Portfolio Managers:Honglu Liu

Min Min ChenRafi

Qi HePresented April 17, 2012

04/21/23

Introduction

• SBUX Current Price @2012/4/16: $ 59.65

• GICS map: 30201030• Industry: Coffee Production• Founded in 1971 as a coffee bean

roaster and retailer• Strong customer loyalty (Not just

coffee)

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Industry Overview• Coffee consumers in the United States

spending an approximated 9.2 billion dollars in the retail sector and 8.7 billion dollars in the foodservice sector every year.

• That is on average $164.71 per year on coffee

Source: www.coffeeresearch.org04/21/23

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Industry Overview

Industry Overview - External Driver

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Macroeconomic

Souce:CapitalIQ Macroeconomic

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• Market Cap : 44.94 Billion• P/E(ttm): 35.72• Forward P/E: 25.82• PEG Ratio: 1.71• 52-Week High: 61.98• 52-Week Low: 33.72

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Relevant Stock Market Prospects

Source: www.finance.yahoo.com

Relevant Stock Market Prospects

04/21/23Source: http://www.investorguide.com/stock-charts.php?ticker=SBUX

SBUX vs. S&P 500

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Relevant Stock Market Prospects

Source: http://www.investorguide.com/stock-charts.php?ticker=SBUX

SBUX vs. NASDAQ Index

04/21/23 Source: SBUX 10-k

Relevant Stock Market Prospects

Business review

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Brand Portfolio

Source: SBUX Company Profile

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Business review

Source: SBUX &10-k

Suppliers

•Coffee bean •Other diary products•Farmer Support Center

Starbucks

Products through•Stores•Grocery•Warehouse club•Food service•etc

Customers

•US 69%•International 22%•CPG 7%•Others 2%

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Business review

Source: SBUX 10-k

0%

10%

20%

30%

40%

50%

60%

70%

80%

Beverages Food Whole bean and soluble

coffees

Others

FY2009

FY2010

FY2011

Sales % by Products

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72.5%

17.2% 10.3%0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Total Americas Total CAP Total EMEA

Source: SBUX Q1 FY12 Store Counts By Country

Business review% of stores globally

38%63%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

US Int'l

Licensed

Co-operated

47%

% of Total Stores

Co-operated

Licensed

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Business review

17,244 stores globally

Source: SBUX Q1 FY12 Store Counts By Country

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Business review

Source: SBUX Q1 FY12 Store Counts By Country

6500

7000

7500

8000

8500

9000

9500

Licensed

Co-operated

17,244 stores globally

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Business review

Source: SBUX 10-k

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Business review

Source: SBUX 10-k

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Business review

Source: SBUX 10-k

04/21/23Source: SBUX 10-k

Business review

Financial Analysis

2007 2008 2009 2010 2011

Current Ratio .79 .80 1.29 1.55 1.83

Quick Ratio .47 .48 .87 1.24 1.36

Cash Ratio .13 .12 .38 .65 .5504/21/23 Data Source: SBUX 10-K

2008 2009 2010 2011

Receivables Turnover

33.63 32.55 37.33 33.95

Days Sales Outstanding

10.85 11.21 9.78 10.75

Inventory Turnover

12.60 11.81 13.74 11.95

Days Inventory on Hand

28.97 30.92 26.56 30.5504/21/23 Data Source: SBUX 10-K

2008 2009 2010 2011

Net Profit Margin

3% 4% 9% 11%

Gross Margin 16% 18% 22% 23%

ROA 6% 7% 16% 18%

ROE 13% 14% 28% 31%

Interest Coverage

9.44 14.37 43.41 51.9104/21/23 Data Source: SBUX 10-K

2008 2009 2010 2011

ROE 13% 14% 28% 31%

Tax Burden 69% 70% 66% 69%

Interest Burden 90% 100% 101% 105%

EBIT Margin 5% 6% 13% 15%

Asset Turnover 1.88 1.74 1.79 1.70

Leverage 2.31 2.03 1.78 1.7104/21/23 Data Source: SBUX 10-K

Key StatisticsClosing price on 4/16/2012 : $ 59.65Annual EPS (ttm): 1.67PEG ratio: 1.71D/A = 1%P/E (ttm): 35.72P/E (forward): 25.82Implied 1-yr growth in EPS: 38.34%

Graham g (5-7 year growth) : 13.61%

Greenblatt profitability ratios:1.EBIT/Tangible Assets = 46.67%2.EBIT/ Enterprise Value= 3.8% 1. + 2. = 50.47%

04/21/23 Data Source: SBUX 10-K

Public Comparable AnalysisPNRA DNKN MCD

Company Name

Panera Bread Dunkin’ Brands

McDonald’s Corp

Price per Share

161.9 31.29 97.64

D/A 0% 28% 11%

P/E 35.68 42.97 18.4

P/S 2.59 5.99 3.68

P/BV 7.2 5.01 6.93

EV/Revenue 2.48 7.96 4.03

EV/EBITDA 15.03 18.98 11.22

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ValueP/E $ 54.02 25%EV/EBITDA $ 43.62 25%EV/Revenue $ 75.70 25%P/BV $ 40.45 25%

Final Value $ 43.34

Data Source: Yahoo Finance

Financial Projection – DCF Analysis

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• - History Data: Balance Statement

2007 2008 2009 2010 2011Total Cash & ST Investment 438.7 322.3 666.1 1449.7 2050.7Total Assets 5,343.90 5,672.60 5,576.80 6,385.90 7,360.40Total Liability 3,059.80 3,181.70 2,519.90 2,703.60 2,973.10% of revenue 32.51% 30.64% 25.78% 25.25% 25.41%

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- History Data: Income Statement

Financial Projection – DCF Analysis

2007 2008 2009 2010 2011Total Net Revenue 9,411.50 10,383.00 9,774.60 10,707.40 11,700.40% of Growth 10.32% -5.86% 9.54% 9.27%Total Cost of Good Sold 7,509.20 8720.5 8014.4 8303.2 9016.4% of Revenues 79.79% 83.99% 81.99% 77.55% 77.06%Net Income 672.6 315.5 390.8 945.6 1,245.70% of margin 7.15% 3.04% 4.00% 8.83% 10.65%

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- WACC

Financial Projection – DCF Analysis

Rate AssumptionsTax Rate 30.00%

Risk Free Rate (10-yr) 3.00%

Market Risk Premium 5.00%

Spread Over Treasury 5.00%

Cost of Debt 6.25%

After-Tax Cost of Debt 4.38%

CAPM return 9.15%

Average ROE 21.82%

Cost of Equity 10.42%

Capital

Beta 1.23

Equity Value 44,898.00Debt 550Cash (Net of Restricted Cash) 2,051Net Debt (Debt - Cash) -1501.2

Enterprise Value 43,396.80Leverage -3.46%

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- AssumptionYear 1 Year 2 Year 3 Year 4 Year 52012 2013 2014 2015 2016

16.00% 16.00% 15.00% 12.00% 12.00% Base 1 14.10% 15.50% 14.10% 11.80% 11.50% Upside 2 16.00% 16.00% 15.00% 12.00% 12.00%

3 12.00% 12.00% 10.00% 10.00% 8.00%

72.00% 72.00% 72.00% 72.00% 72.00% Base 1 76.00% 75.10% 75.30% 78.60% 77.50% Upside 2 72.00% 72.00% 72.00% 72.00% 72.00%

3 80.00% 80.00% 80.00% 80.00% 80.00%

4.00% 4.00% 4.00% 4.00% 4.00% Base 1 5.00% 5.00% 5.00% 5.00% 5.00% Upside 2 4.00% 4.00% 4.00% 4.00% 4.00%

3 5.50% 5.50% 5.50% 5.50% 5.50%

11.00% 13.00% 6.00% 6.00% 6.00% Base 1 9.00% 10.00% 5.00% 4.00% 4.00% Upside 2 11.00% 13.00% 6.00% 6.00% 6.00%

3 5.00% 5.00% 5.00% 3.00% 3.00%

Downside

Cash Flow Statement AssumptionsCapital Expenditures (% of sales)

Downside

Income Statement AssumptionsSales (% growth)

Downside

Cost of Goods Sold (% sales)

Downside

SG&A (% sales)

Financial Projection – DCF Analysis

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• We use 10.5% WACC• Base Scenario: $34.43• Upside Scenario: $58.75• Downside Scenario: $ 17.62

- Results

Financial Projection – DCF Analysis

Current Shares

Shares Outstanding 748.3

Current Share Price $60.00

Recommendation

Watch List

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