
ANF
3.54%
4.32%
SELL
1.54%
DirecTV
DTV
5%
8.50%
HOLD
5%
Tumi
TUMI
1.84%
-
HOLD
-
Comcast
CMCSA
2%
-
HOLD
-
Dollar
General
DG
1.08%
-
HOLD
-
Target
TGT
0%
-11.14%
NOT BUY
-