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General Body Meeting 02-22-12

General Body Meeting 02-22-12. Welcome. AIESEC Cornell. Spring 2010. AIESEC Cornell Spring Recruitment 2012. What is AIESEC?. World ’ s largest student-run organization International, non-political, non-profit, independent. AIESEC Global Partners. AIESEC Cornell. Spring 2010.

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General Body Meeting 02-22-12

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  1. General Body Meeting 02-22-12

  2. Welcome

  3. AIESEC Cornell Spring 2010 AIESEC Cornell Spring Recruitment 2012

  4. What is AIESEC? World’s largest student-run organization International, non-political, non-profit, independent

  5. AIESEC Global Partners

  6. AIESEC Cornell Spring 2010 Exchange Programme

  7. Exchange Global Internship Program Global CommunityDevelopmentProgram General Internships Global Exchange Partners Tata ConsultancyServices Educational Internships Developmental Internships

  8. Global Internship Programme • Corporate internships • Work nature • Management • Technical • Education (corporate) • Location:developed countries • Duration:Long-term (6-12 months) • Compensation:Paid

  9. Sample Internship – Finance • Company: Deutsche Post DHL • Location: Germany • Field: Finance and HR Job Description: • Coordinating projects, quality assurance and decision-making processes • Independent development and implementation of reports for the processes • Cost-benefit-analysis for process proposals Requirements: English, Experience with cost accounting, financial accounting and financial planning and budgeting

  10. Sample Internship– Global Exchange Partner • Company: UBS • Location: Switzerland • Field: Finance Job Description: • Analyzing and mapping of the current processes to develop new strategies to increase efficiency • Utilizing various tools such as Excel and Access to develop applications to support new strategies • Attending training programs in credit risk control Requirements: English, Background in statistics, banking and introductory finance

  11. Sample Internship – Partnership • Company: Tata Consultancy Services • Location: India • Field: Management/Technical Job Description: • Job descriptions can be modified to suit interns’ abilities • 100% acceptance rate in Spring 2011 Requirements:Graduating seniors, non-Indian descent Interested? Information sessions: • January 31st: Rockefeller 128, 6:30PM • February 1st: Rockefeller 132, 6:30PM

  12. Application Process • Submit application on: http://www.aieseconline.net • Application deadline: Sunday, February 26th, 23:59PM • Formal interviews: February 28-March 1 • Notification of acceptance:March 4th • Questions? Email vpogx-cornell@aiesecus.org

  13. DCF Modeling Workshop • March 3rd and 4th • 11:30 am – 6:00 pm • Martha van Rensselaer G71 • Lunch Fee of $15 • Applications released on website tomorrow • Deadline is February 28th, 11:59 pm • 130 spots open

  14. News Updates

  15. Energy Sector

  16. Oil Prices • Iran cuts off oil exports to France and Britain • Threatens premature cut to others in EU

  17. Macro Sector

  18. Greece: Last Week • Tuesday Feb 14: Bailout plan delayed • Warned Athens that needed to respect bailout terms • Did not receive the required political assurances from the leaders of the Greek coalition parties • $525 million for a fiscal gap: prerequisite for the bailout was missing

  19. Approved Bailout Package • Brussels, Tuesday February 21st: agree on a second bailout • Offer Greece €130 billion ($171.9 billion) • Greece agrees: reduce debt to 120.5% of GDP by 2020 • Debt currently at 160% of GDP • Estimate: 129% of GDP in 2020 • $66bn more from 2015-2020 to reach goal • If no bailout: 178% of GDP in 2015 • Deal includes: 53.5% write down for investors in Greek bonds, from already having a 50% loss • Overall loss of 75%

  20. Bailout Plan • Distribute profits (estimated €45 bn to €50 bn) from holdings of bonds • Plan designed to write off ~ €100 billion of Greek debt by mid march deadline • Exchange before March 20 to escape the full 14.5 billion-euro cost of the bond redemption • Further reduction in interest rates on the €53 billion in loans from the euro-zone

  21. Greece: Big Spending Cuts • Reducing pharmaceutical expenditures by $1.3 billion in 2012 • Cut overtime pay for hospital doctors by $66 million • Save $396 million in military procurement • Save $40 million by reducing the number of deputy mayors and staff • Many protests, especially from public sector employees

  22. Uncertainties • Long term questions ability to pay off debt • Greek economy: more competitive through wage cuts • Falling wages will deepen Greece's recession • Tension: bailout plan of reducing debt and improving competitiveness • The internal devaluation to restore Greece's competitiveness will lead to a higher debt-to-GDP ratio, in the short term • Elections in April

  23. What’s Next? • Results of second aid program will come in months • European Stability Mechanism: • €500 billion to address firewall issue • Injection of liquidity into the banking sector by the ECB • Determination to save currency • Prevent chain reactions • To mark the beginning of the end and give euro zone momentum it needs!

  24. Extension of Payroll Tax Cuts MICC General Body Meeting 2/22/2012

  25. Payroll Tax: Background • Resolved payroll tax stalemate in December • $143 billion economic package passed, includes: • Extension of payroll tax holiday • Tax benefits for unemployed • Reimburse doctor’s Medicare compensation • Support “work sharing” program • Extends lowered payroll tax of 4.2% from original 6.2% for 160 million workers.

  26. Specifics • Passed in House 293-132, Senate 60-36 with bipartisan support • Republicans originally antagonized package due to cost/spending • Dropped resistance to avoid public backlash during election year • No spending cuts to pay for cost

  27. Specifics • Goal of payroll tax cut: • Help recovery by giving consumers more money • Not just help jobless– help stay in jobs • Concessions by Democrats: • Cuts to other Federal programs, ie. preventative healthcare, to pay cost • Limit on unemployment benefit • Drug test program for unemployment benefit candidates

  28. Discussion • Prevents 0.4% reduction in GDP, half million jobs, and 0.3% increase in unemployment. • Improvement in GDP improves chances of Obama’s reelection. • Rising stock prices

  29. Criticism • What about social security? • Payroll tax = money taken from paycheck to pay for social security • Iconic program for Democrats • No spending cuts to offset cost of package • Added to deficit of over $1 trillion • Re-progamming payroll systems with 2 month lead time

  30. Two Minute Drill Guest Lecturer: SiddhantTrivedi Topic: Venture Capital

  31. MCD QuanTeam

  32. “MCD is a business you can own forever. As long as people need to eat, McDonald's offers good quality food and service, and the company keeps growing every year.“ -Bill Ackerman

  33. MCD: Overview

  34. MCD at a Glance MCD has risen from a share price of $12.8 in March 2003 to now $100. Annualized return of 25.7% over last nine years with a 35% return in 2011.

  35. Trading Multiples and Key Statistics • Stock Price: $100.67 • 52-week range: $72.89-$102.22 • Beta: 0.31 • Market cap: $102.99 billion • Dividend: $2.80 • Dividend Yield: 2.80% • Operating margin: 30.71%

  36. Pays a Great Dividend • Current Div Payout is 2.53%, back to where it was before 2008 • Payout is constantly increasing

  37. Trading Multiples and Key Statistics • 2011 Global Sales Growth: 6.7% • Analyst expectations: 5.7& • US Sales growth: 7.8% • Asia Sales growth: 7.3% • P/E (ttm): 19.10 • P/E (fwd): 15.93 • P/BV (ttm): 7.71 • Lower Multiples than those for competitive companies Yum and Wendy’s even given its impressive performance: • Yum P/E of 23x and P/BV of 15x • Wendy’s fwd P/E 21.6x

  38. Business Model • Earns revenue as a franchiser and operator of restaurants • 15% owned and operated directly – “models” • Remainder through JV / franchise agreements

  39. Industry Overview • Competitors • WEN, YUM, JACK • YUM includes KFC, Pizza Hut, LJS, and A&W • Burger King Holdings (Private) • Internationally, MCD competes with YUM

  40. MCD: Growth Expectations

  41. Performance 2011 Performance: 35% increase Volatility: 60% less than market

  42. Growth in Asia • YUM: • 14% EPS growth in 2011 • 19% sales growth in China • 50% of revenue from Asia • Operating margin: 15.81% • MCD: • 7.3% sales growth in Asia • 22% of revenue from Asia • Operating margin: 30.71% • Reasons for growth: • Huge capital expenditures in China (opened record 200 restaurants in 2011) • Margins down 80 bps due to stores opening, will rise in future • $2.9 billion in CapEx in 2012: 1300 new restaurants, 250 in China

  43. Growth in Asia

  44. Reinvestment and Menu Growth • Menu expansions: • Premium coffee drinks • Breakfast items • Salads • Value menu • Reinvestment: • 2012: $2.9 billion in CapEx • 1,150 new stores • 2,500 reimaged stores (45% of interiors and 25% exteriors) • Returning money to shareholders: • 2011: $6 billion returned to shareholders

  45. Benjamin Graham Analysis 8 Hurdles: • Hurdle #1: Earnings/Price > 2×(10 Year Treasury Yield) • Hurdle #2: Current P/E Ratio < [½ × (5-Year P/E Ratio)] • Hurdle #3: Dividend Yield > [1/2 ×(10 Year-Treasury Yield)] • Hurdle #4: Stock Price < [1.5 × Book Value/Share] • Hurdle #5: Total Debt < Book Value • Hurdle #6: Current Ratio > 2.00 • Hurdle #7: Earnings Growth > 7% over past 5 years • Hurdle #8: Stability in Growth of Earnings

  46. Benjamin Graham Analysis Hurdle #1 • Earnings/Price > 2×(10 Year Treasury Yield) • McDonald’s Earnings/Price • EPS: $5.27 • Price: $100.61 • Earnings/Price: 5.24% • 10 Year Treasury Yield (×2) • 4.02% Hurdle: Passed

  47. Benjamin Graham Analysis Hurdle #2 • Current P/E Ratio < [½ × (5-Year P/E Ratio)] • Forward Price/Earnings: 15.8% • Highest 5-Year Price/Earning: 32.2% Hurdle: Passed

  48. Benjamin Graham Analysis Hurdle #3 • Dividend Yield > [1/2 ×(10 Year-Treasury Yield)] • McDonald’s Dividend Yield: 2.8% • 10-Year Treasury Yield: 2.01% Hurdle: Passed

  49. Benjamin Graham Analysis Hurdle #4 • Stock Price < [1.5 × Book Value/Share] • McDonald’s Book Value/Share: $13.04 • Stock Price: $100.61 Reason: Much of McDonald’s Operations are owned by Franchisees, thus not showing up on Balance Sheet Hurdle: Failed

  50. Benjamin Graham Analysis Hurdle #5 • Total Debt < Book Value • McDonald’s Total Debt: $12.54 billion • McDonald’s Book Value: $13.3 billion Hurdle: Passed

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