1. CFA Internal Equity Research Competition
Ready to Speed Up
Team 2
May 12, 2016
2. Company Profile
Price $57.84
Date Of Price 3-Feb-16
52-week Range $64.99 - $50.01
Market Cap ($) 154,881M
Fiscal Year End December
Shares Outstanding 2,678M
Dividend Yield 1.90%
Total Return 27.47%
Price Target $72.63
Price Target End Date 2-Aug-17
RECOMMENDATION: BUY
Forward P/E : 18.86
Major drivers
Xfinity Residential Service
Comcast Business
Attractive Universal’s
Theme Parks
Strengthening Financial
Statements
Source: SEC Filings, Bloomberg, Team Estimates
Risks:
• New Entrants
• Behavior Changes
• Regulatory Changes
• Programming Expense
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
Valuation Method
WACC
DCF Model
Scenario Analysis
DDM & Multiples
Risks
Target Price:
$72.63
Total Return of
Stock: 27% BUYTarget Period:
12-18 months
Target Price is 3.46% above market consensus
3. BUSINESS OVERVIEW
Comcast
Cable
62% of Sales
NBC
Universal
38% of Sales
Cable Networks
Broadcast TV
Filmed Entertainment
Theme Parks
The Largest Broadcasting Company and Cable Company
In the World By Revenue.
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
Valuation Method
WACC
DCF Model
Scenario Analysis
DDM & Multiples
Risks
4. Competitive Advantages
High Speed Internet Leads to Growth in
Residential Services Revenue
Higher Market
Penetration
Revenue
Growth
Consumer
Base Growth
0
100
200
300
400
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
U.S. Number of broadband
connections (millions)
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
0
5
10
15
20
25
30
35 2007
2008
2009
2010
2011
2012
2013
2014
2015
2016E
2017E
2018E
2019E
2020E
Millions Comcast High speed internet customer
relationships and market penetration
high-speed internet customers
high-speed internet penetration
13.2
27.3%
23.3
41.9%
29.4
49.9%
• Fastest available Internet
speeds
• Fastest in-home Wi-Fi
• Millions of hotspots
nationwide
Source: Statistia, team estimation
Source: Company data team estimation
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
Valuation Method
WACC
DCF Model
Scenario Analysis
DDM & Multiples
Risks
5. • Higher speed
• Lower price
• Industry-specific services
Two Engines Drives Cable Business
Growth
Two engines of
growth
Healthy penetration
growth
Small business
Mid-size business
New enterprise division
gaining traction
Large enterprises
1953
2565
3241
3951
4742
5,736.1
6,938.6
8,393.1
10,152.6
12,281.0
0
2000
4000
6000
8000
10000
12000
14000
Business Services revenue
• Extending fiber network to more
potential business customers
• NNI (network to network
interconnection) wholesale agreements
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
Valuation Method
WACC
DCF Model
Scenario Analysis
DDM & Multiples
Risks
6. $1,874 $2,085
$2,325
$2,623
$3,339
2011 2012 2013 2014 2015
NBCUniversal Theme Park
Segment Revenue
NBC Universal Media LLC
Market Share: 19.0%
Industry Brand Names :
Universal Studios Japan
Universal Studios Florida
Universal Island of Adventure
Universal Studios Hollywood
Universal Studios Singapore
Universal Studios China
ATTRACTIVE THEME PARKS
Average Guest
Spending
Revenue
Guest
Attendance
The Diagon Alley
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
Valuation Method
WACC
DCF Model
Scenario Analysis
DDM & Multiples
Risks
7. Twenty-First Century Fox
Walt Disney Company
Time Warner Cable Inc.
Verizon Communications Inc.
Dish Network Corp.
AT&T, Inc.
1. Strong Increase in Revenue
2. Profitability Metrix is set to improve
3. Strengthening Balance sheet
4. Expansion of cash flow and earning
NBCUniversal
37%
Cable
Communication
63%
PEER GROUP:
KEY TAKEAWAYS
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
Valuation Method
WACC
DCF Model
Scenario Analysis
DDM & Multiples
Risks
8. 0
2
4
6
8
10
12
2011 2012 2013 2014 2015
EBITDA MULTIPLE
CMCSA Peer group's average
HOW LONG CAN LOW VALUATION EXIST?
LOW PROFITABILITY RATIO
0.00%
2.00%
4.00%
6.00%
8.00%
2011 2012 2013 2014 2015
ROA
CMCSA Peer's average
0.00%
10.00%
20.00%
30.00%
40.00%
2011 2012 2013 2014 2015
ROE
CMCSA peer median
0.00
1.00
2.00
3.00
4.00
5.00
2011 2012 2013 2014 2015
LOW EPS
CMCSA peer group
-
1.00
2.00
3.00
4.00
5.00
2011 2012 2013 2014 2015
LOW DIVIDEND YIELD
CMCSA peer group
Source: SEC Filings, Team estimates
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
Valuation Method
WACC
DCF Model
Scenario Analysis
DDM & Multiples
Risks
9. CMCSA 5.9% CAGR > Peers’ 3% CAGR > Cable Industry 2.6% CAGR
Business
service,
25%
High
speed
internet,
27%
Theme
park, 8%
Other
business
line, 40%
60% total
revenue
increment in the
next 5 years
will be driven by
3 business
segments.
SEGMENT CAGR
Business
Services 18.52%
High speed
Internet 9.14%
Theme Parks 10.34%
DIVERSIFIED BUSINESS SEGMENTS
ENSURING REVENUE GROWTH
$-
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
2015 2016E 2017E 2018E 2019E 2020E
Theme Parks
Filmed Entertainment
Broadcast Television
Cable Networks
Advertising
Business Services
Residential Cable
Services
Source: SEC Filings, Team estimates
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
Valuation Method
WACC
DCF Model
Scenario Analysis
DDM & Multiples
Risks
10. 4.00%
4.50%
5.00%
5.50%
6.00%
ROA
PROFITABILITY METRICS SET TO IMPROVE
13.00%
14.00%
15.00%
16.00%
17.00%
18.00%
ROE
2014 2015
CMCSA 16.19% 15.59%
Peer's median 26.70% 26.27%
CMCSA/PEER 60.65% 59.33%
2014 2015
CMCSA 5.40% 5.05%
Peer's average 5.37% 7.33%
CMCSA/PEER 100.47% 68.89%
CMCSA’s ROA will increase 1.18% from
2016E to 2020E
CMCSA’s ROE will increase 2.09% from
2016E to 2020E
Source: SEC Filings, Team estimates
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
Valuation Method
WACC
DCF Model
Scenario Analysis
DDM & Multiples
Risks
11. CASH FLOW EXPANSION
$-
$5.0
$10.0
$15.0
$20.0
$25.0
2015 2016 2017 2018 2019 2020
Cash flow coverage
CFO CAPEX DIVIDEND
$-
$2.0
$4.0
$6.0
$8.0
2015 2016 2017 2018 2019 2020
Share repurchases
Diff between CFO and Capex + div
Share repurchases
CFO CAPEX DIVIDEND
CAGR 5% 6% 5.5%
Expansion of CFO ensures the growth of Capex and dividend
Steady cash flow difference between CFO and Capex+Dividend
create the room for high steady share repurchases.
Source: SEC Filings, Team estimates
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
Valuation Method
WACC
DCF Model
Scenario Analysis
DDM & Multiples
Risks
12. STRENGTHENING BALANCE SHEET
$1.702
billion
$17.335
billion
net
long term debt issuance
Total long term debt repayment
between 2016-2020
3.00
3.05
3.10
3.15
3.20
2015 2020E
Equity multiple
17%
83%
Net Long-term debt repayment
Cash flow to cash and other item
(CFO -Capex - div - share repurchase)
between 2016-2020
-
0.05
0.10
0.15
0.20
2015 2015-2020
average
Cash ratio
Source: SEC Filings, Team estimates
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
Valuation Method
WACC
DCF Model
Scenario Analysis
DDM & Multiples
Risks
13. EARNING EXPANSION
$-
$10.00
$20.00
$30.00
$40.00
$50.00
2015 2016E 2017E 2018E 2019E 2020E
Revenue and Cost per share
revenue cost
(Revenue-Cost) Growth + Repurchases =
$0.95 + $0.97 = $1.925 Increase in EPS between 2015 and 2020
60% EPS growth
Source: SEC Filings, Team estimates
$-
$1.000
$2.000
$3.000
$4.000
$5.000
$6.000
2015 2020E
EPS
Base EPS (Rev-cost) Share repurchase
2015 2016E 2017E 2018E 2019E 2020E
CMCSA $ 3.240 $ 3.340 $ 3.850 $ 4.230 $ 4.750 $ 5.170
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
Valuation Method
WACC
DCF Model
Scenario Analysis
DDM & Multiples
Risks
14. DCF
Priority
Accurate Modeling
More Factors Taken Into Consideration
Base & Bear Scenario Analysis
Undervalued
for
all
methods
KEY TAKEAWAYS
DCF
$71.93
DDM
$64.65
MULTIPLES
$82.71
Primary
Method
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
Valuation Method
WACC
DCF Model
Scenario Analysis
DDM & Multiples
Risks
15. 73.24
%
26.76
%
Weight
Cost of
Equity
Cost of
Debt
Cost of debt
4.76% After tax
x
cost of
debt
Weighted
cost
1 – Tax rate 3.00% of debt
34.28% x 0.80% Weighted
average cost of
Capital
% of debt
26.76%
Risk free rate + 7.02%
2.80%
+
% of
equity
Weighted
cost
Beta 73.24% of equity
1.032 x 6.22%
x
Cost of
equity
(Market return
8.49%
8.31%
-
Risk free rate)
2.80%
WEIGHTED AVERAGE COST OF CAPITAL
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
Valuation Method
WACC
DCF Model
Scenario Analysis
DDM & Multiples
Risks
19. NER
BCR
RR
PER
0
1
2
3
4
5
6
0% 50% 100%
RISK PROFILE
Risk Profile
Probability
Impact
Behavior Change Risk
Regulatory Risk
Programming Expense
Risk
New Entrants Risk
INVESTMENT RISKS
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
Valuation Method
WACC
DCF Model
Scenario Analysis
DDM & Multiples
Risks
20. Table of Content
Internet Speed Outline
High Speed Industry Development
Competitive Landscape
Broadband Infrastructure
Major Players Market Shares
ARPU & Subscriptions
Market Survey Results
Market Survey Results(Cont’d)
Cable Industry Subscribers
Internet Connection Types
Business Diversification Comparison
Top 25 Theme Park Worldwide
Top 25 Theme Park Worldwide(Cont’d)
Universal Theme Park Attendance
Dividend Discount Model
Debt Schedule
Perpetual Growth Method
Enterprise Multiple Valuation
Revenue Component 1
Revenue Component 2
EPS
Income Statement Analysis
Net Income Growth Rate
FOXA and VZ Net Income Issue
ROA
ROE
CAPEX
Depreciation & Amortization
Equity Multiplier
Asset Per Share
Dividend Yield
Bond Yield
DuPont Analysis
Valuation-Projection
21. 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
collecting 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 Stream Live TV
Verizon Fios: $ 59.99 50MBPS Internet
AT&T U-verse: $30.00 3Mbps Internet speeds(up to at most 6 Mbps)
Fastest Internet Speed Providers in United States
22. 39%
37%
22%
2%
residential broadband services
business broadband services
carrier and internet backbone
other
0
50
100
150
200
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
U.S. internet traffic volume
（Exabytes per month）
0
100
200
300
400
500
number of broadband connections
（million）
Number of broadband connections has increased an
annualized 13.8% in the five years to 2015
internet traffic has more than quadrupled over
the same period
Of all broadband internet connections:
cable internet (68.4%)
DSL (19.3%)
fiber optic (10.5%)
High Speed Internet Industry Development
23. Technology at 25 Mbps/3 Mbps
DSL,FTTN, Other CopperCABLE
HTTPFixed Wireless
Source: Federal Communications Commission (FCC) 2016 Broadband Progress Report
Competitive Landscape
24. Acquisition of
Contingent
NNI
agreements
with large
MSOs
nationwide
deployment
of broadband
infrastructure
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.
Contingent：A global Technology
Services Company Specializing in
WAN Management, Network
Integration, Logistics & Maintenance
for Large Enterprises.
Development of Broadband Infrastructure
25. 9%
11%
11%
15%18%
36%
Time Warner Cable
Verizon Communication Inc
Century Link Inc.
Comcast Corporation
AT&T Inc.
Major players market share
(including both residential and business)
Comcast formed Business Services from 2006
Comcast business reached 20% market share in
small size businesses and 5% in mid size
businesses.
0%
5%
10%
15%
20%
SMALL-
SIZE
BUSINESS
MID-SIZE
BUSINESS
SMALL-
SIZE
BUSINESS
MID-SIZE
BUSINESS
2006 2015
Comcast market share in business services
HSI Industry Major Players Market Shares
27. How much are you willing to pay at most for your Internet services?
How much does your household spend on Internet services per month?
Market Survey Results
28. Are you going to visit any theme
parks in the next three years?
Do you like the way of bundling services of
cable, Internet and mobile network?
What are the devices that you use to access the Internet?
Market Survey Results (Cont’d)
29. 0
20
40
60
80
100
120
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
cable industry subscribers and ARPU
cable subscriber(mils) Monthly ARPU ($)
40%
21%
10%
8%
5%
16%
major cable providers market share
Comcast
Time warner Cable
Cox Enterprise Inc.
Charter Communications Inc.
Cablevision Systems Corporation
Other Companies
Comcast subscribers decrease at 0.7%
CAGR till 2015
Average Revenue Per User increases at
3.5% CAGR till 2015
Cable Industry Subscribers
30. Internet
Connection
Types
Price Range
per Month
Internet
Speed
Provided
Dependence
on distance
Rural Area
Avalibility
DSL $30 to $90 Up to 15 mbps High High
Cable $60 to over
$300
50 to 100
mbps
Normal Normal
Fiber $70 to $200 15 to 150
mbps
Normal Low
For small size businesses with no more than 20 employees, Comcast Business provides six levels
of Internet Speed, from 16 Mbps to 150 Mbps.
Internet Connection Types
31. 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.
Business Diversification Comparison
32. Top 25 Theme Park Worldwide By Annual Attendance
33. Top 25 Theme Park Worldwide By Annual Attendance
50. 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 52,089 4.76%
51. Weighted average cost of
capital: 7.0%
Net present value of free
cash flow $41,261.6
Growth rate of FCF after
2020 2.9%
Terminal value $266,969.1
Present value of the terminal
value 190,180.4
Enterprise Value $231,442.0
LESS: Net Cash (50,326.0)
Equity Value $181,116.0
Diluted shares: 2,518.000
Equity Value Per Share $71.93
Perpetual Growth Method
