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Consumer Discretionary. Reza Aditya Hakan Altan Adam Barrick Peter Manuselis. Agenda. Sector Recommendation Recap Stock Selected Overview Financial Analysis Valuation Analysis Stock Recommendation. Current SIM Holdings. Sector Recommendations Recap.

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Consumer Discretionary

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Consumer Discretionary

Reza Aditya

Hakan Altan

Adam Barrick

Peter Manuselis


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Agenda

  • Sector Recommendation Recap

  • Stock Selected Overview

  • Financial Analysis

  • Valuation Analysis

  • Stock Recommendation


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Current SIM Holdings


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Sector Recommendations Recap

Recommendation: Hold the Underweight Position at 8%


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Current Position


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Nike Overview

  • 2006 Revenue $14,955 MM (8.8% increase from ‘05) 

  • 2006 Net Income $1,392 MM (14.9% increase from ‘05)

  • 2006 EPS $2.64 (17.9% increase from ‘05)

  • 52 week range: $37.76 – $55.10

  • Completed a 2 – 1 stock split on April 2, 2007

  • Current Price as of 5/14/07 - $52.87

  • 1.4% Div. Yield


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Catalysts

  • Strong market position and brand

    • Number one shoemaker, holding a 40% market share of the global footwear industry

    • World’s largest manufacturer of athletic apparel

    • Nike swoosh sign is one the most widely recognized logo

    • Relatively inelastic demand

  • Robust financial performance

    • Strong cash position that will provide funding for future expansion strategies

  • Strong product portfolio

    • Reduced dependence on footwear and has established a strong position in the equipment and apparel markets

    • Offers specialized sports gear for sports including golf, hockey, skateboarding, and cycling

    • Allows them to spread risk across its product segments


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Financial Analysis

  • Stock price,

  • Revenue/share,

  • EPS are increasing.


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Financial Analysis

  • Relative to Consumer discretionary sector

  • Stock price,

  • Revenue/share,

  • EPS are increasing.


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Financial Analysis

  • Dividends/share

  • are higher compared to Cons Disc.

  • Growth rate estimates are going up compared to Cons Disc.


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Valuation Analysis – 5yr

CU < ME

Trending Down

CU > ME

Trending Down

CU > ME

Stable

CU < ME

Trending Down


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Valuation Analysis – 5yr

CU < ME

Trending Down


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Valuation Summary 5-yr


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Valuation Analysis - 10yr

CU < ME

Stable

CU > ME

Trending Up

CU > ME

Stable

CU < ME

Stable


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Valuation Analysis – 10yr

CU < ME

Trending Down


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DCF Analysis


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Stock Recommendations

Recommendation: Buy


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Risks

  • Rising raw material cost

    • Rising oil prices increase the price of synthetic rubber and plastic based products. Increasing raw material cost would increase the production cost and its profitability.

  • Chinese products

    • Chinese footwear has been flooding the EU and can significantly affect Nike’s market share in the EU

  • Intense competition

    • The launch of technologically superior products by competitors such as Adidas could lead to a fall in the company’s market share


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Action Recommendation


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Questions?


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