Materials Sector:
Stock Analysis
Presented by:
Rashid Mammadov
Sei Zhang
11/2/2013
PRESENTATION AGENDA
ROAD MAP
•
•
•
•
•
•
•
Brief Sector Overview
Mosaic Company
Valspar Corporation
Alcoa Inc
Freeport McMoRan Copper & Gold, Inc
Recommendations
Class Discussion And Voting
11/2/2013
2
OVERVIEW
SECTOR INFORMATION
S&P 500 Sector Allocation
Materials
3.5%
Utilities Telecom.
2.5%
3.1%
Sector
Materials
Market Cap
55,640.00 (MLN. USD)
# of Companies
31
Median Market Cap
Information
Tech
17.8%
Consumer
Staples
10.2%
Energy
10.5%
Sector
Materials
Financials
16.1%
Industrials
10.8%
Consumer
Disc.
12.5%
11/2/2013
12,015.22 (MLN. USD)
SP 500 SIM
Diff.
3.51% 2.91% -0.61%
Target Sector Weight
2.91%
~ Mosaic Company
2.91%
Health Care
13.0%
3
OVERVIEW
STOCKS CONSIDERED AND RECOMMENDATION
Company
Name
Symbol
Cost
Basis
Mosaic
MOS
$53.45
$47.05
-12%
$52.00
Valspar
VAL
~
$71.01
~
Alcoa
AA
~
$9.54
FCX
~
$35.4
Freeport
11/2/2013
Current Gain, Target Upside
Price
%
Price
%
SIM
%
Action
10.5%
2.91%
Sell
(2.91%)
$68.60
-3.4%
~
No Action
~
$9.11
-4.5%
~
No Action
~
$40.43
22.9%
~
Buy
(2.91%)
4
MOSAIC COMPANY - HOLD
COMPANY OVERVIEW
 Incorporated: March - 2004
 Headquarter: Plymouth, MN
 Main Business: Phosphates &
Potash
 Revenues: $ 9,974 MLN
 Net Income: $ 1,889 MLN
 Exports: 40 Countries
11/2/2013
Net Sales
Potash
35%
Phospha
te
65%
5
MOSAIC COMPANY - HOLD
COMPANY OVERVIEW
Mosaic stock price has dropped in mid-2013 and is slowly reverting back
70
70,000,000
65
60,000,000
Market Data
Current Price: $47.01
Market Cap: 20.49 B
Avg. Volume: 5,170 M
Diluted shares: 426.9 MM
Dividends: $1.00
Dividend Yield: 2.10%
Institutional Owners: 58%
60
50,000,000
55
50
40,000,000
45
30,000,000
40
35
20,000,000
30
10,000,000
25
20
0
Volume
11/2/2013
Close
6
MOSAIC COMPANY - HOLD
COMPANY OVERVIEW
MOSAIC IS A LARGE GLOBAL PLAYER WITH EXPORTS TO OVER 40 COUNTRIES
Operating Earnings
Net Sales by Country
United States
2%
2% 2% 2%
39%
8%
Canpotex (b)
Canada
5%
Phosphat
e
38%
Brazil
India
7%
Others
Potash
62%
Argentina
Japan
12%
Australia
21%
China
11/2/2013
7
MOSAIC COMPANY - HOLD
Business Analysis
Medium term business drivers remain modest
Key Short/Medium Term:
 Weather patterns and field conditions
 US Import/Export of Crops
 Grain Prices
 Inventory in agricultural chemicals
 Exchange rates (India)
Key Long Term Drivers:
 Positive demographic growth
 Need for bio-fuel energy
 Government Subsidies and Policies
 Long term technological trends
 Supply and Demand mismatch
Price Performance
70
65
60
55
50
45
40
35
30
Nov-12
11/2/2013
Dec-12
Jan-13
Feb-13 Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
8
MOSAIC COMPANY
Industry Position
Company Competitive Advantages in the Market:
Access to resources
Sales Team
Distribution Channels
Strong Presence in Overseas Markets
Vertical Integration
11/2/2013
9
MOSAIC COMPANY
Financial Analysis
Direct Competitor Comparison
MOS
POT
URALL
CF
Market Cap:
20.44B
27.86B
14.83B
12.46B
Employees:
8,400
5,870
21,000
2,500.00
Qtrly Rev Growth (yoy):
-0.24
-0.31
-0.278
-0.19
9.97B
6.86B
3.33B
5.63B
0.28
0.43
N/A
0.46
2.92B
3.11B
1.82B
2.83B
0.23
0.36
0.4174
0.43
1.89B
1.98B
1.16B
1.61B
EPS (ttm):
4.42
2.25
1.98
26.47
P/E (ttm):
10.83
14.36
13.38
8.22
PEG (5 yr expected):
N/A
5.46
N/A
1.93
P/S (ttm):
2.06
4.13
4.45
2.24
EV/EBITDA
6.22
9.69
9.71
4.73
Revenue (ttm):
Gross Margin (ttm):
EBITDA (ttm):
Operating Margin (ttm):
Net Income (ttm):
11/2/2013
10
MOSAIC COMPANY
Multiple Analysis
Absolute
Valuation
P/Forward E
High
Low
Median Current
25.60
3.40
14.00
12.00
P/S
12.9
1.3
2.3
P/B
10.4
0.7
48.74
74.6
P/EBITDA
P/CF
#Your
Target
Multiple
*Target
E, S per
Share
Target
Price
14.00
3.58
$50
1.3
2.3
22.02
$51
2.3
1.5
2.2
31.29
$69
4.09
9.54
8.75
9.5
5.4
51.30
5.8
13.1
9.3
13.1
5.1
66.81
Relative to
S&P 500
Relative to the
Industry
Target
Price
$51 per
share
Median Current Median Current
P/Forward E
P/S
P/B
P/EBITDA
P/CF
11/2/2013
1.2
1.8
1.0
1.44
1.4
0.94
1.4
0.6
1.13
0.8
0.96
0.8
0.6
0.95
0.9
0.74
0.7
0.5
0.86
0.7
11
MOSAIC COMPANY - DCF Analysis
Year
2014E
2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E
Revenue
% Growth
9,573
10,340 11,374 12,284 13,021 13,763 14,533 15,333 16,099 16,824 17,455
8.0% 10.0% 8.0%
6.0%
5.7%
5.6%
5.5%
5.0%
4.5% 3.75%
Operating Income
Operating Margin
1,886
19.7%
2,366
22.9%
2,366
20.8%
2,555
20.8%
2,708
20.8%
2,863
20.8%
3,023
20.8%
3,189
20.8%
3,349
20.8%
3,500
20.8%
3,631
20.8%
Interest and Other
(9)
(9)
(9)
(10)
(10)
(11)
(11)
(12)
(12)
(13)
(14)
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
Taxes
Tax Rate
451
23.8%
528
22.2%
591
24.9%
641
25.0%
680
25.0%
718
25.0%
759
25.0%
800
25.0%
840
25.0%
878
25.0%
911
25.0%
Net Income
% Growth
1,423
1,580
11.0%
1,768
11.9%
1,923
8.8%
2,039
6.0%
2,155
5.7%
2,276
5.6%
2,401
5.5%
2,521
5.0%
2,634
4.5%
2,733
3.8%
Depreciation/Amort
% of Sales
Changes WC
574
6.0%
565
620
6.0%
(100)
682
6.0%
(134)
737
6.0%
(184)
768
5.9%
(195)
798
5.8%
(206)
828
5.7%
(218)
859
5.6%
(230)
885
5.5%
(241)
908
5.4%
(252)
925
5.3%
(262)
% of Sales
Subtract Cap Ex
Capex % of sales
5.9%
1,245
13.0%
-1.0%
1,344
13.0%
-1.2%
1,479
12.0%
-1.5%
1,228
10.0%
-1.5%
1,302
10.0%
-1.5%
1,307
9.5%
-1.5%
1,381
9.5%
-1.5%
1,227
8.0%
-1.5%
1,127
7.0%
-1.5%
1,009
6.0%
-1.5%
925
5.3%
Free Cash Flow
1,318
757
838
1,248
1,310
1,439
1,506
1,803
2,038
2,281
10.7%
48.9%
19.8%
13.0%
11.9%
Interest % of Sales
% Growth
2.6%
5.0%
9.9%
4.6%
2,471
12
8.3%
MOSAIC COMPANY
DCF ANALYSIS (Continued)
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
8,311
12,456
20,767
6.42%
Current Price
Implied equity value/share
Upside/(Downside) to DCF
Debt
Cash
Cash/share
Debt free cash/ share
11/2/2013
40%
60%
100%
$47.03
$ 48.65
3.51 %
1,011
3,697
8.66
$ 6.29
Terminal Discount Rate =
11.0%
Terminal FCF Growth =
3.75%
13
MOSAIC COMPANY
DCF Valuation Sensitivity to Growth / Discount Rate
1.75%
2.25%
2.75%
3.25%
3.75%
4.25%
4.75%
5.25%
5.75%
9%
$55.94
$58.66
$61.82
$65.53
$69.94
$75.29
$81.89
$90.25
$101.2
9.50%
$51.72
$53.99
$56.61
$59.64
$63.20
$67.44
$72.56
$78.90
$86.92
10%
$48.03
$49.95
$52.13
$54.64
$57.55
$60.97
$65.04
$69.96
$76.04
10.50%
$44.78
$46.41
$48.26
$50.35
$52.76
$55.55
$58.83
$62.74
$67.46
11%
$41.90
$43.29
$44.86
$46.63
$48.65
$50.96
$53.64
$56.79
$60.54
11.50%
$39.32
$40.53
$41.87
$43.37
$45.07
$47.01
$49.23
$51.80
$54.83
12%
$37.01
$38.06
$39.21
$40.50
$41.95
$43.58
$45.44
$47.57
$50.05
12.50%
$34.93
$35.84
$36.84
$37.95
$39.19
$40.58
$42.15
$43.93
$45.98
13%
$33.04
$33.83
$34.71
$35.67
$36.74
$37.93
$39.27
$40.77
$42.49
11/2/2013
14
MOSAIC COMPANY
TARGET VALUE
MOSAIC TARGET PRICE - $52 PER SHARE
 THE DCF ANALYSIS TARGET PRICE IS $48.65
 EXCESS CASH OF $3.35 PER SHARE HAS ALSO BEEN CONSIDERED
AS AN ADJUSTMENT TO DCF VALUE
 THUS, TARGET PRICE FOR MOSAIC IS ESTIMATED AT $52 PER SHARE
 MULTIPLE METHOD VALUATION REVEALS PRICE OF $51 PER SHARE
WHICH IS ALSO SUPPORTING THE ABOVE TARGET RATE
11/2/2013
15
VALSPAR CORPORATION
COMPANY OVERVIEW
Revenues - 4,104MM
Op. Income - 492.42MM
EPS - 3.49
Current Price - $70.88
Market Cap - 6.1B
P/E - 22.19
Beta - 1.11
Dividends - $1.04
Operating Earnings
Sales
-5%
6%
29%
Coating
40%
66%
11/2/2013
54%
Paintings
Others
16
VALSPAR CORPORATION
BUSINESS ANALYSIS
KEY DRIVERS:
 US HOUSING MARKET
 RECOVERY AND GROWTH IN GLOBAL ECONOMY
 BRAND AWARENESS AND EQUITY
 INVESTMENTS IN OVERSEES MARKETS - CHINA, INDIA,
EUROPE.
11/2/2013
17
VALSPAR CORPORATION
FINANCIAL VALUATION
Averaging P/E, P/S & P/CF reveals target price of 58$ per share
#Your *Target E,
Target
S per
Multiple
Share
Absolute
Valuation
High
Low
Median
Current
P/Forward
E
21.5
10.9
14.9
17.4
14.9
4.08
60.79
P/S
P/B
P/EBITDA
1.6
5.5
95.78
0.5
1.1
4.56
1
2.1
8.23
1.5
4.4
10.1
1.2
2.4
8
47.34
16.2
7.1
56.81
38.88
56.80
P/CF
16.5
7
11.6
15.6
12
4.56
54.72
11/2/2013
Target
Price
18
VALSPAR COMPANY – FREE CASH FLOWS TO THE FIRM
Year
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
Revenue
% Growth
4,511
4,829
7.1%
5,114
5.9%
5,395
5.5%
5,686
5.4%
5,987
5.3%
6,299
5.2%
6,614
5.0%
6,925
4.7%
7,222
4.3%
7,511
4.00%
Operating Income
Operating Margin
607
13.5%
670
13.9%
715
14.0%
754
14.0%
795
14.0%
837
14.0%
881
14.0%
925
14.0%
968
14.0%
1,010
14.0%
1,050
14.0%
68
1.5%
68
1.4%
72
1.4%
76
1.4%
80
1.4%
84
1.4%
88
1.4%
93
1.4%
97
1.4%
101
1.4%
105
1.4%
173
193
206
217
229
241
254
266
279
291
302
32.0%
32.0%
32.0%
32.0%
32.0%
32.0%
32.0%
32.0%
32.0%
32.0%
32.0%
Net Income
% Growth
367
410
11.8%
438
6.7%
462
5.5%
486
5.4%
512
5.3%
539
5.2%
566
5.0%
592
4.7%
618
4.3%
643
4.0%
Add Depreciation/Amort
113
121
128
124
131
138
145
152
159
166
173
2.5%
(59)
-1.3%
135
3.0%
2.5%
(43)
-0.9%
121
2.5%
2.5%
(38)
-0.8%
128
2.5%
2.3%
(40)
-0.8%
135
2.5%
2.3%
(43)
-0.8%
142
2.5%
2.3%
(45)
-0.8%
150
2.5%
2.3%
(47)
-0.8%
157
2.5%
2.3%
(50)
-0.8%
165
2.5%
2.3%
(52)
-0.8%
173
2.5%
2.3%
(54)
-0.8%
181
2.5%
2.3%
(56)
-0.8%
173
2.3%
285
367
28.6%
399
8.8%
410
2.8%
432
5.4%
455
5.3%
479
5.2%
503
5.0%
527
4.7%
549
4.3%
586
6.7%
Interest and Other
Interest % of Sales
Taxes
Tax Rate
% of Sales
Plus/(minus) Changes WC
% of Sales
Subtract Cap Ex
Capex % of sales
Free Cash Flow
% Growth
VALSPAR CORPORATION
DCF ANALYSIS CONTINUED
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
2,719
3,456
6,175
4.82%
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
16.1
16.8
9.5
9.9
Shares Outstanding
89.9
Current Price
$
71.08
Implied equity value/share
$
68.68
Debt
Cash
Cash/share
11/2/2013
44%
56%
100%
14.4
15.1
8.7
9.0
13.5
14.1
8.1
8.4
Terminal
Discount
Rate =
Terminal FCF
Growth =
10.5%
4.00%
4,643
3,697
41.12
20
VALSPAR CORPORATION
RECOMMENDATION
 CURRENT PRICE: $71.08
 TARGET PRICE: $68.7
 RECOMMENDATION: NO ACTION (NEGATIVE)
11/2/2013
21
Alcoa Inc.
Company Overview
Alcoa Inc. produces and manages primary aluminum, fabricated
aluminum, and alumina combined and participates in mining, refining,
smelting, fabricating, and recycling. Its products are used in aircraft,
automobiles, packaging & defense, among others.
Key Fundamentals
Current Price
$9.54
Market Cap
10.25B
P/E ratio
34.6
EPS
0.28
Revenue
23.43B
Profit margin
1.27%
ROE
1.97%
Beta
1.85
11/2/2013
Alcoa Sales by Segments
Alumin
a
13%
Engine
ered
Produc
ts
23%
Primar
y
Metals
32%
Global
Rolled
Produc
ts
32%
22
Alcoa Inc.
Company Overview
Source: Yahoo Finance.
- October 8, 2013 , AA reported its third quarter results.
- Trading at the highest level since 2012
11/2/2013
23
Alcoa Inc.
Company Overview
The company is making progress to boost earnings through
productivity improvements.
11/2/2013
24
Alcoa Inc.
Business Analysis
Key Drivers
- Productivity improvements
- A possible recovery in aluminum prices
- Speculation last week that aluminum price will risk
- Down stream, less price sensitive profits business profits
solid
- Engineered products business which it’s a huge
supplier to Boeing
- Growing market in aerospace industry and automotive
industry, brings huge orders
11/2/2013
25
Alcoa Inc.
Business Analysis
Risks
- High debt
- A reduction in demand, or a lack of
increased demand, for aluminum by
China, Europe or a combined number
of other countries may negatively
impact Alcoa’s results.
- Poor pricing
- Profitability of aluminum
producers is heavily depend on
the underlying commodity price.
Source: MetalPrices.com.
11/2/2013
26
Alcoa Inc.
Valuation Analysis
11/2/2013
27
Alcoa Inc.
ALCOA (AA)
Analyst: Sai Zhang
2013-11-26
Terminal
Discount Rate
=
11.00%
Terminal FCF
Growth =
3.00%
DCF Analysis
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
23,679
23,016
-2.80%
23,775
3.30%
24,488
3.00%
24,978
2.00%
25,478
2.00%
25,732
1.00%
25,990
1.00%
26,250
1.00%
26,512
1.00%
27,042
2.00%
1,807
7.63%
1,857
8.07%
1,972
8.30%
1,469
6.00%
1,399
5.60%
1,401
5.50%
1,364
5.30%
1,377
5.30%
1,391
5.30%
1,405
5.30%
1,433
5.30%
544
2.30%
520
2.26%
644
2.71%
612
2.50%
624
2.50%
637
2.50%
515
2.00%
520
2.00%
525
2.00%
530
2.00%
541
2.00%
480
36.00%
503
36.00%
496
36.00%
309
36.00%
279
36.00%
275
36.00%
306
36.00%
309
36.00%
312
36.00%
315
36.00%
321
36.00%
784
834
6.37%
832
-0.21%
549
-34.06%
496
-9.66%
489
-1.29%
543
11.10%
549
1.00%
554
1.00%
560
1.00%
571
2.00%
1,374
5.80%
1,340
5.82%
1,384
5.82%
1,425
5.82%
1,454
5.82%
1,483
5.82%
1,498
5.82%
1,513
5.82%
1,528
5.82%
1,543
5.82%
1,574
5.82%
29
0.12%
1,261
5.33%
37
0.16%
1,215
5.3%
12
0.05%
1,001
5.3%
245
1.0%
1,308
5.3%
250
1.0%
1,334
5.3%
229
0.9%
1,361
5.3%
206
0.8%
1,374
5.3%
208
0.8%
1,388
5.3%
210
0.8%
1,402
5.3%
212
0.8%
1,416
5.3%
216
0.8%
1,444
5.3%
926
996
7.52%
1,227
23.21%
911
-25.74%
865
-5.02%
841
-2.83%
873
3.82%
882
1.00%
890
1.00%
899
1.00%
917
2.00%
NPV of Cash Flows
5,580
57%
NPV of terminal value
Projected Equity Value
4,159
9,739
43%
100%
Terminal Value
11,810
Free Cash Flow Yield
9.08%
Free Cash
Yield
7.77%
Terminal P/E
20.7
Terminal
EV/EBITDA
6.0
Revenue
% Growth
Operating Income
Operating Margin
Interest
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
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
Shares Outstanding
Current Price
13.0
12.4
12.2
11.7
12.3
11.7
5.2
5.0
5.2
5.0
4.9
4.8
1,069
9.54
Implied equity value/share
9.11
Upside/(Downside) to DCF
-4.5%
11/2/2013
Debt
Cash
Cash/share
7,340
1,020
0.95
28
Alcoa Inc.
Recommendation
Recommendation: Not action (Negative).
11/2/2013
29
Freeport-McMoRan Copper & Gold Inc.
Company Overview
Freeport-McMoRan Copper & Gold Inc. (FCX) is an international natural
resources company with headquarters in Phoenix, Arizona. The company
operates large, long-lived, geographically diverse assets with significant
reserves of copper, gold, molybdenum, cobalt, oil and gas.
Key Fundamentals
Current Price
$35.40
Market Cap
36.74B
P/E ratio
12.9
EPS
2.74
Revenue
19.55B
Profit margin
13.78%
ROE
14.84%
Beta
2.29
11/2/2013
FCX Sales by Segments
Africa
8%
Indone
sia
23%
South
Americ
a
21%
North
Americ
a
48%
30
Freeport-McMoRan Copper & Gold Inc.
Company Overview
Source: Yahoo Finance.
- 2013, declining commodity prices
- Posted decent margins in the recent quarter despite the decline in
commodity prices
11/2/2013
31
Freeport-McMoRan Copper & Gold Inc.
Business Analysis
Key Drivers
- High dividend, 3.4%
- Massive reserve base and
hedged pricing
- Can maintain the productivity
level fro 30 years
- Diversification into oil exploration
- Acquisitions of Plains
Exploration & Production
Company
- aims to double its production of
oil & gas over the next five
years
11/2/2013
FCX Sales by
Commodity
Diversification
Oil
and
Natura
l Gas
26%
Mining
74%
32
Freeport-McMoRan Copper & Gold Inc.
Company Overview
Although the company is not performing well relative to the industry, it
presents a good investment opportunity.
11/2/2013
33
Freeport-McMoRan Copper & Gold Inc.
Business Analysis
Risks
- Economic Volatility
- Slowdown in emerging market economies
- Acquisition increased significant debt amount
- High leverage ratio
- Slowing U.S. and global GDP growth
- Lagging demand of copper in China
11/2/2013
34
Freeport-McMoRan Copper & Gold Inc.
Valuation Analysis
11/2/2013
35
Freeport-McMoRan Copper & Gold Inc.
FCX
Analyst: Sai Zhang
2013-11-26
Terminal Discount
Rate =
11.50%
Terminal FCF
Growth =
4.00%
DCF Analysis
Year
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
Revenue
19,209
19,424
1.12%
21,599
11.20%
22,247
3.00%
22,024
-1.00%
22,244
1.00%
22,912
3.00%
23,599
3.00%
23,835
1.00%
24,074
1.00%
24,555
2.00%
5,324
27.71%
5,493
28.28%
5,246
24.29%
5,562
25.00%
5,506
25.00%
5,784
26.00%
6,186
27.00%
6,372
27.00%
6,435
27.00%
6,500
27.00%
6,630
27.00%
384
2.00%
491
2.53%
540
2.50%
556
2.50%
551
2.50%
556
2.50%
458
2.00%
472
2.00%
477
2.00%
481
2.00%
491
2.00%
1,616
33.00%
1,633
33.00%
1,484
33.00%
1,652
33.00%
1,635
33.00%
1,725
33.00%
1,890
33.00%
1,947
33.00%
1,966
33.00%
1,986
33.00%
2,026
33.00%
3,293
3,327
1.04%
3,026
-9.06%
3,354
10.83%
3,320
-1.00%
3,502
5.49%
3,838
9.57%
3,953
3.00%
3,992
1.00% `
4,032
4,113
2.00%
Capex % of sales
1,374
7.15%
1,080
5.62%
1,261
6.56%
1,130
5.82%
(124)
-0.64%
1,215
5.5%
1,257
5.82%
(387)
-1.79%
1,001
5.5%
1,295
5.82%
-111
-0.5%
1,224
5.5%
1,282
5.82%
-110
-0.5%
1,211
5.5%
1,295
5.82%
-111
-0.5%
1,223
5.5%
1,333
5.82%
-115
-0.5%
1,260
5.5%
1,373
5.82%
-118
-0.5%
1,298
5.5%
1,387
5.82%
-119
-0.5%
1,311
5.5%
1,401
5.82%
-120
-0.5%
1,324
5.5%
1,429
5.82%
-123
-0.5%
1,429
5.8%
Free Cash Flow
4,487
3,119
-30.47%
2,895
-7.18%
3,314
14.44%
3,281
-1.00%
3,462
5.54%
3,796
9.65%
3,910
3.00%
3,949
1.00%
3,989
1.00%
3,990
0.03%
NPV of Cash Flows
19,944
52%
NPV of terminal value
Projected Equity Value
18,630
38,574
48%
100%
Terminal Value
55,331
Free Cash Flow Yield
14.30%
Free Cash Yield
7.21%
Terminal P/E
13.5
Terminal
EV/EBITDA
7.0
% Growth
Operating Income
Operating Margin
Interest
Interest % of Sales
Taxes
Tax Rate
Net Income
% Growth
Add Depreciation/Amort
% of Sales
Plus/(minus) Changes WC
% of Sales
Subtract Cap Ex
% Growth
Current P/E
Projected P/E
9.5
11.7
9.4
11.6
10.4
12.7
Current EV/EBITDA
Projected EV/EBITDA
4.8
5.9
4.9
5.9
5.0
6.1
Shares Outstanding
954
Current Price
Implied equity value/share
Upside/(Downside) to DCF
Debt
Cash
Cash/share
11/2/2013
32.89
40.43
22.9%
3,525
2,700
2.83
36
Freeport-McMoRan Copper & Gold Inc.
Recommendation
Current Price: $35.40
Target Price: $40.43
Recommendation: Buy.
11/2/2013
37
OVERVIEW
STOCKS CONSIDERED AND RECOMMENDATION
Company
Name
Symbol
Cost
Basis
Mosaic
MOS
$53.45
$47.05
-12%
$52.00
Valspar
VAL
~
$71.01
~
Alcoa
AA
~
$9.54
FCX
~
$35.4
Freeport
11/2/2013
Current Gain, Target Upside
Price
%
Price
%
SIM
%
Action
10.5%
2.91%
Sell
(2.91%)
$68.60
-3.4%
~
No Action
~
$9.11
-4.5%
~
No Action
~
$40.43
22.9%
~
Buy
(2.91%)
38