Mu RanNan LiangYa ZuoYang HanYuwei Hong December 1, 2011

Agenda

• Introduction • Macroeconomic and industry overview• Company and business overview • Relevant stock market prospects• Financial analysis • Multiple valuation • Financial projections• DCF valuation• Recommendation

Introduction

• The Cheesecake Factory– Upscale, casual, full-service dining restaurants

• Industry– Chain restaurants

• Selection reasons– Interests– Operations and management – Financial health – Few analyst coverage

Macroeconomic Overview

• Real GDP

Source: Capital IQ MacroEconomic 2011 Nov 30

Macroeconomic Overview

• Unemployment Rate

Source: Capital IQ MacroEconomic 2011 Nov 30

Macroeconomic Overview

• Consumer Confidence Index

Source: Capital IQ MacroEconomic 2011 Nov 30

Macroeconomic Overview

• Consumer spending

Data Source: ISIB Consumer Spending Report 2011

Industry Overview

• Chain Restaurant– Providing food services to patrons who order and are served while

seated (i.e. waiter or waitress service) and pay after eating– Products and services segmentations

– Major players

Source: ISIB Chain Restaurants in the US Industry Report 2011

Major Markets

• Income demographics • Age demographics

Data Source: ISIB Chain Restaurants in the US Industry Report 2011

Key Success Factors

Industry Performance

Declining industry’s revenue

growth rate in past few years

Data Source: ISIB Chain Restaurants in the US Industry Report 2011

• Industry’s annual revenue

Key External Drivers

Expected to increase slowly potential opportunity for the industry

Expected to increase slowly potential opportunity for the industry

Expected to increase threatens operators in the industry

Expected to increase potential threat to the industry

Expected to increase slowly potential opportunity for the industry

Data Source: ISIB Chain Restaurants in the US Industry Report 2011, ISIB Consumer sentiment index report, ISIB consumer spending report, ISIB households over $100,000 report, ISIB healthy eating index report

Industry Structure

• Barriers to Entry: Low• Competition Level: High• Concentration Level: Low• Life Cycle Stage: Mature• Revenue Volatility: Low• Capital Intensity: Medium• Industry Assistance: Low• Regulation Level: Medium• Technology Change: Medium• Industry Globalization: Low

Industry Trend

• Restaurants will offer new and healthy foods to survive in a competitive market

• The domestic market is increasingly becoming saturated. Therefore, some major operators are continuing to invest internationally through franchises

• Restaurants will continue to invest in technology, including electronic customer ordering, labor scheduling and electronic product ordering systems

US Bread Production Industry

• Manufactures bread and bakery products, such as cakes, muffins, pastries, pies and other similar baked goods.

Data Source: ISIB Bread Production in the US Industry Report 2011

Company OverviewEvolution

Data Source: Annual Report Fiscal 2011

Company OverviewBrief Description

The sale in 2010 is The sale in 2010 is $1,659,404 $1,659,404

Company OverviewBrands

Data Source: Annual Report Fiscal 2011

Company Overview Competitive Advantage

Data Source: Annual Report Fiscal 2011

Company OverviewFuture Expansion

Data Source: Annual Report Fiscal 2011

Company OverviewFuture Expansion

Data Source: Annual Report Fiscal 2011

Company Overview Risk Factors Analysis

Data Source: Annual Report Fiscal 2011

Stock OverviewHistory Price

Data Source: Capital IQ

Stock Overview 8 competitors

Data Source: Capital IQ

• No dividends– Past– future

• Stock Repurchase– 2008: 2.1 million– 2010: 9.6 million– 2011-2012

• Stock Options– Employees

Stock OverviewRelevant Policy

Data Source: Annual Report fiscal 2011

Financial AnalysisRevenues

Data Source: Annual Report fiscal 2011

  2006 2007 2008 2009 2010Profitability Return on Assets % 6.8% 6.3% 4.9% 5.9% 7.7% Return on Equity % 11.4% 13.1% 11.6% 8.3% 13.8%

Margin Analysis Gross Margin % 41.2% 42.3% 40.9% 42.4% 42.8% SG&A Margin % 5.5% 5.6% 5.2% 5.9% 5.8% EBIT Margin % 8.1% 7.3% 5.6% 6.4% 7.7%

Asset Turnover Total Asset Turnover 1.3x 1.4x 1.4x 1.5x 1.6x Fixed Asset Turnover 2.0x 1.9x 1.9x 1.9x 2.1x Accounts Receivable Turnover 133.2x 131.5x 134.5x 134.1x 120.5x Inventory Turnover 38.8x 38.9x 40.3x 40.7x 42.0x

Long Term Solvency Total Debt/Equity 5.5% 40.0% 76.3% 30.2% 8.8% Total Debt/Capital 5.2% 28.6% 43.3% 23.2% 8.1% EBIT / Interest Exp. 56.9x 10.2x 6.1x 4.4x 7.6x EBITDA / Interest Exp. 85.1x 16.1x 11.1x 7.6x 11.9x

Financial AnalysisRatios

Data Source: Annual Report fiscal 2011

DuPont Analysis

2006 2007 2008 2009 2010tax burden 71.85% 70.00% 71.38% 73.48% 73.56%

interest burden 105.89% 95.36% 84.04% 69.60% 86.65%operating profit margin 8.12% 7.33% 5.43% 4.60% 7.73%

asset turnover 126.51% 131.93% 140.59% 153.05% 161.36%leverage 146.12% 203.54% 252.48% 202.81% 173.62%

ROE 11.42% 13.14% 11.55% 8.30% 13.80%

Data Source: Annual Report fiscal 2011

Comparable

• Brinker International Inc. (NYSE:EAT)• Market share: 4.4%• Industry Brand Names: Chili’s Grill &

Bar, On the Border Mexican Grill & Cantina and Maggiano’s Little Italy

• 1,550 restaurants

• Darden Restaurants, Inc. (NYSE:DRI)• Market share: 14.3%• Industry Brand Names: Red Lobster,

Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze and Seasons 52

• 1,800 restaurants

Source: ISIB Chain Restaurants in the US Industry Report 2011

Comparable

• DineEquity, Inc. (NYSE:DIN)• Market share: 1.9% • Industry Brand Names:

Applebee’s Bar & Grill and IHOP• 2,000 Applebee’s restaurants• 1,500 IHOP restaurants

• P.F. Chang's China Bistro, Inc. (NasdaqGS:PFCB)

• Industry Brand Names: P.F. Chang's China Bistro and Pei Wei Asian Diner.

• 201 full service Bistro restaurants• 168 quick casual Pei Wei

restaurantsSource: ISIB Chain Restaurants in the US Industry Report 2011

Comparable

Buffalo Wild Wings Inc. (Nasdaq: BWLD)800 restaurants

Ruby Tuesday Inc. (NYSE: RT)746 restaurants

Panera Bread Co. (Nasdaq: PNRA) 1,467 bakery-cafes

Texas Roadhouse Inc. (Nasdaq: TXRH)350 restaurants

Data Source: Capital IQ

Public Comps Analysis

Data Source: Capital IQ

Public Comps Analysis

Data Source: Capital IQ

Recommendation

WACC=12.45%