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Introduction Financial ThesisEconomic Thesis Management Thesis Conclusion
Team C
Bill MacGregor Dev Nath Morris MacLeod
“Invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price.”
― Benjamin Graham, The Intelligent Investor
Recommendation: No Buy
Market Cap: $5.93B# Shares: 277.13MP/B: 9.41Yield: 2.64%P/E: 25.25EPS: $0.84
Introduction Financial ThesisEconomic Thesis Management Thesis Conclusion
Investment Thesis
Economics :In a rapidly changing industry,Sabre is threatened byIndustry Disruption.
Management :Board and Management donot act like long term owners.
Financial :Balance sheet and earningspotential do not represent agood investment.
$29.76
Current Price
$7.00 $21.18
Overview of Business
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
Company Description Inventory Aggregator of Fragmented Suppliers Intermediary in the Financial Transaction Provider of Software/Logistical Services
North America
54%
APAC19%
EMEA17%
Latin America
10%
GEOGRAPHIC DISTRIBUTION
Source – Sabre 10K
Global Economic Forces at Play
Airline travel has grown at 1.5x GDP for last forty years
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2014 (Actual) 2015 (Actual) 2016(Estimate)
2017(Projection)
2018(Projection)
2019(Projection)
Source: World Bank
GDP Growth Projection
World High-income countries Emerging countries BRICS
Industry Overview
Barrier to switching are significant but decreasing
Uber having a noticeable effect on package volumes
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
Source: seekingalpha.com
38% 33% 33% 33% 33% 34%
36%40% 41% 42% 44% 45%
26% 27% 27% 25% 23% 21%
2011 2012 2013 2014 2015 2016
% Revenue - Top 3
Sabre Amadeus TravelPort
1959 – IBM and AA introduced Sabre GDS
1960s – Delta, American, BOAC start using GDS
1970s – AA markets SABRE to Travel Agents &
Hotels. Pricing and routing deregulated.
1980s – SABRE in 10,000 travel agency offices. Air France, Lufthansa, Iberia and SAS found Amadeus
1990s–Tickets & hotel bought online, speeds
increase, costs decrease. Travelocity launched.
2000s – Further consolidation,
distribution shifted to internet.
2004 – Airlines committed to 100% e-
ticketing by 2007.
2007 - SABRE purchased by TPG and Silver Lake.
NDC 787 Regulations (Disintermediation)
Data communication standard allowing airlines to communicatedirectly with Travel Agents, Corporate and Individual Customerscompletely bypassing GDS and integrating higher margin ancillaryofferings (meals, upgrades, seat selection, etc.) that is difficult forSabre to accommodate!
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
Amadeus 3
Farelogix! 3
Travelport 1
Sabre 1
NDC Certification Level
Close Economic Thesis
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
In a rapidly changing industry, Sabre is threatened by Industry Disruption.
Positive Negative
Air Travel likely to continue Growing at 1.5x GDP.
Customer Switching costs are high. Barriers to Entry are currently high.
• GDS interruptions/failure severe. Solid hold in high RPK market.
SABR Relies on Mainframes and continuous middleware development. SABR can’t push higher margin ancillary offerings to customers. NDC 787 will increase number of travelers bypassing SABR.
• Significant increase in competition. Lufthansa charging 16 Euro fee for SABR ticketing. Inverse Economies of Scale for bigger airlines and hotels. SABR spending less on R&D absolutely and as percentage of revenue
compared to peers. SABR late to NDC 787 Certification. As Market Entry Barriers decrease, SABR must invest increasing capital to
maintain current hardware and evolve with technological advances.
Timeline – Post IPO
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
Did they do what they said they would do?
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
Despite all the red here, Incentives include:• Stock and Stock Option Awards Threshold - 90% of Revenues• Cash Bonus Incentives Threshold - 90% of Adj. EBITDA
2016 Management Compensation
Ind
ivid
ual
Posi
tio
n
Tota
l ($
M)
Ince
nti
ve
Simonson, R. EVP and CFO $6,590 90%
Gonzales, R. EVP and General Counsel $3,670 87%
Jones, H. EVP & Pres. Airline Sol'ns $2,518 80%
Menke, S. President & CEO $5,477 89%
Robinson, W. EVP & Chief HRO $3,647 87%
Fulfilled? Delta Fulfilled? DeltaBookings Growth Y N
Passengers Boarded Y 4.1% Y 3.8%
Travel Network Revenue Growth Y 9.0% N 0.5%
Airline & HS Revenue Growth Y 1.7% N 0.1%
Adjusted EBITDA Y 5.2% N 2.8%
Adjusted Net Income Y 12.0% N 6.1%
Adjusted EPS Y 10.0% N 6.4%
FCF > 60% approach $400 million N/A N 7.0%
2015 2016Forward Guidance
Litigation and TRA
TRA: Pre-IPO Shareholders may receive approximately 85% of $330-$380 MM from Pre-IPO Deferred Tax Assets (Total Now $395 MM)
$101 MM paid in Jan 2017, balance in Non-Current Liabilities
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
$18.5 $14.1
$16.7
$47.0
2013 2014 2015 2016
Litigation Exense
Trending High!
Legal Proceedings Loss till Date Potential Loss in Future
US Airways Antitrust Litigation $32 M $33 M +
Putative Class Action Lawsuit - Significant (Monetary)
Deartments of Justice Investigation - Significant (Monetary/Business Model)
Indian Income Tax Litigation - $43 M
Sabre SelloffTPG: Private Equity & VC Firm that invests across a wide-range of situations in all 10 Sectors.
Silver Lake: Achieve superior risk-adjusted returns through large-scale private investments in technology tech-enabled companies and related growth industries
Sovereign Co-Invest:
Managed by:
Peterson, K., (TPG)
Mondre, G., (Silver Lake)
Combined Share Ownership:
Post IPO: 83%
Current: 25%
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
Corporate Governance
TPG & Silver Lake have a lock on Compensation, Governance and Nomination.
All TPG and Silver Lake Board Members and their nominees are “Independent”.
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
IPO 2015 2016 2017 Audit CompensationGovernance and
NominatingTechnology Executive
TPG Peterson, K. Peterson, K. Peterson, K. Peterson, K. Member Chair Member
TPG Kusin, G. Kusin, G. Kusin, G. Kusin, G. Chair Member
TPG Bravnnte, G Bravnnte, G Bravnnte, G Member
Silver Lake Mondre, G. Mondre, G. Mondre, G. Mondre, G. Member Member Member
Silver Lake Osnoss, J. Osnoss, J. Osnoss, J. Osnoss, J. Chair
TPG / Silver Lake Joint James, R. James, R. Member Member
% TPG / Silver Lake 63% 63% 60% 60%
Pres & CEO Klein, Klein Klein Menke, S. Member Member
Chairman Kelllner, L.W. Kelllner, L.W. Kelllner, L.W. Kelllner, L.W. Chair
Odom, G Odom, G Odom, G. Odom, G. Chair
Rowe, Z Rowe, Z Member Member
% Other 38% 38% 40% 40%
Close Management Thesis
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
Board and Management do not act like long term owners.Positive Negative
Achieved profitability Successful IPO Acquisitions revenue accretive Successful acquisitions/negotiations Hospitality Solutions: positive coverage through investor
call Exceeded all 2015 Guidance Targets CEO Menke, airline experience with disintermediation and
pushing ancillaries.
Litigation costs are increasing Management’s Incentives tied exclusively to Revenue &
Adj. EBITDA Private Equity firms SL & TPG retain complete control of
Board SL & TPG have reduced ownership shares from 83% (Post-
IPO) to 25% 85% of TRA directed to pre-IPO shareholders Yield post TRA to decrease CEO Menke’s recent tenure track record.
32.6%
45.6%
39.2%
21.5%
38.1%
17.2%
7.2%
18.5%
0.7%
(20.0%)
(10.0%)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016
Sabre Amadeus Travelport
MARGIN COMPARISON
Gross Margin EBITDA Margin Net Profit Margin
Financials and Peer Comparison
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
Margin Comparison
Source: Company Financials
OCF per Employee
Gross Margin lowest amongst peers Travel Network YOY EBIT per Booking -4.1% Air/Hos Solutions YOY EBIT/Pass -9.5% Operational efficiency low compared to peers
$80.60
$67.99
Peer Average Sabre
$2,042
$1,956
$1,877
2014 2015 2016
Travel Network – EBIT per Booking
-4.1%
$313 $281
$256
2014 2015 2016
Airline and Hospitality Solutions – EBIT per Passengers
Boarded/Booking-9.5%
Value Model• 1st Pass RoIC = 9.95%
• 2nd Pass RoIC = 1.97%
• WACC = 5.80%
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
• NAV = $6.05
• EPV = $11.06
• P(Sustainability) = 20%-30%
• IV = $7.05 - $7.55
Assumptions: Goodwill from Acquisitions, Customer Relationships and
Intangibles are key to revenues, thus taken at Book. Bulk of PP&E is rapidly depreciating software. Land,
Leaseholds & Buildings approximately 20% of Net PP&E, thus taken at Book.
Balance Sheet Adjustments: Debt: Book Value ($3,454 MM) reduced 11% to Market
Value ($3,085) due to marginally lower coupons on their Senior Secured Notes.
Product Portfolio = $842 MM. Constantly developing software and technology to support current & new customer initiatives.
Customer Relations = $69 MM. These last two items account for $3.29 of NAV
Income Statement Adjustments: Average Adjusted Operating Profit/ Sales = 6% ($204
MM) Adjustments every year, but fewer and less severe since IPO.
Discounted Cash Flow Analysis
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
DCF Summary Growth Rate assumed to be 6% and decreasing. Included WACC and terminal EBITDA multiple in
sensitivity analysis. Predicted a range: $5.56-$8.00 Current WACC and EBITDA Multiple price: $6.72
#### 11.0x 11.5x 12.0x 12.5x 13.0x 13.5x 14.0x 14.5x 15.0x
3.6% 6.24 6.46 6.68 6.90 7.12 7.34 7.56 7.78 8.00
4.0% 6.15 6.37 6.58 6.80 7.01 7.23 7.45 7.66 7.88
4.4% 6.06 6.27 6.49 6.70 6.91 7.13 7.34 7.55 7.76
4.8% 5.97 6.18 6.39 6.60 6.81 7.02 7.23 7.44 7.65
5.2% 5.89 6.10 6.30 6.51 6.72 6.92 7.13 7.33 7.54
5.6% 5.81 6.01 6.21 6.42 6.62 6.82 7.03 7.23 7.43
6.0% 5.72 5.92 6.12 6.32 6.53 6.73 6.93 7.13 7.33
6.4% 5.64 5.84 6.04 6.24 6.43 6.63 6.83 7.03 7.22
6.8% 5.56 5.76 5.95 6.15 6.34 6.54 6.73 6.93 7.12
Price Range $5.56 – $8.00 Target Price $6.72
Terminal EBITDA Multiple
WA
CC
Sensitivity Analysis
EBITDA MULTIPLE METHOD
Terminal Value UndiscountedDiscounted
EBITDA Multiple 12.0x $ 19,685 $ 16,047
14.0x $ 22,966 $ 18,722
DCF Range (Implied Enterprise Value) $ 20,067 $ 22,742
Equity Value $ 20,407 $ 23,081
Implied Price per Share $ 6.29 $ 7.12
–
–
–
––
Discounted Cash Flow Analysis
($ in millions, except per share data)
2017 2018 2019 2020 2021
EBITDA $ 1,140 $ 1,255 $ 1,375 $ 1,506 $ 1,640
EBIT 618 652 682 706 727
Less: Cash Taxes @ 26.4% (163) (172) (180) (186) (192)
Tax-effected EBIT $ 455 $ 480 $ 502 $ 519 $ 535
Plus: Depreciation & Amortization 521 602 693 801 914
Less: Capital expenditures (509) (527) (583) (645) (639)
Plus / (Less): Change in net working capital 190 287 312 403 433
Unlevered free cash flow $ 658 $ 842 $ 924 $ 1,078 $ 1,243
WACC @ 5.24%
NPV of Unlevered free cash flow @ 5.2% $ 4,020
Projected
Dividend Discounting Model
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
DDM Summary Assumed same growth rate as DCF (6%) Payout ratio to remain constant at 48.9% Monte Carlo instances: 1,000 We have 95% confidence the price will fall between $6.15 and
$7. 03.
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
$5.40 $5.60 $5.80 $6.00 $6.20 $6.40 $6.60 $6.80 $7.00 $7.20 $7.40 $7.60 $7.80
DDM Price Plot – Monte Carlo Simulation
CI Min Max
Average 6.60$ 68% 6.38$ 6.82$
Stdev 0.22$ 95% 6.16$ 7.04$
Year EPS G EPS Payout Ratio DPS Beta Cost of Equity Present Value
2016(Base) 0.87 0.489 0.426 0.882 0.1066
2017 6.00% 0.92 0.489 0.451 0.882 0.1066 $0.408
2018 5.50% 0.97 0.489 0.476 0.882 0.1066 $0.389
2019 4.50% 1.02 0.489 0.497 0.882 0.1066 $0.367
2020 3.50% 1.05 0.489 0.515 0.882 0.1066 $0.343
Stable
Growth2021 3.00% 1.08 0.489 0.530 0.882 0.1066 $4.62
Terminal
Value
Stock Price $6.12
Sabre Dividend Discount Model
Transition
$ 6.15 $ 7.03
Close Financial Thesis
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
Balance sheet and earnings potential do not represent a good investment.
Positive Negative
Growing Free Cash Flow• With Adjustments
Owner Earnings Reasonably Close to Net Income Ex Items
SABR highly leveraged in a cyclical, service business that constantly requires significant, annual capital infusion.
Highly reliant on Goodwill and Customer Relationships for revenue. Pre-IPO impairments of $898 MM to Goodwill & Customer Relationships Acquisitions Accretive to Revenue, no effect on Gross Margins Gross Margins lowest in Peer Group. 2nd Pass RoIC < WACC Decreasing EBIT per transaction. Operational efficiency lower than peer group. Price > All Valuations
Concluding Recommendation: No Buy
Recommendation Financial ThesisEconomic Thesis Management Thesis Conclusion
Thesis SummationEconomic:
Management:
Financial:
In a rapidly changing industry, Sabre is threatened by Industry Disruption.
Board and Management do not act like long term owners.
Balance sheet and earnings potential do not represent a good investment.
Board / Governance Board 2Board 1
Industry Growth Geographic GDPAmericas EuropeAPACAfrica & ME Spending
OasisPass/Reg RPK RegionVol & RPKMap
Revenue Direct Bill Bill/SegPer Billing Cost of RevCost/Billing
Process Map
Rev/Seg
Competition R&D Porter’sAirline Differentiation MarginsBrandsTechnology
Risks Inflation CreditCurrency
Geography
Risk/ImpactPolitical
RatioComp
Technology CTO 1 CTO 2Migration QuotesNDC/AssociGDS Future Tech Evolv
Main Slides Management ConclusionFinancialEconomic
Thank-YouReferences and Extra Material
Market Influences Liquid RatSolven Rat
TRA Dispurs
Profit RatioSabre/nasdaqCyclicality
Valuation Growth Tar Earning/NIProb of Sust CriteriaEPVNAV Acquisition
Industry Growth
Currency RiskReferences
Political Risk References
Credit Risk References
Inflation Risk References
Process Map References
Africa and Middle East - Market Growth References
Americas - Market Growth References
Asia Pacific - Market Growth References
Europe - Market Growth References
Board Independence and Voting References
Board Independence and Voting References
Passenger Volume and RPK References
Geographical Growth and RPK Growth References
Air Passenger by Region References
GDP Growth References
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2014
(Actual)
2015
(Actual)
2016
(Estimate)
2017
(Projection)
2018
(Projection)
2019
(Projection)
Source: World Bank
GDP Growth Projection
World High-income countries Emerging countries BRICS
Tourism Spending Growth References
Tourism Spending Growth References
RPK by Region References
Opinion of Airline DifferentiationReferences
Risk VS. Impact References
Opinion of GDS Future References
Migration to NDC References
Airlines Associated NDCs References
Quotes References
CTO - SABRE’S AND AMADEUS’ TECHNOLOGY
• Sabre originally operated on Mainframe computers. As business evolved, Sabre maintained those mainframes and built middleware to emulate terminals.
• Advantages: Lower Capital costs, bridges to new technology are programming heavy and capital equipment light.
• Disadvantages: Mainframe Technology not friendly with Customer Reservation Systems (CRS), inefficient data exchange. Late 1950s COBOL programming (and programmers) becoming obsolete. Sabre command language must be learned. Like MS-DOS! Changing from Sabre in highly-unionized airline environment will be costly due to retraining. Potential switching failures will impact revenues and brand. Doesn’t interface well with integrated services.
References
CTO - SABRE’S AND AMADEUS’ TECHNOLOGY
• Amadeus’ new software & technology, uses 4GL & open-source software.
• Advantages: Intuitive (drop down menus, check boxes, icons, etc.) easy to learn and use, performs well with CRS and integrated services.
• Disadvantages: Much higher CapEx than Sabre
References
TECHNOLOGY EVOLUTION
• Airlines and cruise lines make higher margins on ancillary services
• Amadeus better positioned for pushing services to enhance the travel experience and increase top & bottom line with higher margin items:• Seat upgrades on that long-haul flight?
• Hot meal in your hotel room on check-in after that long haul flight?
• Drink-of-the-day, spa-treatment or shore excursion on your cruise?
• Swag at the Springsteen concert?
• Uber at the airport or pier when you disembark?
References
Oasis -Technology’s Effect on Travel Agents
• Growth of North American Association of Travel Agents Affiliates
Source: Oasis of the Seas: Case B11A006, Richard Ivey School of Business. University of Western Ontario
Cruise Line Travel Agent Affiliates
Year Members CAGR1972 7,9001980 10,900 4.1%1985 14,887 6.4%1990 20,128 6.2%1995 22,722 2.5%2000 19,895 -2.6%2005 16,629 -3.5%2008 14,953 -3.5%
References
SABRE vs NASDAQ ReturnsReferences
GDS Developed byUsed by
Airlines OTAs Others
(1960)
American Airlines
American Airlines (1) Etihad Airways Gulf Air Jet Airways Virgin America Westjet
Priceline Lastminute.com
88,000 hotels 50 rail carriers 180 tour operators 13 cruise lines 55,000 TAs
Sabre All Nippon Airways (10) Malaysia Airlines Air India
Over 25 Countries in Asia Pacific
(1987)
Air France Iberia Airlines Lufthansa (4) Scandinavian Airlines
System
Air France (5) British Airways (6) Cathay Pacific China Airlines (8) Qatar Airways Southwest Airlines (7) Thai Airways
Expedia CheapOair MakeMyTrip
Over 100,000 hotels 103 rail carriers 203 tour operators 21 cruise lines 90,000 TAs
Apollo (1971) Galileo (1987) Worldspan (1990)
United Airlines (3) Delta Airlines (2) Northwest Airlines Swissair
Expedia Flight Centre Priceline CheapOair Orbitz Source: Company Websites
References
Source: Company Financials
32.6%
45.6%
39.2%
21.5%
38.1%
17.2%
7.2%
18.5%
0.7%
(20.0%)
(10.0%)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016
Sabre Amadeus Travelport
MARGIN COMPARISON
Gross Margin EBITDA Margin Net Profit Margin
References
Source: Company Financials
USD 176.00
USD 309.41
USD 434.60
0.00%
4.00%
8.00%
12.00%
16.00%
20.00%
2013 2014 2015 2016
R&D EXPENSE % OF REVENUE
Sabre Amadeus Travelport
References
Current AssetsTypes within
category
Reproduction
Value Book Adjustment Value
Cash and MS Book Value $364 $0 $364
A/R
Book Value +
Allowance for bad
debts (5% if not
given) $401 $20 $421
Prepaid Expenses $62 $62
Other receiveables Book Value $26 $26
Other receivables $1 $1
Deferred Tax AssetsDCF if long term,
BV if current $0 $0
Total Current Assets $873
Non-current Assets Types within Reproduction Book Adjustment Value
PV Operating LeasesPV using Kd $128 $128
PP&E Book Value $753 $753
Goodwill from
MergersOnly applicable
post 2001 Book Value $2,548 $2,548
Customer
Relationships $388 $388
Other Intangibles $388 $388
Capitalized Incentive $531 $531
Deferred Tax $95 -$10 $86
Long Term Inestment $26 $26
Product Portfolio $842
Customer Relations $69
Total Asset Value $5,711 $11 $6,632
Current LiabilitiesTypes within
category
Reproduction
Value Book Adjustment Value
Accounts Payable Book Value $169 $0 $169
Accrued Exp. Book Value $520 $0 $520
Curr. Port. of LT
Debt Book Value $178 $0 $178
Unearned Revenue $187 $187
Other Current
Liabilities Book Value $113 $0 $113
Total Current Liabilities $1,166
Non-current LiabilitiesTypes within
category
Reproduction
Value Book Adjustment Value
Operating Leases $128
Long-Term Debt Market Value $3,085
Pension & Other
Benefits Current
Book Value *(1-
Tax Rate) $123 -$32 $91
Def. Tax LiabilityLong Term
Discount (90%
post 2000, 80% pre $89 -$18 $71
Stock Options$47 $47
Other Non-Current Market Value $367 $367
NAV Liabililties $4,956
Bulk of PP&E is rapidly depreciating software. Land, building and leaseholds only 20%
Current LiabilitiesTypes within
category
Reproduction
Value Book Adjustment Value
Accounts Payable Book Value $169 $0 $169
Accrued Exp. Book Value $520 $0 $520
Curr. Port. of LT
Debt Book Value $178 $0 $178
Unearned Revenue $187 $187
Other Current
Liabilities Book Value $113 $0 $113
Total Current Liabilities $1,166
Non-current LiabilitiesTypes within
category
Reproduction
Value Book Adjustment Value
Operating Leases $128
Long-Term Debt Market Value $3,085
Pension & Other
Benefits Current
Book Value *(1-
Tax Rate) $123 -$32 $91
Def. Tax LiabilityLong Term
Discount (90%
post 2000, 80% pre $89 -$18 $71
Stock Options$47 $47
Other Non-Current Market Value $367 $367
NAV Liabililties $4,956
George’s NAV Equity Value Per ShareReferences
Equity Value $1,676
Shares outstanding - adjust this to correct for (000s) 277.13
Net Asset Value per share $6.05
NAV EQUITY VALUE
George’s Model
ReferencesEPV per Share NAV Equity Value Per Share
Normalized Operating Profit $228
-One Time Adjustments -$204
+Adjustment for Operating Leases $8
+Growth R&D Expenses $103
+Growth Marketing Expenses $8
EBIT $144
-Taxes on EBIT -$38
NOPLAT $106
+Amort of Goodwill from Mergers
(prior to 2002)
NOPLATPA $106
Depreciation of fixed assets $479
-CAPEX current year -$492
+Growth Capex $529
Zero Growth CAPEX -$224
Zero Growth Free Cash Flows $362
Zero Growth Free Cash Flows $362
WACC 5.8%
PV (ZG FCF) discounted by WACC $6,232
+ECMS $364
-BV STD (inc current portion LTD) $178
-MV LTD $3,085
-Prefered Stock
-Minority Interest $3
-Underfunded (Overfunded)
pension plan $91
-Operating Leases $128
-Executive Stock options $47
Equity Value through EPV method $3,065
# of Shares 277.13
Equity Value per Share $11.06
Intrinsic value vs Probability of SustainabilityReferences
EPV per Share NAV Equity Value Per Share
2014 Future TRA DisbursementsReferences
EPV per Share NAV Equity Value Per Share
Cyclicality References
EPV per Share NAV Equity Value Per Share
Revenue by Geography References
EPV per Share NAV Equity Value Per Share
Billable and Boardable by SegmentReferences
EPV per Share NAV Equity Value Per Share
Revenue per Billing/BookingReferences
EPV per Share NAV Equity Value Per Share
Cost of Revenue per Billing/BookingReferences
EPV per Share NAV Equity Value Per Share
Cost of RevenueReferences
EPV per Share NAV Equity Value Per Share
2015-2016 2014-2015
Travel Network - Increase 150,353.00$ 137,369.00$
Airline and Hospitality Solutions - Increase 89,504.00$ 38,655.00$
Direct BillablesReferences
EPV per Share NAV Equity Value Per Share
Revenue by SegmentReferences
EPV per Share NAV Equity Value Per Share
TechnologyReferences
EPV per Share NAV Equity Value Per Share
Value Investment CriteriaReferences
EPV per Share NAV Equity Value Per Share
-2.2
Growth GuidanceReferences
EPV per Share NAV Equity Value Per Share
Owner’s Earnings VS Net Income Ex ItemsReferences
EPV per Share NAV Equity Value Per Share
For the Fiscal Period Ending 12 monthsDec-31-2016
12 monthsDec-31-2015
12 monthsDec-31-2014
Restated12 monthsDec-31-2013
Restated12 monthsDec-31-2012
Reclassified12 monthsDec-31-2011
12 monthsDec-31-2010
Net Income 242.6 545.5 69.2 (100.5) (611.4) (66.1) (268.9)
+ Depreciation 57.3 43.5 35.6 33.4 96.7 122.6 113.4
+ Amortization Goodwill and Intangibles 143.4 106.5 96.2 129.5 126.7 162.3 163.2
+ Other Amortization 278.6 251.7 209.5 167.9 79.2 23.9 20.7
-CapEx (327.6) (286.7) (227.2) (209.5) (167.0) (164.6) (130.5)
- Acquisitions (164.1) (442.3) (31.8) (30.2) (72.4) (11.3) (51.9)
Owner Earnings 230.2 218.2 151.5 (9.4) (548.2) 66.9 (153.9)
Net Income 242.6 545.5 57.8 (137.2) (645.9) (98.7) (299.6)
Net Income Ex Items 237.0 231.1 96.8 12.5 (251.5) (75.2) (282.3)
5.5 314.4 (38.9) (149.7) (394.4) (23.5) (17.3)
Owner Earnings/ Share $0.83 $0.78 $0.61 -$0.05 -$3.09 $0.38 -$0.88
EPS Continuing Operations $0.87 $0.86 $0.46 $0.29 -$1.22 -$0.45 -$1.80
Reported EPS $0.86 $1.95 $0.23 -$0.74 -$3.65 -$0.56 -$1.71
Margin RatiosReferences
EPV per Share NAV Equity Value Per Share
Ratios
For the Fiscal Period Ending 12 months
Dec-31-2010
12 months
Dec-31-2011
12 months
Dec-31-2012
12 months
Dec-31-2013
12 months
Dec-31-2014
12 months
Dec-31-2015
12 months
Dec-31-2016
Profitability
Return on Assets % NA NA 4.6% 5.6% 5.9% 6.2% 5.9%
Return on Capital % NA NA 6.5% 8.1% 8.5% 8.9% 8.3%
Return on Equity % NA NA (490.2%) NM NM 82.5% 43.5%
Return on Common Equity % NA NA NM NM NM 81.6% 42.9%
Margin Analysis
Gross Margin % 47.1% 39.3% 34.1% 32.9% 34.0% 34.3% 32.6%
SG&A Margin % 25.2% 27.8% 18.7% 16.0% 17.1% 17.4% 17.0%
EBITDA Margin % 21.7% 21.4% 24.7% 23.4% 22.0% 22.0% 21.5%
EBITA Margin % 17.7% 17.1% 20.7% 22.1% 20.6% 20.5% 19.8%
EBIT Margin % 12.0% 11.4% 15.4% 16.9% 16.9% 16.9% 15.6%
Earnings from Cont. Ops Margin % (11.2%) (2.8%) (9.0%) 2.1% 4.2% 7.9% 7.2%
Net Income Margin % (9.5%) (2.3%) (25.7%) (4.0%) 2.6% 18.4% 7.2%
Net Income Avail. for Common Margin % (10.0%) (2.6%) (10.6%) 0.5% 3.7% 7.8% 7.0%
Normalized Net Income Margin % 5.8% 5.2% 3.5% 4.0% 4.1% 7.1% 6.9%
Levered Free Cash Flow Margin % NA NA 15.5% 7.2% 5.0% 12.3% 17.2%
Unlevered Free Cash Flow Margin % NA NA 20.3% 13.7% 10.0% 15.7% 19.8%
Liquidity RatiosReferences
EPV per Share NAV Equity Value Per Share
Ratios
For the Fiscal Period Ending 12 months
Dec-31-2010
12 months
Dec-31-2011
12 months
Dec-31-2012
12 months
Dec-31-2013
12 months
Dec-31-2014
12 months
Dec-31-2015
12 months
Dec-31-2016
Asset Turnover
Total Asset Turnover NA NA 0.5x 0.5x 0.6x 0.6x 0.6x
Fixed Asset Turnover NA NA 5.7x 5.6x 5.0x 5.0x 4.9x
Accounts Receivable Turnover NA NA 5.8x 6.2x 6.9x 8.0x 8.7x
Inventory Turnover NA NA NA NA NA NA NA
Short Term Liquidity
Current Ratio NA 0.6x 0.6x 0.8x 0.8x 0.8x 0.7x
Quick Ratio NA 0.5x 0.5x 0.6x 0.6x 0.7x 0.7x
Cash from Ops. to Curr. Liab. NA 0.3x 0.3x 0.1x 0.2x 0.5x 0.6x
Avg. Days Sales Out. NA NA 62.9 59.2 53.0 45.5 42.1
Avg. Days Inventory Out. NA NA NA NA NA NA NA
Avg. Days Payable Out. NA NA 34.3 25.1 23.7 24.1 24.7
Avg. Cash Conversion Cycle NA NA NA NA NA NA NA
Solvency RatiosReferences
EPV per Share NAV Equity Value Per Share
Ratios
For the Fiscal Period Ending 12 months
Dec-31-2010
12 months
Dec-31-2011
12 months
Dec-31-2012
12 months
Dec-31-2013
12 months
Dec-31-2014
12 months
Dec-31-2015
12 months
Dec-31-2016
Long Term Solvency
Total Debt/Equity NA 944.9% NM NM 3,629.2% 694.8% 552.1%
Total Debt/Capital NA 90.4% 108.7% 109.3% 97.3% 87.4% 84.7%
LT Debt/Equity NA 906.6% NM NM 3,602.6% 654.6% 523.7%
LT Debt/Capital NA 86.8% 107.5% 106.4% 96.6% 82.4% 80.3%
Total Liabilities/Total Assets NA 93.0% 105.9% 106.7% 98.2% 91.0% 89.1%
EBIT / Interest Exp. 1.7x 1.9x 1.6x 1.6x 2.0x 2.9x 3.3x
EBITDA / Interest Exp. 3.0x 3.5x 2.6x 2.1x 2.6x 3.8x 4.6x
(EBITDA-CAPEX) / Interest Exp. 2.4x 2.6x 1.9x 1.4x 1.6x 2.1x 2.5x
Total Debt/EBITDA NA 5.7x 5.9x 6.3x 5.3x 5.2x 4.8x
Net Debt/EBITDA NA 5.6x 5.7x 5.8x 5.0x 4.7x 4.3x
Total Debt/(EBITDA-CAPEX) NA 7.8x 8.2x 9.8x 8.7x 9.3x 8.7x
Net Debt/(EBITDA-CAPEX) NA 7.6x 7.9x 9.0x 8.3x 8.4x 7.7x
Altman Z Score NA 0.38 0.16 0.23 0.93 1.31 1.43
Ratio ComparisonRatios Sabre Amadeus Travelport
P/E Multiple 25.25 24.78 87.12
Beta 0.88 0.43 -
P/B 9.41 7.49 -
Div Yield 2.64% 1.78% 2.54%
Payout Ratio 60.89% 49.97% 226.56%
Sales (5 yrs CAGR) 3.39% 10.15% 2.93%
EPS 0.94% 20.64% 5.26%
Capital Spending (5 yrs CAGR)14.76% 13.74% 6.89%
Current Ratio 0.7x 0.5x 0.7x
Debt/Capital 84.66% 46.45% 116.71%
Altman Z Score 1.4x 3.4x -0.1x
Rev/Employee 337,339 322,232 587,839
Asset Turnover 0.61 0.61 0.82
RoA 4.34% 10.50% 5.06%
RoA (5 yrs avg.) 5.70% 10.49% 4.24%
RoI 5.40% 15.86% 7.05%
RoI (5 yrs avg.) 8.06% 16.10% 5.86%
Efficiency
Returns
Growth
Valuation
Dividends
Credit Strength
References
Acquisitions
Detail FY 2016 FY 2015
Direct Bookable Billings Growth due to Abacus 10.8% 14.3%
Revenue Growth due to Abacus 10.2% 9.3%
References
Porter’s Five Forces
References