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Review of Capital Raising Opportunities
Education
About MeStefano Cabello
Education: St. Mary’s University Honors Program Majors: Finance and Risk Management
Contact: [email protected]
Volunteer Income Tax Assistant (VITA)Duration: 3 monthsRole: Finance Intern• Prepare federal income taxes for
individuals and businesses through schedule C form.
Standard Insurance Group:Duration: 3 months Role: Underwriting Intern• Analyzed operational risks
inherent in businesses • Participated in a project with
claims over $100K
Key Skills:• Fluent in Spanish• Advanced Accounting• Financial Statements Analysis• Mathematical Background
Why Investment Banking?I want to have a career where my work has a direct impact on the capital markets. I want to learn advanced financial and valuation models using quantitative analysis to help companies raise capital and so I can predict their future behavior.
Most people don’t know: that I scuba dive and swam in the oceans of Greece, Italy, and Mexico
My favorite activities are: I like to read philosophy and epistemology and play chess
One place that I would like to visit:Rio de Janiero
Something I’ve never done, but would love to do is: become one of the first people to space travel to other galaxies.
Information
Experience
Summer Plans: Location: San Antonio, TX Company: Nustar Energy Position: Risk Management Intern
Hometown: San Antonio, TX
Education
Experience About Me
Education: Florida Agricultural and Mechanical
University Concentrations: Finance
Contact: [email protected]
Sherie Carter
Information
Summer Plans: Location: Atlanta, GA Company: JB&T Properties Position: Intern
Hometown:Kansas City, MO
JB&T PropertiesDuration: 3 monthsRole: Summer Intern• Managed profits and losses and
developed efficient accounts receivable and accounts payable databases
• Responsible for advertising property information for investors
Alpha Kappa Alpha SororityDuration: 3 monthsRole:AKA Week Committee• Budget the use of funds for a week of
events every semester• Network with other organizations to
ensure attendance at events• Advertise events through social media
outlets
Key Skills:• Project Management• Leadership• Organization• Work Ethic
Why Investment Banking?I love working in groups and also enjoy I am passionate about helping people find the resources they need to be successful and I believe as an Investment Banker I will be helping businesses succeed by getting the financial support they need
Most people don’t know: I can sew
My favorite activity is: sewing and designing
One place that I would like to visit:South Africa.
Something I’ve never done, but would love to do is: run a marathon.
About Me
Education
Ben Dalusma
Education: Cornell University, B.S. Applied Economics and Management Concentrations: Finance Minor: Statistics
Contact: [email protected]
Key Skills:• Fluent in French• Time Management• Corporate Ratings and Credit
Analysis• Data Analysis• Financial Analysis
Why Investment Banking?'m interested in investment banking because I want to apply my theoretical knowledge of finance in a fast paced environment. I also want to learn more about the financial service industry and be exposed to a deal and customer focused environment.
Most people don’t know: that I'm from Port-au-Prince, Haiti..
My favorite activity is: watching European soccer on week ends.
One place that I would like to visit:Australia.
Something I’ve never done, but would love to do is: run a marathon
Information
Experience
Summer Plans: Location: New York, NY Company: Standard and Poors Position: Loans and Recovery Ratings Analytics Analyst Hometown:
Port-au-Prince, Haiti
Standards and PoorDuration: 3 monthsRole: Ratings Analytics Analyst• Gather, organize and analyze data
about high yield bond issuers.• Develop valuation models and
forecasting technique in order to predict future performance of companies in the technology sector
• Use different sensitivity analysis to examine and simulate (company) performance.
Phi Delta ThetaDuration: 12 monthsRole: House Manager and Treasure • Create annual budgets for the
fraternity's operation.• Report different journal entries
for the fraternity's financial statement to our headquarters.
EducationEducation: Cornell University, B.S. Applied Economics and Management Concentrations: Finance and Strategy
Contact: [email protected]
About MeKelli KeithKey Skills:• Strong communication and
leadership skills• Quantitative data analysis with
statistical modeling • Diligent • Detail Orientated
Why Investment Banking?I am really interested in the finance, and applying it in a fast pace environment. I really like the idea of working with a team to create a financial solution for the client.
Most people don’t know: I really enjoy art and crafts and I also have a project to work on.
My favorite activities are: watching Netflix and spending time with my family.
One place that I would like to visit:South East Asia.
Something I’ve never done but would like to do: travel the world and visit every continent.
Information
Experience
Summer Plans: Location: Westchester, NY Company: IBM Position: Financial Analyst Co-op
Hometown: Fairfax, VA
IBMDuration: 6 monthsRole: Financial Analyst Co-op• Consolidated and prepared monthly and
quarterly forecast and close packages on Business Partner channel revenue
• Enhanced processes for more efficient reporting and more accurate forecasting of Business Partner revenue
• Collaborate in teams to create finance reports and action plans for Business Partners
EdgeConneXDuration: 9 monthsRole: Operations Intern• Wrote the user manuals for the company’s
proprietary database detailing step by step processes for both internal and external use
• Helped organized financial presentations for investors; inclusive of slide organization and packaging of presentations
About Me
Education
Rachel Libfraind
Education: University of Pennsylvania, Wharton School Concentrations: Finance and Operations & Information Management
Contact: [email protected]
Recover Care Inc.Duration: 2 monthsRole: Finance Intern• Helped create new product portfolio
Excel file,• Made overlay competitor map of
competitor locations• Created a 6,300 line sales tax write-
off spreadsheet in Excel• Created tax refund excel file and
individual credit memos
Rotaract Philadelphia:Duration: 9 monthsRole: Vice President of Membership• Recruited members and exceeded
the clubs membership goals by adding over 20 members.
• Organized social events to improve group dynamics.
• Helped create resume portfolio to improve membership retention.
Key Skills:• Spanish proficiency• Strong communication skills• Detailed oriented• Leadership
Why Investment Banking?I love working in groups and also enjoy working with quantitative data, so I feel that IB is a great career path to combine the two.
Most people don’t know: that I have hiked in the Andes and visited Machu Picchu.
My favorite activity is: traveling with friends and family.
One place that I would like to visit:Spain
Something I’ve never done, but would love to do is: Skydiving in Argentina, which is where I will be studying abroad next semester
Information
Experience
Summer Plans: Location: Philadelphia, PA Company: Wharton SPUR Research Program Research: Impact of corporate culture on M&A dealsHometown: Princeton Junction, NJ
Yahoo! Overview
Headquarters Sunnyvale, California
Founding Founded by Jerry Yang and
David Filo in January 1994
IPO April 1996 at a split adjusted price of $.54 ($13)
Employees 14,100
Geographic Mix 70% Americas, 30% Rest of World
Product Overview
– Online content– News– Email– Music– Video– TV– Search services– Local advertising– Social networking– Mobile applications
SummarySummary Financial Performance Financial Performance
Trading OverviewTrading Overview
Stock Price $27.00
52-week Change 69.28%
S&P 500 52-week Change 15.95%
Avg Vol (3 months) 0.05%
Share Outstanding 1.08B
Market cap 29.21B
Enterprise Value 25.78B
Enterprise Value/EBITDA 19.42B
Year 2010 2011 2012
Revenue 6.32 4.98 4.99
COGS 2.66B 1.54B 1.66B
EBITDA 1.51B 1.47B 1.46B
Net Income 1.23B 1.05B 3.95B
EPS (Basic) 0.91 0.82 3.31
Gross Margin 58% 69% 67%
Macro-Economic OutlookQuantitative EasingQuantitative Easing Economic PerformanceEconomic Performance
• The Federal Reserve’s $85 billion a month purchase of government and mortgage back securities has produced an environment conducive for investment in equity markets
• Due to the prospects of QE tapering, there has been a spike in short-term and long-term interest rates and a subsequent capital outflow in fixed income securities and a major sell off in the stock markets
• S&P 500: -4.76 %; Dow Jones Industrial Average: -4.30; MSCI Emerging Market Index: -17.14%; SPDR Barclays Capital Intermediate Term Corporate Bond ETF: -4.53%
7/1/
12
8/1/
12
9/1/
12
10/1
/12
11/1
/12
12/1
/12
1/1/
13
2/1/
13
3/1/
13
4/1/
13
5/1/
13
6/1/
13
7/1/
131.3
1.5
1.7
1.9
2.1
2.3
2.5
2.7
2.9
1.51
1.81
2.6410-Year Treasury Yield
Source: Yahoo finance, Bloomberg, World Bank
• The International Monetary Fund reduced its US growth forecast from 1.9% to 1.7%
• Unemployment rate: 7.6%• US economy added 195,000 non-farm jobs in June,
exceeding analyst expectations• Home prices surged 12.2% in May, highest in 7 years• 30 Year Fixed Rate Mortgage: from 3.4% in May to over
4.6% in July• Auto sales grew 9.2% translating into a seasonally
adjusted annual rate of 15.96 million units
2007 2008 2009 2010 2011 2012
-4
-3
-2
-1
0
1
2
3 US GDP Growth
Capital Market Considerations
Nasdaq Adjusted CloseNasdaq Adjusted Close
2900
3000
3100
3200
3300
3400
3500
3600
2939.52
3160.19
3520.76
iShares Core US Bond Market ETF iShares Core US Bond Market ETF
Source: Yahoo Finance
7/1/1
2
8/1/1
2
9/1/1
2
10/1/1
2
11/1/1
2
12/1/1
2
1/1/1
3
2/1/1
3
3/1/1
3
4/1/1
3
5/1/1
3
6/1/1
3
7/1/1
3105
106
107
108
109
110
111
112
109.42
110.07
109.12
110.93
107.01
Industry Considerations Investment ConsiderationsInvestment ConsiderationsInternet Data Usage Internet Data Usage
• 2.7 billion users worldwide as of 1st quarter of 2013• Global Growth Rate: 566.4% (2012)• Global Penetration Rate: 34.3% (2012)• US Social Media Market Share of Visits (May 2013):
-Facebook: 57.28% -Youtube: 24.63%-Twitter: 1.55% -Yahoo! Answers: 1.16%-LinkedIn: 1.12% -Tumblr: .51%
83.16%
8.05%
5.35%1.62%
Desktop Search Market Share
Google - GlobalYahoo - GlobalBingBaiduAsk - GlobalAOL - GlobalLycos - GlobalExcite - Global
• Global Mobile Desktop Search:-Google: 84.55% -Yahoo: 6.68%-Bing: 2.71% -Baidu: .69%Source: MorningStar, internetworldstats.com, Netmarketshare.com, dreamgrow.com
The best mobile Internet companies will create reach with subscribers, platforms, and developers
Companies will continue to struggle to launch effective mobile ad products
Companies that deploy a successful social media strategy will outperform those that create and aggregate
editorial content
Mobile advertising has increasing capacity for growth
Industry Considerations
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$3,292.0 $4,599.0 $5,787.0$7,909.0
$9,993.0 $11,510.0 $10,900.0 $12,127.0$14,941.0
$17,028.0
$3,975.0$5,027.0
$6,755.0
$8,970.0
$11,213.0$11,938.0 $11,761.0
$13,914.0
$16,794.0
$19.5
Last 6 months First 6 months
In b
illio
ns
19.7% CAGR
Online Advertising Historical Revenue MixOnline Advertising Historical Revenue Mix
Source: IAB Internet Advertising Revenue Report, 2012 full Year Results, April 2013
Industry Considerations
Search Display Banners
Classifieds Mobile Digital Video Lead Genera-tion
Rich Media0%
10%
20%
30%
40%
50%
2006 2007 2008 2009 2010 2011 2012
Source: IAB Internet Advertising Revenue Report, 2012 full Year Results, April 2013
The surge in Mobile growth can be attributed to: Growth in device penetration (Smartphone and
tablet), led by Apple and Google Faster connection speeds as 4G / LTE adoption is
fueled by infrastructure and device upgrades Improved screen resolutions that can squeeze
more ads onto the mobile screen Increased sophistication in incorporating ads
into mobile apps and websites Shifting social media consumption onto mobile
devices
Advertising Format Share, 2006-2012 (% of Total Revenue) Advertising Format Share, 2006-2012 (% of Total Revenue)
Key Financial MetricsHistorical Revenues and Net IncomeHistorical Revenues and Net Income
Historical Earnings Per ShareHistorical Earnings Per Share
Free Cash FlowFree Cash Flow
Historical MarginsHistorical Margins
2008 2009 2010 2011 2012 2013 2014
-2,000,000
-1,000,000
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
Free Cash FlowLinear (Free Cash Flow)Pro Forma FCFLinear (Pro Forma FCF)
Note: Free Cash Flow defined as Operating Cash Flow minus Capital Expenditures
2008 2009 2010 2011 20120
10002000300040005000600070008000
Net IncomeExponential (Net Income)
Reve
nue
in M
illio
ns $
2008 2009 2010 2011 20120%
10%20%30%40%50%60%70%80%90%
Gross Margin Profit MarginExponential (Profit Margin)
2008 2009 2010 2011 20120
0.5
1
1.5
2
2.5
3
3.5
4 EPS
Competitors Comparable AnalysisMetrics YHOO AOL GOOG FB MSFT
Market Cap: 27.80B 2.82B 296.43B 90.57B 265.25BEmployees: 11,700 5,600 53,891 4,169 N/AQtrly Rev Growth (yoy): -0.07 0.02 0.31 0.53 0.1Revenue (ttm): 4.91B 2.20B 53.50B 6.12B 77.85BGross Margin (ttm): 0.68 0.31 0.58 0.74 0.74EBITDA (ttm): 1.33B 482.30M 16.81B 2.7B 30.52BOperating Margin (ttm): 0.16 0.14 0.25 0.29 0.34Net Income (ttm): 4.05B 1.05B 11.22B 554M 21.86BEPS (ttm): 3.45 11.7 33.42 0.22 2.58P/E (ttm): 7.45 3.12 26.73 173.4 12.34PEG (5 yr expected): 1.32 1.57 1.29 1.68 1.32P/S (ttm): 5.65 1.27 5.5 13.94 3.37Corporate Credit Rating BBB- (as
of 2009)BB+ AA NR AAA
Entreprise Value/Revenue 4.94 1.18 4.46 12.06 2.61Entreprise Value/EBITDA 18.26 5.38 14.63 27.34 6.65
Simplified 2013 Income Statement Projection
Key Take Away of the Comp Analysis
• Yahoo has very respectable multiples compared to the industry’s main competitors
• EBITDA Valuation multiple is higher than competitor other than Facebook
• EPS is relatively compared to other competitors.• Low P/E and PEG ratio indicating that the company might be undervalued
• Excellent gross margins ratio over the past 2 years
Corporate Credit Rating
• Yahoo has not been rated by one of the credit rating agencies in the past 5 year
• Last time Yahoo was rated, they were at assigned a BBB- (low compared to Google’s AA and Microsoft’s AAA)
• There is evidence to believe that if rated today Yahoo would be in the BBB+ and A+ credit Rating
Why would Yahoo Be assigned an A Corporate Credit Rating
Back in February 2008• Market share, revenue and income
was shrinking.• Yahoo had more than 800M dollar
in debt• Yahoo was a potential target for
Microsoft• Structure of the industry was
changing and Yahoo had missed on many opportunities (cloud computing for example)
• High period of instability in management, S&P’s outlook on the company was negative
• Stock price was declining
Now in August 2013• Revenue and market share is stable
while net income has been increasing
• Yahoo has close to no debt now• Assets on BS worth over 17 billion
dollars compared to 11 billion in 08• Strategic partnership are helping
them jump on the next big thing in the tech place: “Mobile”
• Marissa Mayer has been around for more than a year and there is much more stability in the business. The outlook is positive
• Stock price is increasing
Take Away
• Based on those evidence, it is fair to say that Yahoo’s debt would be assigned a high grade/corporate credit rating.
• It’s also fair to say that investing in Yahoo bond represents a safe/ low risk investment since the likelihood of default is relatively low
• Finally this is an good reason why Yahoo should focus on issuing this debt instead of an equity raising
Key Income Statement Analysis• Yahoo has done an excellent job reducing expenses,
effectively increasing net income by more than 50% in the past three years
• All the income statement ratios indicate that the company is doing well. Metrics such as EPS, gross margins and profit margins have been increasing in the past five years
• It is important to note that the company has close to no leverage.
• $0 of interest expense in the past five years.
2008 2009 2010 2011 20121
1.52
2.53
3.54
4.55
2.78 2.67 2.67 2.86
4.38
Working Capital Ratio
2008 2009 2010 2011 201210.0012.0014.0016.0018.0020.0022.0024.0021.68
19.55 18.8717.88 17.47
Debt-Equity Ratio (%)
2008 2009 2001 2011 201282
82.583
83.584
84.585
85.5
82.19
83.6584.12
84.8485.13
Solvency Ratio
• Increasing solvency ratios indicates Yahoo’s ability to meet long-term debt obligations
• Yahoo’s decreasing debt-to-equity ratios indicates business is less risky as debt is not heavily relied on to finance operations
• Increasing working capital ratios indicate Yahoo is in a good financial position to meet short-term obligations
Analysis of Key Balance Sheet Ratios
Working Capital RatioWorking Capital Ratio Solvency RatioSolvency RatioDebt-Equity Ratio (%)Debt-Equity Ratio (%)
Balance Sheet Ratio Comparison with Competitor
Analysis of Yahoo vs Google ROAAnalysis of Yahoo vs Google ROA
• Yahoo increasing ROA % indicates increasing efficiency in utilizing assets to generate income
• 2012 ROA data shows Yahoo’s ROA is 101.48% higher than it’s main competitor Google
• Conclusion: Increasing trend of Yahoo’s ROA indicates profitability of company is improving 2008 2009 2010 2011 2012
0.00
5.00
10.00
15.00
20.00
25.00
3.06 4.00
8.257.09
23.07
13.31
16.1014.70
13.4211.45
ROA using Net Income (%)
YahooGoogle
Capital Structure Financing Strategy:
• Since IPO in 1996, Yahoo has financed its operations through the issuance of equity every year
• From 2005 going forward, Yahoo has repurchased its common stock on a yearly basis, sometimes exceeding the issued monetary amount; E.g In 2012 issued $218 million in common stock and repurchased $2.16 billion in common stock
• Yahoo’s Weight Average Cost of Capital is solely influenced by the expected return on its equity, which is computed through the Capital Asset Pricing Model
0.9%
99.1%
DebtEquity
Proposed Acquisition of BuzzFeed
• Mar 2013: BuzzFeed launched a business section and hires editor-in-charge of U.S. technology, media and telecom coverage from Thomson Reuters, Peter Lauria
• Similar advertising model, using banner ads as source of revenue
• Target demographic consists of young adults
• Facilitate Yahoo’s attempt to re-brand as a trendier company by improving connections with social media platforms such as Facebook and Twitter
Potential SynergiesPotential Synergies
Headquarters New York City
Founding Founded by Jonah Peretti in 2006
Customers >14 million monthly unique visitors
Geographic Mix Americas 95% Rest of World 5%
Product Overview Stories and news to be shared via social networks
Slogan “The Viral Web in Real Time”
BuzzFeed Financials and Key MetricsBuzzFeed Financials and Key Metrics
Acquisition Financing • Finance acquisition of Buzzfeed through the issuance of interest-bearing bonds
-Pros• Decrease Yahoo’s WACC• Benefit from Tax Shield and lower tax bill• Demonstrates management belief in growth -Cons• Will break industry norm through debt financing• Cash will be tied up in interest payments• Creditors will have a right to assets
Funding Proposal
FCFF Valuation Model of Yahoo
2012 2013E 2014E 2015E 2016E 2017E
Revenue Growth 1.00 0.92 1.0317 1.04 1.05 1.06
Operating Margins 0.11 0.12 0.125 0.13 0.135 0.14
Revenues $4,986,566 $4,585,463 $5,142,198 $5,183,567 $5,233,409 $5,283,251
EBIT $566,368 $550,256 $642,775 $673,864 $706,510 $739,655
EBIT(1-t) $379,467 $368,671 $430,659 $451,489 $473,362 $495,569
Bond Market Overview
Ten Yr Treasury
US Corporate Bonds
Meet the Team:SEO-U: Investment Banking Consultants
Group 2
JP Morgan Investment Bank
“Our aim is to be the world’s most trusted and respected financial services institution”
-Jamie Dimon, Chairman and CEO
“Number One Global Investment Bank and Number One in Debt Issuance in North America”
-Global Finance, Top Investment Banks 2013
JP Morgan Investment Bank
Debt Capital Markets• Serving corporate, institutional and
government clients, J.P. Morgan’s presence in the global credit markets is unmatched. The firm combines superior debt origination and structuring expertise with exceptional distribution capabilities to a large base of investors.
• The origination team works directly with issuers, including corporations, banks and sovereign governments that seek funding. J.P. Morgan advises these clients on debt financing strategies, from a simple bank loan to multi-billion-dollar capital raising across asset classes. Colleagues partner across borders to deliver successful structuring, marketing and pricing. The business then distributes that product to investor clients.
Syndicated and Leveraged Finance
• J.P. Morgan provides leveraged financing to companies to help them achieve objectives such as making an acquisition, effecting a buy-out, repurchasing shares or funding a one-time dividend or investment. J.P. Morgan arranges leveraged loans, high-yield or junk bonds and mezzanine debt for clients
