cfa presentation team_d (1) (1)

Kyiv National Economic University

Bogdan Pavlik, Andriy Vernygor,

Daria Gontar, Tetiana Vozniuk, Tetiana Ohrimets

Long-term revenue stable growth of 2% CAGR in 2014-2018COUNTRY: LUXEMBOURG

RECOMMENDATION: BUY

CURRENT PRICE: €77.00

TARGET PRICE: €89.5

1

CAGR in 2014-2018

Rapid TV-web applications evolution

New expansion opportunities

Level of risk: medium

Cash Flow growth of 6%

COUNTRY: LUXEMBOURG

STOCK EXCHANGES:

FRANKFURT, BRUXELLES,

LUXEMBOURG

TICKER: RTL

Q&ARisksValuationFinancial analysisIndustry overviewBusiness overview

Industry overview

Business overview.

Financial analysis

Valuation Risks

1 2 3 4 5

2Segmentation & Audience share

Group M6

22.5 %French Radio

18.3 %

RTL Deutschland

30.6 %RTL Belgium

36.4 %

RisksValuationFinancial analysisIndustry overviewBusiness overview

RTL Netherland

33.5 %Other

around 30 %FremantleMedia

8,500 hours

350 programs

62 countries


3

TV

RTL GroupABCMTV

SamsungSonyPhilips

FremantleMediaRay William Johnson

Nigahiga

YouTubeApp storeFacebook

Value chain

Content Aggregation Distribution Devices

MCNs


BroadbandTVMaker Studios

Fullscreen

DisneyWarner Bros.

FremantleMedia

ComcastSky

Freeview

AppleAndroid

Windows phonePC

Industry overview.

Business overview

Financial analysis

Valuation Risks

1 2 3 4 5

Competitive position 4

Belgium

RTL – 36.3%

RTBF – 18.6%

Netherland

RTL – 32.3%

SBS Group – 20%

India

Main competitors – 75%

France

RTL – 22.9% / Radio – 13%

TF1 – 33.3% / NRJ – 12.6%

Germany

RTL – 33.7%

Pro7sat1 – 32.5%

Hungary

RTL – 37.3%

TV2 Group – 19%

Croatia

RTL – 27.5%

NOVA – 23.9%


Key market trends 5

Broadcasting Content

PlatformsHigh potential for

broadcasters: distribution fees from

platforms

Structural changesIncreasing importance

of the rights to the content because of

structural changes in the TV industry

Broadcasting Content Digital

AdvertisingTendency to growth on demand for television

advertising

Reducing riskBroadcasters may reduce risk by filling air time with content which has a track-

record.

FragmentationIncreasing demand for

content because of fragmentation of the digital channels and emerging platforms


Industry overview

Business overview

Financial analysis.

Valuation Risks

1 2 3 4 5

6

CAGR=2.13%

2001

2086

2220

2013 2015 2018

Revenue analysis by divisions


CAGR=−2.33%

13831319

1229

2013 2015 2018

Revenue & margin analysis 7

24.10%

26.09%

19.56%

21.77%

16.10%

16.61%

12%

14%

16%

18%

20%

22%

24%

26%

28%

Level of margins, %

57655998 5889

60136140

62696401

6536

Revenue growth, €m

1,8%


10%2011 2012 2013 2014 2015 2016 2017 2018

EBITDA margin EBITA margin

Net margin

2011 2012 2013 2014 2015 2016 2017 2018

RTL Group revenue

TV advertising markets across Europe continued to show signs of improvement. New TV channels strengthen RTL Group’s family of channels

Average annual growth is equal to 1.8% and represents the good tendency

FremantleMedia Nth-Am recently launched digital content studio. RTL Group completed the acquisition of a 65% majority stake in the video advertising platform SpotXchange.

After some deterioration in 2014 we expect the increasing in all kind of margins

8

28,5%35,2%

26,3%

+9 p.p.

DuPont analysis


2013 2015E 2018E

ASSET TURNOVER

INTEREST BURDEN

FINANCIAL LEVERAGE 211% 222% 241%

103,9% 100,17% 99,44%

78% 84% 90% +12 p.p.

- 4 p.p.

+30 p.p.


Industry overview

Business overview

Financial analysis

Valuation. Risks

1 2 3 4 5

10

14.81% 16.61%

23.60%26.09%

0%

10%

20%

30%

40%

50%

2014Е 2015Е 2016Е 2017Е 2018Е

Margins Comparison, %

Net Margin EBITDA Margin

5,600

5,800

6,000

6,200

6,400

6,600

2014Е 2015Е 2016Е 2017Е 2018Е

Revenue, €m

8.6%

Valuation forecasts

050

100150200250300350400

2014Е 2018Е

Taxes, €m

+18%

294


Net Margin EBITDA Margin

2014E 2015E 2016E 2017E 2018E

431

300

200

100

0

-178

-52

+183

+184

Working capital, €m

+46%


11

0

100

200

300

400

2014Е 2018Е

CapEx, €m

1%

Capital Expenditures are set

to increaseRTL GROUP enters new markets

EBITDA MARGINS rise

CapEx VS. Cash Flow

RisksValuationFinancial analysisIndustry overviewBusiness overview Q&ARisksValuationFinancial analysisIndustry overviewBusiness overview

0

100

200

300

400

500

600

2014Е 2018Е

Free Cash Flow, €m

+13%

TV content launching

CASH inflows to progress

12

Slow GDP growth

%Discount rate

6,13%

Enterprise Value

17,286 €m

PV of Terminal Value

14,423 €m

UPSIDE

17%

DCF assumptions


TGR = 2% BUY

Equity Value

13,886 €m

14,423 €m

Net Debt

3,400 €m

PV of Cash Flows

2,863 €m€

€

13

SXXP Index0.8

SPX IndexBeta0.83

DAX Index

1.07

0.65

German 10Y government bond

Rf = 1,34

Cost of equity = 7.4%

Cost of debt = 1.7%

WACC6.13%

Equity risk premium: 7.3%

Tax rate: 26%

Share of Equity: 77.8%

Share of Debt: 22.2%

After-tax cost of debt: 1.2%

WACC calculation

WACC

Ter

min

al G

row

th

Rat

e

5.6% 5.8% 6% 6.13% 6.4% 6.6% 6.8%

1.7% € 95.15 € 90.25 € 85.80 € 82.96 € 78.00 € 74.57 € 71.40

1.8% € 97.84 € 92.68 € 88.01 € 85.04 € 79.86 € 76.28 € 72.98

1.9% € 100.67 € 95.24 € 90.33 € 87.22 € 81.80 € 78.06 € 74.62

2% € 103.66 € 97.93 € 92.77 € 89.50 € 83.82 € 79.92 € 76.34

2.1% € 106.82 € 100.77 € 95.33 € 91.90 € 85.94 € 81.86 € 78.12

2.2% € 110.17 € 103.77 € 98.03 € 94.42 € 88.17 € 83.89 € 79.99


Enterprise value:

13,640 €m

Enterprise value:

3,234 €m

Share price:

12.82 €

Enterprise value:

10,902 €m

14

Societe Television Francaise 1

Peers valuation

Share price:

123.11 €

10,902 €m

Share price:

34.80 €


ProSiebenSat.1 Media AG

KabelDeutschland

Holding

Price range of RTL” Group : € 65 - € 124

15

Share price 2013

Share price 2014E

Share price 2013

Share price 2014E

EV / EBITDA calculations P / E calculations

Multiples valuation


UPSIDE

17%

€ 0.00 € 57.11 € 87.55 € 123 € 166.9 € 0.00 €69 € 73.7 € 103 € 136.1

BUY

Industry overview

Business overview

Financial analysis

Valuation Risks.

1 2 3 4 5

16

Med

ium

Hig

h

Regulatory risk

Market risk

Taxation

Financial risk

Changes in the intellectualproperty

Currency fluctuations

PR

OO

BA

BIL

ITY

Risk matrix

Insignificant Moderate Severe

Lo

w

Operational risk

Decrease of audience share

Reduction in barriers for new competitors

Negative macroeconomicconditions

Technological failures IMPACT

PR

OO

BA

BIL

ITY


17

Legislative restrictions on licenses and increase in the tax expenses

Managed by developing and exploiting new revenue sources

Foreign currency fluctuations

Managed by using foreignexchange forward contracts

Analyzed risks

Decrease in audience and advertising market shares

Managed by expanding new markets


18

digital programmatic advertising

distribution at global scale

17% upside

Upside split

HD technical potential

Base price €77

Current price€84

Target price €89,5

Drivers


19

250

300

350

400

450

Fre

quen

cy

1 StdDev=59.3

Mean = 87.95

- 1 StdDev=80.6

Median = 87.89

Monte Carlo simulation

0

50

100

150

200

67.71 77.48 87.25 97.02 108.18

Fre

quen

cy


THANK YOU FOR ATTENTION!THANK YOU FOR ATTENTION!THANK YOU FOR ATTENTION!THANK YOU FOR ATTENTION!

Appendix I 20

Input and Assumptions - RTL

Seller Name:Seller Ticker:Last Historical Year: 31.12.2013Valuation Date: 30.01.2014

Months in Year: 12Conversion Units: 1 000 000

Circularity: YesCircularity Breaker: No Operating Case: 1Base

1BaseStock & Option Information: 2ConservativeStock & Option Information: 2Conservative

3Optimistic

Common Shares Outstanding: 154790000

Current Share Price: € 77.00

Enterprise Value Calculation:Equity Value: 11 918 830 000 Less: Cash & Cash-Equivalents: 574 000 000

Plus: Total Debt: 3 974 000 000

Diluted Shares: 154 790 000 Enterprise Value: € 15 318 830 000


Appendix II CAGR by divisions

2010-2009 2011-2010 2012-2011 2013-2012 CAGRMediengruppe RTL Deutschland 108.67% 101.17% 103.15% 101.99% 2.10%Groupe M6 105.02% 97.71% 98.30% 99.71% -2.33%Fremantlemedia 107.54% 112.20% 119.37% 90.12% 3.75%RTL Nederland 112.97% 117.46% 86.76% 106.81% 5.31%RTL Belgium 103.47% 103.35% 97.22% 99.52% -0.76%RTL Radio (France) 99.42% 106.98% 97.83% 97.22% 0.29%RTL Hungary 126.51% 94.29% 102.02% 99.01% -1.61%RTL Hungary 126.51% 94.29% 102.02% 99.01% -1.61%RTL Hrvatska 92.68% 97.37% 83.78% 106.45% -5.28%


Appendix III Revenue by divisions

Revenue 2013

Revenue 2015E

Revenue 2018E

Mediengruppe RTL Deutschland 33.98% 34.37% 34.78%

Groupe M6 23.48% 21.73% 19.25%

Fremantlemedia 26.03% 27.19% 28.87%

RTL Nederland 7.73% 8.31% 9.23%RTL Nederland 7.73% 8.31% 9.23%

RTL Belgium 3.55% 3.42% 3.25%

RTL Radio (France) 2.97% 2.90% 2.78%

RTL Hungary 1.70% 1.59% 1.44%

RTL Hrvatska 0.56% 0.49% 0.39%

Total 100.00% 100.00% 100.00%


Appendix IV

PROFITABILITY2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E

gross profit margin

(revenue-COGS)/revenue 17.6% 22.2% 21.3% 19.9% 21.4% 22.2% 22.9% 23.6% 24.2% 24.8%

net profit marginprofit after tax/revenue 5.8% 13.2% 13.8% 11.5% 16.1% 13.0% 13.6% 14.1% 14.6% 14.9%

operating profit margin

operating profit/revenue 13.2% 19.4% 20.5% 17.2% 18.7% 19.2% 19.7% 20.2% 20.7% 21.0%profit before

pre-tax marginprofit before tax/revenue 14.2% 20.4% 20.7% 16.1% 21.3% 19.9% 20.4% 20.8% 21.1% 21.4%

return on assets

profit after tax/average total assets 3.6% 8.9% 9.6% 8.4% 11.5% 10.8% 11.6% 12.3% 12.9% 13.5%

return on total capital

operating profit/average total liabilities and assets 8.3% 13.0% 14.4% 12.5% 13.4% 16.0% 16.8% 17.6% 18.3% 19.0%

return on equity

profit after tax/average total equity 6.0% 14.8% 16.1% 14.0% 19.2% 25.0% 26.7% 28.3% 29.8% 31.2%


Appendix V

LIQUIDITY2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E

current ratio

current assets/current liabilities 160% 164% 147% 149% 116% 110% 104% 98% 93% 88%current ratio liabilities 160% 164% 147% 149% 116% 110% 104% 98% 93% 88%

quick ratio

(current assets -inventories)/current liabilities 114% 128% 111% 111% 82% 76% 71% 67% 62% 58%

cash ratio

cash&cash equivalents/current liabilities 15% 32% 28% 26% 20% 18% 17% 16% 15% 13%


Appendix VISOLVENCY

2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018Elong-term debt-to-equity

non-current liabilities/total equity 11% 10% 10% 12% 30.28% 27.80% 27.80% 27.79% 27.77% 27.74%

debt-to-equity ratio

total liabilities/total equity 58% 58% 61% 63% 111% 114% 122% 131% 141% 152%

total debt ratiototal liabilities/total assets 37% 37% 38% 38% 53% 53% 55% 57% 58% 60%

financial leverage

total assets/total equity 158% 158% 161% 163% 211% 214% 222% 231% 241% 252%total liabilities/total

debt to capitaltotal liabilities/total liabilities & assets 37% 37% 38% 38% 53% 53% 55% 57% 58% 60%

ACTIVITY2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E

receivables turnoverrevenue/average recevaibles 239% 256% 267% 278% 273% 322% 329% 336% 343% 350%

DSO365/recevaibles turnover 153 142 137 131 134 113 111 109 106 104

total asset turnover

revenue/average total assets 63% 67% 70% 73% 71% 83% 85% 87% 89% 90%

working capital turnoverrevenue/average working capital 419% 450% 469% 488% 479% 489% 499% 510% 520% 531%


Appendix VII

Extended DuPont analysis2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E

EBIT margin EBIT/revenue 13.70% 20.10% 21.20% 16.32% 20.48% 19.83% 20.37% 20.85% 21.26% 21.62%asset turnover revenue/total assets 59% 63% 70% 76% 78% 81% 84% 87% 90% 93%

interest burden EBT/EBIT 101.44% 97.63% 98.88% 103.90% 100.41% 100.17% 99.84% 99.44% 98.95%

financial leverage total assets/total equity 158% 158% 161% 163% 211% 214% 222% 231% 241% 252%

tax burdennetincome/pretax income 68% 77% 75% 71% 76% 74% 75% 76% 77% 78%tax burden income 68% 77% 75% 71% 76% 74% 75% 76% 77% 78%

ROE 0.00% 15.45% 17.49% 14.22% 26.38% 25.52% 28.54% 31.79% 35.29% 39.10%

2011 2012 2013 2014E 2015E 2016E 2017E 2018EEBITDA margin 24.51% 19.61% 24.10% 23.60% 24.30% 24.95% 25.54% 26.09%EBITA margin 19.67% 17.97% 19.56% 19.99% 20.53% 21.01% 21.42% 21.77%Net margin 15.46% 11.52% 16.10% 14.81% 15.39% 15.88% 16.28% 16.61%


Appendix VIIIRTL Group - Unlevered Free Cash Flows Projection

Projected2014 2015 2016 2017 2018

Revenue: 6 013 6 140 6 269 6 401 6 536

EBITDA: 1 419 1 492 1 564 1 635 1 705

EBIT: 1 192 1 251 1 307 1 361 1 413

Less: Taxes 305 320 334 348 362Plus: Depreciation 217 232 247 264 282Depreciation 217 232 247 264 282Plus: Amortization 10 10 10 10 10

Less: Changes in NWC: 294 116 64 247 431

Less: CapEx: 302 308 315 322 328

Unlevered Free Cash Flow: 517.8 747.6 850.7 718.2 584.0PV of Free Cash Flow: 487.9 663.7 711.6 566.1 433.7

Projection Year: 0 1 2 3 4 5Mid-Year Conversion Discount: 0.5 1.5 2.5 3.5 4.5

Free Cash Flow Growth Rate: 44% 14% -16% -19%


Appendix IX

RTL Group - DCF Assumptions & Output

Discount Rate: 6.13%Terminal Growth Rate: 2%

PV of Terminal Value: 14 423

RTL Group - WACC Calculation

Risk-free rate 1.34%

Beta 0.83Equity risk premium: 7.3%Cost of equity 7.40%

PV of Terminal Value: 14 423Sum of PV of Cash Flows: 2 863.0Enterprise Value: 17 286Net Debt: 3 400Equity Value: 13 886

# of Shares Outstanding: 155Implied Share Price 89.5Current Share Price: 77Upside: 17%

Cost of debt 1.68%Tax rate 26.00%After-tax cost of debt 1.24%

Share of Equity: 78%Share of Debt: 22%WACC 6.13%


Appendix X


Appendix XI


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