Earning Price $57.84 Valuation Date Of Price 3-Feb-16 Valuation Method $64.99 - WACC 52-week Range $50.01 DCF Model Market Cap ($) 154,881M Scenario Analysis Fiscal Year End December Shares Outstanding 2,678M DDM & Multiples Risks: Risks Dividend Yield 1.90% • New Entrants Total Return 27.47% • Behavior Changes Price Target $72.63 • Regulatory Changes Price Target End Date 2-Aug-17 • Programming Expense Source: SEC Filings, Bloomberg, Team Estimates
BUSINESS OVERVIEW Business Overview Industry Overview Xfinity Residential Cable Service Comcast Business Networks Broadcast TV Attractive Universal’s Theme Parks Filmed Financial Analysis Strong Revenue Profitability Analysis Cash flow Comcast E N nter B tai C nment Theme Parks Balance Sheet Earning Valuation Cable Universal Valuation Method 62% of Sales 38% of Sales WACC DCF Model Scenario Analysis DDM & Multiples Risks The Largest Broadcasting Company and Cable Company In the World By Revenue.
High Speed Internet Leads to Growth in Business Overview Residential Services Revenue Industry Overview Consumer Higher Market Revenue Xfinity Residential Base Growth Penetration Growth Service Comcast Business Comcast High speed internet customer relationships and market penetration Competitive Advantages Attractive Universal’s Theme Parks • Fastest available Financial Analysis 29.4 Internet speeds Strong Revenue 23.3 49.9% • Fastest in-home Wi-Fi Profitability Analysis 41.9% • Cash flow Mil ions of hotspots 13.2 Balance Sheet nationwide 27.3% Earning Valuation U.S. Number of broadband connections (mil ions) Valuation Method WACC DCF Model Scenario Analysis DDM & Multiples Risks Source: Company data team estimation high-speed internet customers Source: Statistia, team estimation high-speed internet penetration
Two Engines Drives Cable Business Growth Business Overview Industry Overview Xfinity Residential Service Comcast Business Attractive Universal’s Theme Parks Financial Analysis Strong Revenue Profitability Analysis Cash flow Balance Sheet Earning Valuation Business Services revenue Valuation Method • 12281 Extending fiber network to more WACC potential business customers DCF Model 10152.65 • NNI (network to network Scenario Analysis 8393.15 interconnection) wholesale agreements DDM & Multiples 6938.58 5736.09 Risks 4742 3951 • Higher speed 3241 2565 • Lower price 1953 • Industry-specific services
ATTRACTIVE THEME PARKS Business Overview Industry Overview NBC Universal Media LLC Xfinity Residential NBCUniversal Theme Park Segment Revenue Market Share: 19.0% Service $3,339 Industry Brand Names : Comcast Business $2,623 Universal Studios Japan Attractive Universal’s Universal Studios Florida $1,874 $2,085 $2,325 Universal Island of Adventure Theme Parks Universal Studios Hollywood Financial Analysis Universal Studios Singapore Strong Revenue Universal Studios China Profitability Analysis Cash flow Guest Average Guest Balance Sheet Attendance Spending Revenue Earning Valuation Valuation Method WACC DCF Model Scenario Analysis DDM & Multiples Risks The Diagon Alley
KEY TAKEAWAYS Business Overview Industry Overview 1. Strong Increase in Revenue Xfinity Residential Service 2. Profitability Metrix is set to improve Comcast Business Attractive Universal’s 3. Strengthening Balance sheet Theme Parks 4. Expansion of cash flow and earning Financial Analysis Strong Revenue Profitability Analysis PEER GROUP: Cash flow Balance Sheet Time Warner Cable Inc. NBCUniversal Earning Valuation Verizon Communications Inc. 37% Valuation Method Dish Network Corp. WACC DCF Model AT&T, Inc. Scenario Analysis Cable DDM & Multiples Communication Risks Twenty-First Century Fox 63% Walt Disney Company
HOW LONG CAN LOW VALUATION EXIST? Business Overview Industry Overview LOW EPS Xfinity Residential EBITDA MULTIPLE Service Comcast Business Attractive Universal’s Theme Parks CMCSA peer group Financial Analysis Strong Revenue LOW DIVIDEND YIELD Profitability Analysis Cash flow Balance Sheet CMCSA Earning Peer group's average Valuation Valuation Method LOW PROFITABILITY RATIO CMCSA peer group ROA WACC ROE DCF Model Scenario Analysis DDM & Multiples Risks CMCSA Peer's average CMCSA peer median Source: SEC Filings, Team estimates
DIVERSIFIED BUSINESS SEGMENTS ENSURING REVENUE GROWTH Business Overview Theme Parks Industry Overview Xfinity Residential Filmed Entertainment Service Broadcast Television Comcast Business Cable Networks Attractive Universal’s Theme Parks Advertising Financial Analysis Business Services Strong Revenue Residential Cable Servic Profitability Analysis es Cash flow Balance Sheet CMCSA 5.9% CAGR > Peers’ 3% CAGR > Cable Industry 2.6% CAGR Earning Valuation 60% total Valuation Method revenue WACC DCF Model increment in the Business service; 25% SEGMENT CAGR Scenario Analysis Other business line; 40% next 5 years Business DDM & Multiples will be driven by Services 18.52% Risks High speed internet; 27% 3 business High speed Theme park; 8% segments. Internet 9.14% Theme Parks 10.34% Source: SEC Filings, Team estimates
PROFITABILITY METRICS SET TO IMPROVE Business Overview Industry Overview ROA Xfinity Residential Service Comcast Business Attractive Universal’s Theme Parks Financial Analysis Strong Revenue Profitability Analysis CMCSA’s ROA wil increase 1.18% from Cash flow 2016E to 2020E Balance Sheet ROE Earning Valuation Valuation Method WACC DCF Model Scenario Analysis DDM & Multiples CMCSA’s ROE wil increase 2.09% from Risks 2016E to 2020E Source: SEC Filings, Team estimates
CASH FLOW EXPANSION Business Overview Industry Overview Xfinity Residential
Expansion of CFO ensures the growth of Capex and dividend Service
Steady cash flow difference between CFO and Capex+Dividend Comcast Business create the room for high steady share repurchases. Attractive Universal’s Theme Parks Financial Analysis CFO CAPEX DIVIDEND Strong Revenue Profitability Analysis CAGR 5% 6% 5.5% Cash flow Balance Sheet Cash flow coverage Share repurchases Earning Valuation Valuation Method WACC DCF Model Scenario Analysis DDM & Multiples Risks CFO CAPEX DIVIDEND Diff between CFO and Capex + div Share repurchases Source: SEC Filings, Team estimates
STRENGTHENING BALANCE SHEET Business Overview Industry Overview Total long term debt repayment (CFO -Capex - div - share repurchase) Xfinity Residential between 2016-2020 Service betwe n 2016-2020 17% Comcast Business Attractive Universal’s Theme Parks $1.702 83% Financial Analysis Strong Revenue $17.335 Profitability Analysis Net Long-term debt repayment net Cash flow Cash flow to cash and other item long term debt issuance Balance Sheet Earning Valuation Valuation Method Cash ratio Equity multiple WACC DCF Model Scenario Analysis DDM & Multiples Risks Source: SEC Filings, Team estimates
EARNING EXPANSION Business Overview Industry Overview Revenue and Cost per share EPS Xfinity Residential Service Comcast Business Attractive Universal’s Theme Parks Financial Analysis Strong Revenue Profitability Analysis Cash flow Balance Sheet cost revenue Share repurchase (Rev-cost) Base EPS Earning Valuation (Revenue-Cost) Growth + Repurchases = Valuation Method WACC $0.95 + $0.97 = $1.925 Increase in EPS between 2015 and 2020 DCF Model 60% EPS growth Scenario Analysis DDM & Multiples
KEY TAKEAWAYS Business Overview Industry Overview Xfinity Residential Service MULTIPLES Comcast Business $82.71 Attractive Universal’s Undervalued Theme Parks for Financial Analysis DDM Strong Revenue all $64.65 Profitability Analysis methods DCF Cash flow $71.93 Balance Sheet Primary Earning Method Valuation Valuation Method WACC DCF Model Scenario Analysis DDM & Multiples Risks
WEIGHTED AVERAGE COST OF CAPITAL Business Overview Cost of debt Industry Overview Xfinity Residential 4.76% After tax Service Comcast Business cost of Weighted x debt cost Attractive Universal’s 3.00% Theme Parks 1 – Tax rate of debt Weighted Financial Analysis 0.80% average cost of 34.28% x Capital Strong Revenue Profitability Analysis % of debt Cash flow 26.76% Balance Sheet Earning Weight Risk free rate + 7.02% Valuation Valuation Method Cost o 2.80% WACC 27% f Equit % of Weighted DCF Model + equity cost y Scenario Analysis 73.24% 73% Beta of equity DDM & Multiples Cost o Risks 1.032 x 6.22% f Debt Cost of x equity 8.49% (Market return 8.31% - Risk free rate) 2.80%
SCENARIO ANALYSIS Business Overview Industry Overview Scenario Base Bear Xfinity Residential Service Video revenue growth rate 2.7% 1.9% Comcast Business Internet revenue growth rate 12.7% 11.7% Attractive Universal’s Programming expense growth Theme Parks rate 10.0% 10.7% Financial Analysis Strong Revenue Technical expense growth rate 7.1% 7.6% Profitability Analysis Perpetual growth rate 2.9% 1.9% Cash flow Balance Sheet Target price $71.93 $52.41 Earning Valuation Video Revenue Growth Valuation Method Internet Revenue Grow WACC th DCF Model Programming Expense Scenario Analysis Growth DDM & Multiples Risks Technical Expense Gro wth
Dividend Discount Model & EV/EBITDA MULTIPLES Business Overview Industry Overview Dividend Growth Rate Xfinity Residential Service Comcast Business Attractive Universal’s Theme Parks Financial Analysis Strong Revenue Profitability Analysis Cash flow Balance Sheet Earning Valuation EV=EV/EBITDA*Projected Valuation Method EBITDA WACC Shareholder's Equity= EV + DCF Model Cash -Total Debt Scenario Analysis -Noncontroling Interest DDM & Multiples Risks Share Price=Shareholders' Equity/Outstanding Shares = $82.72
INVESTMENT RISKS Business Overview Industry Overview Impact Risk Profile Xfinity Residential Service Comcast Business Attractive Universal’s Theme Parks Risk Profile Financial Analysis Strong Revenue Profitability Analysis Cash flow Probability Balance Sheet Earning Valuation Valuation Method WACC DCF Model New Entrants Risk Behavior Change Risk Scenario Analysis DDM & Multiples Risks Regulatory Risk Programming Expense Risk
Table of Content Internet Speed Outline Revenue Component 1 High Speed Industry Development Revenue Component 2 Competitive Landscape EPS Broadband Infrastructure Income Statement Analysis Major Players Market Shares Net Income Growth Rate ARPU & Subscriptions FOXA and VZ Net Income Issue Market Survey Results ROA Market Survey Results(Cont’d) ROE Cable Industry Subscribers CAPEX Internet Connection Types Depreciation & Amortization Business Diversification Comparison Equity Multiplier Asset Per Share Top 25 Theme Park Worldwide Dividend Yield Top 25 Theme Park Worldwide(Cont’d) Bond Yield Universal Theme Park Attendance Dividend Discount Model DuPont Analysis Debt Schedule Valuation-Projection Perpetual Growth Method Enterprise Multiple Valuation
Fastest Internet Speed Providers in United States Fastest ISP in United States Downward (Mbps) Upward(Mbps) Xfinity 104.56 12.71 TWC 99.11 19.23 Cox Communication 94.06 21.28 Verizon Fios 83.39 87.26 Charter Spectrum 66.31 4.46 Data source: speedtest.net. Speedtest is a third party independent agency which has been col ecting Speedtest results to determine the fastest ISPs and mobile networks in the United States. Comcast Xfinity: $54.99 75Mbps Internet+45 TV channels + Stream HBO® with the XFINITY TV app Time Warner Cable: $44.99 50Mbps Internet + 20+ channels + FREE S tream Live TV Verizon Fios: $ 59.99 50MBPS Internet AT&T U-verse: $30.00 3Mbps Internet speeds(up to at most 6 Mbps)
Chart Title High Speed Internet Industry Development 3% 22% Of all broadband internet 39% connections: residential broadband services cable internet (68.4%) business broadband services DSL (19.3%) carrier and internet backbone fiber optic (10.5%) other 37% U.S. internet traffic volume number of broadband connections （ Exabytes per month ） （ mil ion ） internet traffic has more than quadrupled over Number of broadband connections has increased an the same period annualized 13.8% in the five years to 2015
Competitive Landscape Technology at 25 Mbps/3 Mbps CABLE DSL,FTTN, Other Copper Fixed Wireless HTTP Source: Federal Communications Commission (FCC) 2016 Broadband Progress Report
Development of Broadband Infrastructure Contingent：A global Technology Services Company Specializing in WAN Management, Network Integration, Logistics & Maintenance for Large Enterprises. Comcast established NNI wholesale agreements with a number of other Tier 1 cable MSOs including Cox Communications, Time Warner Cable, Charter Communications, Cablevision and Mediacom.
HSI Industry Major Players Market Shares Ch M a aj r ort T pla iytelre s market share (including both residential and business) 9% 11% 36% Time Warner Cable Verizon Communication Inc Century Link Inc. 11% Comcast Corporation AT&T Inc. 16% 18% Comcast market share in business services Comcast formed Business Services from 2006 Comcast business reached 20% market share in small size businesses and 5% in mid size businesses.
Market Survey Results How much are you wil ing to pay at most for your Internet services? How much does your household spend on Internet services per month?
Market Survey Results (Cont’d) What are the devices that you use to access the Internet? Are you going to visit any theme Do you like the way of bundling services of parks in the next three years? cable, Internet and mobile network?
Cable Industry Subscribers cable industry subscribers and ARPU cable subscriber(mils) Monthly ARPU ($) major cable providers market share Comcast subscribers decrease at 0.7% CAGR till 2015 16% Comcast Average Revenue Per User increases at 5% 40% 8% Time warner Cable 3.5% CAGR till 2015 10% Cox Enterprise Inc. 21% Charter Communications Inc. Cablevision Systems Corporation Other Companies
Internet Connection Types Internet Price Range Internet Speed Dependence Rural Area Connection per Month Provided on distance Avalibility Types DSL $30 to $90 Up to 15 mbps High High Cable $60 to over 50 to 100 Normal Normal $300 mbps Fiber $70 to $200 15 to 150 Normal Low mbps For smal size businesses with no more than 20 employees, Comcast Business provides six levels of Internet Speed, from 16 Mbps to 150 Mbps.
Business Diversification Comparison Diversified Business of Media Industry Major Companies AREA DISNEY COMCAST FOX TWC DIRECTV CBS VIACOM DISCOVERY SONY Basic cable network(s) √ √ √ √ √ √ √ √ √ Book publishing √ √ √ √ Broadcast TV networks √ √ √ √ √ Broadcast TV stations √ √ √ √ Cable systems √ Film Production √ √ √ √ √ √ √ Internet/broadband sites √ √ √ √ √ √ √ √ √ Magazine/newspapers √ Merchandise licensing √ √ √ √ √ √ √ Premium cable networks √ √ √ Radio stations/networks √ √ √ Recorded music labels √ √ Satellite TV broadcasting √ √ Theme parks/resorts √ √ TV production √ √ √ √ √ √ √ √ Source: S&P Capital IQ Equity Research; Company Reports.
Debt Schedule Bonds Rate Number Weighted Cost of Equity Commercial paper 0.62% 975 0.01% Term loans 2.74% 3,259 0.17% Senior notes with maturities of 5 years or less, at face value 4.40% 14,300 1.21% Senior notes with maturities between 5 years and 1o years, at face value 4.24% 9,630 0.78% Senior notes with maturities greater than 10 years, at face value 5.63% 23,925 2.59% Total debt
Perpetual Growth Method Weighted average cost of capital: