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Consumer Discretionary

Consumer Discretionary. Reza Aditya Hakan Altan Adam Barrick Peter Manuselis. Agenda. Sector Recommendation Recap Stock Selected Overview Financial Analysis Valuation Analysis Stock Recommendation. Current SIM Holdings. Sector Recommendations Recap.

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Consumer Discretionary

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  1. Consumer Discretionary Reza Aditya Hakan Altan Adam Barrick Peter Manuselis

  2. Agenda • Sector Recommendation Recap • Stock Selected Overview • Financial Analysis • Valuation Analysis • Stock Recommendation

  3. Current SIM Holdings

  4. Sector Recommendations Recap Recommendation: Hold the Underweight Position at 8%

  5. Current Position

  6. Nike Overview • 2006 Revenue $14,955 MM (8.8% increase from ‘05)  • 2006 Net Income $1,392 MM (14.9% increase from ‘05) • 2006 EPS $2.64 (17.9% increase from ‘05) • 52 week range: $37.76 – $55.10 • Completed a 2 – 1 stock split on April 2, 2007 • Current Price as of 5/14/07 - $52.87 • 1.4% Div. Yield

  7. Catalysts • Strong market position and brand • Number one shoemaker, holding a 40% market share of the global footwear industry • World’s largest manufacturer of athletic apparel • Nike swoosh sign is one the most widely recognized logo • Relatively inelastic demand • Robust financial performance • Strong cash position that will provide funding for future expansion strategies • Strong product portfolio • Reduced dependence on footwear and has established a strong position in the equipment and apparel markets • Offers specialized sports gear for sports including golf, hockey, skateboarding, and cycling • Allows them to spread risk across its product segments

  8. Financial Analysis • Stock price, • Revenue/share, • EPS are increasing.

  9. Financial Analysis • Relative to Consumer discretionary sector • Stock price, • Revenue/share, • EPS are increasing.

  10. Financial Analysis • Dividends/share • are higher compared to Cons Disc. • Growth rate estimates are going up compared to Cons Disc.

  11. Valuation Analysis – 5yr CU < ME Trending Down CU > ME Trending Down CU > ME Stable CU < ME Trending Down

  12. Valuation Analysis – 5yr CU < ME Trending Down

  13. Valuation Summary 5-yr

  14. Valuation Analysis - 10yr CU < ME Stable CU > ME Trending Up CU > ME Stable CU < ME Stable

  15. Valuation Analysis – 10yr CU < ME Trending Down

  16. DCF Analysis

  17. Stock Recommendations Recommendation: Buy

  18. Risks • Rising raw material cost • Rising oil prices increase the price of synthetic rubber and plastic based products. Increasing raw material cost would increase the production cost and its profitability. • Chinese products • Chinese footwear has been flooding the EU and can significantly affect Nike’s market share in the EU • Intense competition • The launch of technologically superior products by competitors such as Adidas could lead to a fall in the company’s market share

  19. Action Recommendation

  20. Questions?

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