Upload
roxy
View
47
Download
0
Tags:
Embed Size (px)
DESCRIPTION
Healthcare Sector Stock Presentation. Winter 2006 Xin Lu Hai-ran Xu. Agenda. Sector and Current Holding Recommendations Business Analysis Financial Analysis Valuation Analysis Conclusions Q&A. Sector and Current Holding. Defensive Sector Demographics-driven Prospect - PowerPoint PPT Presentation
Citation preview
Healthcare SectorHealthcare SectorStock PresentationStock Presentation
Winter 2006Winter 2006
Xin LuXin Lu
Hai-ran XuHai-ran Xu
AgendaAgenda
• Sector and Current HoldingSector and Current Holding
• RecommendationsRecommendations
• Business AnalysisBusiness Analysis
• Financial AnalysisFinancial Analysis
• Valuation AnalysisValuation Analysis
• ConclusionsConclusions
• Q&AQ&A
Sector and Current HoldingSector and Current Holding
• Defensive SectorDefensive Sector
• Demographics-driven ProspectDemographics-driven Prospect
• Heavily RegulatedHeavily Regulated
• High Entry Barrier, Little SubstituteHigh Entry Barrier, Little Substitute
• Vulnerable to Legal CostVulnerable to Legal Cost
• Generic Drug ImpactGeneric Drug Impact
Current HoldingCurrent Holding
• Current Holding:Current Holding:1.1. BSXBSX = = 2.32%2.32%
2.2. JNJJNJ = = 3.41%3.41%
3.3. MRKMRK = = 5.64%5.64%
4.4. UNHUNH = = 1.11%1.11%
5.5. PFEPFE = = 3.72%3.72%
SIM percentage SIM percentage == 16.20%16.20%
S&P percentageS&P percentage == 13.58%13.58%
• We voted to maintain current weight
RecommendationsRecommendations
• Pfizer (PFE): BUY by 110 basis pointPfizer (PFE): BUY by 110 basis point
• United Health Group (UNH): SELL by United Health Group (UNH): SELL by 110 basis point110 basis point
Pfizer-Business AnalysisPfizer-Business Analysis
• Largest Drug ManufacturerLargest Drug Manufacturer
• Strong R&D and MarketingStrong R&D and Marketing
• Wide Product LinesWide Product Lines
• Won Patent CasesWon Patent Cases
• Blockbuster Lipitor hurt by ZocorBlockbuster Lipitor hurt by Zocor
• Generous Dividend and Stock Buy-backGenerous Dividend and Stock Buy-back
• Spun off its Consumer Product Division to Spun off its Consumer Product Division to boost growthboost growth
Pfizer-Financial AnalysisPfizer-Financial Analysis
• Sales growth slowed downSales growth slowed downPFIZER INCORPORATED (PFE)StockVal® DATE 02-24-2006
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
REVENUES ($BIL)
7788
1010
1212
14141616
1919
2222
2727
3131
3737
4444
52
61
72
8%
16%
24%
32%
NPMTAX
12 13 12 12 9 13 11 14 14 15 15 14 19 24 27 30 24 26 29 2934 30 27 27 24 27 15 26 28 30 27 26 28 35 24 22 50 19
FYEDec
Pfizer-Financial AnalysisPfizer-Financial Analysis
• Volatile Before-tax MarginVolatile Before-tax MarginStockVal®PFIZER INCORPORATED (PFE) Price 26.37
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
PRE-TAX MARGIN %6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
38
HI 36.4 LO 6.5 ME 21.3 CU 22.5
03-31-199612-31-2005
Pfizer-Financial AnalysisPfizer-Financial Analysis
DuPont AnalyticsPFIZER INCORPORATED (PFE) StockVal ®
FYE Dec INT TAX ASSET
MARGIN% BURDEN BURDEN% TURN LEVERAGE
EBIT EBT T Sales Assets
------- ------- 1 - ---- ------- ------- ROE Acct ROE
Sales EBIT EBT Assets Equity Rpt% Adj% Adj%
2004 27.36 0.98 80.97 0.44 1.80 17.05 3.69 20.74
2003 7.90 0.92 50.28 0.55 1.92 9.19 15.73 24.91
2002 37.30 0.98 77.91 0.76 2.24 47.73 2.33 50.05
2001 35.53 0.97 75.65 0.80 2.11 45.32 0.87 46.19
2000 22.74 0.93 64.61 0.80 2.16 24.82 17.08 41.90
1999 27.27 0.95 71.66 0.92 2.21 37.28 0.40 37.68
1998 20.30 0.94 73.55 0.92 2.13 39.40 -11.91 27.49
1997 22.64 0.93 72.83 0.85 2.16 29.42 -1.28 28.14
1996 23.07 0.93 70.49 0.85 2.28 30.35 -1.68 28.67
1995 22.23 0.91 71.82 0.89 2.49 32.66 -2.45 30.21
1994 21.27 0.92 74.18 0.87 2.64 34.69 -2.99 31.70
1993 9.31 0.84 84.90 0.86 2.36 17.09 5.61 22.70
1992 21.14 0.92 73.50 0.86 2.12 23.23 1.08 24.31
1991 10.95 0.83 76.28 0.82 1.97 11.75 2.29 14.05
1990 19.28 0.88 73.03 0.82 1.89 21.05 -2.36 18.68
1989 17.88 0.88 73.44 0.80 1.92 19.95 -1.53 18.42
1988 19.83 0.90 69.69 0.81 1.93 22.50 -2.51 20.00
1987 19.90 0.92 65.66 0.92 1.88 21.72 -1.05 20.67
• ROE
• Current Price: $26.37Current Price: $26.37
• Cost: $30.57Cost: $30.57
• Shares: 745,157Shares: 745,157
Pfizer-ValuationPfizer-Valuation
Pfizer-ValuationPfizer-Valuation
StockVal®PFIZER INCORPORATED (PFE) Price 26.371996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20071996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
PRICE / YEAR-FORWARD EARNINGS RELATIVE TO S&P HEALTH CARE SECTOR COMP ADJ (SP-35) M-Wtd0
1
2HI 2.05 LO 0.59 ME 1.17 CU 0.72
02-23-199602-24-2006
PRICE / BOOK VALUE RELATIVE TO S&P HEALTH CARE SECTOR COMP ADJ (SP-35) M-Wtd0
1
2HI 2.44 LO 0.58 ME 1.73 CU 0.71
02-23-199602-24-2006
RETURN ON EQUITY RELATIVE TO S&P HEALTH CARE SECTOR COMP ADJ (SP-35) M-Wtd0.8
1.2
1.6HI 1.80 LO 0.81 ME 1.21 CU 0.89
03-31-199612-31-2005
GROWTH RATE ESTIMATE RELATIVE TO S&P HEALTH CARE SECTOR COMP ADJ (SP-35) M-Wtd0.3
0.6
0.9
1.2 HI 1.34 LO 0.48 ME 1.06 CU 0.50
02-23-199602-17-2006
It is Cheap!!!
Pfizer-ValuationPfizer-Valuation
• DCF Assumptions:DCF Assumptions:– Sales growth at 3% to perpetuitySales growth at 3% to perpetuity– EBIT at 28%EBIT at 28%– Tax rate at 30%Tax rate at 30%– Discount rate 9% (4.58%+0.5*6%)Discount rate 9% (4.58%+0.5*6%)– Current Financial StructureCurrent Financial Structure– No M&A or Spin-offNo M&A or Spin-off
Pfizer-RecommendationPfizer-Recommendation
• Target Price $31.64 Target Price $31.64
United Health Group-Business United Health Group-Business AnalysisAnalysis
• Health care plan industryHealth care plan industry
• Three business unitsThree business units– UnitedHealthcareUnitedHealthcare
•mid-size local employers and consumersmid-size local employers and consumers
– AmeriChoiceAmeriChoice•State medical programsState medical programs
– OvationsOvations•Health service to American over the age of 50Health service to American over the age of 50
United Health Group-Business United Health Group-Business AnalysisAnalysis
• UNH business will go to matureUNH business will go to mature• In 2005 10-K reportIn 2005 10-K report
– UnitedHealthcare increase 24% (15% UnitedHealthcare increase 24% (15% from M&A)from M&A)
– AmeriChoice 9% (all from M&A)AmeriChoice 9% (all from M&A)– Ovations 24% (4% from M&A)Ovations 24% (4% from M&A)
• Growth expectation of Growth expectation of UnitedHealthcare and AmeriChoice UnitedHealthcare and AmeriChoice would be lower in 2006 would be lower in 2006
United Health Group-Financial United Health Group-Financial AnalysisAnalysis
StockVal®UNITEDHEALTH GROUP INCORPORATED (UNH) Price 58.891996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20071996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
REVENUES6000
10000
17000
28000HI 45365LO 6885ME 21413CU 45365GR 21.3%
03-31-199612-31-2005
PRE-TAX MARGIN %0
3
6
9 HI 11.3 LO -0.6 ME 6.2 CU 11.3
03-31-199612-31-2005
NET PROFIT MARGIN ADJUSTED %2
4
6HI 7.3 LO 2.8 ME 4.1 CU 7.3
03-31-199612-31-2005
DIVIDEND YIELD %0.03
0.06
0.09HI 0.1 LO 0.0 ME 0.1 CU 0.1
02-23-199602-24-2006
United Health Group-Financial United Health Group-Financial AnalysisAnalysis
DuPont AnalyticsUNITEDHEALTH GROUP INCORPORATED (UNH) StockVal ®
FYE Dec INT TAX ASSET
MARGIN% BURDEN BURDEN% TURN LEVERAGE
EBIT EBT T Sales Assets
------- ------- 1 - ---- ------- ------- ROE Acct ROE
Sales EBIT EBT Assets Equity Rpt% Adj% Adj%
2004 11.02 0.97 65.11 1.64 2.87 32.65 0.00 32.65
2003 10.18 0.97 64.26 1.81 3.33 38.20 0.00 38.20
2002 8.74 0.96 64.50 1.88 3.20 32.50 -0.63 31.88
2001 6.68 0.94 62.02 1.99 3.11 24.09 2.35 26.44
2000 5.81 0.94 63.72 1.98 2.82 19.49 1.43 20.92
1999 4.82 0.95 63.53 1.96 2.52 14.38 0.00 14.38
1998 -0.24 NMN NMN 2.01 1.91 -3.66 15.52 11.86
1997 6.29 1.00 61.99 1.61 1.56 9.83 0.00 9.83
1996 5.77 1.00 61.33 1.53 1.64 8.88 0.91 9.79
1995 8.13 1.00 63.00 1.18 1.49 8.82 2.99 11.81
1994 12.47 1.00 62.00 1.43 1.36 85.82 -69.82 16.00
1993 10.80 0.99 64.20 2.00 1.63 22.23 0.00 22.23
1992 9.42 0.99 64.73 2.07 1.70 20.90 0.18 21.08
1991 2.29 2.07 29.99 0.00 29.99
1990 27.82
United Health Group-Valuation United Health Group-Valuation AnalysisAnalysis
StockVal®UNITEDHEALTH GROUP INCORPORATED (UNH) Price 58.891996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
PRICE / YEAR-FORWARD EARNINGS RELATIVE TO S&P HEALTH CARE SECTOR COMP ADJ (SP-35) M-Wtd0.0
0.4
0.8
1.2 HI 1.52 LO 0.33 ME 0.74 CU 1.08
02-23-199602-24-2006
PRICE / BOOK VALUE RELATIVE TO S&P HEALTH CARE SECTOR COMP ADJ (SP-35) M-Wtd0.0
0.5
1.0
1.5 HI 1.92 LO 0.18 ME 0.57 CU 1.09
02-23-199602-24-2006
RETURN ON EQUITY RELATIVE TO S&P HEALTH CARE SECTOR COMP ADJ (SP-35) M-Wtd0.0
0.5
1.0
1.5 HI 1.73 LO 0.38 ME 0.77 CU 1.24
03-31-199612-31-2005
GROWTH RATE ESTIMATE RELATIVE TO S&P HEALTH CARE SECTOR COMP ADJ (SP-35) M-Wtd0.6
0.9
1.2
1.5 HI 1.63 LO 0.88 ME 1.19 CU 1.59
02-23-199602-17-2006
United Health Group-Valuation United Health Group-Valuation AnalysisAnalysis
StockVal®UNITEDHEALTH GROUP INCORPORATED (UNH) Price 58.891996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
PRICE RELATIVE TO S&P HEALTH CARE SECTOR COMP ADJ (SP-35) M-Wtd0.2
0.3
0.5
0.8
1.4
2.2
3.6
HI 3.56 LO 0.26 ME 0.81 CU 3.14
02-23-199602-24-2006
PRICE / EBITDA RELATIVE TO S&P HEALTH CARE SECTOR COMP ADJ (SP-35) M-Wtd0.3
0.4
0.6
0.8
1.1
1.6
2.2
HI 10.59 LO 0.30 ME 0.81 CU 0.99
02-23-199602-24-2006
PRICE / SALES RELATIVE TO S&P HEALTH CARE SECTOR COMP ADJ (SP-35) M-Wtd0.0
0.2
0.4
0.6
0.8
1.0
1.2
HI 1.03 LO 0.11 ME 0.31 CU 0.89
02-23-199602-24-2006
United Health Group-United Health Group-recommendationsrecommendations
• Sell at Current Price $58.89Sell at Current Price $58.89
• 52 weeks high $64.6152 weeks high $64.61
By the way, CEO of UNH sold stocks in February
ConclusionConclusionCurrent %
PFE 3.72%
+/-
+1.11%
Target %
4.83%
1.11% -1.11% -UNH
•Cheap Stock •Demographics Drive Long-term Performance•Restructuring Boost Margin•Aggressive Buy-back and Generous Dividend
•Relatively Expensive Stock •Mature Business with Low Growth•Management Sells Stock
Thank You!Thank You!
Q & AQ & A
It is time to wake upIt is time to wake up