This is a summary report for a stock I pitched in Notre Dame\'s Applied Investment Management class.

1. Assisted Living Concepts (ALC)
Investments Club
Stock Pitch
4/12/12
David Young - 4/12/12 – Investments Club

2. A growth industry
Assisted Living Concepts average resident age is 85 years old
David Young - 4/12/12 – Investments Club

3. A growth stock:
High Ownership & Low Debt
David Young - 4/12/12 – Investments Club

4. ~100% Private Pay and Net Margins
David Young - 4/12/12 – Investments Club

5. ALC multiples historically strong
David Young - 4/12/12 – Investments Club

6. Intrinsic Values
Multiples I mplied Value
1.00 $ 13.23 14 $ 14.95
1.25 $ 16.54 16 $ 17.09
Price to Price to
1.50 $ 19.85 t+1 18 $ 19.23
Book Earnings
1.75 $ 23.16 20 $ 21.36
2.00 $ 26.46 22 $ 23.50
1.7 $ 17.94 5 $ 18.10
1.8 $ 18.99 6 $ 21.72
Price to EV to
t+1 1.9 $ 20.05 t+1 7 $ 25.33
Sales EBITDA
2.0 $ 21.10 8 $ 28.95
2.1 $ 22.16 9 $ 32.57
David Young - 4/12/12 – Investments Club

7. DCF Scenario Analysis,
Assumptions & Sensitivity
Scenario Analysis Current Worst Base Best
Avg Daily Revenue growth rate 3.5% 0.0% 3.0% 5.0%
Private pay growth rate 1.0% -1.0% 1.0% 5.0%
Total units growth rate 0.2% 0.0% 0.5% 1.5%
Residence operations as % Rev. 58.0% 63.0% 61.0% 59.0%
Equity Value $16.92 $13.03 $18.38 $33.50
2016E Occupancy 64.2% 62.3% 67.7% 77.0%
DCF Assumptio ns
Cost of Debt 6.65%
Cost of Equity 8.54%
Debt 18% Growth
$ 18.38 0.0% 0.5% 1.0% 1.5% 2.0%
Equity 82% 5.75% $ 23.75 $ 26.06 $ 28.86 $ 32.31 $ 36.69
WACC 7.75% 6.75% $ 19.26 $ 20.86 $ 22.73 $ 24.95 $ 27.64
WACC 7.75% $ 15.94 $ 17.09 $ 18.41 $ 19.95 $ 21.75
ERP 5%
8.75% $ 13.38 $ 14.24 $ 15.21 $ 16.32 $ 17.60
Rf 2% 9.75% $ 11.34 $ 12.01 $ 12.75 $ 13.58 $ 14.52
TV Growth 1%
David Young - 4/12/12 – Investments Club

8. Final Valuation - $21.86
DCF Value Weight Contribution Conclusion
Best $33.50 35% $11.73
Base $18.38 45% $8.27 $22.60
Worst $13.03 20% $2.61
Multiples Value Weight Contribution Conclusion
P/St+1 $ 20.05 25% $5.01
P/Et+1 $ 19.23 25% $4.81
$21.11
EV/EBITDAt+1 $ 25.33 25% $6.33
P/B $ 19.85 25% $4.96
Method Value Weight Contribution Conclusion
DCF $ 22.60 50% $ 11.30
$ 21.86
Multiples $ 21.11 50% $ 10.56
Trading at
$16.92 Final Value $ 21.86
4/3/12 Stock trades ~50K shares/day Excess return 29.2%

9. End
David Young - 3/21/12 - AIM 2012

10. Real Estate valuation
Replacement Value
Price of New Units $ 111,185
% New 25%
Price of Used Units $ 75,000
% Used 75%
Weighted Avg Value per
$ 84,046
Unit
Total Units 9,325
$ 783,731
Total Firm Value (000s)
Less Debt & Oblg. $ 169,336
Equals Equity Value $ 614,395
DSO 23,256
Implied share price $ 26.42
David Young - 3/21/12 - AIM 2012