Team Ksi - CFA Institute · Kevin Bair, Jordan Goldberg, Jack Hall, Will Hoffman, Shivani Modi...

CFA Research ChallengeTeam Ksi

Team KsiKevin Bair, Jordan Goldberg, Jack Hall, Will Hoffman, Shivani ModiFebruary 18th, 2020

1


Agenda

I. RecommendationII. Company BackgroundIII. Industry OverviewIV. Financial AnalysisV. Valuation MethodologiesVI. Risk FactorsVII.Appendix

2


I. Recommendation

Industry Overview

Company Outlook

Corporate Governance

Category Rating Weight

3

3

3

4

4

Score

Recommendation:

HOLD

15%

25%

15%

15%

35%

3.5

Recommendation

3

Company Background

Industry Overview

Financial Analysis

Valuation Methodologies Risk Factors

Financial Position

Valuation


Recommendation

II. Company Background

Revenue by Geography Revenue by Product

4

65%

35%

US

International

96%

4%

PharmaceuticalDistribution

Other

Company Background

Industry Overview

Financial Analysis


Manufacturers ProvidersDrug

Wholesalers Patients

Product Shipment

Product Shipment

PaymentPayment Services

Payment


Company Background

Industry Overview

Financial Analysis


II. ESG Profile

Environmental• Broad set of environmental initiatives• Highly efficient waste and energy minimization

Social• Nearly $2mm in charitable contributions • Opioid Epidemic Liability Risk

Governance• Diverse and largely independent board• No CEO and Chairman separation

SCORE: 6.5

GE S

5

Recommendation


III. Industry OverviewTrends Catalysts

• Direct to store model becoming preferred to self warehousing

• Generic drug price deflation• Lower M&A activity• Potential legislation allowing drug imports

• Public concerns over rising drug prices• Failed diversification efforts by big three• National opioid crisis• Need for increased profitability• Advances in technology

6

Company Background

Industry Overview

Financial Analysis

Valuation Methodologies Risk FactorsRecommendation

ABC MCK CAH

5 Year Revenue CAGR

7.99% 5.52% 9.76%

EBITDA Margin 1.28% 1.68% 1.82%

ROIC 14.95% 8.79% 9.01%


3FCR: 93.15%

4FCR: 95.48%

Company Background

Industry Overview

Financial Analysis


III. Industry Overview – Competitive Landscape

7

Legend:3: High Threat2: Moderate Threat1: Low Threat0: No Threat

Porter’s 5 Forces Industry Market Share

HHI: 2,979


IV. Financial AnalysisProfitability

8

Efficiency Leverage

Liquidity

Company Background

Industry Overview

Financial Analysis



IV. Financial Analysis – DuPont Identity

9

Company Background

Industry Overview

Financial Analysis


0.48 4.65 13.28 29.44

0.94 3.60 6.53

0.015 3.57 6.71

22.01

0.37

Net Margin

Asset Turnover

Equity Multiplier

Return on Equity


V. Valuation – RV AmerisourceBergen vs. Comps

10

Company Background

Industry Overview

Financial Analysis



V. Valuation – Price Target

11

Company Background

Industry Overview

Financial Analysis


DCF - Perpetual Method: $97.77

$95.75

50%

35%

15%

DCF - Exit EBITDA Method: $91.45

Multiples Analysis: $99.04


Ohio County Settlement

Total Value: $215MM

ABC Portion: $66MM

Post-Tax Liability: $50.90MM

Nationwide Deal

E(x) = $3,010.02

V. Valuation – Opioid Litigation

12

Company Background

Industry Overview

Financial Analysis


50% 25%25%


Risk Matrix

VI. Risk Factors

13

PRO

BA

BIL

ITY

Highly Likely LR: Opioid Settlement

Likely

NeutralLR: Drug Pricing

Regulation

Unlikely MR: Amazon Disruption

Highly Unlikely

OR: WBA Privatization

OR: Operational RiskMR: Market RiskLR: Legal Risk

Negligible Low Moderate High Severe

IMPACT

Company Background

Industry Overview

Financial Analysis



Recommendation

I. Recommendation

14

Company Background

Industry Overview

Financial Analysis


Recommendation:

HOLD+1.47%

Price Target:

Projected Return:

$95.75

1 = Strong Sell 2 = Weak Sell 3 = Buy 4 = Weak Buy 5 = Strong Buy


Management Team

Steven H. Collis-Chairman, President and Chief Executive Officer• Compensation: $11,309,930• Spent two decades and includes time

leading the company’s specialty and wholesale distribution and related services businesses

• The company’s annual revenue has jumped more than 80% during his time as CEO

James F. Cleary-Executive Vice President and Chief Financial Officer• Compensation:$3,453,481• Previously served as serving

as Group President of Global Commercialization Services and Animal Health

Robert P. Mauch-Executive Vice President and Pharmaceutical Group President• Compensation: $3,537,600• Previously held multiple positions from 2012 to

2017 within AmerisourceBergen Drug Corporation, including Executive Vice President and President, Chief Operating Officer, and Senior Vice President—Operations.

• Played crucial role in Walgreens Boots Alliance

VII. Appendix

15


VII. Appendix – Key Metrics & Stakeholders

16

ABC Key Metrics

Market Capitalization 19,427.9 M

Beta 1.14

12 Month Dividend Yield

1.72%

52 High - Low 97.50 – 70.55

YTD Return 10.99%

ABC Major Shareholders

Walgreens (WBA) 27.61%

Vanguard 9.09%

BlackRock 5.71%

State Street 3.49%


VII. Appendix – 1 Year Chart

17

50

55

60

65

70

75

80

85

90

95

100

Key Events and News Headlines


VII. Appendix - Correlation

18

Securities ABC MCK CAH

ABC 1.000 0.811 0.735

MCK 0.811 1.000 0.755

CAH 0.735 7.555 1.000


VII. Appendix

19

Walgreens Boots Alliance ● 27.9% ownership in ABC currently has 1 seat on board

but can have 2 ● Ownership drop down to 15% only aloud to have 1 seat

on the board ● Ownership drop down to 7% not aloud to have any● They are free to divest their entire holding whenever they

see fit

CFA Research ChallengeTeam Ksi 20














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Team Ksi - CFA Institute · Kevin Bair, Jordan Goldberg, Jack Hall, Will Hoffman, Shivani Modi...

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