SIM Stock Presentation:
Information Technology
Presenters: Krisztina Nadasdy, Yvonne Qi, Randy
Oenardi Raharjo, David Robinson, Tony Cui
Stock Presentation: Information
Technology
AGENDA
Sector & Portfolio Overview
Stock Discussion
Recommendation
Appendix
2
Stock Presentation: Information Technology
Sector &
Portfolio
Overview
3
Stock Presentation: Information Technology
S&P 500 SECTOR
WEIGHTS
Telecom
2%
Materials
3%
Utilities
3%
Energy
7%
Consumer
Staples
10%
Utilities
2%
Cash
3%
Telecom
2%
Materials
3%
Info
Tech
21%
Consumer
Staples
10%
Energy
7%
Financials
16%
Health
Care
15%
Dividend
Receivables
0%
Consumer
Discretion
ary
13%
Info Tech
21%
Industrials
10%
Consumer
Discretion
ary
13%
SIM PORTFOLIO
WEIGHTS
Industrials
10%
Financials
16%
Health
Care
13%
4
Stock Presentation: Information Technology
Activision Blizzard, Inc.
Apple, Inc.
Information
Technology
Stocks in SIM
Portfolio:
EMC Corp.
Google, Inc.
Micron Technology, Inc.
Vantiv, Inc.
5
Stock Presentation: Information Technology
PORTFOLIO BREAKDOWN BY INDUSTRY
IT Sector
Breakdown:
Semiconductors:
Micron
Software and Services:
Apple, Activision, Google, Vantiv
Technology and Hardware:
EMC, Apple
6
Stock Presentation: Information Technology
IT STOCKS IN SIM PORTFOLIO: CURRENT STATE [11/16]
Company
Market Value
Price/Share
Weight
Activision, Inc.
$286,860.00
$34.15
3.14%
Apple, Inc.
$272,951.76
$113.73
2.99%
EMC Corp.
$359,916.04
$25.35
3.94%
Google, Inc.
$365,118.60
$745.14
4.00%
Micron
Technology, Inc.
$228,429.00
$14.93
2.50%
Vantiv, Inc.
$589,164.00
$50.79
6.54%
7
Stock Presentation: Information Technology
SECTOR RECOMMENDATIONS:
• Sector as whole: overweight
relative to the S&P 500
• Preferred Industry within InfoTech Sector: Software and
Services
• Risks: Possible second
“Internet Bubble”, Cyclical
Industry – Short Life Cycle,
Price Competition
8
Stock Presentation: Information Technology
STOCK RECOMMENDATIONS
Stock
Decision
Current
Weight
Proposed Change
Weight
AAPL
HOLD
2.99% 2.99%
0
EMC
HOLD
3.94% 3.94%
0
ATVI
BUY
3.14% 4.64%
+ 150 bp
VNTV
SELL
6.54% 4.54%
- 200 bp
GOOGL
HOLD
4.00% 4.00%
0
MU
HOLD
2.50% 2.50%
0
9
Stock Presentation: Information Technology
Stock
Discussion
10
Stock Presentation: Information Technology
STOCK OVERVIEW: MICRON TECHNOLOGY, INC.
• One of the largest memory chip
makers in the world.
• Makes DRAM, NAND Flash,
and NOR Flash memory and
other memory technologies.
Stock Ticker
MU
Recommendation
HOLD
Current SIM %
2.57%
Recommended SIM %
2.57%
Current Stock Price
$14.89
Consensus Price Target
$21.37
SIM Price Target
$20.00
Potential Upside
34%
Beta
1.82
Profit Margin (ttm)
17.9%
ROE
23.38%
Forward P/E
6.53
11
Stock Presentation: Information Technology
STOCK OVERVIEW: EMC
EMC Corporation is a multinational
American company offering data
storage, information security, cloud
computing, virtualization, analytics and
other products and services in
providing ITaaS and PaaS.
Ticker
EMC
Recommendation
HOLD
Current SIM%
3.94%
Recommended SIM%
3.94%
Current Price
$25.28
Consensus Price Target
$30.00
SIM Price Target
$26.37
Dividend Yield
1.77%
Potential Upside
20.44%
ROE
11.04%
Forward P/E
12.77
12
Stock Presentation: Information Technology
STOCK OVERVIEW: ALPHABET, INC. [GOOGLE]
Alphabet Inc., through its
subsidiaries, builds technology
products and provides services to
organize information. The company
offers Google Search that provides
information online. It also provides
YouTube that offers video; Android,
hardware products including
Chromebook, Chrome OS devices,
Chromecast, and Nexus devices;
Google Play, Google Drive, and
Google Wallet. In addition, the
company provides Google Apps,
which include Gmail, Docs, etc.
Stock Ticker
GOOG
Recommendation
HOLD
Current SIM %
4.00%
Recommended SIM %
4.00%
Current Stock Price
$747.00
Consensus Price Target
$804.00
SIM Price Target
$804.00
Potential Upside
8.0%
Beta
0.92
ROE
23.38%
Forward P/E
6.53
13
Stock Presentation: Information Technology
STOCK OVERVIEW: VANTIV
Vantiv, Inc. is an “integrated
payment processor” - it
enables merchants and financial
institutions to accept and
process card and electronic
payments. In addition to
payment processing, the
company offers data security
services, financing services, gift
and prepaid services, and
compliance services.
Ticker
VNTV
Recommendation
SELL
Current SIM%
6.54%
Recommended SIM%
4.54%
Current Price
$51.23
Consensus Price Target
$55.05
SIM Price Target
$54.51
Dividend Yield
0.00%
Potential Upside
5.9%
ROE
19.02%
Forward P/E
19.70
14
Stock Presentation: Information Technology
STOCK OVERVIEW: VANTIV
12 Month Stock Price Vantiv
$55.00
$50.00
Last Price
$45.00
$40.00
$35.00
$30.00
$25.00
$20.00
Date
15
Stock Presentation: Information Technology
VANTIV LAST PRICE AND E-COMMERCE QUARTERLY
16
Stock Presentation: Information Technology
VANTIV LAST PRICE AND MOBILE PAY INDEX
17
Stock Presentation: Information Technology
VANTIV AND CREDIT CARD COMPANIES
18
Stock Presentation: Information Technology
VALUATION & FINANCIAL MULTIPLES:
VANTIV AND PEER COMPANIES
Ticker
Mkt Cap P/E
P/S
P/B
P/CF
EV/EBITDA
ROE
Average 30.36B
31.54
4.53
6.30
15.02
12.78
19.02%
VNTV
9.48B
47.02
2.43
10.59 11.61
16.98
19.03%
Change
-20.88
+15.5
-2.1
+4.29 -3.4
+4.2
0
Insights:
• Some multiples indicate that the stock is overpriced [P/E, P/B,
EV/EBITDA]
• Others indicate that it is a good investment [P/S, P/CF]
19
Stock Presentation: Information Technology
VANTIV: RISKS
Risks of Holding Vantiv
•
•
•
•
•
Acquisition Risk
Short History
Data Security
Price War
Quickly Changing Industry with a
complex set of stakeholders
• Regulations
20
Stock Presentation: Information Technology
VANTIV ANALYSIS RECAP
Why Keep?
Why Sell?
• Competitive
advantage in
growing industry
• Largest
payment
processor by
volume in 2014
• Over-weighted
in the SIM
portfolio at
6.54%
• Potential upside
is only 6%
21
Activision Blizzard, Inc. is a leading
global developer and publisher of
interactive entertainment for prior
generation and next-generation
consoles, PCs, and mobile devices.
Ticker
ATVI
Recommendation
BUY
Current SIM%
3.14%
Recommended SIM%
4.64%
Current Price
$34.95
Consensus Price Target
$41.50
SIM Price Target
$39.00
Dividend Yield
0.82%
Potential Upside
12.41%
ROE
14.63%
Forward P/E
22.80
22
12 Month Price Movement
23
Valuation Has Remained Within
Reasonable Range of Competitors
Ticker
P/E TTM
P/S TTM
P/B
P/CF TTM
EV/EBITDA
TTM
ATVI
25.64
3.21
3.40
11.17
9.16
Average 24.20
2.98
4.76
11.28
9.29
Valuation Not Necessarily Cheap In
Historical Terms
Absolute
Basis
High
Low
Median
Current
P/E
90.76
10.55
20.94
22.80
P/B
3.40
0.98
1.39
3.12
P/S
5.51
2.29
3.28
5.08
6.65
10.64
13.82
P/EBITDA 15.71
24
Stock Presentation: Information Technology
ACTIVISION: COMPETITIVE LANDSCAPE
Sustained Competitive Advantages:
1. Exceptional Leadership
2. Intellectual Property
3. Size
Primary Risks:
1. Foreign Exchange Exposure (50% of
sales)
2. Hit-Driven Industry
3. Changes In Tax Legislation
25
Leadership
•
•
•
CEO and President Bobby Kotick and Chairman Brian Kelly
have run the company for the last 20 years
$100 invested in ATVI in 1995 would have returned $4,400
today (more than nine times the S&P 500 return)
Long-term focus, customer oriented
26
Intellectual Property
The Hits Keep Coming
Destiny launched in Q3 2014
• By Q3 2015 over 25 million active monthly players
• Gamers spend an average of three hours a day online
Call of Duty: Black Ops III released Q3 2015
• Generated $550 million in sales in three days
• Beat the box office record of Jurassic World
• 75 million hours played online in first three days of
launch
27
Size
With the recently announced acquisition of King Digital
Entertainment, Activision Blizzard, Inc. now has a larger combined
user base (547 million) than Snapchat (200 million) and Twitter (316
million) combined.
Monthly User Base
600
500
400
300
200
100
0
Activision
Snapchat
Twitter
28
Recent News Indicates Continuation In
Upward Trend
E-Sports Division
•
$465 million market by 2017
•
205 million viewers/participants in e-sports events in 2014
King Digital Entertainment Acquisition
• $5.9 billion price tag, below King’s IPO price
• Major addition to rapidly expanding mobile gaming market
• Mobile to reach $55 billion sales by 2019 (Console and PC = E $57 billion)
Activision Blizzard Studios
• TV series and movies based on award-winning franchises like Call of Duty,
Skylanders, and World of Warcraft
29
Sector Presentation: Information
Technology
Recommendation
30
RECOMMENDATION RECAP
Stock
Current
Price
SIM Target
Price
Consensus Potential
Target
Upside/Do
wnside
Recommen
dation
AAPL
$114.23
N/A
$146.95
28.6%
HOLD
EMC
$25.31
$26.37
$30.00
20.44%
HOLD
ATVI
$36.07
$39.00
$41.50
12.41%
BUY
VNTV
$51.55
$54.51
$55.05
6.00%
SELL
GOOGL
$752.26
$803.75
$826.85
8.00%
HOLD
MU
$15.65
$20.00
$21.37
34.00%
HOLD
31
Stock Presentation: Information Technology
APPENDIX
32
Stock Presentation: Information Technology
MICRON: DCF VALUATION
Analyst: Yihuang Qi
2015/11/6
Terminal Discount Rate =
11.0%
Terminal FCF Growth =
2.0%
(in millions)
Year
2015E
Revenue
2016E
16,137
15,920
2,743
2,229
% Grow th
-1%
Operating Income
Operating Margin
Interest Expense
Interest % of Sales
Taxes
Tax Rate
Net Income
% of Sales
Plus/(minus) Changes WC
% of Sales
Subtract Cap Ex
Capex % of sales
15%
15%
15%
15%
15%
15%
(181)
(186)
(192)
(195)
(199)
(203)
-2%
-1%
-1%
-1%
-1%
-1%
-1%
-1%
-1%
-1%
-1%
(120)
(103)
(103)
(170)
(123)
(152)
(156)
(161)
(164)
(167)
(171)
-5%
-4%
-7%
-5%
-6%
-6%
-6%
-6%
-6%
-6%
474
395
569
435
415
425
420
422
421
422
421
2,762
2,361
3,045
2,695
2,747
2,802
2,868
2,944
2,994
3,046
3,098
-14.5%
29.0%
-11.5%
1.9%
2.0%
2.4%
2.6%
1.7%
1.7%
1.7%
3,400
3,354
3,586
3,473
3,508
3,613
3,721
3,833
3,910
3,988
4,068
21%
21%
21%
20%
20%
20%
20%
20%
20%
20%
20%
-376
200
-536
-521
-702
-903
-930
-958
-782
-798
-814
-2%
1%
-3%
-3%
-4%
-5%
-5%
-5%
-4%
-4%
-4%
-3,212
-3,168
-3,387
-3,473
-3,508
-3,613
-3,721
-3,833
-3,910
-3,988
-4,068
-20%
2,747
-20%
2,707
-1%
-20%
2,175
-20%
-20%
2,046
-6%
-20%
1,899
-7%
-20%
1,938
2%
-20%
1,986
-20%
2,212
2%
-20%
2,248
11%
2%
-20%
2,284
2%
61%
39%
100%
Free Cash Flow Yield
13.37%
Terminal Value
Free Cash Yield
7.0
8.2
6.3
8.5
9.9
7.7
3.6
3.9
3.5
4.3
4.7
4.1
25,888
8.82%
Terminal P/E
8.4
Terminal EV/EBITDA
4.0
1,170
Current Price
$
16.45
Implied equity value/share
$
20.07
Upside/(Downside) to DCF
22.0%
Debt
7,551
Cash
4,860
Cash/share
2%
3,051
15%
23,483
Shares Outstanding
2%
2,991
(175)
Projected Equity Value
Projected EV/EBITDA
2%
2,932
2025E
20,338
15%
9,117
Current EV/EBITDA
3%
2,875
2024E
19,940
(174)
14,366
Projected P/E
2023E
19,549
16%
7%
Current P/E
3%
2,791
2022E
19,165
(172)
% Grow th
NPV of terminal value
3%
2,710
2021E
18,607
14%
2,574
NPV of Cash Flows
1%
2,631
2020E
18,065
(159)
-20%
Free Cash Flow
1%
2,605
2019E
17,539
17%
% Grow th
Add Depreciation/Amort
8%
2,751
2018E
17,365
(335)
-5%
Equity method investees
2017E
17,193
4.15
Terminal FCF Growth =
0%
Terminal
Discount
Rate =
1%
2%
3%
4%
9%
22.56
23.81
25.42
27.56
30.55
10%
20.35
21.27
22.42
23.89
25.87
11%
18.53
19.22
20.07
21.13
22.49
12%
17.01
17.55
18.19
18.97
19.95
13%
15.73
16.15
16.64
17.23
17.95
33
EMC: DCF VALUATION
EMC Corporation
Analyst: Stefanus Randy Oenardi Raharjo
8/2/2012
(000000s)
Year
Terminal Discount Rate =
Terminal FCF Growth =
2010E
Revenue
17,014
% Grow th
2011E
20,006
17.6%
Operating Income
2,683
Operating Margin
Total non-operating income (expense)
Interest % of Sales
Taxes
Tax Rate
Net Income
3,444
6.9%
4,150
24,440
5.0%
5,096
29,724
5.0%
5,350
31,210
5.0%
5,618
32,459
4.0%
5,843
2022E
33,757
2023E
35,107
4.0%
6,076
4.0%
6,319
2024E
36,511
4.0%
6,572
18.0%
18.0%
18.0%
18.0%
18.0%
18.0%
(75)
(193)
(160)
(285)
(275)
(184)
(189)
(199)
(209)
(219)
(230)
(239)
(249)
(259)
(269)
-0.4%
-1.0%
-0.7%
-0.7%
-0.7%
-0.7%
-0.7%
-0.7%
-0.7%
-0.7%
-0.7%
-0.7%
-0.7%
-0.7%
-0.7%
638
640
918
772
868
994
24.5%
19.7%
24.1%
20.0%
23.1%
23.1%
2,611
1,421
2,886
10.5%
1,528
3,093
7.2%
1,665
2,894
3,309
-6.4%
14.4%
1,864
1,620
1,024
23.1%
3,409
3.0%
1,541
1,075
23.1%
3,579
5.0%
1,618
1,129
23.1%
3,758
5.0%
1,699
1,185
23.1%
3,946
5.0%
1,635
1,245
23.1%
4,143
25.2%
1,717
1,294
23.1%
4,309
4.0%
1,785
1,346
1,400
23.1%
4,481
23.1%
4,661
4.0%
1,857
4.0%
1,931
1,456
23.1%
4,847
4.0%
2,008
6.9%
7.1%
7.0%
7.2%
7.6%
6.5%
6.0%
6.0%
6.0%
5.5%
5.5%
5.5%
5.5%
5.5%
5.5%
(1,313)
(483)
(748)
(167)
(232)
(249)
(257)
(270)
(283)
(297)
(312)
(325)
(338)
(351)
(365)
-0.7%
-0.9%
819
943
979
Capex % of sales
4.4%
4.0%
3.8%
4.1%
4.0%
1,079
% Grow th
Debt
Cash
Cash/share
4,853
28,309
2021E
18.0%
-3.4%
2,748
154.7%
25,467
25,901
51,368
2.14%
25.5
26.1
17.2
17.5
2,847
3.6%
3,648
28.1%
4.5%
3,547
3,559
-2.8%
0.3%
-1.0%
1,284
5.0%
3,409
-4.2%
-1.0%
1,348
5.0%
3,579
5.0%
-1.0%
1,557
5.5%
3,617
1.0%
-1.0%
1,635
5.5%
3,649
0.9%
-1.0%
1,717
5.5%
3,831
5.0%
-1.0%
1,785
5.5%
3,984
4.0%
-1.0%
1,857
-1.0%
1,931
5.5%
4,144
5.5%
4,310
4.0%
4.0%
Terminal Value
Free Cash Yield
19.3
19.7
13.6
13.9
17.4
17.8
12.1
12.3
25.83 premarket after preannouncement
26.37
2.1%
22,360
6,343
3.26
-1.0%
1,122
50%
50%
100%
1,948
$
$
5.0%
2020E
18.0%
801
Current Price
Implied equity value/share
Upside/(Downside) to DCF
4,622
26,960
2019E
18.0%
-2.4%
Shares Outstanding
3.0%
2018E
18.0%
745
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
4,487
25,677
2017E
16.5%
-7.7%
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
2.0%
4,037
Subtract Cap Ex
Free Cash Flow
24,929
5.2%
2016E
17.9%
1,167
% of Sales
3,964
23,222
2015E
18.3%
32.5%
Plus/(minus) Changes WC
8.5%
2014E
17.2%
1,970
% of Sales
21,714
2013E
15.8%
% Grow th
Add Depreciation/Amort
2012E
10.25%
3.50%
Terminal P/E
Terminal EV/EBITDA
$
26.37
2.00%
2.25%
2.50%
2.75%
3.00%
3.25%
3.50%
3.75%
4.00%
4.25%
4.50%
4.75%
5.00%
5.25%
5.50%
5.75%
6.00%
9.00%
28.24
28.80
29.41
30.06
30.76
31.53
32.37
33.29
34.29
35.41
36.65
38.03
39.59
41.36
43.38
45.70
48.42
9.25%
27.23
27.74
28.29
28.88
29.52
30.22
30.97
31.79
32.69
33.67
34.77
35.98
37.34
38.86
40.59
42.57
44.85
9.50%
26.29
26.76
27.26
27.80
28.38
29.00
29.68
30.42
31.22
32.10
33.07
34.14
35.33
36.66
38.15
39.84
41.78
9.75%
25.41
25.83
26.29
26.78
27.31
27.88
28.49
29.15
29.88
30.66
31.53
32.47
33.52
34.69
35.99
37.45
39.11
10.00%
24.58
24.97
25.39
25.84
26.32
26.83
27.39
27.99
28.64
29.35
30.12
30.96
31.89
32.92
34.06
35.34
36.77
10.25%
23.79
24.16
24.54
24.95
25.39
25.86
26.37
26.91
27.50
28.14
28.83
29.59
30.42
31.33
32.33
33.45
34.70
10.50%
23.06
23.39
23.75
24.12
24.53
24.96
25.42
25.92
26.45
27.03
27.65
28.33
29.07
29.88
30.77
31.76
32.85
10.75%
22.36
22.67
23.00
23.35
23.72
24.11
24.53
24.99
25.47
25.99
26.56
27.17
27.84
28.56
29.36
30.23
31.20
11.00%
21.70
21.99
22.29
22.61
22.95
23.32
23.70
24.12
24.56
25.04
25.55
26.10
26.70
27.35
28.06
28.84
29.70
11.25%
21.08
21.35
21.63
21.92
22.24
22.57
22.93
23.31
23.71
24.14
24.61
25.11
25.66
26.24
26.88
27.58
28.34
11.50%
20.49
20.74
21.00
21.27
21.56
21.87
22.20
22.54
22.92
23.31
23.74
24.19
24.69
25.22
25.79
26.42
27.10
-1.0%
2,008
5.5%
4,482
4.0%
68,723
6.52%
14.2
9.9
11.75%
19.93
20.16
20.40
20.65
20.92
21.21
21.51
21.83
22.17
22.53
22.92
23.34
23.79
24.27
24.79
25.36
25.97
34
GOOGLE: DCF VALUATION
Go o g le
In Millio n
Te rm inal Disco unt Rate =
Te rm inal FCF Gro w th =
Millio ns
Ye ar
2015E
11.0%
5.0%
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
Re ve nue
% Gro wth
79,201
95,833
21.0%
116,917
22.0%
136,793
17.0%
157,312
15.0%
179,335
14.0%
200,855
12.0%
220,941
10.0%
238,616
8.0%
252,933
6.0%
265,580
5.0%
Op e rating Inco m e
Op e ra tin g Ma rg in
20,617
26.0%
26,642
27.8%
31,382
26.8%
3 5 ,5 6 6
26.0%
4 0 ,9 0 1
26.0%
4 6 ,6 2 7
26.0%
5 2 ,2 2 2
26.0%
5 5 ,2 3 5
25.0%
5 9 ,6 5 4
25.0%
6 3 ,2 3 3
25.0%
6 9 ,0 5 1
26.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
4,123
20.0%
5,328
20.0%
6,276
20.0%
7,113
20.0%
8,180
20.0%
9,325
20.0%
10,444
20.0%
11,047
20.0%
11,931
20.0%
12,647
20.0%
13,810
20.0%
2 1 ,3 1 3
29.2%
2 5 ,1 0 5
17.8%
2 8 ,4 5 3
13.3%
3 2 ,7 2 1
15.0%
3 7 ,3 0 2
14.0%
4 1 ,7 7 8
12.0%
4 4 ,1 8 8
5.8%
4 7 ,7 2 3
8.0%
5 0 ,5 8 7
6.0%
5 5 ,2 4 1
9.2%
Inte re st Inco m e
In te re st % o f Sa le s
Taxe s
Ta x Ra te
Ne t Inco m e
% Gro wth
1 6 ,4 9 3
Ad d De p re ciatio n/ Am o rt
% o f Sa le s
Plus/ (m inus) Chang e s WC
% o f Sa le s
Sub tract Cap Ex
Ca p e x % o f sa le s
4,752
6.0%
2,841
3.6%
15,840
20.0%
5,750
7.0%
2,927
3.1%
20,125
21.0%
7,015
8.0%
3,711
3.2%
25,722
22.0%
10,943
8.0%
3,420
2.5%
30,094
22.0%
14,158
9.0%
3,933
2.5%
29,889
19.0%
17,934
10.0%
4,483
2.5%
32,280
18.0%
20,086
10.0%
5,021
2.5%
34,145
17.0%
24,304
11.0%
5,524
2.5%
35,351
16.0%
26,248
11.0%
5,965
2.5%
35,792
15.0%
30,352
12.0%
6,323
2.5%
35,411
14.0%
34,525
13.0%
6,639
2.5%
34,525
13.0%
Fre e Cash Flo w
% Gro wth
8 ,2 4 7
9 ,8 6 6
19.6%
1 0 ,1 0 9
2.5%
1 2 ,7 2 2
25.8%
2 0 ,9 2 2
54.5%
2 7 ,4 3 8
31.1%
3 2 ,7 3 9
19.3%
3 8 ,6 6 5
18.1%
4 4 ,1 4 4
14.2%
5 1 ,8 5 1
17.5%
6 1 ,8 8 0
19.3%
NPV o f Cash Flo w s
NPV o f te rm inal value
Firm Value
Le ss De b t
Plus Cash
Eq uity Value
1 5 3 ,8 0 6
3 8 1 ,3 8 1
5 3 5 ,1 8 7
5 ,2 0 0
6 8 ,0 0 0
5 9 7 ,9 8 7
29%
71%
100%
Curre nt P/ E
Pro je cte d P/ E
Curre nt EV/ EBITDA
Pro je cte d EV/ EBITDA
3 3 ,0 2 0 .0
3 6 ,2 5 6 .5
2 1 ,4 6 7 .8
2 3 ,5 7 1 .9
Curre nt Price
Im p lie d e q uity value / share
Up sid e / (Do w nsid e ) to DCF
De b t
Cash
Cash/ share
Fre e Cash Yie ld
25,552.4
28,056.9
16,813.2
18,461.1
Te rm inal P/ E
21,692.9
23,819.1
Te rm inal EV/ EBITDA
14,183.7
15,573.9
1 ,0 8 2 ,9 0 2
5 .7 1 %
1 9 .6
1 0 .5
744,000
US$
US$
7 3 2 .0 0
8 0 3 .7 5
9 .8 %
11/ 6/ 2015
5.2
68
in Billio n
in Billio n
13.02
in Billio n
Weig hted
Averag e Cost of
Capital
Dilute d Share s Outstand ing
Te rm inal Value
#######
9%
10%
11%
12%
13%
$539,683
$725.38
$833.44
$957.59
$1,100.24
$1,264.13
$568,088
$689.11
$791.77
$909.71
$1,045.22
$1,200.93
Equity Value
$597,987 $627,887
$689.11
$723.57
$791.77
$831.35
$909.71
$955.20
$1,045.22 $1,097.49
$1,200.93 $1,260.97
$659,281
$797.73
$916.57
$1,053.10
$1,209.98
$1,390.22
$692,245
$923.48
$1,061.04
$1,219.10
$1,400.70
$1,609.36
14%
$1,452.44
$1,379.82
$1,379.82
$1,597.32
$1,849.09
$1,448.81
35
Stock Presentation: Information Technology
VANTIV: DCF VALUATION
(in thousands)
YEAR
REVENUE
ACTUAL
2014
2,577,203.00 $
22%
2015
3,015,327.51 $
17%
2016
3,467,626.64 $
15%
2017
3,918,418.10 $
13%
OPERATING INCOME
$
Operating Margin
314,691.00 $
12%
487,318.53 $
16%
560,416.31 $
16%
633,270.43 $
16%
646,538.99 $
704,727.50 $
INTEREST EXPENSE
$
% of Revenue
79,701.00 $
3%
58,391.67 $
2%
58,391.67 $
2%
58,391.67 $
1%
86,205.20 $
$
% Growth
PROJECTED
2018
2019
2020
4,310,259.91 $ 4,698,183.30 $ 5,121,019.80 $
10%
9%
9%
2021
5,530,701.38 $
8%
2022
5,917,850.48 $
7%
2023
6,332,100.01 $
7%
2024
6,712,026.01
6%
768,152.97 $
829,605.21 $
887,677.57 $
949,815.00 $
1,006,803.90
93,963.67 $
102,420.40 $
110,614.03 $
118,357.01 $
126,642.00 $
134,240.52
NON-OP INC. EXPENSE
$
(177.00) $
9,655.50 $
9,655.50 $
9,655.50 $
9,655.50 $
9,655.50 $
9,655.50 $
9,655.50 $
9,655.50 $
9,655.50 $
9,655.50
TAX EXPENSE
$
66,177.00 $
119,648.14 $
140,508.18 $
161,298.67 $
157,147.95 $
171,539.25 $
187,225.77 $
202,424.27 $
216,786.84 $
232,154.80 $
246,249.41
[Net Income]
$
LESS: NI to NCI
$
% NI to NCI
168,990.00 $
43,698.00 $
26%
299,623.22 $
59,924.64 $
20%
351,860.97 $
52,779.15 $
15%
403,924.59 $
40,392.46 $
10%
393,530.34 $
19,676.52 $
5%
429,569.08 $
12,887.07 $
3%
468,851.30 $
14,065.54 $
3%
506,911.41 $
10,138.23 $
2%
542,878.22 $
5,428.78 $
1%
581,362.70 $
5,813.63 $
1%
616,658.47
0%
NET INCOME (ATV)
% Growth
DEPR. & AMORT
% of Revenues
CAPEX
% of Revenues
CHANGE IN WC
% of Revenues
FREE CASH FLOW (FCF)
%Growth
Terminal Value
Total FCF
125,292.00 $
-6.20%
275,069.00 $
239,698.58 $
91.31%
241,226.20 $
299,081.82 $
24.77%
277,410.13 $
363,532.13 $
21.55%
313,473.45 $
103,179.00 $
4%
(69,090.00) $
2.68%
228,092.00 $
14%
120,613.10 $
4%
(22,343.62) $
0.74%
337,968.06 $
48%
138,705.07 $
4%
(49,536.99) $
1.43%
388,249.90 $
15%
156,736.72 $
4%
(49,371.87) $
1.26%
470,896.99 $
21%
373,853.82
2.84%
301,718.19
7%
172,410.40
4%
(43,102.60)
1.0%
460,059.02
-2%
416,682.00
11.46%
281,891.00
6%
187,927.33
4%
(32,887.28)
0.7%
477,758.39
4%
454,785.76
9.14%
307,261.19
6%
153,630.59
3%
(25,605.10)
0.5%
582,811.26
22%
496,773.19
9.23%
276,535.07
5%
165,921.04
3%
(27,653.51)
0.5%
579,733.71
-1%
537,449.44
8.19%
295,892.52
5%
177,535.51
3%
(29,589.25)
0.5%
626,217.19
8%
575,549.07
7.09%
253,284.00
4%
189,963.00
3%
(31,660.50)
0.5%
607,209.57
-3%
$
337,968.06 $
388,249.90 $
470,896.99 $
460,059.02 $
$
$
$
$
$
NPV [projected equity] $
10,956,609.54
Shares Outstanding (D)
DCF Target Price $
Current Price $
201,000
54.51
46.12
Free Cash Yield
Terminal P/E
Terminal EV/EBITDA
Sensitivity Analysis
$
$
$
$
$
$
$
$
$
477,758.39 $
$
$
$
$
$
582,811.26 $
3.33%
28.37
18.31
$
$
$
$
$
579,733.71 $
Cash
Debt
$
$
$
$
$
626,217.19 $
$
$
411,586.00
5,035,487.00
$
$
$
$
$
$
$
9.5%
35.45
37.39
39.72
42.57
46.13
50.71
56.81
$
$
$
$
$
$
607,209.57 $
616,658.47
7.14%
201,360.78
3%
201,360.78
3%
(33,560.13)
0.5%
583,098.34
-4%
17,492,950.19
18,076,048.53
WACC
$
Terminal Growth Rate
$
54.51
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
$
$
$
$
$
$
$
7.0%
60.88
68.39
78.91
94.69
120.99
173.59
331.39
$
$
$
$
$
$
$
7.5%
53.26
58.66
65.87
75.96
91.09
116.30
166.74
$
$
$
$
$
$
$
8.0%
47.33
51.36
56.54
63.45
73.13
87.64
111.83
$
$
$
$
$
$
$
8.5%
42.58
45.67
49.54
54.51
61.14
70.42
84.34
$
$
$
$
$
$
$
9.0%
38.69
41.12
44.09
47.80
52.57
58.93
67.83
$
$
$
$
$
$
$
10.0%
32.70
34.28
36.14
38.38
41.12
44.53
48.93
36
Stock Presentation: Information Technology
ACTIVISION: DCF VALUATION
Year
Revenue
% Growth
Operating Income
Operating Margin
Interest and Other
Interest % of Sales
Taxes
Tax Rate
Net Income
% Growth
Add Depreciation/Amort
% of Sales
Plus/(minus) Changes WC
% of Sales
Subtract Cap Ex
Capex % of Sales
Free Cash Flow
% Growth
NPV of Cash Flows
NPV of Terminal Value
Projected Equity Value
Free Cash Flow Yield
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
Shares Outstanding
Terminal Discount Rate = 10.75%
Terminal FCF Rate =
4.25%
2015 E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
2026E
2027E
2028E
4,786
5,201
5,659
5,998
6,298
6,550
6,943
7,290
7,618
7,923
8,081
8,566
8,909
9,310
8.7%
8.8%
6.0%
5.0%
4.0%
6.0%
5.0%
4.5%
4.0%
2.0%
6.0%
4.0%
4.5%
1,460
1,586
1,782
2,099
2,015
2,391
2,430
2,624
2,590
2,931
2,869
3,169
3,385
3,584
30.5%
30.5%
31.5%
35.0%
32.0%
36.5%
35.0%
36.0%
34.0%
37.0%
35.5%
37.0%
38.0%
38.5%
(96)
(104)
(113)
(150)
(126)
(98)
(69)
(73)
(76)
(79)
(81)
(86)
(89)
(93)
-2.0%
-2.0%
-2.0%
-2.5%
-2.0%
-1.5%
-1.0%
-1.0%
-1.0%
-1.0%
-1.0%
-1.0%
-1.0%
-1.0%
286
311
351
351
340
413
472
510
453
513
502
617
659
698
21.0%
21.0%
21.0%
18.0%
18.0%
18.0%
20.0%
20.0%
18.0%
18.0%
18.0%
20.0%
20.0%
20.0%
1,078
1,171
1,319
1,598
1,549
1,880
1,888
2,041
2,061
2,339
2,286
2,467
2,637
2,793
8.7%
12.6%
21.2%
-3.1%
21.3%
0.5%
8.1%
1.0%
13.5%
-2.2%
7.9%
6.9%
5.9%
96
104
113
120
126
196
208
146
152
198
162
171
178
186
2.0%
2.0%
2.0%
2.0%
2.0%
3.0%
3.0%
2.0%
2.0%
2.5%
2.0%
2.0%
2.0%
2.0%
7
-18
-13
-30
-13
13
-14
-36
38
-40
-40
43
18
-19
0.1%
-0.4%
-0.2%
-0.5%
-0.2%
0.2%
-0.2%
-0.5%
0.5%
-0.5%
-0.5%
0.5%
0.2%
-0.2%
101
104
113
120
164
144
139
146
168
158
162
171
178
186
2.1%
2.0%
2.0%
2.0%
2.6%
2.2%
2.0%
2.0%
2.2%
2.0%
2.0%
2.0%
2.0%
2.0%
1,080
1,153
1,306
1,568
1,499
1,945
1,944
2,005
2,084
2,339
2,246
2,510
2,655
2,774
6.8%
13.3%
20.1%
-4.4%
29.8%
-0.1%
3.1%
4.0%
12.2%
-4.0%
11.8%
5.8%
4.5%
12,219.51
16,027.87
28,247.38
4.38%
43%
57%
100%
22.90
26.21
15.36
17.66
21.07
24.12
14.14
16.25
Terminal Value 44,495.19
18.71
21.42
12.61
14.49
729
Current Price
Implied Equity Value/Share
Upside/(Downside) to DCF
33.85
38.75
14.5%
Debt
Cash (+Equivalents)
Cash/share
4,078
4,858
6.66
Terminal
Discount
Rate
38.75
9.00%
9.50%
10.00%
10.50%
10.75%
11.00%
11.50%
12.00%
3.25%
47.65
43.54
40.03
37.00
35.63
34.36
32.03
29.97
3.50%
49.03
44.66
40.95
37.76
36.33
35.00
32.57
30.43
Free Cash Yield
6.24%
Terminal P/E
19.5
Terminal EV/EBITDA
14.4
Terminal Growth Rate
3.75%
4.00%
4.25%
50.55
52.22
54.06
45.88
47.21
48.66
41.94
43.02
44.19
38.58
39.47
40.42
37.08
37.88
38.75
35.68
36.41
37.20
33.15
33.76
34.42
30.92
31.44
31.99
4.50%
56.11
50.26
45.46
41.45
39.68
38.05
35.12
32.58
4.75%
58.40
52.03
46.86
42.57
40.69
38.96
35.88
33.21
5.00%
60.98
54.00
48.40
43.80
41.79
39.95
36.69
33.89
37
Sector Presentation: Information
Technology
QUESTIONS?
38