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Copy of Copy of Swatch Group - Presentation

Analyst Report summary
by

Mehdi Mahjour

on 17 April 2013

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Transcript of Copy of Copy of Swatch Group - Presentation

Analyst Report Swatch Group Recent Financial Performance Business Description Industry Overview Global Market of Luxury Goods (in EUR bn) Financial Ratio Analysis Qualitative Analysis Products
in the pipeline Overview of 2012

Total gross sales of CHF 8,143 million
Operating profit of CHF 1,984 million
Operating margin increased to 25.4%
Net income of CHF 1,608 million Important Releases 1983 2013 1998 Merger of ASUAG and SSIH Swatch Group Main actor in watchmaking industry
19 brands
Tourbillon Unique Strategic Positioning Today Yesterday Yesterday Vertical integration
Movement supplier
Distribution channel
Differentiation Recent acquisitions Simon & Membrez (2012)
Harry Winston (2013) Source: “Luxury Industry: a high investment potential”, Derinews (02/2013) - Vontobel bank’s monthly magazine. Main competitors Swatch Group
+
Richemont
+
Rolex
=
40% Europe +20%; Asia +11% in 2012 Short and Long-term prospects Sales growth expected in 2013


Outperformance of Swatch


Exportation to new markets Entry/Mid luxury category Asia major role Middle-East & Russia Liquidity Industry Average in 2012

Quick Ratio: 1.02
Current Ratio: 1.88 Dupont Analysis Industry Average in 2012

Profit Margin: 19%
Asset Turnover: 56%
Financial Leverage: 1.54
Return On Equity: 16.5% Profitability Industry Average in 2012

EBITDA Margin: 24%
Effective Tax Rate: 26%
Net Margin: 11% Financial Health Interest expense coverage: 540 (beg. 2013)


Financial leverage: 1.2 (beg. 2013)


Return on invested capital: 9.2% (2012) Industry average: 45 times Industry average: 1.54 Industry average: 5.9% Strategic Acquisitions Development Brand image Competitive advantage Expansion E-commerce Rivalry Earnings forecasts "5 to 10% for Swiss watch industry growth rate for 2013"

says Mr Nick Hayek (CEO) Refinements Multiplier effect of 2-3 on (S)GDP figures

Austerity measures in Europe

Internal conflict

Integration of Harry Winston

Industrial openings Assumptions 12% sales growth in 2013

Decreasing rate towards 3% in 2017-2023

Perpetual growth rate at 3% as of March 22, 2013 Valuation Beta (over the past 10 years)
Monthly returns
SMI (43.5% voting rights = board)
10-year Swiss government bond

Cost of equity
Expected market return = CAGR
Risk free rate = YTM of 10-y Swiss Gov Bond
CAPM

Cost of debt
Interest expense / Total net debt
No excess cash WACC Investment risks to the Price Target Investment risks to the Price Target Quantitative signals WACC Computation Exchange rate: financial instruments Commodities: various metals Macroeconomic factors Legal: "positive risk" (COMCO) Conclusion & Recommendation Recent financial performance
Business description
Industry overview
Financial ratio analysis
Qualitative analysis
Earnings forecasts
Valuation
Conclusion & Recommendation Watch Brands Sales growth (2012) Swatch Group
Sales repartition Wider luxury industry Watch industry Vertical Integration

Excellent Financial health

Positive Momentum

Harry Winston Acquisition

38 new products this year BUY Currency risk High Momentum Outperforms the competition PRICE TARGET
Full transcript