Market Overview - University Securities Investment Team

Report
Meeting Agenda
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Announcements
Portfolio Update
Market Update
Lecture: Pitch Terminology
Pitch: ACC
Important Dates
Announcements
Announcements
Announcements
Free Wall Street
Journal digital access
for paid members
Contact
[email protected]
to receive login
information
Announcements
Fall Portfolio
Challenge
•Build and manage your own virtual portfolio
•Compete with other McCombs students
•Top three winners receive prizes in January
$5
entry fee
Register at
usiteam.org/events
First USIT Social
Ultimate
Frisbee
• When: Tonight, 8:30 pm
• Where: South Mall
• Cost: Free!
Announcements
The Suggestion Box
Announcements
Workshops
Every Thursday 7-8PM
SAC2.120
Topic this week:
• Cash Flow Modeling
Portfolio Update
Historical Performance
Invested Capital
8/30/2013
$4,396.8
9/6/2013
$7,739.3
9/13/2013
$4,328.6
9/20/2013
$4,381.9
9/27/2013
$5,911.2
10/4/2013
$5,847.4
10/11/2013
$7,037.0
Ticker
AAPL
ADNC
CBRX
ENZN
IDT
SWKH
U
AGX
AIG
Cash
$9,716.0
$6,556.9
$9,922.9
$9,922.9
$8,226.2
$8,226.2
$7,120.9
Shares
US Equity
US Equity
US Equity
US Equity
US Equity
US Equity
CN Equity
US Equity
US Equity
3
50
125
200
75
400
125
25
15
Exposure
31.2%
54.1%
30.4%
30.6%
41.8%
41.5%
49.7%
AUM
$14,112.8
$14,296.2
$14,251.5
$14,304.8
$14,137.4
$14,073.6
$14,157.8
Weekly Portfolio Return
Cost Per Share Total Cost Basis Purchase Date
$486.11
$1,458.32
8/13/2013
$10.51
$525.50
8/13/2013
$6.82
$852.13
8/14/2013
$1.96
$391.00
8/13/2013
$18.00
$1,349.65
8/14/2013
$1.13
$450.00
8/13/2013
$4.64
$579.68
8/28/2013
$21.67
$541.75
9/26/2013
$49.37
$740.55
10/10/2013
Cumulative Return Since 8/30/13
0.0%
1.3%
1.3%
(0.3%)
1.0%
0.4%
1.4%
(1.17%)
0.17%
(0.45%)
(0.28%)
0.60%
0.32%
Exp-Adj Weekly Return
Exp-Adj Cum. Return
0.0%
2.40%
2.4%
(1.03%)
1.3%
1.22%
2.6%
(2.80%)
(0.3%)
(1.09%)
(1.4%)
1.20%
(0.2%)
PX_LAST Total Market Value Gain/Loss Gain/Loss %
Sector
$492.81
$1,478.44
$20.12
1.4% Information Technology
$12.46
$623.00
$97.50
18.6% Information Technology
$7.02
$877.50
$25.38
3.0% Health Care
$1.74
$348.00
($43.00)
-11.0% Health Care
$18.24
$1,368.00
$18.35
1.4% Telecommunication Services
$1.15
$460.00
$10.00
2.2% Financials
$4.74
$593.05
$13.38
2.3% Basic Materials
$21.56
$539.00
($2.75)
-0.5% Industrials
$50.00
$750.00
$9.45
1.3% Financials
Portfolio Update
Sector Exposures
Information Technology
Energy
Consumer Services
Consumer Goods
Financials
Industrials
Health Care
Utilities
Telecommunication Services
Basic Materials
Dollar Amount
$2,101.44
$0.00
$0.00
$0.00
$1,210.00
$539.00
$1,225.50
$0.00
$1,368.00
$593.05
% Allocation
30%
0%
0%
0%
17%
8%
17%
0%
19%
8%
0%
15%
0%
0%
Information Technology
Energy
9%
Consumer Services
Consumer Goods
Financials
Sector Exposures + Cash
Information Technology
Energy
Consumer Services
Consumer Goods
Financials
Industrials
Health Care
Utilities
Telecommunication Services
Basic Materials
Cash
Historical Performance
Invested Capital
8/30/2013
$4,396.8
9/6/2013
$7,739.3
Cash
$9,716.0
$6,556.9
$2,101.4
$0.0
$0.0
$0.0
$1,210.0
$539.0
$1,225.5
$0.0
$1,368.0
$593.1
$7,120.9
15%
0%
0%
0%
9%
4%
9%
0%
10%
4%
50%
Exposure
31.2%
54.1%
AUM
$14,112.8
$14,296.2
4%
50%
Industrials
Health Care
Utilities
9%
Telecommunication Services
Basic Materials
10%
0%
Cash
4%
Weekly Portfolio Return
1.3%
Cumulative Return Since 8/30/13
0.0%
1.3%
Exp-Adj Weekly Return
2.40%
Exp-Adj Cum. Return
0.0%
2.4%
Market Update
Twitter-Based WMD’s
Market Update
Why would TV providers be
willing to allow a direct
competitor steal away facetime for the commercials they
sell?
Market Update
Market Update
Pitch Terminology
Competitive
Advantage
Competitive Advantage
What gives the company an sustainable
edge over its competitors?
Cost
Advantages
Differentiation
Advantages
Cost Advantages
What creates a cost advantage?
Economies of Scale
(Walmart)
Superior
Technology/Process
(Toyota & Dell)
Differentiation Advantage
What creates a differentiation advantage?
Similar Product with
Key Differentiation
(Apple)
Entirely Unique Product
Competitive Advantage
Not all competitive advantages fall into one
of the two categories:
Reputation
Barriers to Entry
Strategic Assets
Flexibility
Brand Popularity
Switching Costs
Competitive Advantage
How does this relate to pitches?
Good Investment = Quality Company + Good Price
Quality Company = Survival Potential + Outperformance
Competitive Advantage
Can you invest in companies without a
competitive advantage?
Good Investment = Quality Company + Good Price
Not every investment is built upon a “company will outperform”
thesis and focus more on price.
October 15, 2013
University Securities Investment Team
American Campus
Communities (NYSE: ACC)
Manideep Ravi
Tyler Menk
Ann Cai
Zach Sunderland
Strategic Capital Group
Company Overview
•
•
•
•
•
Largest student housing company
• 1st publicly traded student housing REIT
Real Estate Investment Trust
• Distribute 90% of income as dividends
• Does not pay corporate income tax
$4.2 billion worth of developments
Partners with universities to build both on and
off campus properties
Headquartered in Austin
Strategic Capital Group
Investment Thesis
Highly experienced management
Strong Revenue Growth
Expanding Market
Strategic Capital Group
Industry Overview: Student Housing REIT
Threat of
New
Entrants
Bargaining
Power of
Suppliers
Competitive
Landscape
Threat of
Substitutes
Bargaining
Power of
Buyers
Strategic Capital Group
Market Overview
•
•
•
Near-campus housing for college students
• More independence
• Lower Costs
• Full kitchen units
Increasingly cash-strapped universities
contract private developers for housing
Students paying for housing with student
loans
Strategic Capital Group
Risks & Mitigating Factors
Seasonality
of leases
Competition
from oncampus
housing
Future
growth
dependent
on favorable
real estate
market
Cannibalization of
customers
Strategic Capital Group
Management
• William C. Bayless Jr., President & CEO
• Owns 20% of the company
• Began student housing career in 1984
• President of ACC since October 2003
• Jonathan A Graf, Executive VP, CFO, Treasurer and
Secretary
• Owns 8% of the company
• Extensive background in accounting
• R.D. Burck, Chairman of the Board
• Former Chancellor of UT Austin
• Former VP of ESPN
Strategic Capital Group
Competitors
Company
Market Current
Ticker Cap
Stock Price FFO
Education Realty Trust
EDR
1065.59.28
40.80
4.40
0.712.11
19.91
Equity Residential
EQR
19357.253.72
993.20
18.49
1.062.91
19.22
Campus Crest
Communities
CCG
663.210.28
25.40
2.47
0.664.16
14.66
353.13
8.45
0.8353.06
17.87
168.40
4.80
0.917.30
17.7
Industry Average
American Campus
Communities
ACC
3673.635.06
Total
Equity
FFO/Share Debt/Equity Value/FFO
TEV/NTM
EBITDA
Strategic Capital Group
Valuation
Revenue
Cost of Sales
Gross Profit
Gross Margin
2012
$491.0
$237.0
$254.0
51.7%
2013
$613.8
$279.7
$334.1
54.4%
Projected (In Millions)
2014
2015
2016
$754.9
$921.0
$1,123.6
$332.8
$399.4
$479.2
$422.1
$521.6
$644.4
55.9%
56.6%
57.3%
SG&A Expenses
Other Income
EBIT
EBIT Margin
$23.0
$0.4
$231.4
47.1%
$25.72
$0.4
$308.8
50.3%
$28.81
$0.4
$393.7
52.2%
$32.26
$0.4
$489.8
53.2%
$36.14
$0.5
$608.7
54.2%
$40.47
$0.5
$733.3
54.4%
NOPAT
D&A
CapEx
Change in NWC
FCF
Present Value of Cash Flows
$231.4
$115.9
$255.0
($0.4)
$92.7
$308.8
$122.8
$280.5
$35.6
$115.6
$110.1
$393.7
$131.4
$314.2
$15.9
$195.1
$176.9
$489.8
$140.6
$358.1
$18.6
$253.7
$219.2
$608.7
$151.9
$408.3
$20.9
$331.5
$272.7
$733.3
$167.1
$469.5
$22.2
$408.6
$320.2
Terminal Value
Enterprise Value
2017
$1,348.3
$575.1
$773.3
57.3%
$
$
Assumptions
WACC
Tax Rate
Exit Multiple
Share Price
5%
0.0%
17.70x
$
35.20
7,232.98
6,766.31
Calculations
Enterprise Value
$
Less Net Debt
$
Equity Value
$
Shares Outstanding
Value Per Share
$
Implied Discount
6,766.3
2,569.9
4,196.4
104
40.35
14.63%
Strategic Capital Group
Conclusion
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