Team D - Student Research Aerospace and Defense Sector IRC Documents... · 2015. 6. 22. · Team D...

Team D - Student Research This report is published for educational purposes only

CFA France Investment Research Challenge.

Important disclosures appear at the back of this report

Ticker: ZODIAC SA – ZC Recommendation: BUY

Price: 26.19€ Price Target: 29.58€

Highlights

Company highlights

• Valuation. A projected value of 29.58€ is found for ZODIAC SA’s share.

• Refocusing on aeronautics. By selling its ‘Marine’ branch, Zodiac has refocused on its core

business: aeronautics.

• Zodiac’s development is driven by external growth. After a vigorous expansion phase, it is

expected that more conservative cash deployment strategies will be followed to build up liquidity.

Financial determinants

• Zodiac’s results are thriving. Net income increased by 71% over the past 4 years. The company

managed to reduce its gearing to 67%, thereby lowering its financial burden and strengthening its

resource pool for future external growth operations.

Future value determinants:

• The dynamism of the aeronautical sector is key for the group. Despite the economic crisis, the

long-term perspectives are promising: Air-passenger traffic is expected to keep increasing at an

annual average rate of 4.9%.

• The company will have to deal with the weakness of the dollar. With about 50% of its sales

realized in dollars, Zodiac is particularly exposed to the Euro/Dollar exchange rate.

___________________________________________________________________________ _________________________________________ Graph: ZODIAC SA’s stock price variations (2006 - 2009) Table: ZODIAC SA Market

Profile

Earnings/Share Feb. Aug. Year P/E Ratio

2006A 1.25 1.72 2.97 20.35

2007A 1.25 1.26 2.51 19.30

2008A 1.13 1.36 2.49 10.72

2009E 1.56 1.55 3.11 13.45

52 Week Price Range 23.73 - 42.93

Average Daily Volume 364.858

Beta 0.93

Dividend Yield (Estimated) 3.96%

Shares Outstanding 55,670,400

Market Capitalization 1,594,956,960

Institutional Holdings 29.05%

Insider Holdings 35.48%

Book Value per Share 21.06

Debt to Total Capital 54.55%

Return on Equity 14.18%

ZODIAC SA

Industry: Aerospace

and Defense

January 1st, 2009

Frederic Baranger

[email protected]

0033 688971136

Olivier Billiet

[email protected]

0033 684 928 973

0032 479 407 062

Hussain Sheikh

[email protected]

0033 630721439

Quentin Rukingama

[email protected]

0033 69827989

Kristof Vandenbulcke

Kristof_vandenbulcke@

hotmail.com

0032 474 75 78 04

Aerospace and Defense Sector

-70,00%

-60,00%

-50,00%

-40,00%

-30,00%

-20,00%

-10,00%

0,00%

10,00%

20,00%

30,00%

Zodiac

SBF 250

2006

2007

2008

Source : Reuters, Datasteam

Source: Datasteam

CFA France Investment Research

Challenge Student Research

January 1st, 2009

II

Investment summary

Target price January 2010: 29.58€ - BUY

According to our calculations, the expectation is that ZODIAC SA's share price will increase to

29.58€ in the year to come. This represents an upward potential of 12.94%. Because of the

current stock price volatility, the start price of 26.19 € was computed as the average of the last

15 days of December 2008.

Main risk factors in the aeronautical industry:

� Temporary economic slowdown in US/EU markets as well as in emerging countries

� Tensions on raw material markets affect both manufacturers and airlines

� Instability of the Euro/Dollar exchange rate and forecasts of a weakening Dollar

Main opportunities in the aeronautical industry:

� Order books are full for the 7.5 years to come for both Airbus & Boeing, following an

exceptional 2007 year

� Kick in of A380 and B787 programs

� Air passenger traffic growth is expected to remain dynamic, with an average growth of 4.9%

per year1

� New constraints on the aircraft market: noise & environmental impact (more fuel efficient

airplanes might drive airlines to replace their current fleets)

Key factors in Zodiac's strategy:

- Refocusing on aeronautics: Zodiac has just let go of its historical ‘Marine’ activities, in an

attempt to focus on its core business.

- External growth: Zodiac has continuously acquired specialized firms. Zodiac is enlarging its

scope of activity to maintain its leadership around the world, and to be able to offer an ever

wider range of business solutions.

- Internal development: Zodiac's departments aim at strengthening their leadership through a

continuous effort on innovation. Zodiac's organic growth remains particularly strong at an

average of 10% a year.

Challenges:

� Preserve cost efficiency by enhancing the raw material sourcing in dollars and monitoring

pay-roll expenses

� Acquire leading companies in the same business

� Diversify revenue sources

Graph: Stock price of ZODIAC SA with volume between October 2006 and January 2009

1 Airbus Global Market Forecast 2007-2026

Source: Datastream



January 1st, 2009

III

Valuation

In order to have a qualified opinion about the company’s value, three distinct methods have

been chosen: A discounted cash flow model to accurately incorporate market expectations, and

two multiples based methods (regression and peer group comparison) to reflect the current

market conditions.

Valuation from discounted cash flows (see figures 4 & 5)

The value for Zodiac 12 months from now as determined by the Discounted Cash Flow (DCF)

model is at 32.91€. The model is built so that the determining factors for Zodiac are included

separately: The company’s three main activities, the exposure to the Euro/Dollar exchange

rate and the profitability margin are found to be crucial. Forecasts are made with precision up

until 2013. It is expected that the company will grow at 3.9% annually afterwards. This

percentage is obtained by taking the growth in air traffic and the worldwide economic growth

for the coming 20 years into account 2. This choice reflects the anticipation that Zodiac will

grow faster than the general economy for the two decades to come given the dynamism of the

aeronautical sector.

• The activities are split up into three main branches: Aerosafety & Technology,

Aircraft systems and Cabin interiors. This corresponds to ZODIAC SA’s new

organizational structure from January 20th, 2009, onwards. This approach allows to

include branch specific assumptions into the model and hence to estimate the final

value with more precision.

• For each of the branches, the amount of sales in dollar is estimated. This allows to

implement the sensitivity for variations in the Euro/Dollar exchange rate. The

different branches are not exposed to the variability of the Euro/Dollar exchange rate

to the same extent. In total and according to the info provided by Zodiac, 50% of the

sales are in dollar (A-R 07/08).

• The correlation between the growth and performance of each branch and the sector3

is estimated and used to forecast the growth. The Cabin interiors branch has recorded

the best historical performance plus the greatest correlation with the sector

performance (0.9). For the three branches, the forecasts in sales are made with

prudence. The subsequent sensitivity analysis shows the impact of an overall more

optimistic growth (+2%, compared to the medium growth) or more pessimistic

growth (-2%). For the coming year, the company’s management states that only a

slight growth is attainable.

• For the current accounting period (2008-2009), the management hedges against the

exchange rate exposure. Zodiac entered in a forward contract to sell short 278

million dollar at 1.25 $/€ (A-R 07/08).

• The EBIT/Sales ratio, currently at 11.65%, is expected to rise in the future. Cost

savings and dollar sourcing should increase this ratio to a historical attainable level of

13.15% (Reuters).

• Zodiac’s assets will continue to grow at the same rate as sales. Historically, a growth

in sales has always been accompanied by a growth in assets. The correlation

between the growth in fixed assets and the growth in sales is 0.41.

• The amount of debt compared to the balance total seriously diminished after the sale

of the Zodiac marine division. The debt equity ratio is expected to remain at its

current level.

• The Return on Assets (ROA) should increase through time and reach 6.70%. This is

primarily caused by the increase in the EBIT/sales ratio.

• The cost of Equity is estimated by both the CAPM (Capital Asset Pricing Model)

and the Fama & French three-factor model. Since the CAPM mathematically

2 Embraer Market Outlook, 2008-2027 3 The sector for comparison is the ‘Aerospace products and parts’ sector.

Forecasts for 2012-2013

▲2,678 M€

Sales

▲13.15 %

EBIT margin

▲1.41 $/€

Average exchange rate

2012/2013

▬ 32.12 %

Tax rate

▲6.70 %

Return on Assets

▬ 67 %

Gearing ratio



January 1st, 2009

IV

underestimates the cost of capital for small caps, the average of the two methods is

used. The results of the regression and the Weighted Average Cost of Capital

(WACC) are tabulated in the annex.

Valuation from multiple regression (see figure 6)

� The forward PE ratio is regressed against (ROE – k), the expected growth rate, the

systematic risk, the market value, the payout ratio and a dividend distribution dummy.

� The regression is based on 84 companies of the SBF 250 index, active in the

manufacturing industry. This purposefully wide industry choice was rendered necessary to

have relevant regression results.

The findings are compatible with financial literature and practices. The expected growth

rate has a determining impact on valuation, the size effect has a positive impact on stock but

the systematic risk has a decreasing effect. The analysis of the payout ratio and the dividend’s

distribution dummy shows that in ZODIAC SA’s industry, the dividend distribution policies

of a profitable firm do not affect its valuation.

The projected share price computed through multiple regression is 26.60€.

Valuation by peer group comparison (see figures 7 & 8)

Comparable analysis of ZODIAC SA is based on equivalent companies active in the same

sector (Aerospace and Defense). Moreover, companies with a similar ROE, ROA, operating

margin and D/E ratio to Zodiac’s were preferred.

� 9 sector companies were selected worldwide: Thales, Safran, Latecoere, EADS NV,

Meggitt, BE Aerospace, Goodrich Corporation, Bombardier Inc. and Embraer.

� Comparables for the analysis include: EV/net sales, EV/EBITDA, EV/EBIT, P/E, fP/E,

P/CF and MC/net sales.

A target price of 25.90€ is computed by taking the average of the different multiple values.

In million euros

2008 2009e 2010e 2011e 2012e 2013e

Total growth Sales 10.31% 0.54% 6.98% 9.17% 9.93% 7.88%

Total Sales 2014.49 2120.71 2282.03 2466.24 2678.16 2896.27

Total EBIT margin 11.65% 11.95% 12.25% 12.55% 12.85% 13.15%

Total EBIT 234.69 253.42 279.55 309.51 344.14 380.86

Taxes 62.98 65.18 76.81 85.25 94.96 105.53

Net fixed asset inv. -251.43 7.67 98.99 138.98 164.31 143.44

Working capital inv. -198.76 1.59 20.53 28.82 34.08 29.75

OFCF 621.89 178.98 83.22 56.47 50.79 102.14

� The target price is obtained by means of a weighted average of the projected share prices given

by the three methods.

� The given weights reflect anticipations that the two multiple based models are downwardly biased

because of the current market conditions. The DCF-Method reflects the positive market outlook

more accurately but cannot stand alone because of its high sensitivity to parameter inputs.

The respective weights for the DCF model, multiples regression method and peer group multiples

method are 2, 1 and 1 which results in a projected share price of 29.58€.

� An upward price potential of 12.94% is found for Zodiac’s share.

VALUATION SYNTHESIS



January 1st, 2009

V

Business Description

Activity

Having started as a balloonist over a century ago, Zodiac has diversified to become a leading

aircraft equipment supplier. Their business is divided into 3 main branches: Cabin Interiors

(48% of turnover), Aircraft Systems (27%) and Aerosafety and Technology (25%).

� Cabin interiors. This division comprises everything to furnish and equip the passenger

part of the aircraft, as well as part of the cockpit. The company’s target is to provide its

customers with floor to ceiling solutions for the equipment of the cabin. Products of this branch

are as diverse as passenger & crew seats, on-board kitchens (galleys), food trolleys, and toilet

systems.

� Aircraft systems. This segment offers a number of complex technology systems that handle

the functioning of aircraft systems. Amongst them, systems that handle the management of

water and energy aboard the airplane, but also waste and oxygen supplies. This branch of the

company also produces high tech navigation equipment and calculators for the cockpit.

� Aerosafety and Technology. This branch specializes in all products dedicated to the

passenger’s rescue and protection. Key products include electric interconnections, elastomers,

parachutes, emergency brake systems, and evacuation systems such as inflatable slides.

Graph: ZODIAC SA’s activities (as % of business)

Business structure

Zodiac has a balanced business mix. It can be subdivided as follows:

� 10% of its business comes from government and defense contracts

� 40% comes from the civil aftermarket, including maintenance, spare parts and service

activities

� 50% comes from civil activities with major aircraft manufacturers

- 1/3rd with commercial aircraft manufacturers (Airbus & Boeing)

- 1/3rd with regional aircraft manufacturers (Embraer, Bombardier and ATR)

- 1/3rd with other aeronautic manufacturers

Zodiac has managed to limit its exposure to the two main commercial aircraft manufacturers.

Furthermore, with almost half its business made on maintenance activities, Zodiac is partly

shielded from the wavering in the civil aircraft market. Maintenance activities are non-cyclical

and secure a continuous income for the firm.

From a geographical perspective, Zodiac makes 80% of its business in either the US or Europe.



January 1st, 2009

VI

Shareholder structure

As of today, 33% of Zodiac’s shares are family owned, whilst 67% are floating. Nevertheless, in

an attempt to stabilize its shareholder structure, Zodiac has initiated an original voting rights

system that attributes double voting rights to stock owners if they have owned their shares for

over 4 years. As a consequence, the family owners together hold 46.7% of the voting rights.

Although takeover rumors are recurrent, actual risks remain quite slim. Zodiac remains one of

the most expensive companies of the sector on the market, with a market cap of close to 2

billion euros. The family owners are long time investors in the company that have confirmed

their intentions to keep their shares by renewing a binding pact that seals their involvement in

Zodiac for the next 6 years. Furthermore, nine of the ten board members have direct ties to the

company, which renders an eventual takeover less probable.

Graph: Shareholder structure for ZODIAC SA

Business Model and Strategy

In 2007, Zodiac went through a turning point in its history with the sale of its historical

Marine branch to a joint holding with Carlyle. The exact sale price was not disclosed, but a

close enough estimation is that the deal was cut for approximately 1 billion euros4. Zodiac still

owns 28% of the holding. The sale reflects the management’s decision to enhance focus on their

core business and to generate financial resources to pursue the company’s external growth.

Cost efficiency remains a key concern. Zodiac will use this transition period to enhance its

operational efficiency and restructure its organization from 4 to 3 internal departments. Former

divisions Aerosafety systems and Technology have been merged into a new Aerosafetey and

Technology division.

Focus remains high on Research and Development to preserve Zodiac’s competitive

advantage and image as a leading innovator. On the sector level, the current R&D spending is

driven by new commercial aircraft developments5. Furthermore, Zodiac still has a leading

position in the number of registered patents when compared with the sector. However, a

reduction in the activation of R&D costs is noticeable (32.2 M€ in 2006-2007 compared to

28.5 M€ in 2007-2008). This could threaten the continuation of the new product development

flow. Yet, according to the management, figures are lower for R&D because Zodiac has been

signing smaller contracts. R&D expenses have thus more often been expensed as incurred

instead of activated.

Zodiac has redefined its development strategy. Due to the peculiarity and complexity of

aircraft equipments, it is more cost efficient for Zodiac to expand through external growth

operations. The company aims at enhancing its product range and capabilities. The sector is

concentrating, with fewer actors but broader capabilities. Zodiac’s long term goal is to be able

to propose a floor to ceiling equipment package, to allow aircraft manufacturers and airlines to

deal with fewer suppliers.

4 Les Echos, April 18th, 2007 5 The R&D scoreboard ‘Aerospace&Defense’ sector summary. Department for innovation, universities and skills.



January 1st, 2009

VII

Industry Overview and Competitive Positioning

The aerospace and defense (A&D) industry is a mature industry that swings with the general

economy. The success of companies operating within this industry is dependent upon air

passenger traffic, airline profits, airline fleet retirement cycles and defense needs. Thus, the

forecasts for Zodiac’s three market segments are a key factor in the analysis of Zodiac’s future

development perspectives.

1. Defense Outlook (10% of Sales)

Global military expenses have risen by 37% in the last ten years, and should follow the same

trend in the upcoming years6. However, further delays or cancellations of military aircraft

programs are expected because of their substantial costs.

2. Civil Aftermarket Outlook (40% of Sales)

This high-margin segment has a favourable long-term outlook given the ageing of the regional

jets and LCA fleets, long-term global air traffic growth and the increasing maintenance

outsourcing by airlines and governments. The aftermarket counts as a very stable, profitable,

cash-generative part of Zodiac’s business.

3. Civil OEM Outlook (50% of Sales)

- Opportunities

� Emerging economies (Eastern Europe, South-America, Asia-Pacific) will continue to build

out their aerospace infrastructures

� Large backlogs provide manufacturers and suppliers with comfortable visibility

� OEMs have launched new models in recent years, pushing orders even higher

� Increasing regional liberalizations should boost the number of regional airlines

� Injection of 5 billion euros by the French government and banks to fund the purchase of

Airbus planes by foreign companies7

- Risk factors

� Deteriorating economic environment impacts investment decisions of airlines and demand

for air traffic

� Airlines continue to cut capacity as traffic load factors - international and cargo - are falling

sharply

� Additional delays in the supply chain

� Concerns about financing: debt capital markets, investment banks and aircraft leasing

companies are facing exceptional difficulties

� Expectations to see airlines delaying or cancelling orders due to the credit crunch

The Civil OEM market of ZODIAC SA can be divided into three sub-segments (Fitchratings):

• Large commercial aircrafts (LCA) The LCA backlog for Airbus and Boeing at the end of November 2008 reaches more than

7.5 years of production8. The international nature of the backlog (85% outside North

America) provides some comfort. The forecast is that the fallback in orders in the coming

two years will only have a reduced effect on the manufacturers’ output9.

• Regional aircrafts The regional aircraft market outlook is comparable to the LCA outlook, although this

segment has a smaller backlog. The predictions for deliveries in the coming years will

remain constant at approximately 400 aircrafts.

• Helicopter and Business jet market The need for helicopters is expected to increase by a diminishing amount: the market is

softening due to worldwide budget restraints on the very diverse customer base including

corporations, municipalities, hospitals and newsrooms.

6 International Institution for Peace in Stockholm 7 Financial Times, January 27th, 2009 8 Zodiac Analyst Presentation, 2007-2008 9 Financial Times, January 22nd, 2009



January 1st, 2009

VIII

The market for business jets has been very strong for quite a few years and it is delivering

record numbers of jets. Nevertheless, there are signs that the market is slowing down with

the economy including the lower utilization and higher inventories of used aircrafts.

Competitive positioning

Zodiac combines a diversification strategy with a horizontal integration and aims at leading on

specific niche markets.

� Main quoted competitors are BE Aerospace, Goodrich, Thales, Safran, Latecoere, Meggitt,

Spirit Aerosystems Holdings Inc. and Astronics Corporation.

� Non-quoted competitors include Liebherr-Aerospace and Diehl Aerospace.

Zodiac has one of the lowest D/E ratios of the sector. Its ROE, ROA and operating margins are

higher than the average of the sector companies. But when compared to the sector’s bests, there

is still room for improvement.

Cabin interiors: 48% of turnover

� Passenger seats compete with BE Aerospace's Seating segment

� Aircraft interiors compete with BE Aerospace’s Interior Systems segment and Premium

Aircraft Interiors Group

Aircraft Systems: 27% of turnover

� Electrical Power Distribution competes with Astronics Advanced Electronic Systems

Aerosafety & Technology: 25% of turnover

� The very diverse and specific activities of this branch lead to a fragmented competitive

environment

Zodiac itself could be a target for potential takeovers but the controlling families have already

shown not to be interested in the past in selling to Safran (Reuters). Zodiac favours partnerships

with complementary companies. In June 2008, Zodiac, Diehl Aerospace, Liebherr Aerospace,

Safran, and Thales signed an agreement to create a company called OEM Defence Services, an

innovative company dedicated to military aerospace equipment support.

SWOT Matrix for ZODIAC SA



January 1st, 2009

IX

Financial Analysis10

Earnings

� Between 2005 and 2008, sales increased by an average of 13.62% a year. For coherence

purposes the ‘Marine’ branch - sold in 2007 - is not taken into account in the analysis.

� Between August 2007 and August 2008, Zodiac’s revenues increased by 0.62% whereas

organic growth was of 10.3%. This is explained by the weakening of the dollar.

� Zodiac’s growth mainly results from:

• External growth [C&D Aerospace (US, 2005), Driessen Aerospace (NL, 2008)

etc.]. It allowed Zodiac to diversify its offer and to access new markets.

• Organic growth through intensive R&D of new business solutions. Zodiac obtained

certifications from the main airplane manufacturers and R&D expenses almost

doubled since 2005 to reach 160 M€ in 2008.

� The Dollar-Euro exchange rate penalizes Zodiac Zodiac has hedged against the Euro/Dollar exchange rate for the first time in FY08/09. 278 M$

were sold short at 1.25 $/€ in November 2008. The reason is obvious: a change of 0.01€ in the

exchange rate has an impact of 3.4 M€ on Zodiac’s revenue (A-R 07/08). Furthermore, dollar

sourcing and increasing production capabilities in the dollar zone are pursued to reduce the

exposure to variability in the exchange rate.

� A strong operating income and EBIT The 11.65% EBIT margin for 2008 has decreased since 2007 (13.17%). Despite the increase in

raw material prices over the last years, Zodiac was able to maintain the percentage of costs over

sales at 88%.

� A drop in Interest and Tax Weights The interest expense dropped by 8 points in 2008 to 13.55% of the EBIT due to the sale of the

Marine branch in 2007. The tax rate fell to 32.12% in 2008, compared to the 33.14% tax rate

during FY06/07.

� An impressive increase in net income The net income from continuing operations has increased steadily since 2005 by 71% and

reached 137.7 M€ in 2008, primarily because of external growth. This led to a ROE ratio of

11.75% and a ROA ratio of 5.34%.

Cash Flow

� Stable operating cash flows over the last 4 years.

� Financing and investing cash flows are more volatile. This is caused by the various

acquisitions Zodiac has made in the previous years.

Balance Sheet & Financing

� The proceeds from the sale of the ‘Marine’ branch in 2007 allowed Zodiac to reduce its

debt. The gearing ratio is now of 67% .

� A share repurchase program has been announced. Zodiac can purchase shares until the 8th

July 2009 for a total amount of 341.4 M€, at a minimum price of 35€ and a maximum price of

65€. Up to date, Zodiac has repurchased 5% of its outstanding shares and plans on using them

as a payment instrument for future external growth operations.

� Due to numerous acquisitions, Zodiac’s main fixed asset is its goodwill, which represents

70% of the all fixed assets in 2008. Property plant and equipment accounts for 16% of all fixed

assets.

10 cfr. Figure 9 Annexes

Past performance

(Sept. 2007- Aug. 2008)

▲2,014 M€

Sales

▼11.65 %

EBIT margin

▼1.50 $/€

Average exchange rate

2007/2008

▲32.12 %

Tax rate

▲5.34 %

Return on Assets

▲67 %

Gearing ratio



January 1st, 2009

X

Investment Risks



January 1st, 2009

XI

Table of Contents

- Financial data – between 2006 and 2008…………………………………………..…….…p.II

o Figure 1: Income Statement

o Figure 2: Balance Sheet

o Figure 3: Statement of Cash Flows

- Valuation

data……………………………………..………………………...………..……p.VI

o Figure 4: DCF Valuation guidelines

o Figure 5: DCF Valuation Method

� Sensitivity Analysis

� Cost of Capital Calculations

� DCF Forecast Table

o Figure 6: Multiple Regression Valuation Method

o Figure 7: Multiple Valuation guidelines

o Figure 8: Multiple Valuation Method

- Financial Statement Analysis

Graphs…………………..………………………………p.XIII

o Figure 9

� Tax Weight

� Interest Rate

� Fixed Asset Share Out

� Gearing

� Evolution of Cash Flows

� Ratios

- Company structure

information…………..………………………………………..……p.XV

o Figure 10:

� Business Mix

� Zodiac Activities

� Business per Geographical Area

� Share ownership

- Economic & prospective

data…………………………….…………………………..…p.XVI

o Figure 11: World economic growth perspectives

o Figure 12: Air Traffic Growth Perspectives

o Figure 13: Airline expenses and Evolution of fuel consumption of World Fleet

- Disclosures…………………………….……………………………………...………..…p.XI

X



January 1st, 2009

XII

Figure 1: Income Statement in millions Source: ZODIAC SA Annual Reports

In Million € 2005 2006 2007 2008

Sales 1373.5 1862.5 2002 2014.5

Other Revenues 4 7.3 6.2 8.5

Total Revenues 1377.5 1869.8 2008.2 2023

Cost of Goods Sold (COGS) 963.7 1240.8 1396.6 1421.2

Gross Profit 413.8 629 611.6 601.8

Selling General & Admin. Expenses 176 318.6 273.2 286.2

Other Operating Expenses 22.8 27.8 22.7 22.5

Depreciation / Amortization 38.2 47 52.9 58.6

Other Operating Expenses Total 237 393.4 348.8 367.3

Operating Income 176.8 235.6 262.8 234.5

Interest Expense -23.3 -43.3 -57 -31.8

Interest and Investment Income 0.8 0 0 0

Net Interest Expense -22.5 -43.3 -57 -31.8

Currency Exchange Gain (Loss) 0 0 -1.6 -0.1

Other Non-Operating Income (Expenses) -0.8 -1.7 2.1 1.3

Earnings Before Tax. Excluding Unusual Items 153.5 190.6 206.3 203.9

Merger & Restructuring Charges 0 -3.5 -1 -0.8

Gain (Loss) on Sale of Assets 0 0 -0.4 0.2

Other Unusual Items. Total -16.2 -0.9 3.1 -0.4

Legal Settlements 0 -0.8 0.1 0

Other Unusual Items -16.2 0.3 5.7 0

Earnings Before Tax. Including Unusual Items 137.3 186.1 207.7 203

Income Tax Expense 55.9 61.5 66.1 65.2

Minority Interest in Earnings -0.8 -0.8 -1.2 0

Earning from Continuing Operations 80.6 123.8 140.5 137.7

Earning from Discounted Operations 41.1 38.6 42 373.6

Net Income 121.7 162.4 182.5 511.3

Net Income To Common Sh. Including Extra Items 121.7 162.4 182.5 511.3

Net Income To Common Sh. Excluding Extra Items 80.6 123.8 140.5 137.7



January 1st, 2009

XIII

Figure 2: Balance Sheet in millions of euros Source: ZODIAC SA Annual Reports

In Million € 2005 2006 2007 2008

Assets

Cash & Cash Equivalents 61.2 59.5 45.9 99

Short-Term Investments 0.3 0.4 0.2 0.3

Total Cash & Short-Term Investments 61.5 59.9 46.1 99.3

Accounts receivable 460.7 523.4 419.8 498.2

Notes receivable 0.3 0.5 0.4 0.3

Other receivables 2.2 2.2 2.6 1.4

Total Receivables 463.2 526.1 422.8 499.9

Inventory 435.7 417.1 448.1 526.3

Prepaid Expenses 10.4 11.7 9.6 9.1

Other Current Assets 15 92.5 27.7 35.5

Total Current Assets 985.8 1107.3 954.3 1170.1

Property Plant and Equipment 251.5 246.9 201 223.1

Goodwill 1301.4 1270.2 906.1 979.9

Long-Term Investments 5.3 32.8 45.7 18.9

Loans receivable. Long Term 1.6 1.3 1 0.6

Deferred Tax Assets. Long Term 35.3 24.3 9.4 3.1

Deferred Charges. Long Term 81.2 110.8 135.4 184

Other Long-Term Assets 54.8 0 567.8 0

Total Non Current Assets 1731.1 1686.3 1866.4 1409.6

TOTAL ASSETS 2716.9 2793.6 2820.7 2579.7



January 1st, 2009

XIV

In Million € 2005 2006 2007 2008

Liabilities & Equity

Accounts Payable 199.9 236.4 208.2 256.1

Accrued Expenses 91.8 103.5 98 105.6

Short-Term Borrowings 0 0 84 35

Current Portion of Long Term Debt/Capital Lease 402.2 342.4 194.1 359.3

Current Income Taxes Payable 36.2 27.4 16.9 55.1

Other Current Liabilities. Total 108.5 100.8 61.9 60.5

Unearned Revenue. Current 1.5 4.7 5.5 6.2

Total Current Liabilities 840.1 815.2 668.6 877.8

Long-Term Debt 1006.5 1038.1 1020.4 456.2

Minority Interests 3.6 3.4 4.3 1.2

Pensions & Other Post-Retirement Benefits 0 40.3 22.2 24.5

Deferred Tax Liability Non-Current 18.3 23.5 35.1 42.8

Other Non-Current Liabilities 61.9 1.7 102.7 4.9

Total Non-Current Liabilities 1090.3 1107 1184.7 529.6

TOTAL LIABILITIES 1930.4 1922.2 1853.3 1407.4

Common Stock 10.9 11.1 11.1 11.1

Additional Paid in Capital 165 175 181.8 72.6

Retained Earnings 121.7 162.4 182.5 511.3

Treasury Stock 0 0 -0.7 -81.5

Comprehensive Income & Other 488.9 522.9 592.7 658.8

TOTAL EQUITY 786.5 871.4 967.4 1172.3

TOTAL LIABILITIES & EQUITY 2716.9 2793.6 2820.7 2579.7



January 1st, 2009

XV

Figure 3: Statement of Cash Flows in millions Source: ZODIAC SA Annual Reports

In Million € 2005 2006 2007 2008

NET INCOME 80.6 123.8 140.5 137.7

Depreciation & Amortization 45.1 49.9 40.5 50.2

(Gain) Loss from Sale of Assets 2.9 -0.1 0.7 -0.2

Other Operating Activities 13.4 7.2 21.6 19.7

Net Cash from Discontinued Operations 49 71.1 44.2 0

Change in Accounts Receivable -7.6 -69.4 -17.6 -62

Change in Inventories -49.6 -51.9 -43.2 -51.8

Change in Other Working Capital 21.3 38.8 10.5 31.2

CASH FROM OPERATIONS 155.1 169.4 197.2 124.8

Capital Expenditures -51.3 -110.5 -85.2 -92.8

Sale of Property., Plant. and Equipment 3.2 3.6 4.3 3.8

Cash Acquisitions -794.8 -18.2 -0.1 -206.7

Other Investing Cash Flow Items -14 -3.2 -9.1 896.7

CASH FROM INVESTING -856.9 -128.3 -90.1 603.7

Long-Term Debt Issued 709.3 0 0 0

Long Term Debt Repaid 0 -18 -59.5 -487.7

Issuance of Common Stock 54.6 10.2 6.1 1.9

Repurchase of Common Stock 0 0 0 -80.8

Common Dividends Paid -34.4 -41 -47.5 -55.5

Special Dividends Paid 0 0 0 -111.1

Other Financing Activities -0.2 -3.7 -0.1 0

CASH FROM FINANCING 729.2 -52.6 -101.1 -733.2

Foreign Exchange Rate Adjustments -1.5 -0.7 -2.5 -1

NET CHANGE IN CASH 25.9 -12.2 3.5 -5.8



January 1st, 2009

XVI

Figure 4: DCF Valuation Guidelines

Key assumptions for financial analysis

• The forecast for the sales up to 2013 are largely driven by the “Aerospace products and parts” sector. For the coming

year, the forecast is less optimistic due to the global financial and economic crisis.

• The sensitivities of the organic sales to the sector performance is measured for each of the three branches. This is

then used to make predictions for the sales in the coming years.

• For each branch, the amount of sales in dollar is estimated. This gives the degree of exposure vis-à-vis the

Euro/Dollar exchange rate.

• For each year up to 2013, the average Euro/Dollar exchange rate is estimated by applying the interest rate parity

equation (Source: Reuters).

• For FY08/09, the expected average Euro/Dollar exchange rate is adjusted so that the announced dollar hedge is taken

into account.

• Total EBIT for Zodiac is obtained by multiplying the aggregate sales with the forecasted EBIT margin.

• The EBIT margin increases steadily over the coming 5 years to attain its 6 year historical average.

• Zodiac’s assets are assumed to grow at the sales growth rate.

• The operating free cash flows are discounted at the WACC. The WACC is the weighted average (weights are market

values) of the cost of equity and the cost of debt. The former is determined with two methods, the CAPM and the

Fama & French three factor model. As for the cost of equity, the average of the two methods is taken. The reason is

that both methods have distinct qualities. However, the CAPM usually understates the cost of equity.

• The long term growth rate for the company is set at 3.90%. This growth rate is crucially higher than the global

economic expected growth rate. The reason is that economic and business reports (f.i. Embraer market outlook

2008-2027) forecast a substantially higher growth for the aerospace sector.



January 1st, 2009

XVII

Figure 5: DCF Valuation Method

Sensitivity analysis

The sensitivity analysis for the DCF model tabulates the impact of the variation in four determining variables on the Zodiac

share price. The four variables concern the WACC, the growth perspective for the coming 5 years, the Dollar/Euro exchange

rate and the EBIT/sales target ratio for 2013.

WACC

6.60% 6.70% 6.80% 6.90% 7.00%

growth

Unfav. 34.17 36.46 32.04 30.05 28.19

Normal 37.44 35.09 32.91 30.88 28.98

fav. 39.42 36.98 34.72 32.60 30.62

Dollar/Euro

1.6 27.30 25.35 23.55 21.86 20.28

1.4 37.44 35.09 32.91 30.88 28.98

1.2 51.93 49.01 46.31 43.78 41.41

EBIT margin

13.00% 33.45 33.45 31.33 29.36 27.51

13.15% 37.44 35.09 32.91 30.88 28.98

13.30% 39.15 36.78 34.50 32.40 30.44

LT Growth

3.80% 35.32 33.13 31.09 29.18 27.39

3.90% 37.44 35.09 32.91 30.88 28.98

4.00% 39.72 37.20 34.87 32.70 30.67

Cost of Capital Calculations

CAPM Fama French Model

rf 2.99 rf 2.99

beta 0.93 rm-rf 5.50

rm-rf 5.50 SMB 3.55

k 8.10% HML 5.21

k 11.40%



January 1st, 2009

XVIII

In thousands of euros

2008 2009e 2010e 2011e 2012e 2013e

Sales g AsT 3.71% -2.00% 6.98% 7.00% 9.06% 6.69%

Sales AsT 512798.00 511465.20 548411.12 584883.47 635012.56 678081.52

Sales As T $ (in €) 102559.60 109431.57 118327.72 124694.23 133149.89 142666.49

Sales As T $ (in $) 153762.52 150687.27 161200.67 172484.72 188104.45 200680.30

Sales As T € 410238.40 402033.63 430083.40 460189.24 501862.67 535415.03

Sales g Arc 7.70% 7.00% 4.00% 4.00% 8.00% 0.08

Sales Arc 539366.00 612987.51 642435.01 660853.82 703054.12 761639.24

Sales Arc $ (in €) 377556.20 439851.03 462373.07 473589.40 500808.55 543214.02

Sales Arc $ (in $) 566051.27 605674.86 629901.86 655097.93 707505.77 764106.23

Sales Arc € 161809.80 173136.49 180061.95 187264.42 202245.58 218425.22

Sales g Ci 15.30% -2.12% 8.74% 13.00% 11.35% 8.38%

Sales Ci 962322.00 996255.39 1091181.68 1220503.32 1340090.95 1456550.30

Sales Ci $ (in €) 625509.30 666590.05 732688.85 815406.43 889016.25 967678.95

Sales Ci $ (in $) 937795.05 917894.50 998159.50 1127920.24 1255937.28 1361175.31

Sales Ci € 336812.70 329665.34 358492.82 405096.89 451074.70 488871.35

Total growth Sales 10.31% 0.54% 6.98% 9.17% 9.93% 7.88%

Total Sales 2014486.00 2120708.10 2282027.81 2466240.61 2678157.64 2896271.06

Total EBIT margin 11.65% 11.95% 12.25% 12.55% 12.85% 13.15%

Total EBIT 234687.62 253424.62 279548.41 309513.20 344143.26 380859.64

Taxes 62984.18 65180.29 76811.43 85246.49 94963.17 105528.65

Net fixed asset inv. -251425.00 7669.84 98986.03 138975.51 164311.11 143437.88

Working capital inv. -198759.00 1590.72 20529.66 28823.46 34078.06 29748.96

OFCF 621887.44 178983.77 83221.29 56467.73 50790.92 102144.15

Value firm 3032872.55

Value Eq 1626766.55

Value Eq (1/1/2009) 1669538.54

Share price (1/1/2009) 29.99

Value Eq (1/1/2010) 1804721.07

Share price (1/1/2010) 32.91

Goodwill 600651.31

fPER 11.12

BV/MV 0.67

Assets 2579782.00 2593818.51 2774972.06 3029310.03 3330014.50 3592519.04

Non current Assets 1409646.00 1417315.84 1516301.87 1655277.37 1819588.49 1963026.37

Current Assets 1170136.00 1176502.67 1258670.19 1374032.66 1510426.02 1629492.67

Liabilities 2579782.00 2593818.51 2774972.06 3029310.03 3330014.50 3592519.04

Equity 1173676.00 1204069.76 1288162.58 1406228.15 1545817.39 1667673.94

Debt 1406106.00 1389748.75 1486809.48 1623081.88 1784197.11 1924845.10

LT 528330.00 507196.80 542619.67 592353.07 651153.00 702483.29

financial part 455948.79 437710.84 468280.78 511200.70 561945.04 606243.08

ST 877776.00 882551.95 944189.81 1030728.81 1133044.11 1222361.81

financial part 394999.20 397148.38 424885.41 463827.97 509869.85 550062.81

Working capital 292360.00 293950.72 314480.38 343303.85 377381.90 407130.86

Net Income 137768.00 137747.15 162327.52 180153.55 200688.04 223016.33

ROA 4.88% 5.34% 6.26% 6.49% 6.62% 6.70%

ROE 14.18% 11.74% 13.48% 13.99% 14.27% 14.43%

growth Aerospace Prod&Parts sector 5.87% -2.26% 9.30% 15.82% 12.07% 8.91%

% Sales AsT $ 20%

% Sales Arc $ 70%

% Sales Ci $ 65%

$/€ 1.50 1.38 1.36 1.38 1.41 1.41

tax rate 0.32 0.32 0.32 0.32 0.32 0.32

D/E (market values) 0.67

average E(Ri) 9.75%

E(Ri) Fama French 11.40%

E(Ri) CAPM 8.10%

WACC 6.80%

LT growth 3.90%



January 1st, 2009

XIX

Figure 6: Multiple Regression Valuation Table

Source: Thompson One Banker / IBES Database / Datastream Database

Regression statistics

Multiple coefficient of determination 0.69

R² 0.48

Adj. R² 0.44

Standard deviation 5.00

Observations 84

VARIANCE ANALYSIS

Degrees of freedom sum of squares Mean of squares F Critical F value

Regression 6 1777.19 296.20 11.86 2.22053E-09

Residual 77 1923.02 24.97

Total 83 3700.22

Coefficients

standard

deviation T Statistic Probability

Lower limit confidence

level = 95%

Upper limit confidence

level = 95%

Constant 10.766 2.65 4.06 0.01% 5.48 16.05

ROE-k 3.791 6.12 0.62 53.76% -8.40 15.98

g 6.984 1.34 5.22 0.00% 4.32 9.65

beta -6.780 1.93 -3.51 0.08% -10.63 -2.93

LN(MV) 1.102 0.39 2.86 0.55% 0.33 1.87

Payout 7.733 3.44 2.25 2.75% 0.88 14.59

Dummy -7.454 2.33 -3.20 0.20% -12.09 -2.82



January 1st, 2009

XX

fPE ratio 7.84

Price computed at 01/01/2009 24.60 €

Price computed at 01/01/2010 26.60 €

Lower Bound 16.60 €

Upper Bound 36.59 €

The sample includes 83 industrial companies of the SBF 250 on January 1st 2009. 6 independent variables have been used: the Return on Equity(ROE) minus cost of capital (k) (ROE – k), the

growth rate (g), the systematic risk (Beta), the logarithm of the market value (ln(MV)), the payout ratio and a dummy for dividend distribution (the dummy takes a value of one if there is a

dividend distribution, zero otherwise).

ROE (Forward earnings/Equity), g, payout ratio (Forward Dividend/Earnings) and the dependent variable forward price earnings ratio ( price/ forward earnings) were calculated with expected

values to take expectations into account. The systematic risk (beta) and the cost of capital (k) are calculated using the Capital Asset Pricing Model (CAPM).

For the CAPM, given the current market situation, a 5.5% risk premium has been used. We assume all companies share the same risk free rate (2.991%).

The regression to be estimated is as follows:

fPER=α0+α1*(ROE-k)+α2*g+α3*ln(MV)+α4*Beta+α5*Payout+α6*Dummy

In order to obtain Zodiac’s share price, the forward price earnings ratio (fPER) is multiplied by the expected earnings per share (EPS).



January 1st, 2009

XXI

Figure 7: Multiple Valuation Guidelines

Key assumptions for financial analysis

• 9 sector companies were selected (Latecoere, Thales, Safran, EADS NV, Meggitt, BE Aerospace, Goodrich

Corporation, Bombardier Inc. and Embraer) for the multiples valuation.

• Boeing and Astronics Corporation were taken out of the peer group respectively due to a too high and a too low

market capitalization.

• The calculation for the multiples was based on the 20th January 2009. The average of the multiples for all the

companies was computed and afterwards multiplied by Zodiac’s EPS, fEPS, CFPS, net sales, EBITDA and EBIT

to obtain the respective price values.

• The average price of the different values was calculated to find a Zodiac’s price of 23.72 euro on the 20th January

2009. Finally, a target price for 1st January 2010 of 25.91 euro is obtained.

EV

EV/net sales

EV/EBITDA

EV/EBIT

P/E

Forward P/E

P/CF

MC/net sales

market capitalization + ST-borrowings + LT-borrowings- cash

current EV/trailing 12-month net sales

current EV/trailing 12-month EBITDA

current EV/trailing 12-month EBIT

price on January20th 2009 / trailing 12-month EPS

price on January20th 2009 / forecast 12-month EPS

price on January20th 2009 / trailing 12-month CFS

market capitalization / trailing 12-month net sales



January 1st, 2009

XXII

Figure 8: Multiple Valuation Table Source: Reuters, Financial Times, Annual Reports

Data are in M€ Financial ratios

Zodiac SA Thales Safran Latecoere EADS NV Meggitt BE Aerospace Goodrich

Corporation

Bombardier

Inc.

Embraer Empresa

Brasileira de

Aeronautica

ROE 11.75 22.87 0.9 6.95 -3.41 8.4 11.71 18.71 11.44 6.29

ROA 5.34 5.42 0.24 1.88 -0.6 4.29 9.01 6.69 1.62 2.07

Operating Margin 11.65 6.2 2.11 9.38 -0.08 18.36 14.72 13.79 5.69 5.06

TL/Equity 0,67 3.56 2.69 2.93 4.76 1.59 0.41 1.92 6.27 1.95

Peer Group Comparison

Company Zodiac SA Thales Safran Latecoere EADS NV Meggitt BE Aerospace Goodrich

Corporation

Bombardier

Inc.

Embraer Empresa

Brasileira de

Aeronautica

Country France France France France Netherlands UK USA USA Canada Brazil

Share price on 20/01/09 27.18 EUR 32.78 EUR 9.17 EUR 5.49 EUR 13.29 EUR 152 GBP 9.07 USD 38.24 USD 4.47 CAD 9.99 BRL

Market capitalization 1512.88 EUR 6500.39 EUR 3824.58 EUR 47.27 EUR 10828.29 EUR 1011 GBP 902.17 USD 4707.29 USD 6436.8 CAD 7229.46 BRL

Current EV 2004.08 EUR 8171.99 EUR 4474.58 EUR 493.77 EUR 14582.29 EUR 2320.1 GBP 1052.47 USD 6283.29 USD 10724.8 CAD 8778.76 BRL average value

EV/net sales 1.00 0.64 0.44 0.92 0.35 2.15 0.48 0.89 0.61 0.71 0.82 20.80

EV/EBITDA 7.01 6.30 4.40 18.29 3.84 7.41 2.68 4.64 7.58 7.20 6.93 26.80

EV/EBIT 8.49 8.99 7.10 25.99 7.36 8.32 2.96 5.63 11.89 8.51 9.52 31.55

P/E 10.79 11.04 12.56 14.64 8.46 6.13 4.27 7.62 17.19 1.85 9.46 23.83

Forward P/E 8.66 9.53 8.53 6.31 7.84 5.85 4.75 7.70 8.11 7.42 7.47 23.46

P/CF 6.83 7.27 5.94 3.56 3.89 5.59 4.72 7.31 7.84 1.58 5.45 21.71

MC/net sales 0.75 0.51 0.37 0.09 0.26 0.94 0.41 0.66 0.37 0.58 0.50 17.92

Price 23.72

cost of

equity 0.0975

Target

price 25.910

Figure 9: Financial Statement Analysis



January 1st, 2009

XXIII

Source: ZODIAC SA Annual Reports

The sale of Zodiac Marine allowed the company to reduce its debt ratio, and therefore the

interest weight (over the EBIT). Goodwill remains the main fixed asset of the company

because of the acquisitions made by Zodiac.

Cash flows from investing and financing activities fluctuated a lot in the past years. In

2008, the cash from investing came essentially from the sale of Zodiac Marine. The

company used this cash to repay debt. Zodiac also paid a special dividend to its

shareholders in 2008. Hence, the cash from financing activities dropped to -733.2 M€ in

2008.

0,00%

10,00%

20,00%

30,00%

40,00%

50,00%

2005 2006 2007 2008

Tax Weight

Tax expense / Earnings Before Tax

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

2005 2006 2007 2008

Interest Weight

Interest Expense / EBIT

0,00%

20,00%

40,00%

60,00%

80,00%

100,00%

2005 2006 2007 2008

Fixed Assets Share Out

Intangible assets

Long Term Investments

Goodwill

Property Plant and

Equipment



January 1st, 2009

XXIV

0,00%

50,00%

100,00%

150,00%

200,00%

2005 2006 2007 2008

G earing

2005 2006 2007 2008

-1000

-500

0

500

1000

2005 2006 2007 2008

E volution of Cash-flows

Cash from operating activitiesCash from investing activitiesCash from financing activities



January 1st, 2009

XXV

Figure 10: ZODIAC SA’s Business Mix & Shareholder Structure

Source: ZODIAC SA Analyst Presentation 2008 & Annual Report 2007-2008



January 1st, 2009

XXVI

Figure 11: Projected Economic World Growth

Source: IMF & IATA

Figure 12: Projected Traffic Growth by Region (2008-2027)

> The IMF expects World GDP Growth to remain stable for the year 2009

somewhere close to 4%.

> GDP growth for the US Market - the World’s biggest aircraft buyer – is

expected to remain low around 1% for year 2009.

Comparative figures show a high correlation between GDP Growth

figures and Air Traffic growth:

� it thus seems reasonable to base our growth expectations for Zodiac on

the expected growth of the economy and of the Air Passenger traffic.



January 1st, 2009

XXVII

Source: Embraer Market outlook 2008-2027

Global Air Passenger Shares in 2011 Global Air Passenger Freight in 2011

Global Insight forecast for the next 20 years (World):

� GDP growth (average): 3.2%

� Air Passenger Traffic growth (average): 4.9%

The main markets will remain the domestic traffic in the US, Europe, and

in the Asia Pacific area.

Part of the traffic growth will be achieved through the more efficient and

intensive use of the current fleet. The rest will result in an increasing

demand for aircrafts.

In this respect - and given the high correlation between demand for Air

Traffic and Global Economic Growth-, the expectation is that the

Aircraft market grows by 3.9% per year in average for the next 20

years.



January 1st, 2009

XXVIII

Figure 13: Airline Expenses and Evolution of Fuel Consumption of World Fleet

Source: Airbus Global Market Forecast. 2007-2026 & EIA (Energy Information Administration)

Resource prices are bound to have a significant impact on the evolution

of the demand for air traffic. Given the current cost structure for an

average flight, fuel expenses account for 36% of the global costs

incurred by an airline.

As could be observed during the year 2008, skyrocketing resource

prices have an impact on the cost of air travel, and question the

survival of airlines. Airlines with aging fleets or low cost airlines are

especially sensitive to changes in the price of natural resources.

It is expected for the next 20 years that oil prices will increase by

an average of 5% a year, which will be partly offset by the

generalization of more fuel efficient aircrafts, and the more intensive

use of high capacity airplanes between the bigger destinations.

[Society Name] Investment Research Challenge

Student Research

Date

29

Disclosures:

Ownership and material conflicts of interest:

The author(s). or a member of their household. of this report [holds/does not hold] a financial interest in the securities of this company.

The author(s). or a member of their household. of this report [knows/does not know] of the existence of any conflicts of interest that might bias the content

or publication of this report. [The conflict of interest is…]

Receipt of compensation:

Compensation of the author(s) of this report is not based on investment banking revenue.

Position as a officer or director:

The author(s). or a member of their household. does [not] serves as an officer. director or advisory board member of the subject company.

Market making:

The author(s) does [not] act as a market maker in the subject company’s securities.

Ratings guide: Investment recommendations: are as either a BUY. HOLD or SELL. A BUY rating is given when the security is expected to deliver absolute returns of

10% or greater over the next twelve month period. and recommends that investors take a position above the security’s weight in any relevant index. A

SELL rating is given when the security is expected to deliver negative performance (<-10%) over the next twelve months. while a HOLD rating implies a

performance between 0 and 10% over the next twelve months.

Investment Research Challenge and Global Investment Research Challenge Acknowledgement:

CFA France Investment Research Challenge as part of the CFA Institute Global Investment Research Challenge is based on the Investment Research

Challenge originally developed by the New York Society of Security Analysts.

Disclaimer:

The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable. but

the author(s) does not make any representation or warranty. express or implied. as to its accuracy or completeness. The information is not intended to be

used as the basis of any investment decisions by any person or entity. This information does not constitute investment advice. nor is it an offer or a

solicitation of an offer to buy or sell any security. This report should not be considered to be a recommendation by any individual affiliated with CFA

France. CFA Institute or the Global Investment Research Challenge with regard to this company’s stock.

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