13
Team Square AlphaResearch Industry Sector, Entertainment Facilities Date: 11/12/2016 New York Stock Exchange (NYSE) This report is published for Global Markets Investments Club Annual IBS Stock Pitch Challenge purposes. Ticker: SIX NYSE Current Price: 53.90 USD Target Price: 60.19 USD Recommendation: BUY (11.70% Upside) SIX: Riding Higher We issue a BUY recommendation on Six Flags Entertainment Corporation (SIX) with a one-year target price of $60.19, which offers a 11.70% upside from its closing price of $53.90 as of 10/26/2016. SIX has a stable historical performance and enjoys robust growth potential driven by consumer confidence level and healthy consumer base. However, market concerns about quarterly earnings led to over 20% drop of its 52-week high of $62.7 in 3Q2015, though recovering to $53.90 in late October. We believe SIX’s season pass (introduced in 2010) and membership (introduced in 2013) strategy will continue to generate stable revenue each year, with in-sight revenue from global expansion starting 2019. Strong Support by Prospect Industry Performance Amusement park industry has been growing steadily in the past few years due to stronger consumer confidence and spending after 2008 financial crisis. Over 400 enterprises operate in the industry and five major players take over more than 98% of market share. Over the next five years, the industry is expected to grow at a CAGR of 2.4% from $16 billion in 2016 to $17.9 billion in 2020E. Robust Growth Potential from Season Pass and Membership SIX’s season pass and membership have been one of consumers’ favorites due to deep discounts and affordability (up to 72% savings compared to single-ticket). Thanks to this strategy, each pass holder spends 2x compared to single-ticket holder. And we expect its penetration rate (season pass & membership attendance to total attendance) to grow from 56.80% in 2016E to 60.00% in 2020E, implying a five-year CAGR of 4.51% in attendance numbers. Besides, given slow growth of U.S. population, SIX shows strong, unaffected and growing demand for season pass and membership. Marginal-Cost Revenue Contributed by Global Expansion SIX started its global expansion in early 2014 and has entered licensing partnership with companies from emerging markets, such as China, Vietnam and Dubai. Its licensing strategy requires no capital expenditure from SIX and generates revenue from both licensing fees and earnings allocation. We expect three parks to open in 2019 (two in China and one in Dubai) and another two parks (in Vietnam) open in 2020, contributing to premium of 4.8% and 5.8% of domestic revenue in 2019E and 2020E respectively. Attractive Profitability and Reliable Liquidity Sources Due to increasing operating efficiency, SIX enjoys higher EBITDA margin of 36.75% in 2016E, compared to industry average of 25.69% TTM, with consistently positive cash flows from operating activities (CFO) from $501 million to $582 million during 2016E-2020E. Besides solid CFO, SIX has the option of $250 million revolving loan to satisfy any anticipated liquidity needs, such as working capital, capital expenditure, stock dividends and discretionary common stock repurchases. Six Flag's Key Financial Ratios Key Ratios 2015 2016E 2017E 2018E 2019E 2020E EBITDA margin 35.35% 36.75% 36.83% 37.09% 37.16% 37.22% Net profit margin 15.26% 16.58% 16.89% 17.33% 17.61% 17.93% ROA 7.77% 9.26% 9.98% 10.79% 11.54% 12.36% Current ratio 0.84 0.97 1.04 1.16 1.27 1.40 Quick ratio 0.72 0.71 0.72 0.74 0.75 0.75 Cash conversion cycle 14 4.54 5.33 4.42 3.55 2.64 Cash turnover 13 12.80 12.61 11.16 10.59 9.78 CFO/EBIT 1.40 1.29 1.28 1.23 1.20 1.17 CFO/CapEX 4.15 4.11 4.11 3.96 3.91 3.84 Long-term debt to assets 0.62 0.61 0.61 0.61 0.60 0.60 Interest coverage 4.45 5.11 5.42 5.79 6.14 6.53 EPS (in $) 1.65 2.00 2.18 2.39 2.60 2.83 Dividends (in $) 2.14 2.29 2.44 2.59 2.74 2.89 Source: Company report, Team estimates Market Profile Closing Price $53.90 52-Week Price Range $45.2-$62.7 Average Daily Volume 654,284 Shares Outstanding 92.1M Market Cap 4986.7M Dividend Yield (TTM) 4.3% P/E (TTM) 41.6 EV/EBITDA (TTM) 16.8 Source: Bloomberg Valuation Breakdown DCF $63.17 Weight 50.00% Multiple $57.22 Weight 50.00% Target Price $60.19 Source: Bloomberg, Team estimates Six Flags Entertainment Corporation 85 95 105 115 Stock Price Movement SIX US Equity SPX Index FUN US Equity Source: Bloomberg 1.65 2.00 2.18 2.39 2.60 2.83 0 500 1,000 1,500 2,000 0.0 1.0 2.0 3.0 2015 2016E 2017E 2018E 2019E 2020E SIX's EPS and Revenue Forecast EPS (in $) Revenue - RHS (in mn $) Source: Company report, Team estimates

Six Flags Final

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Page 1: Six Flags Final

Team “Square Alpha” Research Industry Sector, Entertainment Facilities

Date: 11/12/2016 New York Stock Exchange (NYSE)

This report is published for Global Markets Investments Club Annual IBS Stock

Pitch Challenge purposes.

Ticker: SIX – NYSE Current Price: 53.90 USD Target Price: 60.19 USD Recommendation: BUY (11.70% Upside)

SIX: Riding Higher

We issue a BUY recommendation on Six Flags Entertainment Corporation (SIX) with a one-year

target price of $60.19, which offers a 11.70% upside from its closing price of $53.90 as of

10/26/2016. SIX has a stable historical performance and enjoys robust growth potential driven by

consumer confidence level and healthy consumer base. However, market concerns about quarterly

earnings led to over 20% drop of its 52-week high of $62.7 in 3Q2015, though recovering to $53.90

in late October. We believe SIX’s season pass (introduced in 2010) and membership (introduced in

2013) strategy will continue to generate stable revenue each year, with in-sight revenue from global

expansion starting 2019.

Strong Support by Prospect Industry Performance

Amusement park industry has been growing steadily in the past few years due to stronger consumer

confidence and spending after 2008 financial crisis. Over 400 enterprises operate in the industry and

five major players take over more than 98% of market share. Over the next five years, the industry

is expected to grow at a CAGR of 2.4% from $16 billion in 2016 to $17.9 billion in 2020E.

Robust Growth Potential from Season Pass and Membership

SIX’s season pass and membership have been one of consumers’ favorites due to deep discounts

and affordability (up to 72% savings compared to single-ticket). Thanks to this strategy, each pass

holder spends 2x compared to single-ticket holder. And we expect its penetration rate (season pass

& membership attendance to total attendance) to grow from 56.80% in 2016E to 60.00% in 2020E,

implying a five-year CAGR of 4.51% in attendance numbers. Besides, given slow growth of U.S.

population, SIX shows strong, unaffected and growing demand for season pass and membership.

Marginal-Cost Revenue Contributed by Global Expansion

SIX started its global expansion in early 2014 and has entered licensing partnership with companies

from emerging markets, such as China, Vietnam and Dubai. Its licensing strategy requires no capital

expenditure from SIX and generates revenue from both licensing fees and earnings allocation. We

expect three parks to open in 2019 (two in China and one in Dubai) and another two parks (in

Vietnam) open in 2020, contributing to premium of 4.8% and 5.8% of domestic revenue in 2019E

and 2020E respectively.

Attractive Profitability and Reliable Liquidity Sources

Due to increasing operating efficiency, SIX enjoys higher EBITDA margin of 36.75% in 2016E,

compared to industry average of 25.69% TTM, with consistently positive cash flows from operating

activities (CFO) from $501 million to $582 million during 2016E-2020E. Besides solid CFO, SIX

has the option of $250 million revolving loan to satisfy any anticipated liquidity needs, such as

working capital, capital expenditure, stock dividends and discretionary common stock repurchases.

Six Flag's Key Financial Ratios

Key Ratios 2015 2016E 2017E 2018E 2019E 2020E

EBITDA margin 35.35% 36.75% 36.83% 37.09% 37.16% 37.22%

Net profit margin 15.26% 16.58% 16.89% 17.33% 17.61% 17.93% ROA 7.77% 9.26% 9.98% 10.79% 11.54% 12.36%

Current ratio 0.84 0.97 1.04 1.16 1.27 1.40

Quick ratio 0.72 0.71 0.72 0.74 0.75 0.75

Cash conversion cycle 14 4.54 5.33 4.42 3.55 2.64

Cash turnover 13 12.80 12.61 11.16 10.59 9.78

CFO/EBIT 1.40 1.29 1.28 1.23 1.20 1.17 CFO/CapEX 4.15 4.11 4.11 3.96 3.91 3.84

Long-term debt to assets 0.62 0.61 0.61 0.61 0.60 0.60

Interest coverage 4.45 5.11 5.42 5.79 6.14 6.53 EPS (in $) 1.65 2.00 2.18 2.39 2.60 2.83

Dividends (in $) 2.14 2.29 2.44 2.59 2.74 2.89 Source: Company report, Team estimates

Market Profile

Closing Price $53.90

52-Week Price Range $45.2-$62.7

Average Daily Volume 654,284

Shares Outstanding 92.1M

Market Cap 4986.7M

Dividend Yield (TTM) 4.3%

P/E (TTM) 41.6

EV/EBITDA (TTM) 16.8

Source: Bloomberg

Valuation Breakdown

DCF $63.17

Weight 50.00%

Multiple $57.22

Weight 50.00%

Target Price $60.19

Source: Bloomberg, Team estimates

Six Flags Entertainment Corporation

85

95

105

115

Stock Price Movement

SIX US Equity SPX Index

FUN US Equity

Source: Bloomberg

1.65 2.00 2.18 2.39 2.60 2.83

0

500

1,000

1,500

2,000

0.0

1.0

2.0

3.0

2015 2016E 2017E 2018E 2019E 2020E

SIX's EPS and Revenue Forecast

EPS (in $) Revenue - RHS (in mn $)

Source: Company report, Team estimates

Page 2: Six Flags Final

Business Description

Six Flags Entertainment Corporation is the largest roller coaster theme park in the world per number

of parks it operates and achieved $688 million revenue in 2015, with a) 57.1% from theme park

admissions; b) 41.5% from theme park food, merchandise and other; c) 1.4% from accommodations

and d) 4.68% from sponsorship, licensing and other fees. (Table 1)

There are 16 theme parks in United States, and two parks in Mexico and Canada (Exhibit 1). Given

effective coverage radius of 50 miles and 100 miles, each domestic park generally serves 100 million

people and 175 million people respectively. Besides, all parks are featured with unique roller coaster

rides combination and placed within regions with high population density, such as Vallejo, Los

Angeles, Atlanta, New Jersey, Chicago, Washington DC and New England.

Different from regular amusement parks, SIX attracts consumers by offering thrilling and exciting

roller coaster rides while maintaining some regular rides for non-roller-coaster riders. Thus,

continuous introduction of new rides facilitates its consumer base, with ages ranging from 15-year-

old to 40-year old. Besides regular-themed roller coaster rides, SIX also holds exclusive long-term

licenses of characters from Warner Bros. and DC Comics, such as Batman, Suicide Squad and

Superman, which are currently used for marketing purpose.

Company Strategy

Global Expansion: Compared to domestic amusement park peers (excluding Walt Disney and

Universal Studios), SIX has taken a lead in global expansion using no-CapEx licensing strategy,

which provides revenue premium but requires no further investments apart from operation

assistance and brand licenses.

Active Pass Base: Leveraging on season pass and membership strategy, SIX provides affordable

pass tickets and thus can attract and retain a larger consumer base. Meanwhile, SIX is planning to

introduce other passes to attract more customers. And thanks to big-data driven marketing

strategies, SIX can better target potential consumers. (Table 2)

Cutting-Edge Innovation: SIX has been leading the roller coaster industry with featured thrilling

rides and recently introduced new Virtual Reality (VR) technology to enhance multi-dimensional

and interactive riding experience, such as Superman and Batman rides. With VR headsets, riders

can choose different specially-designed storylines and even use “weapons” by moving headsets.

Industry Overview and Competitive Positioning

Amusement park industry, featuring with high entry barriers, has been growing steadily in the past

few years due to stronger consumer confidence and spending after 2008 financial crisis. The industry

revenue heavily relies on leisure time and disposable income of consumers. Over 400 enterprises

operate in the industry and five major players take over more than 98% of market share. Over the

next five years, the industry is expected to grow at a CAGR of 2.4% from $16 billion in 2016E to

$17.9 billion in 2020E.

Consumer Base Overview

Slow Population Growth & Large Young Population: Per U.S. Census Bureau, population

between 0 and 44 years old is expected to grow by 2.5% from 2016E to 2020E while total population

by 5%, showing a mild and slow growth (Exhibit 2). Regarding amusement park industry’s

consumer base, it is majorly teenagers and younger (under 18), occupying 22% of total attendances,

while adults (18-44 years old) accompanying kids, taking up 36%, in 2016.

Geographic Competition Overview

Fierce Competition in Populated Areas: Five major players in the market are Walt Disney,

Universal Studios, Six Flags, Cedar Fair, and Sea World (Appendix 7), with the first two taking up

75% of total industry earnings utilizing only two locations of Orlando and Los Angeles. Sea World

is mainly targeting at five locations while Six Flags and Cedar Fair are operating parks located in

many populated areas across U.S., showing diversity in geographic strategies and stronger

competition between each other.

China and Dubai Potential Outlook

Attractive Asian and Middle-East tourism & entertainment market: Operators in U.S. are

expanding into international markets, especially Asia and Middle East, due to high growth potential

in the coming years. Specifically, booming tourism in China and Dubai offers attractive prospects

for amusement park industry.

(in '000 $) 2013 2014 2015

Theme

park

admissions

602,204 641,535 687,819

Share 56.4% 57.4% 57.1%

Theme park

food,

merchandise

and other

448,547 460,131 500,190

Share 42.0% 41.1% 41.5%

Accommo-

dations

revenue

17,000 16,877 16,796

Share 1.6% 1.5% 1.4%

Sponsorship,

licensing and

other fees

42,179 57,250 59,133

Share 3.8% 4.9% 4.7%

Revenue 1,109,930 1,175,793 1,263,938

Category Type Discount

Daily

Ticket Fright Fest 15%

Season

Pass

Regular

4+

Purchases

Each 18%

Membership

(Monthly) 72%

Gold

1-3

Purchases

Each 34%

Membership

(Monthly) 34%

Regular

1-3

Purchases

Each 59%

Membership

(Monthly) 59%

Source: Company report

Table 1. Historical Revenue by Segment

Source: Company report

Exhibit 1. SIX’s Parks Across U.S.

Source: Company report, US Census Bureau

Population Density Six Flags

22%

36%

25%

17%

under 18 18-44 45-64 over 65

Exhibit 2. 2020E U.S. Age Distribution

Source: US Census Bureau

Table 2. Discounts Portfolio of Six Flags

Page 3: Six Flags Final

Valuation

We considered two standard valuation models to value SIX – Discounted Cash Flow (DCF) model

and comparable company multiple pricing, with one-year target prices at $63.17 using DCF model

and $57.22 using multiple pricing method. Given equal weights to value-based valuation and

market-based valuation, we arrived at our final target price of $60.19 (upside 11.70% to $53.90 as

of 10/26/2016).

DCF Valuation Given amusement park industry is currently in growth stage of its life cycle, we expect Six Flag’s

revenue to continue growth and applied the Three-Stage Growth Free Cash Flow model, which

considers its high growth prospects and long-term values. Our DCF model implies a one-year target

price of $63.17 per share in base case projection and $75.04 in premium case projection. (Exhibit 3)

In applying the three-stage growth model, we forecasted five-year pro forma statements and

assumed explicit growth in first stage (2016E-2020E), semi-explicit growth of 5.00% in second

stage (2021-2025), and terminal growth of 2.0% in third stage (from 2026). The following factors

are material when assessing company’s performance and calculating the DCF model.

Revenue

Per Six Flag’s business, its revenue is divided into four segments: Theme park admission, Theme

park merchandise and other, Accommodations revenue & Sponsorship, licensing and other fees.

Based on nature of business, we categorize first three segments revenue as direct operation revenue

and the fourth segment as indirect operation revenue, which is composed of domestic and

international sponsorship, licensing and other incomes.

Direct Operation Revenue: The direct operation revenue depends on total attendance and

adjusted revenue (revenue minus indirect operation revenue) per capita and is calculated as below:

In summary, we forecast total attendance to grow at 3.08% CAGR in 2016E-2020E, adjusted

revenue per capita to grow at 3.08% CAGR for premium group and at 1.20% CAGR for regular

group in 2016E-2020E. (Exhibit 4)

Indirect Operation Revenue: We forecast indirect operation revenue to grow at 4.8% annually

in 2016E-2020E as our base case projection. Besides, given that new parks will start operation in

2019E and 2010E, we developed a premium case projection by adding up 5.0% in 2019E and 6.0%

in 2010E of corresponding direct operation revenue.

Operating Expenses

Per improving management efficiency, we forecast all expenses to stay stable as fixed portion of

revenue, with operating margin at 64.0%, SG&A (selling, general & administration, excluding

stock-based compensation - SBC) at 14.0%, SBC at 5.0% and COGS (cost of goods sold) at 8.0%.

Also, we forecast depreciation rate to stay at 5.0% of total PPE (property, plant and equipment) and

amortization to stay in line with management’s forecast.

Tax Rate, Terminal Growth Rate & Weighted Average Cost of Capital

We assume tax rate to be 28.0% based on US Federal income rate of 35.0% and further adjustments.

Terminal growth rate is set as 2.0% using industry standards. Weighted average cost of capital

(WACC) is 7.11% using formula: WACC = 𝑤𝑒×𝑟𝑒 + 𝑤𝑑×𝑟𝑑×(1 − 𝑇) and 𝑤𝑒 = 𝑟𝑓 + 𝛽×(𝑟𝑀 − 𝑟𝑓).

(Table 3)

Multiple Valuation Besides DCF method, we used multiple analysis to calculate market-justified price range by

comparing SIX and its peers – public amusement park companies. To find the optimal-comparable

companies, we then filtered the list by identifying the ones that have the closest revenue and positive

earnings and finally arrived at four public companies for multiple valuation.

Considering valuation common practices and proximity to intrinsic value, we chose P/E (price to

earnings), EV/EBIT (enterprise value to earnings before interest and tax expense) and EV/EBITDA

(enterprise value to earnings before interest, tax depreciation and amortization expense) ratios for

valuation purpose. Applying the mean of the three ratios, we arrived at $67.03 (33.59x P/E), $69.72

(21.54x EV/EBIT) and $34.9 (10.23x EV/EBITDA), with the average of $57.22 as our one-year

target price. (Table 4)

Direct

Operation Revenue

=

Group attendance + Season pass & Membership attendance

× Adjusted revenue per capita

(Premium group)

Single-ticket attendance × Adjusted revenue per capita

(Regular group)

Table 3. WACC Computation

Risk free rate 1.85%

Beta 0.80

Equity risk premium 8.74%

Cost of equity 8.84%

Equity % 74.90%

Cost of debt 2.68%

Debt % 25.10%

Effective tax rate 27.37%

WACC 7.11%

Source: Bloomberg, Team estimates

Table 4. Multiple Valuation

Ratio Mean Median Price

P/E 33.59x 31.49x $ 67.03

EV/EBIT 21.54x 17.89x 69.72

EV/EBITDA 10.23x 10.49x 34.90

Target Price (Multiple) $ 57.22

Source: Bloomberg, Team estimates

1,296 1,378

1,901 2,204

4,549 5,274

0

2,500

5,000

7,500

10,000

Base Premium

Exhibit 3. Projected Firm Value by DCF

(in mn $)

Explicit stage Semi-explicit stage Terminal Value

Source: Team estimates

28,557

29,713

30,573

31,437

32,321

33,231

42

44

45

46

47

49

25,000

28,000

31,000

34,000

40

42

44

46

48

50

Exhibit 4. Projected Attendance

and Revenue Per Capita

Attendance

Revenue per capita - RHS (in $)

Source: Team estimates

Page 4: Six Flags Final

Financial Analysis

Key Ratios 2015 2016E 2017E 2018E 2019E 2020E

Profitability

Net profit margin 15.26% 16.58% 16.89% 17.33% 17.61% 17.93% EBITDA margin 35.35% 36.75% 36.83% 37.09% 37.16% 37.22%

EBIT margin 26.85% 28.63% 28.77% 29.09% 29.21% 29.41%

ROE 155.46% 628.49% 431.95% 369.35% 324.43% 279.68% ROA 7.77% 9.26% 9.98% 10.79% 11.54% 12.36%

Liquidity

Current ratio 0.84 0.97 1.04 1.16 1.27 1.40

Quick ratio 0.72 0.71 0.72 0.74 0.75 0.75 Cash ratio 0.44 0.43 0.44 0.47 0.49 0.50

Efficiency

Cash conversion cycle 13.63 4.54 5.33 4.42 3.55 2.64 Cash turnover 12.67 12.80 12.61 11.16 10.59 9.78

Fixed asset turnover 1.05 1.15 1.23 1.31 1.41 1.51

Total asset turnover 0.51 0.56 0.59 0.62 0.66 0.69 CFO/EBIT 1.40 1.29 1.28 1.23 1.20 1.17

CFO/CapEx 4.15 4.11 4.11 3.96 3.91 3.84

Solvency

Long-term debt to assets 0.62 0.61 0.61 0.61 0.60 0.60

Debt ratio 0.81 0.80 0.79 0.79 0.78 0.77 Interest coverage 4.45 5.11 5.42 5.79 6.14 6.53 Source: Company report, Team estimates

Competitive Margins Indicate Strong Profitability

The robust margins are expected to stay stable in the future considering possible growth in revenue

and rising operating efficiency. During 2016E-2020E, we forecast EBIT margin to be at a range of

28.63% to 29.41%. (Exhibit 5)

Robust Cash Generating Ability and High Efficiency

We expect SIX to continually produce increasing positive Operating Cash Flows due to solid

performance. A strong indicator of the company’s favorable cash position is its ability to finance

most of its capital expenditures from internally generated funds, which is reflected by its favorable

CFO/CapEx ratios. Also, the cash conversion cycle of the company shows high efficiency. And we

anticipate decreasing cash conversion cycle in 2016E-2020E. (Exhibit 6)

Revolving Loan Provides Additional Support for Liquidity

The principle sources of liquidity of SIX are generated from operations, funds from borrowings and

existing cash in hand. Although cash decreased significantly due to stock repurchase activities, SIX entered the Amended and Restated Credit Facility in 2015, which promises to provide a 250 million

revolving loan. Based on historical and anticipated operating results, we believe the future operating

cash flow and the revolving loan will cover the liquidity needs of the company.

Stock Repurchase Plans Suggest Higher Intrinsic Value

SIX started several stock repurchase programs in 2012 and 2013, allowing the company to buy back

over 1,000 million common stocks in the following four years. This action indicates a higher

intrinsic value evaluated by the management of the company comparing with the current market

value, and therefore can be considered as a signal of an undervalued stock price in the market.

Investment Risks

Impact and likelihood of the following risks are presented in Exhibit 7.

Economic Risk (ER1): Worsening U.S., China and Middle East economy adversely affects SIX’s

revenue growth and may even lead to liquidity problems.

Environmental Risk (ER2): The second and third quarter take up 76% of total revenue,

indicating high sensitivity to weathers. In case of extreme weathers, SIX must shut down operation.

Safety Risk (SR): Lack of necessary safety control harms SIX’s reputation and causes injuries or

deaths, resulting in expensive litigations.

Equity Risk (ER3): Continuing stock repurchase in large amount leads to liquidity problems in

extreme cases and facilitates concerns about being taken private.

Cyber Risk (CR): Breach of private information discourages purchase of season pass and

memberships, leading to litigation costs and possible downturn of active pass base.

10%

20%

30%

40%

2015 2016E 2017E 2018E 2019E 2020E

Exhibit 5. Projected Stable Margin

Source: Team estimates

EBITDA Margin

EBIT Margin

Net Profit Margin

122,026

128,906

136,120

143,757

151,864

214,298

228,335

242,372

256,409

270,446

165,243

172,172

160,549

161,857

160,264

2016E

2017E

2018E

2019E

2020E

Exhibit 6. Cash Surplus from CFO

(in '000$)

CapEx Dividends Surplus

Source: Team estimates

Source: Team analysis

Exhibit 7. Risk Matrix

Page 5: Six Flags Final

Appendix 1. SIX Statement of Financial Position

(in '000 dollars) 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

ASSETS

Cash and cash equivalents 169,310 73,884 99,760 105,953 113,596 135,508 150,867 172,518

Accounts receivable 51,609 58,823 63,803 67,792 71,615 75,622 79,865 84,369

Inventories 22,172 21,099 21,535 23,321 24,635 26,014 27,474 29,023

Prepaid expenses and other current assets 39,006 44,705 42,879 47,349 46,742 48,411 51,117 55,919

Deferred income taxes 71,761 102,413 0 - - - - -

Total current assets 353,858 300,924 227,977 244,415 256,588 285,556 309,322 341,830

Debt issuance costs 23,821 19,062 5,386 5,386 5,386 5,386 5,386 5,386

Restricted-use investment securities 1,823 2,471 3,036 3,601 4,166 4,731 5,296 5,861

Deposits and other assets 4,268 4,750 7,211 5,714 6,196 6,678 7,160 7,642

Sub-sum of other assets 29,912 26,283 15,633 14,701 15,748 16,795 17,842 18,889

Property and equipment, at cost 1,716,975 1,797,617 1,862,764 1,955,902 2,053,697 2,156,382 2,264,201 2,377,411

Accumulated depreciation -485,292 -579,511 -664,610 -772,185 -885,138 -1,003,739 -1,128,270 -1,259,028

Total property and equipment 1,231,683 1,218,106 1,198,154 1,183,718 1,168,559 1,152,643 1,135,931 1,118,384

Goodwill 630,248 630,248 630,248 630,248 630,248 630,248 630,248 630,248

Intangible assets, net 362,113 359,358 356,428 353,822 351,337 348,901 346,471 345,429

Total assets 2,607,814 2,534,919 2,428,440 2,426,903 2,422,481 2,434,143 2,439,814 2,454,779

Current liabilities:

Accounts payable 24,464 19,315 25,570 27,117 28,646 30,854 32,585 35,097

Accrued compensation, payroll taxes and

benefits 29,277 37,463 46,583 35,000 35,000 35,000 35,000 35,000

Accrued insurance reserves 50,771 41,276 40,796 41,796 40,796 40,796 40,796 40,796

Accrued interest payable 19,598 19,542 19,555 19,377 17,796 17,712 16,159 16,082

Other accrued liabilities 25,988 36,176 34,714 25,000 25,000 25,000 25,000 25,000

Deferred income 60,443 71,598 97,334 94,909 93,099 90,747 87,851 84,369

Current portion of long-term debt 6,269 6,301 7,506 7,506 7,506 7,000 7,000 7,000

Total current liabilities 216,810 231,671 272,058 250,705 247,843 247,109 244,391 243,345

Long-term debt 1,394,334 1,389,215 1,498,022 1,490,516 1,483,010 1,476,010 1,469,010 1,462,010

Other long-term liabilities 39,934 65,396 58,150 67,073 62,286 61,992 58,760 58,480

Deferred income taxes 145,830 187,197 140,273 135,585 128,906 136,120 135,770 134,990

Total liabilities 1,796,908 1,873,479 1,968,503 1,943,879 1,922,046 1,921,231 1,907,932 1,898,825

Redeemable noncontrolling interests 437,569 437,545 435,721 435,721 435,721 435,721 435,721 435,721

Stockholders' equity:

Preferred stock, $1.00 par value - - - - - - - -

Common stock 2,371 2,323 2,289 2,419 2,549 2,679 2,809 2,939

Capital in excess of par value 842,488 983,317 1,041,710 1,099,710 1,149,137 1,187,895 1,228,515 1,267,485

Retained earnings (accumulated deficit) -438,825 -702,116 -953,225 -980,776 -1,005,181 -1,023,493 -1,036,695 -1,042,537

Accumulated other comprehensive loss

(net) -32,697 -59,629 -66,558 -74,049 -81,791 -89,891 -98,468 -107,654

Total Six Flag's SE 373,337 223,895 24,216 47,304 64,714 77,191 96,161 120,233

Noncontrolling interests - - - - - - - -

Total equity 373,337 223,895 24,216 47,304 64,714 77,191 96,161 120,233

Total liabilities and equity 2,607,814 2,534,919 2,428,440 2,426,903 2,422,481 2,434,143 2,439,814 2,454,779

Page 6: Six Flags Final

Appendix 2. SIX Statement of Comprehensive Income

(in '000 dollars) 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Theme park admissions 602,204 641,535 687,819 737,508 779,388 823,298 869,801 919,196

Theme park food, merchandise and other 448,547 460,131 500,190

536,958

567,449

599,419

633,276

669,239

Accommodations revenue 17,000 16,877 16,796

19,408

20,510

21,666

22,890

24,189

Sponsorship, licensing and other fees 42,179 57,250 59,133 61,971 64,946 68,063 71,330 74,754

International expansion contribution

- - - - - - 76,298 96,758

Revenue - Base 1,109,930 1,175,793 1,263,938 1,355,846 1,432,293 1,512,447 1,597,297 1,687,380

Revenue - Premium 1,109,930 1,175,793 1,263,938 1,355,846 1,432,293 1,512,447 1,673,596 1,784,137

Operating expenses 417,482 437,431 465,219 490,816 518,490 544,481 575,027 607,457

SG&A (involve stock-based

compensation), total 189,218 310,955 234,810 248,863 262,518 276,839 291,973 308,002

- Stock-based compensation 27,034 140,038 56,233 59,045 61,997 65,097 68,352 71,769

- Net SG&A 162,184 170,917 178,577 189,818 200,521 211,743 223,622 236,233

COGS 86,663 90,515 100,709 108,468 114,583 120,996 127,784 134,990

Depreciation 113,682 105,449 104,788

107,575

112,953

118,601

124,531

130,758

Amortization 14,393 2,658 2,623

2,606

2,485

2,436

2,430

1,042

Loss on disposal of assets 8,579 5,860 9,882

9,470

9,348

9,221

9,087

8,947

Equity in loss (income) of investee/

Gain on sale of investee

- (10,031) - - - - - -

Interest expense 75,044 73,057 76,205

76,000

76,000

76,000

76,000

76,000

Interest income (899) (468) (302) (300) (300) (300) (300) (300)

Other expense (income), net 1,234 356 223

200

200

200

200

200

Loss on debt extinguishment 789 - 6,557 - - - - -

Income before reorganization 203,745 160,011 263,224 312,148 336,015 363,973 390,565 420,284

Reorganization items, net (180) - - - - - - -

Income before tax and discontinued

operations 203,925 160,011 263,224 312,148 336,015 363,973 390,565 420,284

Income tax expense/benefit 47,601 46,522 70,369 87,402 94,084 101,912 109,358 117,679

Income before discontinued operations 156,324 113,489 192,855 224,747 241,931 262,060 281,207 302,604

(Loss) income from discontinued

operations 549 545 - - - - - -

Net income 156,873 114,034 192,855 224,747 241,931 262,060 281,207 302,604

Less: Net (income) loss attributable to noncontrolling

(38,321) (38,012) (38,165) (38,000) (38,000) (38,000) (38,000) (38,000)

Net income attributable to SIX 118,552 76,022 154,690 186,747 203,931 224,060 243,207 264,604

Foreign currency translation adjustment (1,341) (6,803) (8,195) (9,491) (10,742) (12,100) (13,577) (15,186)

Defined benefit retirement plan 17,427 (19,872) 1,769 2,000 3,000 4,000 5,000 6,000

Change in cash flow hedging 318 (257) (503) - - - - -

Comprehensive income/loss 173,277 87,102 185,926 217,256 234,188 253,961 272,630 293,418

Comprehensive loss contributes to SIX 134,956 49,090 147,761 179,256 196,188 215,961 234,630 255,418

EPS – basic (in $) 1.22 0.80 1.65 2.00 2.18 2.39 2.60 2.83

Cash dividends (in $) 1.82 1.93 2.14 2.29 2.44 2.59 2.74 2.89

Page 7: Six Flags Final

Appendix 3. SIX Statement of Cash Flow

(in '000 dollars) 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Cash flow from operations

Net income/loss 156,873 114,034 192,855 224,747 241,931 262,060 281,207 302,604

Adjustments before reorganization activities:

Depreciation and Amortization 128,075 108,107 107,411 110,181 115,438 121,037 126,961 131,800

Reorganization items, net (180) - - - - - - -

Stock-based compensation 27,034 140,038 56,233 59,045 61,997 65,097 68,352 71,769

Interest accretion on notes payable 1,252 1,221 856 1,200 1,200 1,200 1,200 1,200

Loss on debt extinguishment 789 - 6,557 - - - - -

Gain on discontinued operations - - - - - - - -

Amortization of debt issuance costs 4,285 4,748 4,518 4,518 4,518 5,237 4,518 4,518

Other, including loss on disposal of assets 10,320 1,672 17,278 9,470 9,348 9,221 9,087 8,947

Gain on sale of investees - (10,031) - - - - - -

Decrease (increase) in accounts receivable (22,146) (7,764) (6,072) (3,989) (3,822) (4,008) (4,243) (4,504)

(Increase) decrease in inventories, prepaid

expenses and other current assets (2,062) (5,744) 306 (6,255) (709) (3,047) (4,165) (6,352)

Decrease (increase) in deposits and other assets

473 (486) (2,465) 1,497 (482) (482) (482) (482)

Increase (decrease) in accounts payable,

deferred income, accrued liabilities and other long-term liabilities

12,147 13,293 41,775 42,147 43,147 25,178 24,344 28,416

(Decrease) increase in accrued interest payable 17,239 (56) 13 (178) (1,581) (84) (1,553) (77)

Deferred income tax (benefit) expense 34,915 33,291 54,496 59,186 58,428 57,632 56,797 44,735

Net CFO before reorganization 369,014 392,323 473,761 501,567 529,414 539,042 562,023 582,575

Net cash used in reorganization activities (332) - - - - - - -

Total CFO 368,682 392,323 473,761 501,567 529,414 539,042 562,023 582,575

Cash flow from investing activities

Additions to property and equipment (101,853) (108,660) (114,370) (91,149) (91,149) (84,149) (91,149) (91,149)

Property insurance recovery - 850 173 - - - - -

Purchase of identifiable intangible assets (75) (49) (29) - - - - -

Purchase of restricted-use investments (605) (648) (565) (565) (565) (565) (565) (565)

Proceeds from sale of DCP - 10,031 - - - - - -

Proceeds from sale of assets 230 148 5,123 1,500 2,000 2,000 2,000 2,000

Net CFI (102,303) (98,328) (109,668) (90,214) (89,714) (82,714) (89,714) (89,714)

Cash flow from financing activities

Repayment of borrowings (6,276) (6,308) (710,565) (7,506) (7,506) (7,506) (7,000) (7,000)

Proceeds from borrowings - - 834,250 - - - - -

Payment of debt issuance costs (2,660) - (11,916) - - - - -

Net proceeds from issuance of common stock 30,860 38,840 40,531 48,783 40,000 52,000 51,000 48,000

Stock repurchase (523,589) (195,353) (245,114) (189,639) (197,016) (197,537) (201,741) (199,263)

Payment of cash dividends (176,171) (184,300) (200,957) (214,298) (228,335) (242,372) (256,409) (270,446)

Purchase of HWP ownership interests (9,554) - - - - - - -

Purchase of redeemable noncontrolling interest (288) (19) (1,552) - - - - -

Noncontrolling interest distributions (37,452) (38,012) (38,165) (38,000) (38,000) (38,000) (38,000) (38,000)

Net CFF (725,130) (385,152) (333,488) (400,660) (430,857) (433,415) (452,150) (466,709)

Effect of exchange rate on cash (1,147) (4,269) (4,729) (4,500) (1,200) (1,000) (4,800) (4,500)

Increase/decrease in cash and cash equivalents (459,898) (95,426) 25,876 6,193 7,643 21,912 15,358 21,652

Beginning Cash 629,208 169,310 73,884 99,760 105,953 113,596 135,508 150,867

Ending Cash 169,310 73,884 99,760 105,953 113,596 135,508 150,867 172,518

Page 8: Six Flags Final

Appendix 4. SIX DCF Assumptions & Computations

Assumptions - WACC

Variable Value Basis

Risk free rate 1.85% US generic government 10-year yield

Beta 0.80 Using SPX Index, 10/28/2014 - 10/28/2016

Equity risk premium 8.74% SPX Index 5-year annual growth

Cost of equity 8.84% Calculated using CAPM model

Equity % 74.90% Bloomberg

Cost of debt 2.68% Bloomberg

Debt % 25.10% Bloomberg

Effective tax rate 27.37% TTM effective tax rate

WACC 7.11% Team Calculation

DCF Result Base Case Premium Case

(in '000 $) Value Proportion Value Proportion

Explicit stage 1,295,647 16.73% 1,378,071 15.56%

Semi-explicit stage 1,900,567 24.54% 2,203,768 24.88%

Terminal Value 4,548,818 58.73% 5,274,499 59.56%

Core firm value 7,745,031 100.00% 8,856,338 100.00%

Add: Cash 99,760 99,760

Minus: Minority interest 435,721 435,721

Minus: Long-term debt 1,498,022 1,498,022

Equity Value 5,911,048 7,022,355

Shares outstanding 93,580 93,580

Share price $ 63.17 $ 75.04

Upside 17.21% 39.25%

Sensitivity Test

(in '000

dollars) Historical Stage Stage 1 - Explicit Growth

Stage 2 –

Semi-Explicit

Stage 3 –

Eternal

2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2025E 2026E EBIT 279,518 233,613 339,429 388,148 412,015 439,973 466,565 496,284

Effective Tax Rate

17.03% 19.91% 20.73% 22.52% 22.84% 23.16% 23.44% 23.71%

NOPLAT 231,917 187,091 269,060 300,747 317,931 338,060 357,207 378,604

Add:

Depreciation 113,682 105,449 104,788 107,575 112,953 118,601 124,531 130,758

Amortization 14,393 2,658 2,623 2,606 2,485 2,436 2,430 1,042

Minus:

CapEx 101,900 107,800 114,200 122,026 128,906 136,120 143,757 151,864

Change in

NWC 21,094 11,290 (839) 4,228 3,608 3,178 3,971 3,541

FCFF 236,998 176,108 263,110 284,673 300,854 319,799 336,440 354,999 372,749 453,078 9,041,666

One-year target price

(in USD)

WACC

6.11% 6.61% 7.11% 7.61% 8.11%

Terminal

Growth

1.00% 69.14 61.82 55.75 50.65 46.31

1.50% 75.25 66.62 59.59 53.79 48.90

2.00% 82.83 72.47 63.17 57.48 51.91

2.50% 92.42 79.75 69.80 61.90 55.45

3.00% 105.33 89.04 76.77 67.28 59.69

Page 9: Six Flags Final

Appendix 5. Comparable Company Analysis

Company Ticker Country

Marekt

Cap

(mn

USD)

Profitability Multiples

Revenue EBITDA Net

Margin P/E EV/Revenue EV/EBITDA EV/EBIT

Walt Disney Company

DIS US 150,248 56,002 16,908 16.5% 16.09 3.03 10.02 11.71

SeaWorld

Entertainment Iinc.

SEAS US 1,260 1,356 287 1.5% 37.66 2.11 9.96 34.67

Cedar Fair,

L.P. FUN US 3,203 1,258 429 11.8% 19.62 3.76 11.01 15.70

Merlin

Entertainments

PLC

MERL UK 5,632 1,942 602 13.9% 25.33 3.63 11.73 16.10

Euro Disney

S.C.A. EDL FR 974 1,530 89 -9.9%

- 1.38 23.63

(15.73)

Village

Roadshow

Limited

VRL AU 620 756 125 1.5% 51.75 1.36 8.24 19.67

Six SIX US 4,961 1,298 409 9.14% 41.43 5.32 16.88 22.95

Source: Bloomberg, as of 10/26/2016

Appendix 6. Porter’s Five Forces Analysis

Threat of Substitutes - INSIGNIFICANT: Substitutes of roller coaster are rare, and any other entertainments that can provide thrilling

experience which makes visitors want to scream may end up in a few extreme sports. Some extreme sports don’t have safety measures

to make a guarantee for security of visitors. Some may be too expensive for people in middle income to afford. Therefore, the substitutes

for roller coasters are hard to find, and thus providing score 1.

Threat of New Entrants - INSIGNIFICANT: barriers to entry of the amusement parks industry are high, especially for entrants

interested in opening roller coaster theme parks. The industry has more than 98% of revenue shared by five major players, presenting

another strong obstacle for new entrants.

Existing Rivalries - MEDIUM: SIX accounts for 7.5% of total market share and ranks four among five. Even though the ranking shows

SIX has a disadvantageous position, SIX is a competitor for Cedar and all the others. SIX has operated 16 theme parks in grand area of

the United States. All of them are in places with large population density. Moreover, SIX revenue has grown stronger than Cedar Fair

and its over financial condition is healthy compared to its peers like Cedar and SeaWorld.

Power of Suppliers - MEDIUM: SIX needs to renovate its roller coaster construction every few years and it has partnerships with Coca

Cola and any other food & drink wholesalers to provide visitor things to eat. Since SIX needs to cooperate with them to provide food

and drinks consumers want, these contractors and partners have some bargaining power. However, the long-term relationships with

these partners may help ease the pricing power of suppliers a bit.

Power of Customers - LOW: SIX adopts pricing strategy on its season passes and memberships by using complex marketing analysis

on consumer data. Since consumers are only the price takers for these ticket packages offered by SIX and since there is asymmetric

information between consumers and SIX, the bargaining power of consumers is not strong enough to make an impact on SIX sales.

0

1

2

3

4

5Existing Rivalries

Power of Suppliers

Power of CustomersThreat of New Entrants

Threat of Substitues

Page 10: Six Flags Final

Appendix 7. SWOT Analysis

Appendix 8. Amusement Parks Distributions by Company

STRENGTHS WEAKNESSES

Comparatively high market shares Comparatively low international

brand name awareness

Wide geographic reach in the US

Global expansion ability Dependence on general economic

conditions

Strong cash generating ability

Industry-leading Innovation Sensitive to bad or extreme

weathers

License agreement with Warner

Bros. and DC Comics OPPOTUNITIES SO WO

Prosperous tourism industry Utilize the investment ability to

international expansion

Cooperate with local well-known

property developers

Increasing personal consumption

Emerging markets in Asia and

Middle East

Sustain market shares in domestic

market

THREATS WT WT

High population penetration rate

in domestic market

Explore new rides and attractions

to attract visitors Increase international influence

Competitions from other

entertainment industries Cultivate customer loyalty

Page 11: Six Flags Final

Appendix 9. SIX’s Park Description

# Name Location Area

(in acres) Themes

Designated Market

Area and Rank

Population coverage (in mn)

50 miles 100 miles

1 Six Flags America

(owned) Largo, MD 515 + 300 Theme + Water

Washington, D.C. (7) Baltimore (26)

8.3 13.9

2

Six Flags Discovery

Kingdom (owned)

Vallejo, CA 135

Theme + Marine

+ Land animal exhibits

San Francisco / Oakland

(6) Sacramento (20)

6.3 11.9

3 Six Flags Fiesta Texas

(owned)

San Antonio,

TX 220 Theme + Water

Houston (10) San Antonio (32)

Austin (39)

2.5 4.6

4

Six Flags Great Adventure

& Safari (owned)

Jackson, NJ 2200 + 456

Separately-gated Theme park +

Safari

+ Water park

New York City (1)

Philadelphia (4) 13.8 29.4

5

Six Flags Hurricane

Harbor (owned)

6 Six Flags Great America

(owned) Gurnee, IL 304 + 30 Theme + Water

Chicago (3) Milwaukee (35)

8.8 13.9

7 Six Flags St. Louis

(owned) Eureka, MO 323 + 40 Theme + Water St. Louis (21) 2.8 4

8 Six Flags Magic Mountain

(owned)

Valencia, CA

250 Separately-gated

Theme + Water Los Angeles (2) 10.4 18.7

9

Six Flags Hurricane

Harbor

(owned)

12

10 Six Flags Mexico

(occupied pursuant to a

permit agreement)

Mexico City,

Mexico 110 Theme N/A 24.5 33

11 Six Flags New England

(substantially all owned) Agawam, MA 262 Theme + Water

Boston (8)

Hartford / New Haven (30)

Providence (52)

Springfield (116)

3.4 16.5

12 Six Flags Over Georgia

(leasehold interest) Austell, GA 283 Theme + Water Atlanta (9)

5.7 8.8

13 Six Flags White Water

Atlanta

(owned)

Marietta, GA 69 Water Atlanta (9)

14 Six Flags Over Texas

(leasehold interest)

Arlington, TX

217 Separately-gated

Theme + Water Dallas/Fort Worth (5) 6.9 8.1

15

Six Flags Hurricane

Harbor

(owned)

47

16 La Ronde (owned)

Montreal, Canada

146 Theme N/A 4.4 6.1

17 The Great Escape and Splashwater Kingdom

(owned) Queensbury,

NY 345

Theme + Water

(200 room hotel

and 38,000 square foot

indoor

waterpark)

Albany (59) 1.1 3.1

18

Six Flags Great Escape

Lodge & Indoor Waterpark

(owned)

Page 12: Six Flags Final

Appendix 10. U.S. Population Forecast from U.S. Census Bureau

192,200,000

192,400,000

192,600,000

192,800,000

193,000,000

193,200,000

164,000,000

164,500,000

165,000,000

165,500,000

166,000,000

166,500,000

2,015 2016E 2017E 2018E 2019E 2020E

US Population Forecast

Weighted Population Original Population (RHS)

Population Group Weight 2,015 2016E 2017E 2018E 2019E 2020E

Female population 10-14 0.50 10,093,446 10,196,000 10,278,000 10,342,000 10,381,000 10,383,000

Female population 15-19 0.70 10,066,517 10,038,000 10,093,000 10,205,000 10,328,000 10,429,000

Female population 20-24 0.90 11,266,559 11,209,000 11,018,000 10,756,000 10,531,000 10,406,000

Female population 25-29 1.00 10,711,383 10,857,000 11,087,000 11,343,000 11,527,000 11,581,000

Female population 30-34 1.00 10,893,282 11,000,000 10,991,000 10,924,000 10,897,000 10,965,000

Female population 35-39 1.00 9,770,693 9,918,000 10,197,000 10,542,000 10,850,000 11,055,000

Female population 40-44 0.90 10,381,899 10,304,000 10,134,000 9,937,000 9,821,000 9,846,000

Female population 45-49 0.70 10,222,507 10,144,000 10,188,000 10,297,000 10,379,000 10,376,000

Female population 50-54 0.50 11,532,467 11,314,000 10,990,000 10,628,000 10,325,000 10,142,000

Male population 10-14 0.70 10,526,401 10,616,000 10,691,000 10,753,000 10,793,000 10,797,000

Male population 15-19 0.90 10,631,931 10,559,000 10,574,000 10,654,000 10,752,000 10,836,000

Male population 20-24 1.00 11,996,587 11,915,000 11,679,000 11,362,000 11,081,000 10,909,000

Male population 25-29 1.00 11,254,853 11,445,000 11,710,000 11,987,000 12,178,000 12,223,000

Male population 30-34 1.00 11,114,717 11,257,000 11,298,000 11,289,000 11,317,000 11,432,000

Male population 35-39 1.00 9,932,894 10,090,000 10,361,000 10,694,000 10,998,000 11,219,000

Male population 40-44 1.00 10,390,339 10,310,000 10,162,000 10,003,000 9,920,000 9,964,000

Male population 45-49 0.90 10,378,298 10,283,000 10,279,000 10,327,000 10,357,000 10,330,000

Male population 50-54 0.70 11,387,743 11,207,000 10,938,000 10,634,000 10,376,000 10,210,000

Total Weighted Population 164,812,740 165,070,000 165,260,500 165,457,900 165,749,100 166,155,100

Total Population 192,552,516 192,662,000 192,668,000 192,677,000 192,811,000 193,103,000

Page 13: Six Flags Final

Appendix 11. Management Team Profiles

Name Age Title

James Reid-Anderson 56 Chairman, President and Chief Executive Officer

John M. Duffey 55 Chief Financial Officer

Lance C. Balk 58 General Counsel

Walter S. Hawrylak 68 Senior Vice President, Administration

Michael S. Israel 49 Senior Vice President and Chief Information Officer

Tom Iven 57 Senior Vice President, U.S. Park Operations

Nancy A. Krejsa 57 Senior Vice President, Investor Relations and Corporate Communications

David McKillips 44 Senior Vice President, In-Park Services

John Odum 58 Senior Vice President, International Park Operations

Brett Petit 52 Senior Vice President, Marketing and Sales

Leonard A. Russ 42 Vice President and Chief Accounting Officer

Appendix 12. Dividend Discount Model Analysis

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Dividend 2.14 2.38 2.62 2.9 3.22 3.58 3.98 4.42 4.69 5.01 5.31 5.58 5.80 5.98 6.10 6.16

∆Dividend 0.24 0.24 0.28 0.32 0.36 0.4 0.44 0.48 0.52 0.55 0.59 0.62 0.64 0.66 0.67 0.68

Div. growth rate

17% 14% 13% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1%

PV of Div.

2.41 2.45 2.50 2.55 2.61 2.66 2.59 2.55 2.48 2.39 2.29 2.16 2.03 29.9

Assumption: Discount rate(Cost of equity)=8.84%; according to previous dividend policy in the last five years, we conclude that

growth rate of dividend will decrease by 1% marginal rate per year from 2016 16% to 2029 2%. At 2030, the terminal growth rate will

be 2% for infinity. Final price is $61.58.