Stock Presentation Consumer
Discretionary
Autumn 2011
Phil Alexander - GM
Ammon Bowen - BestBuy
Aurelio Carrillo - Comcast
Shawn Cochran – Las Vegas Sands
Consumer DiscretionarySIMSummary
Portfolio
S&P 500 Weight by Sector
Telecom Svc
3%
Materials Utilities
3%
3%
Utilities
4%
Info Tech
19%
Energy
12%
Materials
4%
Info Tech
25%
Industrials
11%
Cons Disc
11%
Financials
14%
Health Care
12%
Industrials
3%
Health Care
11%
Cons Staples
11%
Cons Staples
21%
Financials
11%
Energy
13%
Consumer
Discrectionary
9%
Recommended hold at 200bbp below
S&P
Holdings as of 11/11/11
COMPANY
COST BASIS
MARKET
VALUE
OVERAL
GAIN
(LOSS)
OVERAL
GAIN
(LOSS)
%
RECOMMENDATION
BEST BUY
(BBY)
$328,188
$235,956
($92,232)
(28.1%)
SELL ALL
COMCAST
(CMCSA)
$253,920
$360,320
$106,400
41.9%
BUY 100 BPS
GENERAL
MOTORS
(GM)
$456,504
$310,638
($145,866)
(31.95%)
Buy 110 BPS
$0
$0
$0
DO NOT BUY
LAS VEGAS $0
SANDS (LVS)
Comcast: Summary
•
•
•
•
Current Weight: 3.44%
Expected Return: 40.5%
Recommended Weight: 4.44%
Recommendation: Overweight 100 bps
Comcast: Business Summary
“With the NBC Universal integration ramping up,
Comcast hasn't missed a beat. The firm continues
to take share in the residential telecom market,
putting up solid customer growth figures relative to
its cable peers, while also growing its commercial
services business rapidly. The ups and downs of the
NBCU content business may cause variability in
Comcast's reported results, but we expect the cable
side of the house will post solid, steady results for
the foreseeable future.” Morningstar
Comcast: Background
• Largest provider of video, high-speed internet
& phone service to residential & business
customers in the United States.
• 2 business segments
– Cable: manages & operates cable systems in the
U.S.
– Programming: NBC Universal, E, Golf Channel,
Versus, G4, and Style.
Comcast: Catalysts
• Addition of Content
– Stronger programming & rating would generate
higher add sales
• Diversification
– Theme Parks, Sports Arena, and Universal (film
entertainment)
• Upgrades to internet platform:
– As cable subscriptions decrease in the market, it’s
key to focus on having a strong internet platform.
Comcast: Risks
• Increase FCC regulation
• Changes in consumer behavior
– Slow cable subscriber growth
– Shift from cable to internet
• Loss of programming distribution agreements.
• Intense price competition with other cable
companies
Comcast (CMCSA) vs S&P 500
Five year historical
Comcast: Valuation
RELATIVE TO
CABLE &
SATELLITE
INDUSTRY
HIGH
LOW
MEDIAN
CURRENT
TRAILING P/E
1.2
.78
.99
1.0
FORWARD P/E
1.1
.92
1.0
1.0
P/B
.8
.5
.6
.5
P/S
1.6
1.0
1.3
1.0
P/CF
1.2
.9
1.0
1.0
Comcast: Valuation
RELATIVE TO
S&P INDEX
HIGH
LOW
MEDIAN
CURRENT
TRAILING P/E
24.8
.69
1.9
1.3
FORWARD P/E
23.3
.80
2.0
1.1
P/B
.8
.5
.6
.7
P/S
3.0
1.1
1.9
1.3
P/CF
2.0
.4
1.0
.6
Comcast: Overall Valuation
ABSOLUTE HIGH
VALUATION
LOW
MEDIAN CURRENT
# YOUR
YOUR
TARGET
TARGET
MULTIPLE X/SHARE
YOUR
TARGET
PRICE
F* G
A
B
C
D
E
F
G
H
TRAILING
P/E
436.4
11.7
30.2
14.0
18.0
1.63
$29.34
FORWARD
P/E
4.4
1.2
2.8
1.5
1.7
19.92
$33.86
P/B
2.5
.9
1.6
1.5
1.6
16.00
$25.60
P/EBITDA
19.46
2.98
6.55
4.27
6.55
5.00
$32.75
P/CF
21.2
4.2
11.2
5.5
11.20
3.00
$33.60
AVERAGE
$31.03
Comcast Corporation
Analyst: Aurelio Carrillo
Date: 11/12/2011
Year
2011E
Revenue
56,179
% Grow th
10,562
Operating Margin
Interest and Other
Interest % of Sales
Taxes
Tax Rate
Net Income
61,431
2013E
67,574
11,918
10.0%
12,636
% of Sales
Subtract Cap Ex
16,845
95,998
6.0%
17,760
101,182
5.4%
18,719
106,241
5.0%
19,655
110,756
4.3%
20,490
18.5%
18.5%
(3,371)
(3,747)
(4,392)
(4,788)
(5,171)
(5,533)
(5,887)
(6,240)
(6,577)
(6,906)
(7,199)
-6.0%
-6.1%
-6.5%
-6.5%
-6.5%
-6.5%
-6.5%
-6.5%
-6.5%
-6.5%
-6.5%
(3,036)
(3,443)
(3,490)
(3,594)
(3,850)
(4,120)
(4,383)
(4,608)
(4,857)
(5,100)
(5,316)
-40.0%
-40.0%
-40.0%
-40.0%
-40.0%
-40.0%
-40.0%
-40.0%
-40.0%
-40.0%
-40.0%
4,571
5,182
5,255
5,392
5,775
6,179
6,575
6,912
7,285
7,649
7,974
10,099
1.4%
10,812
16.4%
2.6%
11,785
7.1%
12,728
7.0%
13,619
6.4%
14,852
5.1%
15,744
5.4%
16,594
5.0%
17,423
16.0%
16.0%
16.0%
16.0%
16.4%
16.4%
16.4%
16.4%
4.3%
18,164
16.4%
923
98
111
(729)
(700)
(655)
(638)
(634)
(601)
(584)
(518)
1.6%
0.2%
0.2%
-1.0%
-0.9%
-0.8%
-0.7%
-0.7%
-0.6%
-0.6%
-0.5%
35,033
55,968
91,002
8.90%
13.9
19.9
5.0
6.4
10,198
11,623
16.6%
5,182
17.2%
4,733
-8.7%
38%
62%
100%
12,227
16.6%
4,520
-4.5%
13,125
16.5%
4,958
9.7%
13,959
16.4%
5,438
9.7%
14,852
16.4%
6,100
12.2%
15,744
16.4%
6,440
5.6%
16,594
16.4%
6,838
6.2%
17,423
16.4%
7,214
5.5%
12.3
17.6
4.6
5.8
22.52 as of 11/11/11
32.27
43.3%
39,559 as of 06/30/11
1,997
0.71
154,782
25.6%
11%
18,164
16.4%
7,589
5.2%
Terminal Value 142,550
Free Cash Yield
2,820
$
$
6.4%
18.5%
-8.3%
Shares Outstanding
15,832
90,564
2021E
18.5%
5,651
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
7.0%
2020E
18.6%
% Grow th
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
14,796
85,117
2019E
18.6%
16.0%
Free Cash Flow
8.0%
2018E
18.6%
8,989
Capex % of sales
13,774
79,548
2017E
18.7%
16.9%
Plus/(minus) Changes WC
9.0%
2016E
18.7%
9,517
% of Sales
73,656
2015E
19.4%
13.4%
Add Depreciation/Amort
2014E
9.8%
4.25%
18.8%
% Grow th
Debt
Cash
Cash/share
Total Assets
Debt/Assets
Working Capital % of Growth
2012E
9.3%
Operating Income
Current Price
Implied equity value/share
Upside/(Downside) to DCF
Terminal Discount Rate =
Terminal FCF Growth =
12.1
17.3
4.3
5.5
5.32%
Terminal P/E
17.9
Terminal EV/EBITDA
4.7
Comcast: Overall Valuation
VALUATION
PRICE
WEIGHT
VALUE
MULTIPLES
$31.03
50%
15.515
DCF
$32.27
50%
16.135
WEIGHTED
AVERAGE
$31.65
CURRENT PRICE
$22.52
IMPLIED EQUITY VALUE
$31.65
UPSIDE (DOWNSIDE)
40.5%
Summary
Current Weight: 2.10%
Basis=$328,188
Market Value=$235,956
Recommendation: Sell all
Business Analysis
“As the world's leading consumer electronics specialty retailer,
Best Buy would appear to be well positioned to capitalize on
improving discretionary spending patterns and an increased
consumer appetite for connected, portable electronic devices.
However, we believe the fall of Circuit City and other industry
participants has invited increased competition from mass
merchants, warehouse clubs, and online retailers, changing
the economics of the consumer electronics retail category in
the process and making market share gains more difficult.
Although Best Buy's customer-centric shopping environment
and service offerings provide some differentiation, we're not
convinced that the firm has an economic moat to fend off its
encroaching rivals.” - Morningstar
Bestbuy Catalysts
• Increase in consumer discretionary income
• Exit of rivals (Circuit City)
• Customer-centric shopping environment and
service offerings
• Focus on mobile stores and online retail
Risks
• Increased competition from mass merchants,
warehouse clubs, and online retailers
• Changes in consumer preferences
• Intensely competitive margins
• Economic concerns
Bestbuy BBY
•
•
•
•
•
•
•
Last trade: $28.09
52wk range: $21.79 - $45.63
Market Cap: 10.18 Billion
Average 3 month Volume: 6,867,530
P/E (ttm): 9.40
EPS (ttm): 2.99
Div & Yield: .64 (2.30%)
Bestbuy BBY vs S&P 500
Five year historical
Analyst: Ammon Bowen
Date: 11/14/2011
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
2012E
51,730
2.90%
2,369
Terminal Discount Rate =
Terminal FCF Growth =
2013E
52,247
1.0%
2,471
2014E
52,770
1.0%
2,665
2015E
51,714
-2.0%
1,551
2016E
51,197
-1.0%
1,945
11.0%
2.0%
2017E
51,760
1.1%
2,070
2018E
52,381
1.2%
2,095
2019E
53,062
1.3%
2,122
2020E
53,858
1.5%
2,154
2021E
54,774
1.7%
2,246
2022E
55,869
2.0%
2,347
4.6%
4.7%
5.1%
3.0%
3.8%
4.0%
4.0%
4.0%
4.0%
4.1%
4.2%
(96)
(95)
(96)
(94)
(92)
(93)
(89)
(90)
(92)
(93)
(95)
-0.19%
-0.18%
-0.18%
-0.18%
-0.18%
-0.18%
-0.17%
-0.17%
-0.17%
-0.17%
-0.17%
816
836
902
510
649
692
702
711
722
753
788
35.0%
34.3%
34.3%
35.0%
35.0%
35.0%
35.0%
35.0%
35.0%
35.0%
35.0%
1,426
0.0%
958
1.9%
1,509
5.8%
950
1.8%
(34)
(35)
-0.1%
-0.1%
532
528
1.0%
1,764
1.0%
1,844
4.5%
1,635
8.3%
959
1.8%
0
0.0%
533
1.0%
2,004
8.7%
Current Price
Implied equity value/share
Upside/(Downside) to DCF
947
1,205
-42.0%
27.2%
931
922
1.8%
207
0.4%
621
1.2%
1,395
-30.4%
$
$
1.8%
102
0.2%
512
1.0%
1,648
18.1%
1,285
6.7%
932
1,304
1.5%
943
1,321
1.3%
955
1,341
1.5%
969
1,399
4.4%
986
1,463
4.6%
1,006
1.8%
1.8%
1.8%
1.8%
1.8%
1.8%
(114)
(126)
(138)
(162)
(186)
(223)
-0.2%
-0.2%
-0.3%
-0.3%
-0.3%
518
524
531
862
986
1.0%
1,545
-6.2%
1.0%
1,558
0.8%
28.09
34.72
23.6%
1.0%
1,569
0.7%
1.6%
1,294
-17.5%
1.8%
1,238
-4.3%
-0.4%
1,006
1.8%
1,270
2.6%
Valuation
Absolute Basis
High
Low
Median
Current
P/Trailing E
53.7
13.9
20.6
15.9
P/Forward E
44.1
13
18.5
14.8
P/B
3.5
1.5
2.4
2.9
P/S
1.1
.4
.9
1
P/CF
12.8
5.7
9.1
9.6
Relative to
SP500
P/Trailing E
High
Low
Median
Current
3.9
1
1.2
1.2
3
.96
1.1
1.2
P/B
1.4
.7
.9
1.4
P/S
.9
.5
.6
.9
P/CF
1.1
.7
.9
1.1
P/Forward E
Bestbuy Overall Valuation
VALUATION
MULTIPLES
PRICE
$
DCF
$
WEIGHT
26.74 50%
34.72 50%
WEIGHTED
AVERAGE
VALUE
$ 13.37
$ 17.36
$ 30.73
CURRENT PRICE 11-11-11
$28.09
IMPLIED EQUITY VALUE
$30.73
UPSIDE (DOWNSIDE)
(9%)
Las Vegas Sands: Summary
Current Weight: none
Expected Return: (1.4%)
Recommended Weight: none
Recommendation: Do not buy
Las Vegas Sands Background
Incorporated in 2004
Integrated Resorts
– Gaming, hotel, restaurant, entertainment, retail
Las Vegas
– The Venetian, the Palazzo, Sands Expo Center
Bethlehem, PA
– Sands Bethlehem partially opened in May 2009
Macau
– Sands Macau, Venetian Macau, Four Seasons Macau
Singapore
– Marina Bay Sands
– Suspended construction on “Las Vegas Condo Tower”
– Costal Strip properties/sites 3,7, and 8
Las Vegas Sands : Catalysts
• Well positioned to exploit potential growth in Asia
• Structure of industry in Asia
• Asia expansion into Japan
• Diversified target markets
• Early strength in Singapore
Las Vegas Sands : Risks
• Uncertainty of Asia’s GDP growth and stallig
exports. Majority of Asia Rev is from VIP market
which is sensitive to economy.
• No clear successor to 76 yr old CEO Adelson who
owns 63% of company. Most senior management
is new. Replacement will likely not have similar
ownership to act in interest of shareholders.
• Highly leveraged position of $10B can have
adverse affects in economic downturn.
• Regulatory/Licensing/Political Risk, sites 3,7,& 8
Las Vegas Sands: Valuation
Relative to Industry
High
Low
Median
Current
P/Trailing E
7.7
.97
2.5
1.0
P/Forward E
10.4
.82
1.9
.99
P/B
6
.2
2.3
.9
P/S
8.9
.3
4.0
1.7
P/CF
5.7
.4
2.5
1.1
Relative to S&P 500
High
Low
Median
Current
P/Trailing E
14.8
1.1
3.9
2.0
P/Forward E
21.4
1.5
3.1
1.5
P/B
7.5
.3
3.1
2.1
P/S
14.1
.3
6.0
2.9
P/CF
7.0
.3
3.3
1.7
Las Vegae Sands (LSV)
Analyst:Shawn Cochran
Date:11/11/11
Year
Revenue
Operating Margin
Interest and Other
Interest % of Sales
Taxes
Tax Rate
Net Income
% of Sales
Plus/(minus) Changes WC
% of Sales
Subtract Cap Ex
Capex % of sales
Free Cash Flow
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
9,483,057
12,583,353
15,620,432
18,744,519
22,493,423
25,867,436
29,747,551
32,722,306
34,358,422
35,732,759
37,162,069
32.7%
24.1%
20.0%
20.0%
15.0%
15.0%
10.0%
5.0%
4.0%
4.0%
2,312,236
3,342,280
4,271,599
4,686,130
5,173,487
5,432,162
5,652,035
5,562,792
5,840,932
6,074,569
6,317,552
24.4%
26.6%
27.3%
25.0%
23.0%
21.0%
19.0%
17.0%
17.0%
17.0%
17.0%
(495,016)
(656,851)
(815,387)
(978,464)
(1,174,157)
(1,350,280)
(1,552,822)
(1,708,104)
(1,793,510)
(1,865,250)
(1,939,860)
-5.2%
-5.2%
-5.2%
-5.2%
-5.2%
-5.2%
-5.2%
-5.2%
-5.2%
-5.2%
-5.2%
(181,722)
(295,397)
(414,745)
(444,920)
(479,920)
(489,826)
(491,906)
(462,563)
(485,691)
(505,118)
(525,323)
-10.0%
-11.0%
-12.0%
-12.0%
-12.0%
-12.0%
-12.0%
-12.0%
-12.0%
-12.0%
-12.0%
1,303,591
1,937,031
2,447,890
3,262,746
3,519,411
3,592,056
3,607,307
3,392,125
3,561,731
3,704,201
3,852,369
48.6%
26.4%
33.3%
7.9%
2.1%
0.4%
-6.0%
5.0%
4.0%
4.0%
853,475
1,006,668
1,093,430
1,312,116
1,462,072
1,552,046
1,784,853
1,963,338
2,061,505
2,143,966
2,229,724
9.0%
8.0%
7.0%
7.0%
6.5%
6.0%
6.0%
6.0%
6.0%
6.0%
6.0%
(183,680)
(257,325)
(252,078)
(749,781)
(899,737)
(776,023)
(892,427)
(654,446)
(343,584)
(285,862)
(297,297)
-1.9%
-2.0%
-1.6%
-4.0%
-4.0%
-3.0%
-3.0%
-2.0%
-1.0%
-0.8%
-0.8%
2,370,764
2,516,671
2,811,678
2,624,233
2,249,342
1,552,046
1,784,853
1,963,338
2,061,505
2,143,966
2,229,724
25.0%
20.0%
18.0%
14.0%
10.0%
6.0%
6.0%
6.0%
6.0%
6.0%
6.0%
305,745
900,257
1,292,030
2,053,166
2,529,755
3,136,814
3,083,779
3,008,205
3,360,173
3,536,504
3,677,964
194.4%
43.5%
58.9%
23.2%
24.0%
-1.7%
-2.5%
11.7%
5.2%
4.0%
Terminal Value
45,000,976
Free Cash Yield
8.17%
Terminal P/E
11.7
Terminal EV/EBITDA
5.9
% Growth
NPV of Cash Flows
13,090,647
NPV of terminal value
13,857,877
51%
Projected Equity Value
26,948,524
100%
Free Cash Flow Yield
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
Shares Outstanding
Current Price
28.7
19.3
15.3
20.7
13.9
11.0
13.6
10.3
9.9
7.5
8.0
6.0
806,000
$46.41
$33.43
Upside/(Downside) to DCF
-28.0%
Debt
8,985,396
Cash
3,479,106
Total Assets
Debt/Assets
Working Capital % of Growth
49%
0.82%
Implied equity value/share
Cash/share
4.0%
2012E
% Growth
Add Depreciation/Amort
12.5%
Terminal FCF Growth
=
2011E
% Growth
Operating Income
Terminal Discount
Rate =
4.32
21,737,157
41.3%
20%
Las Vegas Sands : Overall Valuation
Absolute
Valuation
High
A.
Low
B.
Median
Current
D.
E.
C.
#Your Target
Multiple
F.
*Your Target
E, S, B,
etc/Share
G.
Your Target
Price
(F x G)
H.
P/Forward E
291.1
17.5
45.0
18.9
28
1.62
40.5
P/S
22.5
.2
8.4
3.5
5
11.77
58.85
P/B
22.8
.4
8.7
4.2
6
10.56
63.36
P/EBITDA
67.63
1.61
25.06
12.45
19
3.56
67.64
P/CF
77.0
2.0
32.9
14.8
20
3.00
60
VALUATION
PRICE
WEIGHT VALUE
MULTIPLES
$58.07
50%
29.04
DCF
$33.43
50%
16.72
WEIGHTED AVERAGE
$45.75
CURRENT PRICE
$46.41
UPSIDE (DOWNSIDE)
(1.4%)
General Motors
Current Weight in the SIM Portfolio : 3.27%
(as of October Holding report)
Recommendation: Buy 110 (BPS)
General Motors Company Overview
•
•
•
•
•
Founded in 1908
Headquartered in Detroit, MI
Employs 209,000 people worldwide
Conducts business in 120 countries
One of the Largest Auto Manufacturers in the world
– Produces and Sells cars in 31 countries
– Major Brands: Buick, Cadillac, Chevrolet, GMC
General Motor Value Drivers
• Continued expansion into China.
– Create value savings and synergies
• Continued investments in fuel economy,
design and quality.
• Continued aggressive marketing campaigns
– Continue to try improve consumer sentiment
regarding American made vehicles.
Challenges for General Motors
Stagnant Job Growth
High Unemployment
Sovereign Debt Crisis (Credit and the cost to get it )
Continuing to improve its Brand Equity globally
through its joint ventures.
• GDP Growth
•
•
•
•
General Motors vs. S &P 500
Since the Restructuring
The Numbers ……
General Motors Valuation
Stock Valuation
Relative to Industry
P/Trailing E
High
Low
Median
Current
2.2
1.4
1.8
1.4
P/Forward E
1.4
82
.97
.82
P/B
NA
NA
NA
NA
P/S
NA
NA
NA
NA
P/CF
1.7
.9
1.1
1.1
General Motors Valuation
Relative to S&P
500
P/Trailing E
High
Low
Median
Current
.81
.41
.62
.46
P/Forward E
.72
.42
.51
.47
P/B
1.4
.5
.7
.6
P/S
.3
.2
.3
.2
P/CF
.6
.4
.5
.4
General Motors Overall Valuation
Absolute
Valuation
High
Low
Median
Current
#Your Target
Multiple
Your Target
Price
(F x G)
7
*Your Target
E, S, B,
etc/Share
4.2
P/Forward E
10.1
4.8
7.3
6
P/B
3.3
1.0
1.7
1.2
3
12.2
$36.60
P/EBITDA
3.72
2.04
3.13
2.74
3.1
11.2
$34.72
P/CF
5.4
3.1
4.1
3.9
4.3
6.1
$26.23
Avg.
$32.10
$30.80
General Motors Final Valuation
Final Valuation
Price
Weight
Value
Multiples
$32.10
25%
$8.01
DCF
$42.59
75%
$31.94
Total
$39.95
Current Share Price
23.05
Implied Eq Val
39.95
Upside
73.33%
*** Assuming a
resolution to the
issues in Europe***
Conclusion
• COMCAST
– BUY (100 BPS)
• BEST BUY
– SELL ALL (210 BPS)
• LAS VEGAS SANDS
– DO NOT BUY
• GENERAL MOTORS
– Buy (110 BPS)
Questions?