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What is AIESEC?
• World’s largest student-run organization
• International, non-political, non-profit, independent
AIESEC Global Partners
Exchange
Global Internship Program
Global Community
Development Program
General Internships
Global Exchange Partners
Tata Consultancy Services Educational
InternshipsDevelopmentalInternships
Global Internship Programme
• Corporate internships• Work nature
– Management– Technical– Education (corporate)
• Location: developed countries
• Duration: Long-term (6-12 months)
• Compensation: Paid
Sample Internship – Finance
• Company: Deutsche Post DHL• Location: Germany• Field: Finance and HR
Job Description:- Coordinating projects, quality assurance and
decision-making processes- Independent development and implementation of
reports for the processes- Cost-benefit-analysis for process proposals
Requirements: English, Experience with cost accounting, financial accounting and financial planning and budgeting
Sample Internship – Global Exchange Partner• Company: UBS • Location: Switzerland• Field: Finance
Job Description:- Analyzing and mapping of the current processes
to develop new strategies to increase efficiency- Utilizing various tools such as Excel and Access to
develop applications to support new strategies- Attending training programs in credit risk control
Requirements: English, Background in statistics, banking and introductory finance
Sample Internship – Partnership• Company: Tata Consultancy Services• Location: India• Field: Management/Technical
Job Description:– Job descriptions can be modified to suit interns’ abilities– 100% acceptance rate in Spring 2011
Requirements: Graduating seniors, non-Indian descent
Interested? Information sessions:• January 31st: Rockefeller 128, 6:30PM• February 1st: Rockefeller 132, 6:30PM
Application Process• Submit application on:
http://www.aieseconline.net
• Application deadline: Sunday, February 26th, 23:59PM
• Formal interviews: February 28-March 1
• Notification of acceptance: March 4th
Questions? Email [email protected]
Mutual Investment Club of Cornell
DCF Modeling Workshop
March 3rd and 4th
11:30 am – 6:00 pm Martha van Rensselaer G71
Lunch Fee of $15 Applications released on website
tomorrow Deadline is February 28th, 11:59 pm 130 spots open
Mutual Investment Club of Cornell
16
Oil Prices
Iran cuts off oil exports to France and Britain Threatens premature cut to others in EU
Mutual Investment Club of Cornell
18
Greece: Last Week
Tuesday Feb 14: Bailout plan delayed Warned Athens that needed to respect
bailout terms Did not receive the required political
assurances from the leaders of the Greek coalition parties
$525 million for a fiscal gap: prerequisite for the bailout was missing
Mutual Investment Club of Cornell
Approved Bailout Package
Brussels, Tuesday February 21st: agree on a second bailout
Offer Greece €130 billion ($171.9 billion) Greece agrees: reduce debt to 120.5% of GDP
by 2020 Debt currently at 160% of GDP
Estimate: 129% of GDP in 2020 $66bn more from 2015-2020 to reach goal If no bailout: 178% of GDP in 2015
Deal includes: 53.5% write down for investors in Greek bonds, from already having a 50% loss Overall loss of 75%
Mutual Investment Club of Cornell
Bailout Plan
Distribute profits (estimated €45 bn to €50 bn) from holdings of bonds
Plan designed to write off ~ €100 billion of Greek debt by mid march deadline Exchange before March 20 to escape the full
14.5 billion-euro cost of the bond redemption Further reduction in interest rates on the
€53 billion in loans from the euro-zone
Mutual Investment Club of Cornell
21
Greece: Big Spending Cuts
Reducing pharmaceutical expenditures by $1.3 billion in 2012
Cut overtime pay for hospital doctors by $66 million
Save $396 million in military procurement
Save $40 million by reducing the number of deputy mayors and staff
Many protests, especially from public sector employees
Mutual Investment Club of Cornell
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Uncertainties
Long term questions ability to pay off debt
Greek economy: more competitive through wage cuts Falling wages will deepen Greece's
recession Tension: bailout plan of reducing debt
and improving competitiveness The internal devaluation to restore
Greece's competitiveness will lead to a higher debt-to-GDP ratio, in the short term
Elections in April
Mutual Investment Club of Cornell
23
What’s Next?
Results of second aid program will come in months
European Stability Mechanism: €500 billion to address firewall issue
Injection of liquidity into the banking sector by the ECB Determination to save currency Prevent chain reactions To mark the beginning of the end and give
euro zone momentum it needs!
Mutual Investment Club of Cornell
Payroll Tax: Background
Resolved payroll tax stalemate in December $143 billion economic package passed,
includes: Extension of payroll tax holiday Tax benefits for unemployed Reimburse doctor’s Medicare compensation Support “work sharing” program
Extends lowered payroll tax of 4.2% from original 6.2% for 160 million workers.
Mutual Investment Club of Cornell
Specifics
Passed in House 293-132, Senate 60-36 with bipartisan support
Republicans originally antagonized package due to cost/spending Dropped resistance to avoid public
backlash during election year
No spending cuts to pay for cost
Mutual Investment Club of Cornell
Specifics
Goal of payroll tax cut: Help recovery by giving consumers more
money Not just help jobless– help stay in jobs
Concessions by Democrats: Cuts to other Federal programs, ie.
preventative healthcare, to pay cost Limit on unemployment benefit Drug test program for unemployment benefit
candidates
Mutual Investment Club of Cornell
Discussion
Prevents 0.4% reduction in GDP, half million jobs, and 0.3% increase in unemployment.
Improvement in GDP improves chances of Obama’s reelection.
Rising stock prices
Mutual Investment Club of Cornell
Criticism
What about social security? Payroll tax = money taken from paycheck
to pay for social security Iconic program for Democrats
No spending cuts to offset cost of package Added to deficit of over $1 trillion
Re-progamming payroll systems with 2 month lead time
Mutual Investment Club of Cornell
30
Two Minute Drill
Guest Lecturer:
Topic:
Siddhant Trivedi
Venture Capital
Mutual Investment Club of Cornell
“MCD is a business you can own forever. As long as people need to eat, McDonald's offers good
quality food and service, and the company keeps growing every
year.“
-Bill Ackerman
Mutual Investment Club of Cornell
MCD at a Glance
MCD has risen from a share price of $12.8 in March 2003 to now $100. Annualized return of 25.7% over last nine years with a 35% return in 2011.
Mutual Investment Club of Cornell
Trading Multiples and Key Statistics Stock Price: $100.67 52-week range: $72.89-$102.22 Beta: 0.31 Market cap: $102.99 billion Dividend: $2.80 Dividend Yield: 2.80% Operating margin: 30.71%
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Pays a Great Dividend
• Current Div Payout is 2.53%, back to where it was before 2008
• Payout is constantly increasing
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Trading Multiples and Key Statistics 2011 Global Sales Growth: 6.7%
Analyst expectations: 5.7& US Sales growth: 7.8% Asia Sales growth: 7.3%
P/E (ttm): 19.10 P/E (fwd): 15.93 P/BV (ttm): 7.71 Lower Multiples than those for competitive
companies Yum and Wendy’s even given its impressive performance: Yum P/E of 23x and P/BV of 15x Wendy’s fwd P/E 21.6x
Mutual Investment Club of Cornell
Business Model
Earns revenue as a franchiser and operator of restaurants
15% owned and operated directly – “models” Remainder through JV / franchise agreements
Q4 (Dec '11) 2011
Net profit margin 20.18% 20.38%
Operating margin 31.07% 31.58%EBITD margin 36.55% 30.93%
Mutual Investment Club of Cornell
Industry Overview
• Competitors– WEN, YUM, JACK– YUM includes KFC, Pizza Hut, LJS, and
A&W– Burger King Holdings (Private)– Internationally, MCD competes with YUM
4Q11 MCD WEN YUM
Net profit margin 20.18% 0.42% 8.68%
Operating margin 31.07% 5.30% 12.33%
ROA 16.6% 0.49% 16.47%
Mutual Investment Club of Cornell
Performance
2011 Performance: 35% increaseVolatility: 60% less than market
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Growth in Asia
YUM: 14% EPS growth in 2011 19% sales growth in China 50% of revenue from Asia Operating margin: 15.81%
MCD: 7.3% sales growth in Asia 22% of revenue from Asia Operating margin: 30.71%
Reasons for growth: Huge capital expenditures in China (opened record 200
restaurants in 2011) Margins down 80 bps due to stores opening, will rise in future $2.9 billion in CapEx in 2012: 1300 new restaurants, 250 in
China
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Reinvestment and Menu Growth
Menu expansions: Premium coffee drinks Breakfast items Salads Value menu
Reinvestment: 2012: $2.9 billion in CapEx 1,150 new stores 2,500 reimaged stores (45% of interiors and 25% exteriors)
Returning money to shareholders: 2011: $6 billion returned to shareholders
Mutual Investment Club of Cornell
Benjamin Graham Analysis
8 Hurdles: Hurdle #1: Earnings/Price > 2×(10 Year Treasury Yield) Hurdle #2: Current P/E Ratio < [½ × (5-Year P/E Ratio)] Hurdle #3: Dividend Yield > [1/2 ×(10 Year-Treasury Yield)] Hurdle #4: Stock Price < [1.5 × Book Value/Share] Hurdle #5: Total Debt < Book Value Hurdle #6: Current Ratio > 2.00 Hurdle #7: Earnings Growth > 7% over past 5 years Hurdle #8: Stability in Growth of Earnings
Mutual Investment Club of Cornell
Benjamin Graham Analysis
Hurdle #1 Earnings/Price > 2×(10 Year Treasury Yield)
McDonald’s Earnings/Price EPS: $5.27 Price: $100.61 Earnings/Price: 5.24%
10 Year Treasury Yield (×2) 4.02%
Hurdle: Passed
Mutual Investment Club of Cornell
Benjamin Graham Analysis
Hurdle #2 Current P/E Ratio < [½ × (5-Year P/E Ratio)]
Forward Price/Earnings: 15.8% Highest 5-Year Price/Earning: 32.2%
Hurdle: Passed
Mutual Investment Club of Cornell
Benjamin Graham Analysis
Hurdle #3 Dividend Yield > [1/2 ×(10 Year-Treasury Yield)]
McDonald’s Dividend Yield: 2.8% 10-Year Treasury Yield: 2.01%
Hurdle: Passed
Mutual Investment Club of Cornell
Benjamin Graham Analysis
Hurdle #4 Stock Price < [1.5 × Book Value/Share]
McDonald’s Book Value/Share: $13.04 Stock Price: $100.61
Reason: Much of McDonald’s Operations are owned by Franchisees, thus not showing up on Balance Sheet
Hurdle: Failed
Mutual Investment Club of Cornell
Benjamin Graham Analysis
Hurdle #5 Total Debt < Book Value
McDonald’s Total Debt: $12.54 billion McDonald’s Book Value: $13.3 billion
Hurdle: Passed
Mutual Investment Club of Cornell
Benjamin Graham Analysis
Hurdle #6 Current Ratio > 2.00
McDonald’s Current Ratio: 0.9 Current Ratio: Current Assets/Current Liabilities
Most analysts agree that a current ratio of 1.0 is the normal amount for stocks
Hurdle: Failed
Mutual Investment Club of Cornell
Benjamin Graham Analysis
Hurdle #7 Earnings Growth > 7% over past 5 years
Earnings Growth: 9.1%
Hurdle: Passed
Mutual Investment Club of Cornell
Benjamin Graham Analysis
Hurdle #8 Stability in Growth of Earnings
December 2007: 1.07
December 2008: 0.86
December 2009: 1.11
December 2010: 1.16
December 2011: 1.33
Hurdle: Passed
Mutual Investment Club of Cornell
Benjamin Graham Analysis
8 Hurdles: Hurdle #1: Earnings/Price > 2×(10 Year Treasury
Yield) Hurdle #2: Current P/E Ratio < [½ × (5-Year P/E Ratio)] Hurdle #3: Dividend Yield > [1/2 ×(10 Year-Treasury
Yield)] Hurdle #4: Stock Price < [1.5 × Book Value/Share] Hurdle #5: Total Debt < Book Value Hurdle #6: Current Ratio > 2.00 Hurdle #7: Earnings Growth > 7% over past 5
years Hurdle #8: Stability in Growth of Earnings
Mutual Investment Club of Cornell
Strong and Stable Growth
Strong Performance and Future Growth Six of Eight Hurdles Passed
EPS Growth Forecast 8.7% in 2012 10.3% in 2013 10.4% in 2014
Long term EPS growth: 9.8%
Lasting upward trend, stable during downturn
Mutual Investment Club of Cornell
DCF
Growth Stage Long term growth rate: 9.690% Growth Payout Ratio:49.90%
Number of Growth years: 9 Required Rate of Return:
8.722%
Risk Free: 2.064% Risk Premium:
5.658%
2012 2013 2014 2015 2016 2017 2018 2019 2020
EPS 5.727 6.328 7.01 7.689269 8.434359 9.251649 10.14813 11.13148743 12.2101286
Payout Ratio 0.49904 0.49904 0.49904 0.49904 0.49904 0.49904 0.49904 0.49904 0.49904
DPS 2.858002 3.157925 3.49827 3.837253 4.209083 4.616943 5.064324 5.555057489 6.09334256
PV 2.858002 2.904587 2.959501 2.985851 3.012435 3.039256 3.066316 3.093616872 3.12116071
Mutual Investment Club of Cornell
DCF
Transition Stage Growth Rate at Maturity: 4.25% Payout at Maturity: 0.45
Number of transition years: 8
2021 2022 2023 2024 2025 2026 2027 2028
EPS 13.31022 14.78109 16.31395 17.89477 19.50702 21.13181 22.7481567 24.33336197
Payout Ratio 0.49291 0.48678 0.48678 0.48065 0.47452 0.46839 0.46226 0.45613
DPS 6.560738 7.195141 7.941304 8.601121 9.256472 9.897929 10.5155629 11.09917639
PV 3.090977 3.11792 3.165192 3.153159 3.12118 3.069731 2.9996531 2.912137169
Mature Stage Growth Rate at Maturity: 0.04246
EPS(1) 25.3668 TV 66.91 Stock Price: 118.5834743
Payout Ratio 0.45 D 2.995017
DPS 11.41506
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Market Comps
McDonalds Yum! Brands Wendy’s
Past P/Earnings 19× 23.8× n/a
Future P/Earnings
15.8× 17.5× 21.6×
Mutual Investment Club of Cornell
Market Comps
Price $65.90 $100.66
EPS (ttm) $2.74 $5.27
EPS (fwd) $3.75 $6.32
P/E (ttm) 24.05 19.1
P/E (fwd) 17.57 15.93
EV (in billions) $32.25 $112.96
EBITDA (ttm) 2.62 9.69
EV/EBITDA 12.29 11.66
YUM P/E (ttm) x MCD EPS (ttm) = MCD P
24.05 $5.27 $126.75
YUM P/E (fwd) x MCD EPS (fwd) = MCD P
17.57 $6.32 $111.02
YUM EV/EBITDA x MCD EBITDA = MCD EV
12.29 $9.69 119.06
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Valuation Range
DCF : DR = 8.72%: $118. 59 DR = 7.72%: $155.62
Market comps: P/E (ttm): $126.75 (P) P/E (fwd): $111.02 (P) EV/EBITDA: 119.06 (EV)
Target price: $125
Mutual Investment Club of Cornell
Technical Indicators
Williams %R (WLPR) Oscillator (between -100 to 0),
shows whether stock is trading high, low, or somewhere in between recent trading range
Measure of current price in relation to high and low of past n days %R = close(today) – high (n days) x 100
high(n days) – low (n days)
Indicators: %R = Five trading days since -100%
reached; %R < -90% strong buy %R < -80% buy %R > -20% sell %R= Five trading days since 0%
reached; %R > -10% strong sell
Mutual Investment Club of Cornell
Technical Indicators
Bollinger Bands (BOLL) Shows two standard deviations below and above
moving stock price Lower bound = mean[close, n] – 2*stdev[close, n]
Upper bound = mean[close, n] + 2*stdev[close, n]
Indicators: Stock price < lower band buy Stock price > upper bound sell
Mutual Investment Club of Cornell
Technical Indicators
Relative Strength Index (RSI) Momentum oscillator (between 0 and 100)
Momentum = rate of the rise or fall in price
Calculates as ratio of average higher closes to average lower closes Positive trading period: U = close(now) – close(previous) Negative trading period: D = close(previous) – close(now) RS = EMA(U,n)
EMA(D,n)
RSI = 100 – [100/ (1+ RS) ]
Indicators: RSI < 30 strong buy RSI < 40 buy RSI > 60 sell RSI > 70 strong sell
Mutual Investment Club of Cornell
Technical Indicators
Moving Average Convergence/Divergence (MACD) Charts fast versus slow moving average to spot changes in
strength, direction, momentum, and duration of stock price 12 day exponential moving average (fast) 26 day exponential moving average (slow) MACD = 12 day EMA – 26 day EMA
Indicators MACD crosses over 0
(12 crosses over 26) strong buy MACD crosses below 0
(12 crosses below 26) strong sell
Mutual Investment Club of Cornell
MCD
Conclusion: Strong Growth history and projections Low beta, low risk Not effected by crisis in Europe Strong dividend Undervalued versus competitors High growth potential in China and Asia Lowering margins
Overall analysis: strong buy Target price: $125 Duration: Long term
Mutual Investment Club of Cornell
73
Stock Competition
Investopedia Trading Simulator $100,000 in Virtual Money Full Trading Platform (Short Selling,
Options) Weekly Leaderboard Update
Game Name: MICC Stock Competition Password: Cornell
Mutual Investment Club of Cornell
76
Brainteaser
You wake up early one morning and find the light in your bedroom is broken!
You get dressed in the dark. Your sock drawer has socks of three different colors: red, white and blue. How many socks do you have to take out to be certain of having a matching pair?