(in thousands USD)
2006
2007
2008
(in thousands) Net Sales
20350655
22399798
8.50%
10.07%
1.94%
5587851
6313687
6247767
14762804
16086111
16586141
SG&A
6501976
6753698
6838359
R&D
3109060
3256785
3373213
Other exp/(income)-net
-2 7 1 4 9 0
-2 9 0 5 4 3
11540
Total operating expenses
9339546
9719940
10223112
EBIT
5423258
6366171
6363029
27%
28%
28%
-6 6 4 6
-9 0 5 1 1
24942
5429904
6456682
6338087
% margin
27%
29%
28%
Income Tax rate
23%
29%
30%
Provision for Income tax
1233198
1840722
1920254
Net earnings
4196706
4615960
4417833
Basic EPS
3.12
3.44
3.31
Diluted EPS
3.08
3.38
3.27
Sales
100%
100%
100%
COGS
27%
28%
27%
Gross profit
73%
72%
73%
SG&A
32%
30%
30%
R&D
15%
15%
15%
Other exp/(income)-net
-1%
-1%
0%
Total operating expenses
46%
43%
45%
EBIT
27%
28%
28%
0%
0%
0%
EBT
27%
29%
28%
Net earnings
21%
21%
19%
growth rate
COGS Gross profit
% margin
Interest expense (income) - net EBT
22833908
Common Size Statement
Interest expense (income) - net
Wyeth Income Statement 2009E
2010E
2011E
2012E
2013E
24395025
26062872
27844748
29748447
31782299
6.84%
6.84%
6.84%
6.84%
6.84%
6749778
7211249
7704270
8230998
8793738
17645247
18851623
20140478
21517449
22988561
7485100
7996844
8543575
9127685
9751730
3625883
3873778
4138622
4421573
4723869
-2 0 9 8 4 6
-2 2 4 1 9 3
-239521
-25 5 8 9 6
-2 7 3 3 9 1
10901137
11646429
12442676
13293362
6744110
7205194
7697801
8224087
8786354
28%
28%
28%
28%
28%
-2 6 6 3 1
-2 8 4 5 2
-30397
-3 2 4 7 5
-3 46 9 5
6770741
7233646
7728198
8256562
28%
28%
28%
28%
28%
27%
27%
27%
27%
27%
1828100
1953084
2086613
2229272
2381683
4942641
5280561
5641584
6027290
6439366
0.00
0.00
0.00
0.00
0.00
100%
100%
100%
100%
100%
28%
28%
28%
28%
28%
72%
72%
72%
72%
72%
31%
31%
31%
31%
31%
15%
15%
15%
15%
15%
-1%
-1%
-1%
-1%
-1%
45%
45%
45%
45%
45%
28%
28%
28%
28%
28%
0%
0%
0%
0%
0%
28%
28%
28%
28%
28%
20%
20%
20%
20%
20%
14202207
8821050
2014E
2015E
2016E
33955202
36276663
38756839
6.84%
6.84%
6.84%
9394951
10037268
10723500
24560251
26239395
28033339
10418439
11130731
11891720
5046832
5391875
5760509
-2 9 2 0 8 3
-3 1 2 0 5 2
-3 3 3 3 8 6
15173188
16210554
17318843
9387063
10028841
10714496
28%
28%
28%
-3 7 0 6 7
-3 9 6 0 2
-4 2 3 0 9
9424130
10068442
10756805
28%
28%
28%
27%
27%
27%
2544515
2718479
2904337
6879615
7349963
7852468
0.00
0.00
0.00
100%
100%
100%
28%
28%
28%
72%
72%
72%
31%
31%
31%
15%
15%
15%
-1%
-1%
-1%
45%
45%
45%
28%
28%
28%
0%
0%
0%
28%
28%
28%
20%
20%
20%
2006
(in thousands USD)
Net Earnings us men s o reconc e ne earn ngs o ne cas prov e
2007
4 19 6 70 6
46 15 96 0
-2972700
-4 8 1 5 8 1
Seventh Amendment Security Fund Disbursement
40 0 00 0
0
Net gain on sales and disposition of assets
-2 8 5 4 5
-5 9 8 5 1
3 7 85 9
14 29 9
Depreciation
76 1 69 0
8 42 72 5
Amortization
4 1 35 0
75 95 4
Stock Based Compensation
39 3 33 0
3 67 52 9
Change in other assets (including Deferred Income Taxes)
59 2 16 5
7 89 45 5
Receivables
-2 3 8 7 6 4
-1624
Inventories
-7 9 1 0
-3 3 7 1 7 3
Accounts Payable and Other Expenses
7 0 86 8
1 69 51 4
Accrued Taxes
-7 5 3 6
60 37 9
Other Current Assets
-3 9 0 3 7
-1 8 1 4 5 6
Pension Provision
35 4 53 1
3 38 77 9
-2 7 1 9 0 9
-3 3 0 7 4 9
-2 7 7 2 1
-6481
3254377
5875679
-1289784
-1 3 9 0 6 6 8
0
0
6 9 23 5
1 21 71 6
-1 0 2 1 8 7
-2 2 1 6 5 5
-2239022
-2 5 3 4 2 1 6
91 5 33 9
14 22 48 8
Diet Drug Litigation Payments
Writedown of investment securities, net
y
Change in working capital, net
Pension Contributions Other Items, net Net Cash Provided by Operating Activities
Cash Flow from Investing Activities: Purchases of Intangibles and PPE Purchase of a Business Proceeds from Sales of Asstes Purchase of additional equity interest in affiliate Purchases of Marketable Securities Proceeds from sales and maturities of marketable securities Net Cash Used in Investing Activities
-2646419
-2602335
Cash Flow from Financing Activities: Proceeds from issuance of long term debt Repayments and Repurchases of debt Other Borrowing Transactions, net Purc Purcha hasse of Comm Common on Stoc Stock k for for Treas reasur ury y
0
25 00 00 0
-1 2 1 0 0
-1 2 0 8 0 6
4 7 33 4
-5717
-664 -66457 579 9
-131 -13167 6734 34
Exercises of Stock Options
51 5 85 3
7 16 89 6
Payment of Dividends
-1358769
-1 4 2 3 4 9 4
Net Cash Provided by (Used in ) Financing Activities
-1472261
350145
2 6 72 3
52 07 9
Effects of change in exchange rates on cash and equivalents Net increase in cash and cash Equivalents
-837580
3675568
Beginning of Year
7615891
6778311
End of Year
6778311
10453879
Cash and Cash Equivalents
Wyeth Cash Flow Statement 2008
2009E
2010E
2011E
2012E
2013E
2014E
4417833
4942641
5280561
5641584
6027290
6439366
6879615
-997946
-1484076
-1585539
-1693940
-1809752
-1933482
-2065671
590462
330154
352726
376841
402605
430131
459538
-166351
-84916
-90721
-96924
-103550
-110630
-118193
187948
80035
85507
91353
97599
104272
111400
928565
1038872
1109898
1185780
1266850
1353462
1445996
79009
65438
69912
74691
79798
85253
91082
314342
358400
382904
409082
437050
466931
498854
34170
471930
504195
538666
575494
614839
656875
-336911
-192433
-205589
-219645
-234662
-250705
-267846
-230121
-191735
-204843
-218848
-233810
-249796
-266874
141335
127239
135938
145232
155161
165769
177103
-131424
-26194
-27984
-29898
-31942
-34126
-36459
692030
157179
167925
179406
191672
204776
218776
346412
346574
370269
395583
422629
451523
482393
-924111
-508923
-543717
-580890
-620605
-663035
-708365
327763
97854
104544
111691
119327
127486
136202
5273005
5528040
5905983
6309766
6741154
7202036
7694427
-1408999
-1505330
-1608247
-1718200
-1835671
-1961172
-2095254
-300000
-100000
-133333
-177778
-137037
-149383
-154733
202428
131126
140091
149669
159902
170834
182513
0
-107947
-115328
-123212
-131636
-140636
-150251
-3526203
-2766480
-2955620
-3157691
-3373577
-3604223
-3850638
1769037
1368955
1462548
1562540
1669368
1783500
1905435
-3263737
-2979677
0
833333
890307
951176
1016206
1085682
1159909
-421258
-184721
-197350
-210843
-225258
-240658
-257112
-6790
11609
12403
13251
14157
15124
16158
-498775
-826696
-883216
-943600
-1008112
-1077035
-1150670
-3209889
-3464672
-3648651
-3901080
-4162927
98074
443608
473936
506339
540956
577940
617453
-1520293
-1700893
-1817181
-1941418
-2074150
-2215956
-2367457
-2349042
-1423761
-1521101
-98228
5.4
-1.3
-9.8
-438002
1124609
1174993
10453879
10015877
10015877
11140486
-1625096
-1736201
-1854902
-1981719
1219988
1356302
1446054
1549781
11140486
12315478
13535466
14891768
16337822
12315478
13535466
14891768
16337822
17887603
2015E
2016E
7349963
7852468
-2206897
-2357779
490956
524522
-126274
-134907
119017
127154
1544857
1650476
97309
103962
532960
569397
701784
749764
-286158
-305722
-285119
-304613
189211
202147
-38951
-41614
233733
249713
515373
550609
-756795
-808536
145513
155462
8220482
8782503
-2238503
-2391546
-147051
-150389
194992
208323
-160523
-171498
-4113899
-4395160
2035706
2174884
-4429279
-4725386
1239210
1323932
-274690
-293470
17263
18443
-1229340
-1313388
659668
704768
-2529316
-2702241
-2117206
-2261956
1673998
1795162
17887603
19561601
19561601
21356762
(in thousands USD) Assets Current Assets: Cash and Cash Equivalent
Accounts Receivables-net of allowances
2006
6778311
2007
10453879
Marketable Securities Inventories Other current assets including deferred taxes Total Current Assets
3383341 1948931 2480459 2923199 17514241
3528009 2993839 3035358 2972513 22983598
PPE-net
10146259
11072158
Goodwill
3925738
4135002
356692
383558
4535785 36478715
4142966 42717282
Current Liabilities: Accounts Payable Loans Payable Accrued Expenses Accrued Taxes Total Current Liabilities Long-term Debt Pension Liabilities Accrued postretirement benefit obligations other than pensions Other Noncurrent Liabilities Total Liabilities
1116754 124225 5679141 301728 7221848 9096743 806413 1600751 3100205 21825960
1268600 311586 5333528 410565 7324279 11492881 501840 1676126 3511621 24506747
Total Equity
14652755
18210535
Total
36478715
42717282
Long Term Debt Total Assets Total
0 36478715 36478715
0 42717282 42717282
Other Intangible Assets-net Other assets including deferred taxes Total Assets Liabilities and Equity (Deficit)
Wyeth Balance Sheet 2008
2009E
2010E
2011E
2012E
2013E
10015877
11140486
12315478
13535466
14891768
16337822
3646439 4529395 2996428 2293201 23481340
3895740 3157388 3237192 2477461 23908267
4162085 3373254 3458514 2646841 25956172
4446640 3603878 3694967 2827801 28108751
4750650 3850269 3947585 3021133 30461405
5075444 4113505 4217475 3227683 32971929
11198211
11963814
12781760
13655628
14589241
15586683
4261737
4553105
4864393
5196964
5552272
5931871
421686
450516
481317
514224
549380
586941
4668750 44031724
4987945 45863647
5328962 49412604
5693295 53168862
6082536 57234833
6498389 61575812
1254369 913245 4426444 256365 6850423 10826013 1601289 1777315 3802842 24857882
1355158 449685 5146371 322886 7274100 9456542 969847 1684731 4062836 23448057
1447808 480430 5498220 344961 7771419 8585543 1036154 1799913 4340605 23533634
1546792 513276 5874124 368546 8302738 7619657 1106994 1922970 4637365 23589725
1652544 548368 6275728 393742 8870382 6640642 1182678 2054440 4954414 23702556
1765526 585859 6704789 420662 9476835 5591715 1263535 2194899 5293140 23820125
19173842
22415590
25878970
29579137
33532277
37755687
44031724
45863647
49412604
53168862
57234833
61575812
0 44031724 44031724
9456542 45863647 36407104
8585543 49412604 40827062
7619657 53168862 45549204
6640642 57234833 50594192
5591715 61575812 55984097
2014E
2015E
2016E
17887603
19561601
21356762
5422443 4394739 4505817 3448354 35658956
5793167 4695200 4813872 3684112 38547952
6189236 5016203 5142989 3935989 41641179
16652319
17790810
19007139
6337423
6770703
7233604
627069
669941
715743
6942673 66218440
7417332 71196737
7924443 76522108
1886232 625913 7163185 449422 10124751 4475939 1349921 2344961 5655023 23950595
2015190 668705 7652920 480148 10816964 3302140 1442213 2505282 6041647 24108245
2152965 714424 8176137 512975 11556501 2054805 1540815 2676564 6454705 24283390
42267845
47088492
52238718
66218440
71196737
76522108
4475939 66218440 61742501
3302140 71196737 67894597
2054805 76522108 74467303
Capex assumptions of Wyeth
(in thousands USD)
2006
2007
2008
Base Case % Sales Capex
6.3%
6.2%
6.2%
1289784
1390668
1408999
6.3%
6.2%
6.2%
1,514,540
1,608,247
6.2%
6.2%
1,514,540
1,608,247
Best Case % Sales Capex
Worst Case % Sales Capex
6.3%
Capex 2009E
2010E
2012E
2013E
6.2%
6.2%
6.2%
6.2%
6.2%
1505329.932
1608246.851
1718200.03
1835670.526
1961172.285
6.2%
6.2%
6.2%
6.2%
6.2%
2,280,393
2,515,274
6.2%
6.2%
2,028,332
2,160,174
1,736,907
6.2%
2011E
1,688,659
1,893,228
6.2%
1,789,979
2,073,085
6.2%
1,904,537
2014E
2015E
2016E
6.2%
6.2%
6.2%
2095254.392
2238503
2391546
6.2%
6.2%
6.2%
2,590,732
6.2% 2,224,979
-
6.2% -
-
6.2% -
(in thousands USD)
2006
2007
2008
Base Case Current Assets Current Liabilities Working Capital % sales Increase in Working Capital
17514241
22983598
23481340
7221848
7324279
6850423
10292393
15659319
16630917
51%
70%
73%
5366926
971598
24395025
26062872
70%
73%
17054148.05
18982710.35
Best Case Sales Working Capital (% Sales) Working Capital Increase in Working Capital
1928562.30
Worst Case Sales Working Capital (% Sales) Working Capital Increase in Working Capital
24395025
26062872
70%
73%
17054148.05
18982710.35 1928562.303
Working Capital Schedule 2009E
2010E
2011E
2012E
2013E
23908267
25956172
28108751
30461405
32971929
7274100
7771419
8302738
8870382
9476835
16634166
18184753
19806014
21591023
23495093
68%
70%
71%
73%
74%
3249
1550587
1621261
1785009
1904070
28147902
30681213
33595928
36955521
40761940
68%
70%
71%
73%
74%
19193130.24
21407091.24
23896837.60
26821820.07
30133300.49
210419.89
2213961.01
2489746.36
2924982.47
3311480.42
27366016
29007977
30864487
32870679
35007273
68%
70%
71%
73%
74%
18659987.7
20239630.1
21953959.2
23857096.5
25879157.9
-322722.6
1579642.4
1714329.1
1903137.3
2022061.4
2014E
2015E
2016E
0
0
0
0%
0%
0%
-23495093
0
0
41984798
0
0
0%
0%
0%
0.00
0.00
0.00
-30133300.49
0.00
0.00
36057491
0
0
0%
0%
0%
0.0
0.0
0.0
-25879157.9
0.0
0.0
Wyeth: DCF
Growth in Sales Base Case Best Case Worst Case
Revenue % growth
EBIT % growth % margin Tax rate Taxes NOPAT NOPAT % margin Plus Depreciation & Amortization Inflow of funds
Incremental working capital Capital Expenditure Outflow of funds
Net Cash Flows Discount Factor WACC
6.6279%
Discounted Cash flows Terminal Value Present value for explicit period Present value for perpetuity Enterprise Value (as of 15 August, 2013) Less: Net Debt as of 31st June, 2013 Equity Value as of 15 August, 2013) Shares Outstanding
Share value
Best Case
Revenue % growth
EBIT % growth % margin Tax rate NOPAT NOPAT % margin Plus Depreciation & Amortization Inflow of funds
Incremental working capital Capital Expenditure Outflow of funds
Net Cash Flows Discount Factor WACC Discounted Cash flows Terminal Value Present value for explicit period Present value for perpetuity Enterprise Value (as of 15 August, 2013) Less: Net Debt as of 31st June, 2013 Equity Value as of 15 August, 2013) Shares Outstanding Share value
6.6%
Worst Case
Revenue % growth
EBIT % growth % margin Tax rate NOPAT NOPAT % margin Plus Depreciation & Amortization Inflow of funds
Incremental working capital Capital Expenditure Outflow of funds Net Cash Flows Discount Factor WACC Discounted Cash flows Terminal Value Present value for explicit period Present value for perpetuity Enterprise Value (as of 15 August, 2013) Less: Net Debt as of 31st June, 2013 Equity Value as of 15 August, 2013) Shares Outstanding Share value
6.6%
FY2013E
FY2014E
FY2015E
FY2016E
FY2017E
5.9%
6.8%
7.2%
7.4%
7.5%
8.0%
9.0%
9.5%
10.0%
10.3%
5.0%
6.0%
6.4%
6.5%
6.5%
Inflow of Funds FY2011 24395025
FY2012
FY2013E
FY2014E 29748447
FY2015E
27844748
6.8%
6.8%
6744110
7205194
7697801
8224087
8786354
9387063
10028841
28%
28%
28%
28%
28%
28%
28%
27%
27%
27%
27%
27%
27%
27%
1820910
1945402
2078406
2220504
2372316
2534507
2707787
4923200
5259792
5619395
6003584
6414039
6852556
7321054
20%
20%
20%
20%
20%
20%
20%
79009
65437.66667
79797.78611
85253.42883
91082.06483
97309.19503
103962.0638
5002209
5325229
5699193
6088837
6505121
6949865
7425016
6.8%
33955202
FY2017E
26062872
6.8%
31782299
FY2016E
6.8%
36276663 6.8%
Outflow of funds FY2011 1390668
FY2012
FY2013E
FY2014E
FY2015E
FY2016E
FY2017E
971598
3249
1550587
1621261
1785009
1904070
1408999
1505330
1608247
1718200
1835671
1961172
2380597
1508579
2944632
4190613
2930004
3165660
3329185
3559773
0.94
0.88
0.82
0.77
0.73
3930129
2577073
2611272
2575461
2582668
3158833
3339461
3620680
3865243
800679324 14276604 580904773 595181377 -5915809 601097186 203
2961070
Inflow of Funds FY2011 24395025
FY2012
FY2013E
FY2014E 30681213
FY2015E
28147902
6.8%
8.0%
6744110
7205194
7781609
8481954
9287740
10216514
11268815
28%
28%
28%
28%
28%
28%
28%
27%
27%
27%
27%
27%
27%
27%
4923200
5259792
5680575
6191827
6780050
7458055
8226235
20%
20%
20%
20%
20%
20%
20%
79009
65437.66667
79797.78611
85253.42883
91082.06483
97309.19503
103962.0638
5002209
5325229
5760373
6277080
6871132
7555364
8330197
9.5%
36955521
FY2017E
26062872
9.0%
33595928
FY2016E
10.0%
40761940 10.3%
Outflow of funds FY2011 1514540
FY2012
FY2013E
FY2014E
FY2015E
FY2016E
FY2017E
1928562
210420
2213961
2489746
2924982
3311480
1608247
1736907
1893228
2073085
2280393
2515274
3536809
1947326
1788420
3813046
2169891
2308301
2349989
2503443
0.94
0.88
0.82
0.77
0.73
3576031
1908519
1904058
1817954
1816285
4107189
4562831
5205376
5826754
995699163 11022847 722394570 733417418 -5915809 739333226 203 3642036
Inflow of Funds FY2011
FY2012
24395025
FY2013E
FY2014E 29007977
FY2015E
27366016
6.8%
5.0%
6744110
7205194
7565454
8019381
8532621
9087242
9677912
28%
28%
28%
28%
28%
28%
28%
27%
27%
27%
27%
27%
27%
27%
4923200
5259792
5522781
5854148
6228813
6633686
7064876
20%
20%
20%
20%
20%
20%
20%
79009
65437.66667
79797.78611
85253.42883
91082.06483
97309.19503
103962.0638
5002209
5325229
5602579
5939401
6319896
6730996
7168838
6.4%
32870679
FY2017E
26062872
6.0%
30864487
FY2016E
6.5%
35007273 6.5%
Outflow of funds FY2011
FY2012 0
FY2013E
FY2014E
FY2015E
FY2016E
FY2017E
1928562
-322723
1579642
1714329
1903137
2022061
1608247
1688659
1789979
1904537
2028332
2160174
3536809
1365937
3369621
3618866
3931470
4182235
1788420
4236642
2569780
2701029
2799526
2986603
0.94
0.88
0.82
0.77
0.73
3973297.38
2260239.88
2228009.64
2165716.26
2166824.76 855545593.80
12794087.91 620711068.60 633505156.51 -5915808.83 639420965.34 203.00 3149856.97
Perpetuity 3.0%
1 WACC
3.0%
2 Perpetuity
6.6279% 3%
3.0% Enterprise ######## Equity Valu ######## Perpetuity
Share price 2961070
37364963 3%
Implied Multiples FY13)
10329706
EV/EBITDA P/E
23.1109 31.86221
28% 27%
Premium
0.2
2789021 7540685
Acquisition Price (USD 7.21E+08
20% 107080.9257 7647766 Sensitivity Analysis
Perpetuity -23495093
WACC
#######
2095254 -21399839
29047605
5.6%
6.1%
6.6%
15.0% ######## ######## ######## m u i m e r P
18.0% ######## ######## ######## 20.0% ######## ######## ######## 22.0% ######## ######## ######## 24.0% ######## ######## ########
Sensitivity Analysis WACC ####### h t w o r g e l t a a n r i m r
5.6%
6.1%
6.6%
2.0% ######## ######## ######## 2.5% ######## ######## ######## 3.0% ######## ######## ######## 3.5% ######## ######## ########
e T
Perpetuity 41984798 3%
11606879 28% 27% 8473022 20% 107080.9257 8580103
Perpetuity -30133300 2590732 -27542568
36122671
4.0% ######## ######## ########
Perpetuity 36057491 3.0%
9968250 28% 27% 7276822 20% 107080.9257 7383903
Perpetuity -25879158 2224979 -23654179 31038082
7.6%
8.6%
######## ######## ######## ######## ######## ######## ######## ######## ######## ########
7.6%
8.6%
######## ######## ######## ######## ######## ######## ######## ########
######## ########
1
DCF Assumptions 1 WACC
6.63%
2 Perpetuity Growth rate Enterprise Value Equity Valuation (USD mm) Share price
3% 595,181,377 601,097,186 2,961,070
Implied Multiples FY13) EV/EBITDA P/E
m u i m e r P
77.32x 106.55x
Premium
20%
Acquisition Price (USD mm)
721,316,623
2
Trading Multiples FY13 EV/EBITDA multiple
#REF!
FY13 P/E Ratio
#REF!
Enterprise Value (EBITDA) Equity Valuation (P/E)
#REF! #REF!
Premium
20%
Acquisition Price (USD mm)
m u i m e r P
#REF!
3
Transaction Multiple FY13 EV/EBITDA multiple
#REF!
Enterprise Value (USD mm) Equity Valuation (USD mm)
#REF! #REF!
Premium Acquisition Price (USD mm)
20% #REF!
m u i m e r P
4
Rolling P/E Ratio 1 year Median rolling P/E Ratio
#REF!
Equity Valution
#REF!
Premium
Acquisition Price (USD mm)
20%
#REF!
m u i m e r P
Sensitivity Analysis WACC #######
5.6%
6.1%
6.6%
7.6%
8.6%
15.0%
33,359
27,801
23,776
18,341
14,842
18.0%
34,229
28,526
24,397
18,819
15,229
20.0%
34,809
29,009
24,810
19,138
15,487
22.0%
35,390
29,493
25,224
19,457
15,745
24.0%
35,970
29,976
25,637
19,776
16,003
Sensitivity Analysis Forward P/E Ratio #REF!
16
17
18.6
20
22
15.0%
103,805,154
110,292,977
######## ######## ########
18.0%
106,513,115
113,170,185
######## ######## ########
20.0%
108,318,422
115,088,323
######## ######## ########
22.0%
110,123,729
117,006,462
######## ######## ########
24.0%
111,929,036
118,924,601
######## ######## ########
Sensitivity Analysis Forward Transaction P/E multiple #REF!
17
19
19.8
22
24
15.0%
158,855,239
176,743,717
######## ######## ########
18.0%
162,999,289
181,354,422
######## ######## ########
20.0%
165,761,989
184,428,226
######## ######## ########
22.0%
168,524,688
187,502,030
######## ######## ########
24.0%
171,287,388
190,575,833
######## ######## ########
Sensitivity Analysis 1 year median Rolling P/E ratio #REF!
19
21
22.9
25
27
15.0%
123,268,621
136,244,265
######## ######## ########
18.0%
126,484,324
139,798,463
######## ######## ########
20.0%
128,628,126
142,167,929
######## ######## ########
22.0%
130,771,928
144,537,394
######## ######## ########
24.0%
132,915,730
146,906,860
######## ######## ########
DCF of Nestle
Nestle: DCF
Revenue % growth
EBIT % growth % margin Tax rate Taxes NOPAT NOPAT % margin Plus Depreciation & Amortization Inflow of funds
Incremental working capital Capital Expenditure Outflow of funds Net Cash Flows Discount Factor WACC Discounted Cash flows Terminal Value Present value for explicit period Present value for perpetuity Enterprise Value (as of 15 August, 2013) Less: Net Debt as of 31st June, 2013 Equity Value as of 15 August, 2013) Shares Outstanding Share value
6.0%
Net Sales Current Assets
Current Liabilities Working Capital % of Net Sales Increment in Working Capital Capex % sales
Inflow of Funds FY2011 83642
FY2012
FY2013E
FY2014E
FY2015E
FY2016E
FY2017E
89721
95251
100147
105154
110412
115932
7.3%
6.2%
5.1%
5.0%
5.0%
5.0%
12538
13464
14452
15377
16299
17224
18201
15.0%
15.0%
15.2%
15.4%
15.5%
15.6%
15.7%
27%
27%
27%
27%
27%
27%
27%
3385
3635
3902
4152
4401
4651
4914
9153
9829
10550
11225
11898
12574
13287
10.9%
11.0%
11.1%
11.2%
11.3%
11.4%
11.5%
3091
3150
3255
3422
3593
3773
3961
12244
12979
13805
14647
15491
16346
17248
Outflow of funds FY2011
FY2012
FY2013E
FY2014E
FY2015E
FY2016E
FY2017E
2531
-7538
3305
7816
1314
1435
5368
5546
5308
5783
5797
5797
7899
-1992
8613
13600
7111
7232
5080
15797
6034
1892
9235
10016
0.94
0.89
0.84
0.79
0.75
14896.80
5366.11
1586.34
7303.54
7469.81 336940.93
36622.60 251276.32 287898.91 5738.00 282160.91 3200.00 88.18
Working Capital Schedule FY2011
FY2012
FY2013E
FY2014E
83,642
89,721
95,251
33,324
34,030
34,833
35,319
35,232
33,407
41,748
38,929
-1,908
623
-6,915
-2%
1%
2,531
FY2015E
-7%
-7,538
100,147
-3,610
3,305
FY2017E
105,154
110,412
115,932
4,206
5,521
6,956
5%
6%
1,314
1,435
-4%
FY2016E
4%
7,816
5368
5546
5308
5783
5797
5797
6%
6%
5%
5.50%
5.25%
5.00%
Perpetuity 119410 3%
18555 15.5% 27% 5010 13545 11.3% 4080 17625
Perpetuity 1403 5970 7373 10252
Perpetuity 119,410
8,359 7% 1,403 5970 5.00%
Nestle: DCF USA 1USD=0.93
Swiss Francs
1.08
Inflow of Fun FY2011 Revenue
89938 % growth
FY2012 96474 7.3%
EBIT
13482
14477
15.0%
15.0%
27%
27%
Taxes
3640
3909
NOPAT
9842
10569
10.9%
11.0%
3324
3387
13165
13956
% growth % margin Tax rate
NOPAT % margin Plus Depreciation & Amortization Inflow of funds
Outflow of fu FY2011
FY2012
Incremental working capital
2722
Capital Expenditure
5772
Outflow of funds
8494
Net Cash Flows
5462
Discount Factor WACC Discounted Cash flows Terminal Value Present value for explicit period Present value for perpetuity Enterprise Value (as of 15 August, 2013) Less: Net Debt as of 31st June, 2013 Equity Value as of 15 August, 2013) Shares Outstanding Share value
6.3%
ds FY2013E
FY2014E
FY2015E
FY2016E
FY2017E
Perpetuity
102420
107685
113069
118722
124658
128398 Assumptio
6.2%
5.1%
5.0%
5.0%
5.0%
15540
16534
17526
18521
19571
19951 Assumptio
15.2%
15.4%
15.5%
15.6%
15.7%
15.5%
27%
27%
27%
27%
27%
27%
4196
4464
4732
5001
5284
5387
11344
12070
12794
13520
14287
14564
11.1%
11.2%
11.3%
11.4%
11.5%
11.3%
3500
3680
3864
4057
4260
14844
15750
16657
17577
18547
3%
4387 Assumptio 18952
ds FY2013E
FY2014E
FY2015E
FY2016E
FY2017E
Perpetuity
-8105
3554
8404
1413
1543
1508 Check for S
5963
5708
6219
6233
6233
6420
-2142
9261
14623
7646
7776
7928
16986
6488
2034
9931
10770
0.94
0.89
0.83
0.78
0.74
15985.12
5746.30
1695.24
7788.86
7949.79 338021.30
39,165 249,500 288,666 6,170 282,496 3,200 88
11023
: 5% is growth rate in DCF analysis on page 15. figures till 2014 are taken from latest data on page 61
: Page 15, EBIT grows by .1% each year. After 2014, increased EBIT by .1% each year
: For 2015,16,17, in DCF analysis on page15, depreciation is constant as 3.5% of sales
igns and values n last 3 years
Combined Firm DCF with Synergy
WACC Calculation
DCF Analysis of combined firm: SYNERGY calculations All figures in million doll ars
Base Case
2011
Sales
2012
24,484,962
26,159,346
% growth
6.8%
EBIT
6,757,592
7,219,671
Growth
27.60%
% margin
Taxes
1,824,550
Tax as % of ebit
1,949,311
27%
27%
NOPAT
4,933,042
5,270,360
Plus: Depreciation & Amortization
82,333
68,825
5015375
5339185
Inflow of funds
Less: Capital Expenditures
1,414,771
Less: Increase in Net Working Capital
974,320
Outflow of funds
2,389,091
FCFF
2,950,094
WACC
4.63%
0.96
Discounted Cash flow
2,819,497
Terminal Value
Present value for explicit period
45,650
Present value for perpetuity
289,867
Enterprise Value (as of 15 August, 2013)
335,517
Less: Net Debt as of 31st June, 2013
(5,909,639)
Equity Value as of 15 August, 2013)
6,245,156
Synergy Outcomes Revenue growth EBIT Margin growth
2013
2014 0.00% 0.00%
0.20% 0.10%
Base Case
2011
Sales
2012
24,484,962
% growth
26,159,346 6.8%
EBIT
6,757,592
7,219,671
Growth
27.60%
% margin
Taxes
1,824,550
Tax as % of ebit
1,949,311 27%
NOPAT
5,270,360
Plus: Depreciation & Amortization
82,333
Less: Capital Expenditures
-
Plus: Decrease in Net Working Capital
68,825 1,414,771 974,320
FCFE
2,950,094
WACC
4.63%
Discounted Cash flow
0.96 2,819,497
Terminal Value
Present value for explicit period
45,981
Present value for perpetuity
291,483
Enterprise Value (as of 15 August, 2013)
337,464
Less: Net Debt as of 31st June, 2013
(5,909,639)
Equity Value as of 15 August, 2013)
6,247,103
Synergy Value
Overall Per Share
1,984 8.46
Assumptions: We have assumed the depreciation , Capex and net change in working capital of the combi Wacc and terminal growth rates are calculated as per WACC calculation sheet Synergy is calculated as the diffrence between the FV of combined firm and sum of firm val We have assumed the revenue of the combined firm to grow by 0% in 2013 , 0.2% in 2014 We have assumed the margins of the combined firm to grow by 0% in 2013 , 0.1% in 2014
ITHOUT SYNERGY 2013
2014
27,947,168
6.8%
7,713,341
2,082,602
29,856,132
8,240,621
27%
2,224,968
6.8%
27.60%
2016
31,895,368
6.8%
27.60%
2015
8,803,880
27%
2,377,048
34,073,925
6.8%
27.60%
2017
9,405,583
27%
2,539,508
36,401,321 6.8%
27.60%
Perpetuity
10,048,412 27.60%
27%
2,713,071 27%
37,493,361 3.0% 10,349,657 27.60% 2,794,407 27%
5,630,739
6,015,654
6,426,832
6,866,076
7,335,341
7,555,250
83,298
88,933
94,946
101,366
108,222
111,468
7443562
7666718
5714037
1,511,293
6104587
6521778
6967442
1,613,954
1,724,419
1,841,903
1,967,405
2,101,674
(4,856)
1,554,140
1,629,665
1,786,422
1,905,614
(23,493,585)
1,506,437
3,168,095
3,354,084
3,628,326
3,873,019
(21,391,910)
4,207,599
2,936,492
3,167,694
3,339,116
3,570,543
29,058,628
0.91
0.87
0.83
0.80
0.76
3,843,313
2,563,515
2,642,932
2,662,624
2,721,124 1,780,604,738
2015 0.25% 0.15%
WITH SYNERGY 2013
2014
27,947,168
29,912,026
6.8%
7,713,341
8,285,961
2,082,602
2,237,209
27%
7.08%
27.70%
2016
32,029,860
7.0%
27.60%
2015
8,889,048
27%
2,400,043
34,217,603
9,445,244
6.8%
10,090,783
27.60%
27%
2,550,216
Perpetuity
36,554,814
6.8%
27.75%
2017
27.60%
2,724,511
27%
27%
37,651,458 3.0% 10,393,298 27.60% 2,806,191 27%
5,630,739
6,048,751
6,489,005
6,895,028
7,366,272
7,587,108
83,298
88,933
94,946
101,366
108,222
111,468
1,511,293
1,613,954
1,724,419
1,841,903
1,967,405
2,101,674
(4,856)
1,554,140
1,629,665
1,786,422
1,905,614
(23,493,585)
3,601,474
29,090,486
4,207,599
2,969,590
3,229,867
3,368,068
0.91
0.87
0.83
0.80
0.76
3,843,313
2,592,409
2,694,805
2,685,710
2,744,696 1,782,556,875
ned firm to be the simple addition of the individual firms Nestle and Mead Johnson ue Nestle and Mead Johnson and 0.25% in 2015 nd 0.15% in 2015
WACC Calculation Mead Johnson Calculation of WACC Cost of debt
%
Cost of pre-tax debt
4.3%
Less: Income tax (27%) Post-tax cost of debt
-1.2% 3.1%
Cost of equity: Risk free rate
2.8%
Beta
0.69
Market risk premium
7.0%
Cost of equity
7.7%
Particulars
Cost%
Weights%
Weighted Cost%
Debt
3.1%
23%
0.7%
Equity
7.7%
77%
5.9%
100%
6.6%
Total
Nestle Calculation of WACC Cost of debt Cost of pre-tax debt Less: Income tax (27%) Post-tax cost of debt
% 2.7% -0.7% 2.0%
Cost of equity: Risk free rate
2.8%
Beta
0.62
Market risk premium
7.0%
Cost of equity
6.8%
Particulars
Cost%
Weights%
Weighted Cost%
Debt
2.0%
14180.2
16.32%
0.3%
Equity
6.8%
72719
83.68%
5.7%
86899.2
100%
6.04%
Total
Assumptions: 1
Cost of pre-tax debt is 4.3% based on the current YTM for BBB corporate bond in USA
2
Beta = 0.69 calculated from Google Finance
3
Tax rate = 27% (JP Morgan Equity Research Report on Mead Johnson)
4
Industry average of the weights of debt and equity used (Source: Morning Star calculation)
5
Risk free rate is current risk free on 10 year US treasury bond: 2.84%
Assumptions: 1
Cost of pre-tax debt is 2.676% based on the current YTM for AA German corporate bond
2
Beta = 0.62 calculated from Google Finance (OTC Markets)
3
Tax rate = 27% (JP Morgan Equity Research Report on Nestle)
4
Market Values of Debt and Equity assumed
5
Historical risk free rate of 2.8% on 10 year US treasury bond
6
D/E ratio =19.5% for 2013 taken from p61
7
Risk free rate is current yield on 10 year German Government bond: 2.5% (Source: Bloomberg)
WACC
Nestle
Mead Johnso
WACC
6.03%
Terminal growth rate
3.00%
Debt
14180
Debt
Equity
72719
Equity
Beta (levered) Risk Free Rate Cost of Debt Market Risk Premium
0.62 2.80% 2.7% 6.50%
WACC Terminal growth rate
Beta (levered) Risk Free Rate Cost of Debt Market Risk Premium
Weight of Debt
16.32%
Weight of Debt
Weight of Equity
83.68%
Weight of Equity
Cost of equity Corporate Tax After Tax Cost of Debt Beta (Unlevered) Firm Value
6.83%
Cost of equity
27%
Corporate Tax
1.95% 0.54 288,665.55
After Tax Cost of Debt Beta (Unlevered) Firm Value
