Portfolio Managers:
Honglu Liu
Min Min Chen
Rafi
Qi He
Presented April 17, 2012
4/13/2015
Introduction
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SBUX Current Price @2012/4/16: $ 59.65
GICS map: 30201030
Industry: Coffee Production
Founded in 1971 as a coffee bean roaster
and retailer
• Strong customer loyalty (Not just coffee)
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4/13/2015
Industry Overview
• Coffee consumers in the United States
spending an approximated 9.2 billion
dollars in the retail sector and 8.7 billion
dollars in the foodservice sector every year.
• That is on average $164.71 per year on
coffee
4/13/2015
Source: www.coffeeresearch.org
Industry Overview
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Industry Overview - External Driver
4/13/2015
Macroeconomic
Souce:CapitalIQ Macroeconomic
4/13/2015
Relevant Stock Market Prospects
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4/13/2015
Market Cap : 44.94 Billion
P/E(ttm): 35.72
Forward P/E: 25.82
PEG Ratio: 1.71
52-Week High: 61.98
52-Week Low: 33.72
Source: www.finance.yahoo.com
Relevant Stock Market Prospects
SBUX vs. S&P 500
4/13/2015
Source: http://www.investorguide.com/stock-charts.php?ticker=SBUX
Relevant Stock Market Prospects
SBUX vs. NASDAQ Index
4/13/2015
Source: http://www.investorguide.com/stock-charts.php?ticker=SBUX
Relevant Stock Market Prospects
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Source: SBUX 10-k
Business review
Brand Portfolio
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Source: SBUX Company Profile
Business review
Suppliers
•Coffee bean
•Other diary
products
•Farmer
Support Center
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Starbucks
Products through
•Stores
•Grocery
•Warehouse club
•Food service
•etc
Customers
•US 69%
•International
22%
•CPG 7%
•Others 2%
Source: SBUX &10-k
Business review
80%
Sales % by Products
70%
60%
50%
FY2009
40%
FY2010
30%
FY2011
20%
10%
0%
Beverages
4/13/2015
Food
Whole bean
and soluble
coffees
Others
Source: SBUX 10-k
Business review
% of stores globally
80.0%
70.0%
60.0%
50.0%
40.0%
72.5%
30.0%
20.0%
10.0%
17.2%
0.0%
Total Americas
4/13/2015
Total CAP
10.3%
Total EMEA
Source: SBUX Q1 FY12 Store Counts By Country
Business review
% of Total Stores
Co-operated
47%
Licensed
17,244 stores globally
100%
90%
80%
38%
63%
70%
60%
50%
Licensed
40%
Co-operated
30%
20%
10%
0%
4/13/2015
US
Int'l
Source: SBUX Q1 FY12 Store Counts By Country
Business review
17,244 stores globally
9500
9000
8500
8000
7500
Licensed
Co-operated
7000
6500
4/13/2015
Source: SBUX Q1 FY12 Store Counts By Country
Business review
4/13/2015
Source: SBUX 10-k
Business review
4/13/2015
Source: SBUX 10-k
Business review
4/13/2015
Source: SBUX 10-k
Business review
4/13/2015
Source: SBUX 10-k
Financial Analysis
2
1.8
1.6
1.4
1.2
Current Ratio
1
Quick Ratio
Cash Ratio
0.8
0.6
0.4
0.2
0
2007
2008
2009
2010
2011
2007
2008
2009
2010
2011
Current Ratio
.79
.80
1.29
1.55
1.83
Quick Ratio
.47
.48
.87
1.24
1.36
Cash Ratio
.13
.12
.38
.65
.55
4/13/2015
Data Source: SBUX 10-K
40
35
30
25
Receivables Turnover
Days Sales Outstanding
20
Inventory Turnover
Days Inventory on Hand
15
10
5
0
2008
4/13/2015
Data Source: SBUX 10-K
2009
2010
2011
2008
2009
2010
2011
Receivables
Turnover
33.63
32.55
37.33
33.95
Days Sales
Outstanding
10.85
11.21
9.78
10.75
Inventory
Turnover
12.60
11.81
13.74
11.95
Days Inventory
on Hand
28.97
30.92
26.56
30.55
35%
30%
25%
20%
Net Profit Margin
Gross Margin
ROA
15%
ROE
10%
5%
0%
2008
4/13/2015
Data Source: SBUX 10-K
2009
2010
2011
2008
2009
2010
2011
Net Profit
Margin
3%
4%
9%
11%
Gross Margin
16%
18%
22%
23%
ROA
6%
7%
16%
18%
ROE
13%
14%
28%
31%
Interest
Coverage
9.44
14.37
43.41
51.91
120%
100%
80%
ROE
Tax Burden
60%
Interest Burden
40%
EBIT Margin
20%
0%
2008
2009
2010
2011
5
4
3
Leverage
2
Asset Turnover
1
0
1
4/13/2015
Data Source: SBUX 10-K
2
3
4
2008
2009
2010
2011
ROE
13%
14%
28%
31%
Tax Burden
69%
70%
66%
69%
Interest Burden
90%
100%
101%
105%
EBIT Margin
5%
6%
13%
15%
Asset Turnover
1.88
1.74
1.79
1.70
Leverage
2.31
2.03
1.78
1.71
Key Statistics
Closing price on 4/16/2012 : $ 59.65
Annual EPS (ttm): 1.67
PEG ratio: 1.71
D/A = 1%
P/E (ttm): 35.72
P/E (forward): 25.82
Implied 1-yr growth in EPS: 38.34%
Graham g (5-7 year growth) : 13.61%
Greenblatt profitability ratios:
1.EBIT/Tangible Assets = 46.67%
2.EBIT/ Enterprise Value= 3.8%
1. + 2. = 50.47%
4/13/2015
Data Source: SBUX 10-K
Public Comparable Analysis
PNRA
DNKN
MCD
Company
Name
Panera Bread
Dunkin’
Brands
McDonald’s
Corp
Price per
Share
161.9
31.29
97.64
D/A
0%
28%
11%
P/E
35.68
42.97
18.4
P/S
2.59
5.99
3.68
P/BV
7.2
5.01
6.93
EV/Revenue
2.48
7.96
4.03
15.03
18.98
11.22
EV/EBITDA
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Value
P/E
EV/EBITDA
EV/Revenue
P/BV
$
$
$
$
Final Value
$ 43.34
54.02
43.62
75.70
40.45
25%
25%
25%
25%
Data Source: Yahoo Finance
Financial Projection – DCF Analysis
• - History Data: Balance Statement
Total Cash & ST Investment
Total Assets
Total Liability
% of revenue
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2007
2008
2009
2010
2011
438.7 322.3 666.1 1449.7 2050.7
5,343.90 5,672.60 5,576.80 6,385.90 7,360.40
3,059.80 3,181.70 2,519.90 2,703.60 2,973.10
32.51% 30.64% 25.78% 25.25% 25.41%
Financial Projection – DCF Analysis
- History Data: Income Statement
Total Net Revenue
% of Growth
Total Cost of Good Sold
% of Revenues
Net Income
% of margin
4/13/2015
2007
9,411.50
2008
2009
10,383.00 9,774.60
10.32% -5.86%
7,509.20
8720.5 8014.4
79.79%
83.99% 81.99%
672.6
315.5
390.8
7.15%
3.04% 4.00%
2010
10,707.40
9.54%
8303.2
77.55%
945.6
8.83%
2011
11,700.40
9.27%
9016.4
77.06%
1,245.70
10.65%
Financial Projection – DCF Analysis
- WACC
Rate Assumptions
4/13/2015
Tax Rate
Ris k Free Rate (10-yr)
Market Ris k Prem ium
Spread Over Treas ury
Cos t of Debt
After-Tax Cos t of Debt
30.00%
3.00%
5.00%
5.00%
6.25%
4.38%
CAPM return
Average ROE
9.15%
21.82%
Cos t of Equity
10.42%
Capital
Beta
1.23
Equity Value
44,898.00
Debt
550
Cash (Net of Restricted
Cash)
2,051
Net Debt (Deb t - Cash)
-1501.2
Enterprise Value
43,396.80
Leverage
-3.46%
Financial Projection – DCF Analysis
- Assumption
Year 1
2012
4/13/2015
Year 2
2013
Year 3
2014
Year 4
2015
Year 5
2016
Income Statement Assumptions
Sales (% growth)
Base
Upside
Downside
16.00%
1 14.10%
2 16.00%
3 12.00%
16.00%
15.50%
16.00%
12.00%
15.00%
14.10%
15.00%
10.00%
12.00%
11.80%
12.00%
10.00%
12.00%
11.50%
12.00%
8.00%
Cost of Goods Sold (% sales)
Base
Upside
Downside
72.00%
1 76.00%
2 72.00%
3 80.00%
72.00%
75.10%
72.00%
80.00%
72.00%
75.30%
72.00%
80.00%
72.00%
78.60%
72.00%
80.00%
72.00%
77.50%
72.00%
80.00%
SG&A (% sales)
Base
Upside
Downside
1
2
3
4.00%
5.00%
4.00%
5.50%
4.00%
5.00%
4.00%
5.50%
4.00%
5.00%
4.00%
5.50%
4.00%
5.00%
4.00%
5.50%
4.00%
5.00%
4.00%
5.50%
Cash Flow Statement Assumptions
Capital Expenditures (% of sales)
Base
Upside
Downside
11.00%
1 9.00%
2 11.00%
3 5.00%
13.00%
10.00%
13.00%
5.00%
6.00%
5.00%
6.00%
5.00%
6.00%
4.00%
6.00%
3.00%
6.00%
4.00%
6.00%
3.00%
Financial Projection – DCF Analysis
- Results
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We use 10.5% WACC
Base Scenario: $34.43
Upside Scenario: $58.75
Downside Scenario: $ 17.62
Current Shares
4/13/2015
Shares Outstanding
748.3
Current Share Price
$60.00
Recommendation
Watch List
4/13/2015