FINANCIAL COMPANIES
PRESENTATION
Daniel Jasper
Hantao Wang
Qiang Zhuang
Agenda
• Sector Overview
• JPMorgan Chase & Citigroup
• Wells Fargo & Bank of America
• Capital One & Invesco
• Recommendation
• Q&A, Class Vote
Sector Recommendation
• Keep the financials in SIM position underweight
S&P 500 Vs. SIM Portfolio Sector Weights
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
S&P 500 Weight
SIM Weight
Companies Recommendation
Company
Target Price
Upside/Do
wnside
Current SIM
Allocation
Recommendation
Recommended
SIM Allocation
JPMorgan
Chase
$58.18
+7.50%
3.81%
HOLD
3.81%
Citigroup
$59.34
+18.82%
0%
BUY
2.00%
Bank of
America
$18.61
+29.20%
4.56%
HOLD
4.56%
Wells Fargo
$44.79
+5.50%
4.63%
SELL
2.00%
CapitalOne
Financial
$80.58
+16.00%
0%
BUY
3.00%
Invesco
$30.53
-10.00%
0%
-
0%
TOTAL
12.99%
15.37%
Stock Overview
• Stock price, close (November 11, 2013): $54.10
• Market Cap: $202.85B
• Beta: 1.74
• Dividend yield: 2.90%
• P/E: 12.23
Business Overview
2%
7%
10%
Consumer and
Community Banking
49%
6%
United States
11%
Eurp/Mid Est & Africa
Corporate and Investment
Banking
Asia Pacific
Asset Management
34%
Lat America/Caribbean
Commercial Banking
81%
Business Analysis
• Growth Drivers
• Card – Declining credit losses given room to take on some more
risk, look for some accelerating growth.
• Retail – Tightening expense belt, opportunity to drive positive
operating leverage, declining NPLs
• Investment Bank – Market share gains
• Commercial Bank –loan growth and cheap deposits
• Risks
• Litigation/investigations, regulation, weaker macro and stymied market
share gains.
•
Source: Morgan Stanley
Business Overview
• SWOT Analysis
Strength
Strong brand name and reputation
International presence
Great financial performance
Weakness
Over-dependence on the U.S.
Opportunities
Expansions in emerging markets
Threats
Government regulations
Litigation
JPM vs. Competitors
Valuation - DCF
JPMorgan Chase & Co. (JPM)
(in millions)
Hantao Wang
Date: November 11, 2013
Terminal Discount Rate
Terminal FCF Growth
Year
2013E
2014E
2015E
2016E
2017E
2018E
2019E
11.0%
1.0%
2020E
2021E
2022E
2023E
Revenue
% Growth
$
98,928 $
102,309 $
3.4%
107,888 $ 113,282 $ 118,380 $ 121,931 $ 125,589 $ 128,101 $ 130,023 $ 131,323 $
5.5%
5.0%
4.5%
3.0%
3.0%
2.0%
1.5%
1.0%
132,636
1.0%
Noninterest expense
% of Revenue
$
64,995 $
65.7%
67,217 $
65.7%
72,069 $ 75,899 $ 79,315 $ 81,694 $ 84,522 $ 86,468 $ 87,765 $ 88,643 $
66.8%
67.0%
67.0%
67.0%
67.3%
67.5%
67.5%
67.5%
89,529
67.5%
Provision for credit losses
% of Revenue
$
3,957 $
4.0%
5,115 $
5.0%
5,394 $
5.0%
5,664 $
5.0%
5,947 $
5.0%
6,245 $
5.0%
6,557 $
5.0%
6,885 $
5.0%
7,229 $
5.0%
7,590 $
5.0%
7,970
5.0%
Taxes
Tax Rate
$
8,093 $
27%
8,393 $
28%
8,519 $
28%
8,881 $
28.0%
9,273 $
28.0%
9,518 $
28.0%
9,663 $
28.0%
9,729 $
28.0%
9,808 $
28.0%
9,825 $
28.0%
9,838
28.0%
Net Income (Free Cash Flow)
% Growth
$
21,882 $
21,583 $
-1.4%
21,906 $ 22,838 $ 23,845 $ 24,475 $ 24,848 $ 25,019 $ 25,220 $ 25,264 $
1.5%
4.3%
4.4%
2.6%
1.5%
0.7%
0.8%
0.2%
25,298
0.1%
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
$ 139,219
$ 89,988
$ 229,207
10.5%
Current P/E
Projected P/E
9.5
10.5
Shares Outstanding
Current Price
Implied equity value/share
Upside/(Downside) to DCF
3,850
$
$
53.96
59.53
10%
61%
39%
100%
9.6
10.6
Terminal Value
9.5
10.5
$
$
53.96
59.53
10%
$
255,514
Free Cash Yield
9.90%
Terminal P/E
10.10
Valuation - Multiples
Relative to
Industry
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
1.6
1.3
3.0
2.2
1.1
0.10
0.15
0.7
0.8
0.0
0.97
0.96
1.2
1.1
0.9
0.82
0.90
1.3
1.0
0.8
Relative to S&P
500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
6.9
1.7
0.6
2.2
2.1
0.49
0.55
0.3
1.0
0.6
0.72
0.70
0.5
1.5
0.8
0.57
0.62
0.4
1.4
0.7
Absolute
Valuation
High
Low
Median
Current
#Your
Target
Multiple
P/Forward
E
P/S
P/B
P/EBITDA
P/CF
22.4
6.4
11.7
9.0
10.0
3.3
1.9
5.79
21.6
1.2
0.6
2.16
4.7
2.1
1.1
4.25
8.7
2.0
1.0
4.53
7.2
2.0
1.0
4.5
8.0
*Target
E, S
per
Share
5.95
Target
Price
($)
26.22
52.44
52.56
52.21
58.40
59.5
Valuation & Recommendation
• Target price = 30% multiples + 70% DCF
• 30%*$55.02+70%*$59.53=
• Upside 7.50%
• Hold
$58.18
Stock Overview
• Stock price, close (November 11, 2013): $50.17
• Market Cap: $151.47B
• Beta: 2.27
• Dividend yield: 0.10%
• P/E: 12.60
Business Overview
0%
16%
United States
43%
42%
Global Consumer Banking
57%
Institutional Clients Group
21%
Asia Pacific
Latin America
Corporate/Other
Europe, the Middle
East and Africa
21%
Business Analysis
• Growth Drivers
• Improving macro-economic backdrop, Capital markets activity levels,
declining credit costs, consumer and corporate loan demand, and
international expansion.
• Recently, Citi has moved toward a more customer-driven model and run
down its legacy problem assets which should ultimately reduce its risk and
free up capital. Its emerging markets presence offers another growth avenue
that should help mitigate the impact of U.S. financial regulation/sluggish loan
growth.
• Risks
• Double-dip recession in US, slowdown in global economy, weakening credit
and capital markets environment and operational risks.
•
Source: Barclays; The Buckingham Research Group
Citigroup vs. Competitors
Valuation - DCF
Citigroup, Ticker: C
(in millions)
Hantao Wang
Date: November 11, 2013
Terminal Discount Rate
Terminal FCF Growth
Year
2013E
2014E
2015E
2016E
2017E
2018E
2019E
11.0%
1.0%
2020E
2021E
2022E
2023E
Revenue
% Growth
$
78,803
$
79,757 $
1.2%
81,226 $
1.8%
83,257 $
2.5%
84,922 $
2.0%
86,450 $
1.8%
87,834 $
1.6%
89,063 $
1.4%
90,221 $
1.3%
91,304 $
1.2%
92,217
1.0%
Noninterest expense
% of Revenue
$
48,622 $
61.7%
47,455 $
59.5%
46,705 $
57.5%
48,289 $
58.0%
48,830 $
57.5%
49,277 $
57.0%
49,626 $
56.5%
49,875 $
56.0%
50,524 $
56.0%
51,130 $
56.0%
51,641
56.0%
Provision for credit losses
% of Revenue
$
13,239 $
16.8%
12,203 $
15.3%
12,265 $
15.1%
12,489 $
15.0%
12,738 $
15.0%
12,968 $
15.0%
13,175 $
15.0%
13,360 $
15.0%
13,533 $
15.0%
13,696 $
15.0%
13,833
15.0%
Income from discontinued operations
$
236.41 $
0.30%
319.03 $
0.40%
487.36 $
0.60%
416.28 $
0.5%
424.61 $
0.5%
432.25 $
0.5%
439.17 $
0.5%
445.32 $
0.5%
451.11 $
0.5%
456.52 $
0.5%
461.08
0.5%
Taxes
Tax Rate
$
2,577 $
15%
3,675 $
18%
4,549 $
20%
4,350 $
19.0%
4,518 $
19.0%
4,681 $
19.0%
4,840 $
19.0%
4,992 $
19.0%
4,791 $
18.0%
4,848 $
18.0%
4,897
18.0%
Net Income (Free Cash Flow)
% Growth
$
16,561 $
15.0%
18,048 $
9.0%
18,545 $
2.8%
18,836 $
1.6%
19,525 $
3.7%
20,193 $
3.4%
20,836 $
3.2%
21,373 $
2.6%
21,630 $
1.2%
21,846
1.0%
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
$ 113,379
$ 77,708
$ 191,087
9.5%
% of Revenue
Current P/E
Projected P/E
10.5
13.3
Shares Outstanding
Current Price
Implied equity value/share
Upside/(Downside) to DCF
14,401
3,040
$
$
49.94
62.86
26%
$
59%
41%
100%
9.2
11.5
Terminal Value
8.4
10.6
$
$
49.94
62.86
26%
$
220,646
Free Cash Yield
9.90%
Terminal P/E
10.10
Valuation - Multiples
Relative to
Industry
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
2.2
4.8
4.8
1.4
2.9
0.35
0.60
0.4
0.2
0.0
1.0
0.97
1.0
1.0
1.1
1.1
0.94
0.9
1.1
1.1
Relative to S&P
500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
5.7
6.8
0.9
2.2
2.3
0.47
0.48
0.1
0.2
0.7
0.74
0.69
0.4
1.4
1.1
0.74
0.65
0.3
1.4
1.0
Absolute
Valuation
High
Low
Median
Current
#Your
Target
Multiple
P/Forward
E
P/S
P/B
P/EBITDA
P/CF
101.3
6.2
11.0
9.4
11
3.6
2.9
6.70
21.7
0.1
0.1
0.78
5.8
1.9
0.8
3.52
11.0
2.0
0.7
4.59
9.8
2.0
0.8
3.5
11
*Target
E, S
per
Share
4.93
Target
Price
($)
26.20
52.40
56.25
37.53
55.24
54.23
Valuation & Recommendation
• Target price = 30% multiples + 70% DCF
• 30%*$51.13+70%*$62.86=
• Upside 18.82%
• Buy
$59.34
Company Overview
• Ticker: BAC
• Beta: 2.29
• Current Price: $14.40
• Dividend: 0.3%
• Sector: Financials
• Market Cap: $153.59B
• Industry: Diversified Financial
Services
• Shares Outstanding: 10.76B
Company Overview
Provide various bank and financial products and services
• Clients Include:
• Individual customers
• Small and middle market businesses
• Institutional investors
• Corporations
• Governments
• Lines of Business:
• Global Consumer and Business
Banking
• Consumer Real Estate
• Global Banking
• Global Markets
• Global Wealth and Investment
Management
YTD Net Income by Segment
$5,000
$4,000
$3,000
$2,000
$1,000
$$(1,000)
$(2,000)
$(3,000)
$(4,000)
$(5,000)
Consumer &
Business Banking
Consumer Real
Estate Services
Global Banking
Global Markets
Global Wealth and
Investment
Managament
All Others
Opportunities
Risks
• Rising interest rates on
• Possible $5.1B loss from
mortgages
• Total cost savings from Project
New BAC expected to reach
$8B on annualized basis
• Improving U.S. economic
growth
litigation against Department of
Justice and SEC.
• Increased regulation
• Lower than expected loan,
revenue, and capital growth
• Slower U.S. economy growth
Valuation - Multiples
Relative to
Industry
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
2.1
2.1
4.3
1.3
1.6
0.12
0.23
0.5
0.5
0.0
0.99
0.98
0.9
1.0
1.1
1.3
1.3
0.9
0.9
1.2
Relative to S&P
500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
4.5
5.8
0.9
2.6
2.3
0.43
0.49
0.1
0.4
0.4
0.69
0.71
0.4
1.6
1.0
0.89
0.89
0.3
1.3
1.1
Absolute
Valuation
High
Low
Median
Current
#Your
Target
Multiple
P/Forward E
P/S
P/B
P/EBITDA
P/CF
83.0
3.8
2.8
7.46
21.0
6.0
0.3
0.1
0.57
2.7
10.9
2.0
0.9
4.01
10.1
12.8
1.8
0.7
5.69
11.0
13.0
2.0
0.9
6.00
12.0
*Target
E, S
per
Share
0.89
7.73
Target
Price
$11.57
$15.46
$18.62
$15.27
$15.80
DCF
Analyst: Danny Jasper
9/19/13
Terminal Discount Rate =
Terminal FCF Growth =
Year
2013E
Revenue
90,001
% Growth
2014E
92,218
2.5%
Operating Income
18,000
Operating Margin
20.0%
Taxes
6,300
Tax Rate
35.0%
Preferred Stock
1,800
Preferred Stock % of Sales
2.0%
Net Income
11,700
% Growth
23,977
26.0%
8,392
35.0%
922
1.0%
15,585
33.2%
Free Cash Flow
11,700
% Growth
15,585
33.2%
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
119,189
82,529
201,718
7.49%
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
13.3
17.2
8.7
11.2
Shares Outstanding (in thousands)
10,841
Current Price
Implied equity value/share
Upside/(Downside) to DCF
$
$
Debt (in bliions)
Cash (in billions)
Cash/share
$
$
14.40
18.61
29.2%
590.09
489.90
45.19
2015E
95,432
3.5%
29,584
31.0%
10,354
35.0%
1,909
2.0%
19,230
23.4%
19,230
23.4%
2016E
97,341
2017E
99,288
2.0%
34,069
2.0%
34,751
35.0%
11,924
35.0%
12,163
35.0%
1,947
35.0%
1,986
2.0%
20,198
2.0%
20,602
5.0%
20,198
2.0%
20,602
5.0%
2.0%
11.00%
1.0%
2018E
101,274
2.0%
35,446
35.0%
12,406
35.0%
2,025
2.0%
21,014
2.0%
21,014
2.0%
2019E
103,299
2.0%
36,155
35.0%
12,654
35.0%
2,066
2.0%
21,435
2.0%
21,435
2.0%
59%
41%
100%
2020E
105,365
2.0%
36,878
35.0%
12,907
35.0%
2,107
2.0%
21,863
2.0%
21,863
2.0%
2021E
107,472
2.0%
37,615
35.0%
13,165
35.0%
2,149
2.0%
22,300
2.0%
22,300
2.0%
2022E
109,622
2.0%
38,368
35.0%
13,429
35.0%
2,192
2.0%
22,747
2.0%
22,747
2.0%
Terminal Value
Free Cash Yield
10.0
12.9
6.5
8.4
8.1
10.5
5.3
6.8
$
$
14.40
18.61
29.2%
2023E
111,814
2.0%
39,135
35.0%
13,697
35.0%
2,236
2.0%
23,201
2.0%
23,201
2.0%
234,334
9.90%
Terminal P/E
10.1
Terminal EV/EBITDA
6.0
Company Overview
• Ticker: WFC
• Beta: 0.96
• Current Price: $40.24
• Dividend: 2.9%
• Sector: Financials
• Market Cap: $218.13B
• Industry: Diversified Banks
• Shares Outstanding: 5.3B
Potential Risks
• Only 2% growth rate on outstanding balance of mortgage
•
•
•
•
•
loans
Provisions for credit losses on outstanding mortgage
loans likely to fall 1.1%
Declining number of houses sold
Average new home prices have declined
Possible litigation losses of $1 billion
Mortgage repurchases of $1.4 billion
Valuations – Multiples
Relative to
Industry
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
1.2
1.2
1.9
1.4
1.2
0.16
0.71
0.8
0.8
0.4
0.98
1.0
1.2
1.0
1.0
0.97
0.97
1.0
1.0
1.0
Relative to S&P
500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
1.2
1.6
1.3
2.9
1.7
0.58
0.66
0.5
1.2
0.7
0.82
0.80
0.9
2.0
1.0
0.72
0.74
0.7
1.8
0.9
Absolute
Valuation
High
Low
Median
Current
#Your
Target
Multiple
P/Forward E
P/S
P/B
P/EBITDA
P/CF
24.1
4.1
3.2
10.92
13.0
8.1
0.9
0.8
4.13
5.1
12.8
2.6
2.0
5.93
9.8
10.7
2.6
1.5
6.32
9.7
13.0
3.0
2.0
6.8
10.0
*Target
E, S
per
Share
3.37
16.25
Target
Price
$43.81
$48.75
$55.63
$44.89
$43.01
Valuation – DCF
Analyst: Danny Jasper
10/7/13
Terminal Discount Rate =
Terminal FCF Growth =
Year
2013E
Revenue
86,516
% Growth
2014E
87,382
1.0%
Operating Income
30,281
Operating Margin
35.0%
Taxes
8,479
Tax Rate
Preferred Stock
865
Preferred Stock % of Sales
1.0%
Net Income
21,370
% Growth
31,457
36.0%
8,808
21,370
% Growth
138,305
101,396
239,701
9.41%
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
10.6
11.2
7.5
7.9
Shares Outstanding (in thousands)
5,352
Current Price
Implied equity value/share
Upside/(Downside) to DCF
$
$
Debt (in billions)
Cash (in billions)
Cash/share
$
$
42.44
44.79
5.5%
205.06
261.17
48.80
2.3%
32,195
36.0%
9,015
90,324
2017E
91,227
1.0%
31,613
1.0%
31,930
35.0%
8,852
35.0%
8,940
2018E
92,140
1.0%
32,249
35.0%
9,030
2019E
93,061
1.0%
32,571
35.0%
9,120
2020E
93,992
1.0%
32,897
35.0%
9,211
2021E
94,932
1.0%
33,226
35.0%
9,303
2022E
95,881
1.0%
33,558
35.0%
9,396
2023E
96,840
1.0%
33,894
35.0%
9,490
28.0%
28.0%
28.0%
28.0%
28.0%
28.0%
28.0%
28.0%
28.0%
874
894
903
912
921
931
940
949
959
968
1.0%
22,212
22,212
3.9%
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
89,430
2016E
28.0%
3.9%
Free Cash Flow
2015E
10.0%
1.00%
1.0%
22,733
2.3%
22,733
2.3%
1.0%
21,858
1.0%
22,077
-3.8%
21,858
1.0%
22,077
-3.8%
1.0%
1.0%
22,298
1.0%
22,298
1.0%
1.0%
22,521
1.0%
22,521
1.0%
58%
42%
100%
1.0%
22,746
1.0%
22,746
1.0%
1.0%
22,973
1.0%
22,973
1.0%
1.0%
23,203
1.0%
23,203
1.0%
Terminal Value
Free Cash Yield
10.2
10.8
7.2
7.6
10.0
10.5
7.1
7.4
$
$
42.44
44.79
5.5%
1.0%
23,435
1.0%
23,435
1.0%
262,995
8.91%
Terminal P/E
11.2
Terminal EV/EBITDA
7.8
Stock overview
• Market Capitalization
• Dividend Yield 1.7%
• Dividend $1.2
• Beta 1.44
40.52B
Business overview
10%
Credit Card
31%
Consumer Banking
59%
Commercial Banking
Segments Growth Rate
35.00%
Growth Rate
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
-5.00%
-10.00%
Credit Card
Consumer Banking
Commercial Banking
2009
-7.03%
7.24%
18.99%
2010
-5.98%
15.33%
11.93%
2011
-1.72%
7.81%
27.56%
2012
27.12%
32.57%
10.70%
Business analysis
• Drivers
• Macroeconomic growth
• Demand high
• Card credit remains stronger
• Capital allocation: repurchased 1 billion shares in September
• Grow though acquisition
• Risks
• Leadership of frequent acquisition activities
• Regulation
Competitors’ performance
Valuation - DCF
Capital One Financial
Analysit: Qian Zhuang
Terminal Discount Rate
Terminal FCF growth rate
Year
11%
1%
2013 E
Revenue
2014 E
$ 22,524.50 $ 23,813.84
6%
Income before income taxes & minority
$ 5,783.07
interest $ 6,451.40
27%
Income tax provision
$ (1,619.26) $ (1,806.39)
28%
Loss from discontinued options
$ (227.85) $ (236.96)
1%
Net Income
$ 3,935.96 $ 4,408.05
Free Cash Flow
2015 E
$ 24,859.21
4%
$ 7,296.02
29%
$ (2,042.89)
28%
$ (248.81)
1%
$ 5,004.32
2016 E
$ 25,670.70
3%
$ 7,318.73
29%
$ (2,049.25)
28%
$ (261.25)
1%
$ 5,008.24
2017 E
$ 26,440.82
3%
$ 7,667.84
29%
$ (2,223.67)
29%
$ (264.41)
1%
$ 5,179.76
2018 E
$ 26,969.64
2%
$ 8,090.89
30%
$ (2,265.45)
28%
$ (269.70)
1%
$ 5,555.75
2019 E
$ 27,509.03
2%
$ 7,977.62
29%
$ (2,233.73)
28%
$ (275.09)
1%
$ 5,468.79
2020 E
$ 28,059.21
2%
$ 8,137.17
29%
$ (2,278.41)
28%
$ (280.59)
1%
$ 5,578.17
2021 E
$ 28,339.80
1%
$ 8,218.54
29%
$ (2,301.19)
28%
$ (283.40)
1%
$ 5,633.95
2022 E
$
$
$
$
$
$ 3,935.96 $ 4,408.05 $ 5,004.32 $ 5,008.24 $ 5,179.76 $ 5,555.75 $ 5,468.79 $ 5,578.17 $ 5,633.95 $
2023 E
28,623.20
1%
8,300.73
29%
(2,324.20)
28%
(286.23)
1%
5,690.29
5,690.29 $ 5,747.19
Terminal value
NPV
NPV of terminal value
Projected Equity Value
$30,707.83
$20,443.14
$ 51,150.96
Share Outstanding
Current Price
$
Implied equity value/share
$
Upside/(Downside) to DCF
Include Dividend
$
Upside (with Dividend)to DCF
617.81
69.59
82.79
19%
83.99
21%
$ 28,909.43
1%
$ 8,383.74
29%
$ (2,347.45)
28%
$ (289.09)
1%
$ 5,747.19
Free Cash Yield
Terminal P/E
$ 58,046.67
10%
10.41
Valuation – Multiple
Absolute
Valuation
High
Low
Median
Current
P/Forward E
P/S
P/B
P/EBITDA
P/CF
305.5
353.8
3.1
2.4
15.9
5.2
6.4
0.2
0.3
3.2
10.5
10.4
0.9
1.6
8.4
8.8
9.9
1
1.7
5.7
Your Target
Target E,
Multiple S per Share
10.5
10.4
0.9
1.6
8.4
6.95
6.95
Average
Target
Price
72.98
72.28
72.63
Final price
• 70% DCF 0.7* 83.99 = 58.793
• 30% Multiples 0.3* 72.63 = 21.789
• Total price estimation = 80.582
• Price Today = 69.59
• Potential upside = 16%
Invesco
DCF Valuation
Invesco
Analysit: Qian Zhuang
10/7/2013
Terminal Discount Rate
Terminal FCF growth rate
Year
11%
1%
2013 E
2014 E
2015 E
2016 E
2017 E
2018 E
2019 E
2020 E
2021 E
2022 E
2023 E
Revenue
% of growth
$ 4,528.70 $ 4,800.42 $ 5,088.45 $ 5,393.75 $ 5,717.38 $ 6,003.25 $ 6,243.38 $ 6,430.68 $ 6,623.60 $
6%
6%
6%
6%
5%
4%
3%
3%
6,756.07 $ 6,823.63
2%
1%
Income before income taxes
$ 1,237.09 $ 1,427.66 $ 1,676.23 $ 1,925.27 $ 1,943.91 $ 2,041.10 $ 2,122.75 $ 2,186.43 $ 2,252.02 $
27%
30%
33%
36%
34%
34%
34%
34%
34%
2,297.06 $ 2,320.04
34%
34%
Income tax provision
$ 408.24 $ 471.13 $ 536.39 $ 616.09 $ 622.05 $ 653.15 $ 679.28 $ 699.66 $ 720.65 $
33.0%
33.0%
32.0%
32.0%
32.00%
32.00%
32.00%
32.00%
32.00%
Gain or loss attributable to noncontrolling$ interests
61.00 in$ consolidated
80.00 $ entities
80.00 $
1.3%
1.7%
1.6%
80.00 $
1.5%
57.17 $
1.00%
60.03 $
1.00%
62.43 $
1.00%
64.31 $
1.00%
66.24 $
1.00%
735.06 $
32.00%
742.41
32.00%
67.56 $
1.00%
68.24
1.00%
Net Income
$ 889.85 $ 1,036.53 $ 1,219.84 $ 1,389.19 $ 1,379.03 $ 1,447.98 $ 1,505.90 $ 1,551.08 $ 1,597.61 $
1,629.56 $ 1,645.86
Free Cash Flow
$ 889.85 $ 1,036.53 $ 1,219.84 $ 1,389.19 $ 1,379.03 $ 1,447.98 $ 1,505.90 $ 1,551.08 $ 1,597.61 $
1,629.56 $ 1,645.86
NPV
NPV of terminal value
Projected Equity Value
$8,169.48
$5,854.43
$14,023.91
58.3%
41.7%
Terminal Value $ 16,623.19
Free Cash Yield
Share Outstanding
Current Price
Implied equity value/share
Upside/(Downside) to DCF
453.8
33.57
$30.90
-9%
Terminal P/E
9.90%
10.1
Multiple valuation
Absolute Valuation High
P/Forward E
P/S
P/B
P/EBITDA
P/CF
23
5.4
3
17.02
25.2
Low
Median Current
8.8
1.3
0.8
4.52
6.2
14.6
2.8
1.5
10.58
13.8
13.8
3.1
1.6
9.23
14.5
#Your
*Target E,
Target
Target
S per
Price
Multiple Share
14.6
2.06
30.076
2.8
10.44
29.232
1.5
10.58
13.8
Average
29.654
Final Price
• 30% Multiple = 30% * 29.654 = 8.8962
• 70% DCF = 70% * 30.9 = 21.63
• Estimate Price = 30.53
• Current Price 33.57
• Downside -10%
Companies Recommendation
Company
Target Price
Upside/Do
wnside
Current SIM
Allocation
Recommendation
Recommended
SIM Allocation
JPMorgan
Chase
$58.18
+7.50%
3.81%
HOLD
3.81%
Citigroup
$59.34
+18.82%
0%
BUY
2.00%
Bank of
America
$18.61
+29.20%
4.56%
HOLD
4.56%
Wells Fargo
$44.79
+5.50%
4.63%
SELL
2.00%
CapitalOne
Financial
$80.58
+16.00%
0%
BUY
3.00%
Invesco
$30.53
-10.00%
0%
-
0%
TOTAL
12.99%
15.37%
Q&A