25410 Corporate Financial Analysis

11277769 JIASHUN

HUANG

11466669 TAEHO JOHN

KIM

11469653 SO HYUN LEE

11471152 JI YUN PARK

Agenda

INTRODUCTIONo Exone

o Priceline.com

VALUATION OF THE COMPANY

EQUITY VALUATION METHOD

CONCLUSION

• American based online travel company, incorporated in 1998

• There services such as airline tickets, hotel room reservations and rental cars were delivered worldwide through five primary brands

• PCLN’s revenue growth has outpaced the industry average of 17.6%

• Current debt-to-equity ratio, 0.38 is low and is below the industry average

• Improved earning per share by 21.9% and net income by 24.1%

• The Exone was founded in 2005 by Extrude Hone Corp

• The Exone specialised in 3-dimensional printing and laser micromachining technology

• The price of stock for Exone grew by 68% compared to around 22 % growth of their rivals

• Expansion plan in Germany to improve its facilities with global growth strategies

Valuation of the Company

ProfitabilityThe net income of Exone has been increasing for the past 3 years, which for year 2010 was 5.5 million, 2011 was 8 million and 2012 was increasing to 10million. From this, we can see that the profitability of ExOne is increasing significantly year by year. Also, from February 2013, ExOne is listed on NASDAQ as XONE, for the share price of $18, and within this few months; the share price was up to $78.80 and now is trading at $52.42, which is 3 times of the IPO price. And the figures show that, ExOne is performing well with a great profitability

Credit RiskIt was reported that ExOne (XONE) was underperforming for their share price as at September 2013 which the BETA of ExOne was -2.477. This means that asset moves in the opposite direction as compared to the index. And as June 2013, the debt to equity ratio was 0.027.

Factor RiskExOne is a digital part materialization company with a diversified business models that provide different services to the clients. So there will always be factor risks.For example, there will be huge expenses when the services and production lines don’t maximise their use and as ExOne is newly listed on the share market for just less than a year, they need to be very careful on their business activities to avoid fluctuations on their share price.

ProfitabilityBy comparing the income statement of last 3 years, Priceline.com has resulted strong growth over the years. The group’s net income for the 12 months ending 2011 was around 1 billion USD, which was a 50% increase compared to previous year. The group continues to operate the growth by 74% through the year 2011 to 2012. The group’s operating income in the since 2010 has dramatically increased til now. And this shift is expected to be continued from offline to online bookings, increased penetration of core European and North American market and also outstanding growth in new markets such as Asia region.

Factor RiskFollowings are possible factor risks the Priceline.com is facing with:

• Decrease in occupancy• Higher oil prices• Terrorist attacks, travel related health concerns• Unusual weather patterns, natural disasters

Currency Exchange RatePriceline.com is exposed to fluctuations of currency exchange rates since there is a substantial majority of business operating outside of US while reporting the results in USD. Accordingly, Priceline.com is always exposed to adverse movements in currency exchange rates. Some of the European Union countries like Greece, Portugal and etc., with high levels of sovereign debt have experienced difficulties refinancing their debt. And issues with the sovereign debt in the European Union can create a significant and long-term devaluation of the Euro against USD.

Valuation of the Company

Equity Valuation Method

Income Based MethodDividend Discount MethodResidual Income Method

Cash Flow Based MethodFree Cash Flow Method

Market Based Method

Equity Valuation Method Exone

Cost of Capital -38%, NI Forecasted Growth rate 2%, OE Forecasted Growth rate 6%

Equity Valuation Method

Priceline.com

Cost of Capital: 17%, NI Growth rate: 21%, OE Growth rate: 50%

  0 1 2 3 4 5

Equity BV 2,574,295

3,869,938 3,869,938 3,869,938 3,869,938 3,869,938

NI 395,787

478,071 478,071 478,071 478,071 478,071

             Residual earnings = CSP1 -

(CSE0*CoC(e))   30,401.22 - 194,911.04 - 194,911.04 - 194,911.04 - 194,911.04

     - 7.41 0 0 0

Terminal value       - 1,120,822.57    

Discounted terminal value - 692,856.92          Discounted residual earnings  

25,897.62 - 194,911.04      

             Present value of residual earnings - 861,870.34          Add with OE0, Equity Value 1,712,424.66          

Conclusion

We finally decided to investing in Priceline.com U.S because of it got a better view for investment option compare to ExOne.