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NSIT Valuation

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NSIT Valuation

NSIT Valuation

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  • 1. NSIT  Financial  OverviewGangming  Liang1)  Due  to  the  downturn  of  the  global  economy  during  2012  Q3-­‐  Q4,          NSIT  reduced  long-­‐  term  debt  weight  for  high  business  risk  in  IT  direct        market  and  improving  solvency.  Poor  liquidity  caused  by  poor  receivable          management  offsets  the  positive  sides  of  inventory  turnover  and  sales.        Operating  cash  flow  and  capital  management  maintain  NSITs  profitability.2)  Various  valuation  methods  double  confirm  that  NSIT  is  undervalued.        EV/  EBITDA  multiple  has  potential  increase  as  a  result  of  economic  recovery,        SaaS  sales  increse,  and  cloud  capitalization.  Current  price  breaks  out  from          distribution  range,  $14-­‐  $19,  and  might  fall  back  to  $15-­‐  $17  in  short-­‐  run.          However,  NSIT  is  worth  more  than  the  current  price  fundamentally. NSIT Industry Intrinsic  Price  per  Share g=  2.00% g=  0.00% Implied  Price  per  Share  ($) 21.05 DCF  Direct  Method 33.51 22.7 + Current  Price  per  Share  ($) 19.67 Valuation DCF  Indirect  Method 41.13 27.48 + Acquisition   Share  Price  premium  % 7.00 -­‐ Method Book  Value  Method 13.42 -­‐ Valuation Purchase  Price  ($M) 939 Comparison Residual  Income  Method 29.97 20.03 + IT  Direct  Market  EV/  EBITDA  (x) 4.80 4.80 Benjamin  Graham  Method 26.79 + Aggregate  Purchase  Price  ($M) 868 + EV/  EBITDA  Method 21.47 21.05 + EV/  Revenue  (x) 0.17 0.15 + NSIT Industry EV/  EBITDA  (x) 4.60 4.80 -­‐ GM  % 13.58 13.60 -­‐ Valuation Price/  Sales  (x) 0.16 0.16 OM  % 3.00 3.00 Multiples Price/  Book  (x) 1.22 4.10 -­‐ Profitability PM  % 1.75 3.60 -­‐ P/  E  (x) 9.50 11.43 + (Slightly ROA  % 5.00 11.70 -­‐ Price/  CF  (x) 13.10 12.30 +  Weak) ROE  % 14.25 10.50 + Price/  FCF  (x) 26.20 27.80 -­‐ ROIC  % 11.85 17.90 -­‐ Enterprise  Value  ($M) 901 Tax  Burden  % 64.12 Shares  Outstanding  ($M) 44.62 Interest  Burden  % 95.95 Market  Cap  ($M) 878 483 + Change  in  W/C  ($M) 56 + Beta 1.78 1.04 -­‐ W/C  Turnover  (x) 15.11 + EPS 2.07 0.12 + Cash  Flow Changes  in  CF  ($M) 24 + 5-­‐  Year  PEG  (%)   0.56 -­‐0.09 + Management CF-­‐  to-­‐  Earning  Index  (x) 0.73 + Cash  ($M) 152 (Good) Cash  ROE  % 25.39 + Debt  ($M) 81 Investing  &  Financing  % 138.89 + Revenue  ($M) 5,301 118 + FCF/  Sales  (x) 0.70 3.79 -­‐ Key  Statistics Revenue  Growth  % 0.27 0.30 -­‐ Liquidity CR  (x) 1.44 2.20 -­‐ EBITDA  ($M) 196 16 + (Poor) QR  (x) 1.29 2.00 -­‐ D  &  A  ($M) 41 Cash  Ratio  % 12.87 -­‐ NI  ($M) 93 Debt/  Assets  % 4.03 1.00 -­‐ Goodwill  ($M) 26 Solvency Debt/  Equity  % 11.43 40.00 + W/C  ($M) 379 (Slightly L-­‐R  Debt/  Equity  % 11.00 23.00 + CFO  ($M) 67    Good) Debt/  Capital  % 10.19 6.19 -­‐ CFI  ($M) 34 Interest  Coverage  % 24.70 23.90 + CFF  ($M) 15 Efficiency Asset  Turnover  (x) 2.75 0.60 + Capex  ($M) 30 (Slightly   Receivable  Turnover  (x) 4.10 5.10 -­‐ FCFF  ($M) 58    Good) Inventory  Turnover  (x) 31.20 20.00 + FCFE  ($M) 77 + Payable  Turnover  (x) 4.16

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