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November 2019
PepsiCo Investment HighlightsNovember 24, 2019
Disclaimer
The analyses and conclusions of Queen’s Capital contained herein are based on publicly available information. The analyses provided
may include certain statements, estimates and projections prepared with respect to, among other things, the historical and anticipated
operating performance of the companies, access to capital markets and the values of assets and liabilities.
Such statements, estimates, and projections reflect various assumptions by Queen’s Capital concerning anticipated results that are
inherently subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for
illustrative purposes. Actual results may vary materially from the estimates and projected results contained herein.
Queen’s Capital assumes no responsibility or liability for any error, inaccuracy, or omission contained that may be made of such
information by the viewer. No information herein may be replicated without prior consent by the Executive Board of Queen’s Capital.
1
2
Overview
Company Description
Company Overview
Source: Investor Presentation
Note: Market Data as of 22-Nov-19
• PepsiCo is an American multinational
food, snack, and beverage corporation
founded in 1898, with products offered
in over 200 countries and serving over
1 billion customers daily
• Headquartered in Harrison, NY, it is
the second largest food and beverage
business in the world, behind Nestle
• As of 2018, Pepsi was advertised on
TV more than any other beverage in
the United States(Statista)
1880: Recipe
for soft drink
developed
1898: Coins
the name
“Pepsi-Cola”
1902: Creates
the Pepsi-Cola
Company
1965:
Merger with
Frito-Lay Inc.
1988:
Acquisition
of Tropicana
2001:
Merger with
Quaker Oats
Company History
2019: Pepsi
as we know
it today
Stock Price: US$134.07 52-Wk Range US$105.03 –
US$140.45 ‘
Market Cap: US$187.0 bnEnterprise
Value:US$215.3bn
LTM Revenue: US$66.0bn LTM EBIT: US$10.0bn
Dividend Yield: 2.85% LTM EPS: US$8.88 / Share
Key Financial Information
3
Description of Key Operating Segments
Revenue Segmentation
Frito-Lay North America (FLNA)
Branded food and snack businesses in the
United States and Canada
Quaker Foods North America (QFNA)
Cereal, rice, pasta and other branded food
businesses in the United States and Canada
PepsiCo Beverages North America (PBNA)
Beverage businesses in the United States and
Canada
Latin America (LatAm)
Beverage, food and snack businesses in Latin
America
Europe Sub-Saharan Africa (ESSA)
Beverage, food and snack businesses in Europe
and Sub-Saharan Africa
Asia, Middle East and North Africa (AMENA)
Beverage, food and snack businesses in Asia,
the Middle East and North Africa
North American International
4
$5,456 (33%)
$3,891 (24%)
$3,161 (19%)
$1,868 (11%)
$1,542(9%)
$567(4%)
$17,188
billion
Year-Over-Year Q3 Revenue Breakdown
Portfolio Overview
$5,643(33%)
$4,105(24%)
$3,347 (20%)
$1,904 (11%)
$1,613(9%)
$576(3%)
$16.485
billion
PepsiCo is divided into six segments consisting of its major products and geographies
PepsiCo Beverages
North America
FritoLay
North America
Q3 2018 Q3 2019
European Sub-
Sharan Africa
Latin
America
Asia, Middle East
And North Africa
Quaker Foods
North America
4.3%
5
Price Volume Chart
Company Description
Company Overview
Capitalization Table
0.0
10.0
20.0
30.0
40.0
50.0
$90.00
$104.00
$118.00
$132.00
$146.00
$160.00
12-Nov-18 12-Mar-19 12-Jul-19 12-Nov-19
Current Capitalization
Enterprise Value $213.5
(+) Cash and Cash Equivalents $5.8
('-') Total Debt $32.6
('-') Value of Preferred Equity -
('-') Minority Interest $0.1
Total Equity Value $186.6
Basic Shares Outstanding 1.394
Current Share Price $133.81
9-Jul-19: PepsiCo Tops
Q2 Earnings Forecast,
Holds 2019 Guidance,
as Snack Sales Impress
76.9%
23.1%
Institutional
Retail
Breakdown by Investor Type
6
Ten Largest Shareholders
Shareholder Composition
Company Overview
Source: Bloomberg (November 2019)
Company NamePosition
(millions of shares)
Value
(US$ millions)
1 Vanguard Group 113,728 $15,150,905
2 BlackRock 103,364 $13,770,161
3 State Street 66,761 $8,893,941
4 Bank of America 26,205 $3,491,011
5 Wellington Manement 24,652 $3,284,184
6 Bank of New York 22,975 $3,060,753
7 Geode Capital Manement 19,985 $2,662,352
8 Northern Trust 19,625 $2,614,427
9 Invesco 17,163 $2,286,439
10 Fidelity Investments 15,614 $2,080,066
• PepsiCo shareholder base consists of several
large institutions holding large blocks, each of
whom are well diversified
• Company insiders own about 0.20% (~$350
million) of its shares
• This helps validate the use of the Capital
Asset Pricing Model (CAPM)
Ke = rf + β(Rm – rf)
Capital Asset Pricing Model
Ten Largest Shareholders
7
Management Team
Company Overview
Ramon Laguarta
Chairman and
Chief Executive Officer
Hugh Johnston
Vice Chairman and Chief
Financial Officer
Silviu Popovici
Chief Executive Officer
Europe
Paula Santilli
Chief Executive Officer
Latin America
Paula Santilli
Chief Executive Officer
Latin America
Kirk Tanner
Chief Executive Officer
Beverages North America
Eugene Willemsen
Chief Executive Officer
Africa Middle East and Asia
Steven Williams
Chief Executive Officer
Foods North America
8
Returns by Competitor
Company Overview
Share Price Returns (Indexed to 100)
PepsiCo has delivered consistent returns that have outpaced its counterpart,
Coke, over the last five years
70.0%
100.0%
130.0%
160.0%
190.0%
220.0%
250.0%
280.0%
22-Nov-14 22-Nov-15 22-Nov-16 22-Nov-17 22-Nov-18 22-Nov-19
KEURIG Dr. Pepper (KDP US Equity)
Monster (MNST US Equity)
Pepsi (PEP US Equity)
Coke (KO US Equity)
Keurig Acquisition of Dr Pepper Snapple
Closes, Removed Special Dividend of
$103.75 to Snapple Shareholders
232.3%
161.7%
135.9%
119.8%
9
Dividends (Last 12 Months) Over Time
Company Overview
Dividends have increased for 47 consecutive years, providing a consistent 3% yield on the stock,
Although in this time PepsiCo has maintained approximately a ~0.50% dividend payout ratio
Quarterly Dividend ($)
Dividend Yield$1.700
$1.860
$2.060
$2.210
$2.620
$2.910
$3.220
$3.765
3.3%
2.8%
3.1%
2.8% 2.7% 2.7%3.0%
2.7%
31-Mar-09 30-Sep-10 30-Mar-12 30-Sep-13 31-Mar-15 30-Sep-16 30-Mar-18 30-Sep-19
10
Global Soft Drink Consumption By Region
Non-Alcoholic Beverages and Snacks Industry
Recent Trends
Major Competitors
• Pepsi and Coca-Cola comprise 42% of the liquid
beverage market
• Global soft drinks market forecasted to grow at a
CAGR of 4.5% during 2017-2022
• Growing middle class, increasing disposable
income, and the continuous addition of new
products drives growth
• Factors that determine level of competition
include brand recognition, established customer
and supplier relationships, innovation, and
acquisitions
300
350
400
450
500
550
600
11/01/2016 11/01/2017 11/01/2018 11/01/2019
Beverages Snack Foods
35%
27%
21%
15%
2%
Asia-Pacific
US
Europe
Rest of the World
Middle East
S&P 500 Soft Drinks Index (Pepsi, Coke, Monster)
Major CompetitorsUS$562.57
11
Non-Alcoholic Beverages and Snacks Industry
Market Share by Product
Sourcse: Statista
2.3
9.74.8
9 10.4
0.7 3.3
-0.7
-10.8
3
37.2
7.1
0.9 3.34
2.8
1.4
-5-0.7
4.3
-0.6
-20
-10
0
10
20
30
40
50
60
CSD EnergyDrinks
BottledWater
SparklingWater
SportsDrinks
Juices SaltySnacks
Kellogs Monster Coke Pepsi Market
12-Week Sales Growth Commentary
• The broader energy drink
market is rapidly growing as
consumers move away from
sugar drinks
• Rockstar Energy drinks saw a
9.6% decrease in sales from
2017-2018
• Sparkling water sales
considerably boosted with the
launch of Bubly water in 2018,
which has since been gaining
rapid market share
• The sparkling water market is
predicted to double In size from
2015 – 2021
• Pepsi-owned Gatorade is by far
the most dominant sports drink,
providing them with a 29.3%
market share in that segment
12
Growing Dominance in Snacks Segment
Investment Thesis I – Consistent Product Innovation
Other
Soft Drinks
Sports
Drinks
Energy
DrinksJuice and
Fruit Drinks
Bottled
Water
Cola
Drinks
Healthier
Snacks
Other
Bits and BitesChips
Oats and
GranolaTea
Beverages Snacks
Other
Soft Drinks
Sports
Drinks
Energy
DrinksJuice and
Fruit Drinks
Bottled
Water
Cola
DrinksTea
Beverages Snacks
?
PepsiCo continues to outpace competitors in adapting to changing consumer demands and trends
within the industry, consistently growing their share of wallet
13
Notable Acquisitions
PepsiCo has a long history of making acquisitions
Investment Thesis I – Consistent Product Innovation (cont’d)
1977 – PepsiCo
acquires Pizza Hut
1978 – PepsiCo
acquires Taco Bell
1986 – PepsiCo
acquires KFC
1989 – PepsiCo
acquires Walker Crisps
and Smith Crisps
1998 – PepsiCo
acquires Tropicana
2006 – PepsiCo
acquires Naked
Juice, Izze, and
Stacy’s Pita Chips
2011 – PepsiCo
acquires Mabel, a
leading producer of
cookies in Brazil
2018 – PepsiCo
acquires SodaStream
PepsiCo maintains a healthy cash position of ~$5.5bn leaving it poised to continue to grow its
portfolio. However, it only has a current ratio is only 0.9537
List of Peers
Company Market Cap
$345,829.60
$259,993.57
$215,312.96
$93,235.90
$66,432.25
$58,126.66
$30,456.99
$30,241.00
$24,788.57
$22,556.57
14
PepsiCo is well positioned to create and deliver value to its shareholders
Investment Thesis II – Strong Financial Performance
Source: Company Investor Presentation
13.1%Organic Revenue Growth
Since 2012
+160 bpsCore Operating
Margin Expansion
Since 2012
9%Core Constant Currency
EPS Growth
Since 2012
+9.5 ppsCore Net ROIC
Since 2012
9% CAGRDividends Per Share
Since 2012
$45BCumulative Cash Returned
to Shareholders
Since 2012
Over the long term, PepsiCo is targeting between 4 – 6 % organic revenue growth and
20 – 30 BPS in margin expansion
15
RisksNo Significant Threats Posed to the Business
Source: Company Filings
Potential Risks
O1
C1 O2
Highly
Likely
Not
Likely
Low
Impact
High
Impact
Competitor Risk
Operational Risk
Growth in Developing & Emerging Markets (C1)
Changing Consumer Demands (O1)
Changing Consumer Demands
Growing health concerns
relating to sugary beverages
Risk Mitigating Factor
Increased product
diversification to include
healthier products
Regulation Regarding Disposable Plastics
Potential increase in costs or
negative impact on consumer
demand
Risk Mitigating Factor
Transition to more
environmentally friendly
packaging
Growth in Developing & Emerging Markets
Poor growth due to cultural
differences, consumer
preferences and competition
Risk Mitigating Factor
Acquiring businesses and
developing strategic business
alliances Regulation Regarding Disposable Plastics (O2)
16
Comparable Companies Multiples
Valuation
Source: Bloomberg
Price Mkt. Cap. Ent. Val. EV / Sales EV / EBITDA P / E
(US$ mm) (US$ mm) LTM 2019E 2020E LTM 2019E 2020E LTM 2019E 2020E
Beverage Producers
Coca-Cola Co/The $53.03 $227,206.57 $259,993.57 7.2x 7.0x 6.7x 22.0x 22.1x 20.5x 24.7x 25.1x 23.4x
Keurig Dr Pepper Inc $30.30 $42,625.66 $58,126.66 5.3x 5.2x 5.1x 17.0x 17.3x 15.8x 29.1x 24.7x 21.4x
Monster Beverage Corp $58.63 $31,524.28 $30,241.00 7.4x 7.2x 6.6x 20.5x 20.3x 18.7x 28.6x 28.3x 26.1x
Mean 6.6x 6.2x 5.8x 18.7x 18.8x 17.2x 28.9x 26.5x 23.8x
Median 6.3x 6.2x 5.8x 18.7x 18.8x 17.2x 28.9x 26.5x 23.8x
Convenience Food Producers
Campbell Soup Co $46.83 $14,104.57 $22,556.57 2.4x 2.8x 2.8x 12.4x 13.8x 13.8x 18.4x 18.5x 17.7x
Conagra Brands Inc $28.73 $13,981.57 $24,788.57 2.5x 2.3x 2.3x 12.5x 11.6x 11.1x 15.2x 13.7x 12.2x
Kellogg Co $64.51 $22,003.99 $30,456.99 2.2x 2.3x 2.3x 11.8x 13.6x 13.3x 18.0x 16.6x 16.2x
Kraft Heinz Co/The $30.54 $37,294.25 $66,432.25 2.6x 2.7x 2.7x 10.3x 11.0x 11.3x 9.2x 10.9x 11.7x
Mondelez International Inc $51.80 $74,582.90 $93,235.90 3.6x 3.6x 3.5x 16.8x 17.9x 16.8x 20.5x 20.8x 19.7x
Nestle SA $103.10 $306,825.60 $345,829.60 3.7x 3.7x 3.7x 19.2x 17.3x 16.6x 29.1x 23.7x 22.8x
Mean 2.8x 2.9x 2.9x 13.8x 14.2x 13.8x 18.4x 17.4x 16.7x
Median 2.5x 2.7x 2.7x 12.4x 13.7x 13.6x 18.2x 17.5x 16.9x
PepsiCo Inc $134.07 $186,952.0 $215,313.0 3.3x 3.2x 3.1x 15.8x 16.5x 15.4x 24.1x 24.1x 22.6x
Weight EV / Sales EV / EBITDA EV / EBIT P / E
LTM 2019E 2020E LTM 2019E 2020E LTM 2019E 2020E LTM 2019E 2020E
Coca-Cola Co/The 50.0% 7.2x 7.0x 6.7x 22.0x 22.1x 20.5x 25.2x 25.3x 23.4x 24.7x 25.1x 23.4x
Beverage Producers 25.0% 6.3x 6.2x 5.8x 18.7x 18.8x 17.2x 21.7x 20.7x 18.9x 28.9x 26.5x 23.8x
Convenience Food Producers 25.0% 2.5x 2.7x 2.7x 12.4x 13.7x 13.6x 15.9x 17.5x 17.4x 18.2x 17.5x 16.9x
Weighted Multiples 100.0% 5.8x 5.7x 5.5x 18.8x 19.2x 17.9x 22.0x 22.2x 20.8x 24.1x 23.5x 21.9x
Implied Share Price $255.61 $254.75 $254.92 $163.02 $159.66 $159.33 $149.84 $148.62 $147.65 $134.27 $130.91 $130.00
PepsiCo trades at a discount to other beverage producers and a slight premium to its
Convenience Food Producers universe
17
Comparable Companies Key Metrics
Valuation
Source: Bloomberg
Revenue Growth ROIC ROCE ROA Gross Margin EBITDA Margin Profit Margin
3-Year CAGR 3-Year Average 3-Year Average 3-Year Average 3-Year Average 3-Year Average 3-Year Average
Beverage Producers
Coca-Cola Co/The -8.2% 7.1% 23.6% 5.4% 61.4% 30.5% 23.2%
Keurig Dr Pepper Inc 5.8% 16.0% 39.8% 9.6% 55.6% 23.6% 12.4%
Monster Beverage Corp 11.8% 22.1% 22.2% 18.1% 62.5% 36.4% 24.6%
Mean 3.2% 15.1% 28.5% 11.0% 59.8% 30.2% 20.1%
Median 5.8% 16.0% 23.6% 9.6% 61.4% 30.5% 23.2%
Convenience Food Producers
Campbell Soup Co 0.6% 9.4% 30.2% 5.1% 35.4% 20.2% 5.9%
Conagra Brands Inc 3.3% 8.7% 16.7% 5.8% 29.1% 15.9% 8.5%
Kellogg Co 0.0% 11.2% 50.6% 6.8% 36.2% 15.5% 8.3%
Kraft Heinz Co/The -1.5% 1.5% 2.1% 1.0% 34.5% 6.1% 5.2%
Mondelez International Inc -4.3% 6.7% 10.1% 4.2% 39.2% 15.2% 10.1%
Nestle SA 1.0% 14.0% 14.0% 6.5% 50.0% 17.7% 9.5%
Mean -0.2% 8.6% 20.6% 4.9% 37.4% 15.1% 7.9%
Median 0.3% 9.1% 15.3% 5.5% 35.8% 15.7% 8.4%
PepsiCo Inc 0.6% 17.6% 66.0% 10.4% 54.8% 19.5% 12.4%
18
Precedent Transaction Analysis
Valuation
Source: Bloomberg
PepsiCo trades at a discount to other beverage producers, and is a relatively better buy
on profitability metrics than other Convenience Food Providers
Enterprise Value / Premiums Paid
Date Transaction Purchase Equity Enterprise LTM LTM LTM Days Prior to Unaffected
Announced Acquirer Target Type Consideration Value Value Sales EBITDA EBIT 1 7 30
8/28/2019 Pernod Ricard SA Castle Brands Inc Cash $216 $243 2.6x 70.0x 82.7x 92% 94% 117%
11/22/2018 Berli Jucker PCL White Group PCL Cash n.a. $49 3.8x 24.4x 28.6x 14% 13% 13%
8/20/2018 PepsiCo Inc SodaStream
International Ltd
Cash $3,265 $3,169 5.5x 28.5x 36.5x 11% 12% 30%
2/12/2018 Cott Corp Crystal Rock
Holdings Inc
Cash $21 $34 0.6x 8.7x 43.5x 23% 22% 21%
12/15/2016 Heineken NV Punch Taverns Ltd Cash $497 $1,982 3.9x 7.2x 7.5x 2% 31% 46%
3/15/2016 Davide Campari-
Milano SpA
Societe des
Produits Marnier
Lapostolle SA
Cash $386 $376 4.5x 21.8x 28.9x 60% 60% 66%
12/7/2015 Mondelez
International Inc.
Keurig Green
Mountain Inc
Cash $13,790 $14,065 3.1x 13.6x 18.4x 78% 74% 90%
Mean 3.4x 24.9x 35.2x 40% 44% 55%
Median 3.8x 21.8x 28.9x 23% 31% 46%
19
Forecast Period Output
Discounted Cash Flows
Historical Period CAGR Projection Period CAGR
2016A 2017A 2018A 2016 - 2018 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2019 - 2025
Total Revenues $62.8 $63.5 $64.7 1.5% $67.1 $69.7 $72.3 $75.1 $77.9 $80.9 $84.0 3.8%
% Growth n.a. 1.2% 1.8% 3.8% 3.8% 3.8% 3.8% 3.8% 3.8% 3.8%
EBITDA $12.2 $12.9 $12.8 2.7% $13.5 $14.0 $14.5 $15.0 $15.6 $16.2 $16.8 3.8%
% Growth n.a. 6.0% (0.6%) 5.1% 3.8% 3.8% 3.8% 3.8% 3.8% 3.8%
% Margin 19.4% 20.3% 19.8% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%
EBIT $9.8 $10.5 $10.4 3.1% $10.9 $11.4 $11.8 $12.2 $12.7 $13.2 $13.7 3.8%
% Growth n.a. 7.4% (1.0%) 5.2% 3.8% 3.8% 3.8% 3.8% 3.8% 3.8%
% Margin 15.6% 16.5% 16.1% 16.3% 16.3% 16.3% 16.3% 16.3% 16.3% 16.3%
Unlevered Taxes @ 21.5% $2.1 $2.3 $2.2 $2.4 $2.4 $2.5 $2.6 $2.7 $2.8 $2.9
Unlevered Net Income $7.7 $8.2 $8.2 $8.6 $8.9 $9.3 $9.6 $10.0 $10.4 $10.7
Add: D&A $2.4 $2.4 $2.4 $2.5 $2.6 $2.7 $2.8 $2.9 $3.0 $3.1
Less: Capex $3.0 $3.0 $3.3 $3.3 $3.4 $3.5 $3.7 $3.8 $3.9 $4.1
Less: Increases in NWC $0.5 $0.2 ($2.8) $0.5 $0.5 $0.5 $0.5 $0.5 $0.5 $0.6
Unlevered FCF $6.5 $7.4 $10.1 24.2% $7.4 $7.7 $8.0 $8.3 $8.6 $8.9 $9.2 3.8%
Discount Rate @ 4.18% 4.2% 4.2% 4.2% 4.2% 4.2% 4.2% 4.2%
Discount Period 0.5 1.5 2.5 3.5 4.5 5.5 6.5
Present Value FCF $7.2 $7.2 $7.2 $7.2 $7.1 $7.1 $7.1
Assumptions
Sales (% growth) n.a. 1.2% 1.8% 3.8% 3.8% 3.8% 3.8% 3.8% 3.8% 3.8%
COGS (% sales) 44.9% 45.3% 45.4% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0%
SG&A and Other (% sales) 39.5% 38.1% 38.5% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7%
Dep. & Amort. (% sales) 3.8% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7%
Effective Tax Rate 21.5% 21.5% 21.5% 21.5% 21.5% 21.5% 21.5% 21.5% 21.5% 21.5%
CapEx (% sales) 4.8% 4.7% 5.1% 4.9% 4.9% 4.9% 4.9% 4.9% 4.9% 4.9%
Working Capital (% COGS) 1.7% 0.8% -9.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
3.8% Organic Revenue CAGR since 2012, most other line items have been stabilized and held as a
percentage of sales
20
$12.2
$12.9 $12.8
$13.5
$14.0
$14.5
$15.0
$15.6
$16.2
$16.8
2016A 2017A 2018A 2019A 2020A 2021A 2022A 2023A 2024A 2025A
$62.8 $63.5 $64.7
$67.1
$69.7
$72.3
$75.1
$77.9
$80.9
$84.0
2016A 2017A 2018A 2019A 2020A 2021A 2022A 2023A 2024A 2025A
$9.8
$10.5 $10.4
$10.9 $11.4
$11.8 $12.2
$12.7 $13.2
$13.7
2016A 2017A 2018A 2019A 2020A 2021A 2022A 2023A 2024A 2025A
$9.8
$10.5 $10.4
$10.9 $11.4
$11.8 $12.2
$12.7 $13.2
$13.7
2016A 2017A 2018A 2019A 2020A 2021A 2022A 2023A 2024A 2025A
Assumptions
Discounted Cash Flows Output
Revenue EBITDA
Earnings Before Interest and Taxes (EBIT) Unlevered Free Cash Flows (UFCF)
21
Cost of Capital Calculation
Discounted Cash Flows Output
PepsiCo has a low beta, which when combined with very low U.S. government yields contributes to an
extremely low cost of capital. We added an equity premium of 0.5% to account for market uncertainty
WACC Calculation Comparable Companies Unlevered Beta
Capital Structure Levered Market Val. Market Val. Debt/ Marginal Unlevered
Debt-to-Total Capitalization 15.8% Company Beta(4) of Debt of Equity Equity Tax Rate Beta
Equity-to-Total Capitalization 84.2% Coke 0.55 $43.8 $225.7 19.4% 26.0% 0.48
Monster 1.12 0.0 31.5 0.1% 22.7% 1.12
Cost of Debt Keurig Dr Pepper 0.56 15.6 42.2 36.9% 25.7% 0.44
Cost of Debt 2.1%
Tax Rate 21.5%
After-Tax Cost of Debt 1.7%
Mean 0.74 18.8% 0.68
Cost of Equity Median 0.56 19.4% 0.48
Risk-free Rate 1.8%
Market Risk Premium 5.1% ValueCo Relevered Beta
Levered Beta 0.55 Mean Target Target
Cost of Equity 5.15% Unlevered Debt / Marginal Relevered
Beta Equity Tax Rate Beta
WACC 4.60% Relevered Beta 0.48 18.8% 21.5% 0.55
WACC Calculation Comparable Companies Unlevered Beta
Capital Structure Levered Market Val. Market Val. Debt/ Marginal Unlevered
Debt-to-Total Capitalization 15.8% Company Beta(4) of Debt of Equity Equity Tax Rate Beta
Equity-to-Total Capitalization 84.2% Coke 0.55 $43.8 $225.7 19.4% 26.0% 0.48
Monster 1.12 0.0 31.5 0.1% 22.7% 1.12
Cost of Debt Keurig Dr Pepper 0.56 15.6 42.2 36.9% 25.7% 0.44
Cost of Debt 2.1%
Tax Rate 21.5%
After-Tax Cost of Debt 1.7%
Mean 0.74 18.8% 0.68
Cost of Equity Median 0.56 19.4% 0.48
Risk-free Rate 1.8%
Market Risk Premium 5.1% ValueCo Relevered Beta
Levered Beta 0.55 Mean Target Target
Cost of Equity 5.15% Unlevered Debt / Marginal Relevered
Beta Equity Tax Rate Beta
WACC 4.60% Relevered Beta 0.48 18.8% 21.5% 0.55
22
Implied Share Price and Sensitivity Analysis
Discounted Cash Flows
Teminal Growth Method Implied Equity Value Multiple Method Implied Equity Value
Terminal UFCF $293.40 Implied Enterprise Val. $274.9 Terminal EBITDA $16.8 Implied Enterprise Val. $243.5
Discount Rate 4.2% Value of Cash $5.8 Exit Multiple 15.0x Value of Cash $5.8
Discount Period 6.5 Value of Debt $32.6 Terminal Value $252.4 Value of Debt $32.6
PV of Terminal Value $224.8 Value of Preferred Equity - Discount Rate 4.2% Value of Preferred Equity -
PV of Forecasted FCFs $50.1 Minority Interest $0.1 Discount Period 6.5 Minority Interest $0.1
Implied Enterprise Val. $274.9 Implied Equity Value $248.1 PV of Terminal Value $193.5 Implied Equity Value $216.7
FD Shares Outstanding 1.4 PV of Forecasted FCFs $50.1 FD Shares Outstanding 1.4
Intrinsic Value/Share $177.73 Implied Enterprise Val. $243.5 Intrinsic Value/Share $155.24
Share Price Sensitivity Implied Multiple
Perpetuity Growth Rate Multiple
155 0.0% 0.5% 1.0% 1.5% 2.0% 151 14.0x 14.5x 15.0x 15.5x 16.0x
3.6% $163.49 $187.91 $221.72 $271.63 $352.73 3.6% $151.57 $156.36 $161.16 $165.95 $170.74
4.1% $141.11 $159.09 $182.87 $215.79 $264.40 4.1% $146.82 $151.47 $156.11 $160.76 $165.41
4.6% $123.60 $137.30 $154.81 $177.98 $210.05 4.6% $142.24 $146.74 $151.25 $155.75 $160.25
5.1% $109.52 $120.26 $133.61 $150.67 $173.23 5.1% $137.81 $142.18 $146.54 $150.91 $155.27
5.6% $97.97 $106.56 $117.02 $130.03 $146.64 5.6% $133.53 $137.77 $142.00 $146.23 $150.47
WA
CC
WA
CC
Football Field Implied Share Price
Comparable Set Implied Share Price Weight
Comparable Companies $149.84 30%
Precedent Transactions $159.49 30%
Discounted Cash Flows $154.81 40%
Implied Share Price $154.72 100%
Current Share Price $134.07
Implied Upside 15.4%
$134.07
$140.35
$151.25
$164.02
$192.03
$175.00
ComparableCompanies
PrecedentTransactions
Discounted CashFlows
Position –
Queen’s Capital
23
Alex Collins
Portfolio Manager
Taras Wylynko
Junior Analyst
Thank You