The document discusses an investment opportunity in a large Canadian printing and publishing company. It summarizes the company's operations, strategic business units, management, and financial performance. The company has a strong balance sheet, attractive valuation, and is an industry leader. A discounted cash flow valuation of the company using growth projections, WACC calculations, and terminal growth assumptions values the company as a good investment during the financial downturn.

1. Offering consistent value during a financial meltdown
Maxime Brunet | Sachin Karnakote | Anushree Mohta | Kapil Prakash | Raja Uppuluri

2. Investment Opportunity
Strong Attractive
Balance Sheet Valuation
Buy
Balanced Industry
Portfolio Leader
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 2

3. Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A

4. Company Overview
Largest printer and one of the largest
publishing companies in Canada
Operations in Canada, United States and
Mexico
More than 13,500 employees
Reported revenues of CAD2.4 billion in
FY2008
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 4

5. Revenues for 3 SBUs
Marketing
C$1,252
Publishing
C$647
Printing
C$624
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 5

6. Strategic Business Units
Regional Educational
Newspapers Resources
Management
Magazines
Books
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 6

7. Strategic Business Units (2)
SFC, NYT, G
Flyers and
&M, Metro
Inserts
and others
Catalogues,
Plants across
Books,
North America
Financials
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 7

8. Strategic Business Units (3)
Website Database
Development Analytics
Direct Fulfillment
Marketing Mailing
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 8

9. Management
Founded in 1976 by Rémi
Marcoux (Current Chairman)
Control has always been in
the family
Marcoux family retains 82%
of the Class-B control shares
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 9

10. Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A

11. Macro Analysis
Key Issues Effects
1 Long term contracts ↑ Revenues
2 Acquisitions ↑ Revenues & Market Share
3 Market conditions/Growth ↓ Margins & ↓ Market Size
4 Change in FX ↑ Costs & ↓ Margins
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 11

12. Profitability
Management & State of the art
technology
Barriers to entry
Unionized Workforce
Economies of scale & Pricing Power
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 12

13. Financial Flexibility
Stable Management
Good relationships with bankers
Long term cash flows
High CAPEX
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 13

14. Historical Performance
C$30
C$25
C$20
C$15
C$10
C$5
C$0
11/2000
11/2003
11/2005
11/2007
11/1999
11/2001
11/2002
11/2004
11/2006
11/2008
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 14

15. Dividends Payout 97-08
C$0.31
C$0.28
C$0.25
C$0.21
C$0.17
C$0.14
C$0.12
C$0.10 C$0.10
C$0.08 C$0.08
C$0.06
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 15

16. Fundamentals
Profitability TCL Industry
Gross Margin - 5 Yr Avg. 27.06% 20.29%
Net Profit Margin (5 Yr Avg.) 4.76% 4.00%
Financial Strength TCL Industry
Industry: Printing and Publishing, source: Reuters
Net Debt / (Net Debt + Equity) 39% N/A
Net Debt to Equity 60.00% N/A
LT Debt to Equity 54.41% 13.11%
Management Effectiveness TCL Industry
Return on Assets - 5 Yr Avg. 4.83% 3.76%
Return on Equity - 5 Yr Avg. 9.92% 6.02%
Growth TCL Industry
Sales - 5Yr Growth rate 5.05% 5.25%
EPS - 5 Yr Growth rate 0.05% 11.48%
Dividend Growth - 5Yr 18.00% 12.00%
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 16

17. Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A

18. DCF Valuation Assumptions
5yr projection based on estimated growth rates
WACC of 11% until normal in 2013
Normal Stage WACC 10%
Terminal growth rate estimated at 2.75%
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 18

19. WACC Calculation
Growth Stage Normal Stage
β 1.41 β 1.32
Rd 10.75% Rd 7.00 %
Re(CAPM) 12.74% Re (CAPM) 12.23%
Debt portion (D/V) 0.37 Debt portion (D/V) 0.30
WACC 11% Terminal WACC 10%
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 19

20. Forecasts
C$2,600 C$500
C$2,550
C$400
EBITDA and Cash Flow
C$2,500
C$300
C$2,450
Sales
C$2,400 C$200
C$2,350 C$100
C$2,300
C$0
C$2,250
-C$100
C$2,200
C$2,150 -C$200
2006 2007 2008 2009e 2010e 2011e 2012e 2013e
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 20

21. Comparables
Weighted
Various competitors in
EV/EBITDA average based
3 SBUs
on SBUs
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 21

22. Comparables (2)
Publishing
Marketing 5.85x
5.69x
Printing
4.07x
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 22

23. Share Value
Discounted
Comparables
Cash Flow
Opportunity Company Overview Fundamentals 13.50
Valuation Risks and Scenarios Q&A 23

24. Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A

25. Risks and Concerns
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 25

26. Risks and Concerns (2)
C$20.00
Terminal Growth ± 1%
C$18.00
Terminal WACC ± 1%
C$16.00
EBIT ± 2%
C$14.00
CAPEX ± 5%
C$12.00
WACC ± 1%
C$10.00
FX ± 0.15
C$8.00
Range: CAD9.80 - CAD18.80
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 26

27. Investment Opportunity
Strong Attractive
Balance Sheet Valuation
Buy
Balanced Industry
Portfolio Leader
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 27

28. Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A

29. Questions and Answers
Strategic Business Units Comparable Companies Balance Sheet
Institutional Holders EV/EBITDA Cash Flow Statement
Investment Opportunity Fundamentals Income Statement
Management Growth Rates
Recent Acquisitions Growth Rates Graphs
Revenues by sector Levered/Unlevered Beta
Revenue by sector/region Scenario Analysis
Risk and Concerns Updates
SWOT Analysis WACC Calculations
Opportunity Company Overview Fundamentals Valuation Risks and Scenarios Q&A 29

30. Scenario Analysis
RECESSION CONTINUES IN RECESSION CONTINUES IN
2009, ENDS IN Q1 2010 2009 & WORSENS IN 2010
• Sales 20% below • Sales 40% below
expectations expectations for 2010
• EBIT margin down to 5.6% • EBIT margin down to 2.2% in
• Interest expense up 30% 2010
• Interest expense up 50%
30

31. Comparable Companies
Publicis Groupe SA CBC Corp
Viacom Inc Time Warner Corp.
Comcast Corporation CanWest Global
Media
Glacier Ventures Torstar Corporation
John Wiley & Sons Inc McGraw-Hill Co.
Media General
Acxiom Harte Hanks
Mktg
Dunn and Bradstreet
Cenveo Consolidated Graphics
Printing
RR Donnelley & Sons Bowne & CO
Deluxe Corporation CanWest Global
31

32. Growth Rates
2007 % of sector 2009 2010 2011 2012 2012 2013
Media Sector
Consumer and business magazine group $ 212 33.7% 2.0% 3.0% 3.6% 4.0% $ 250 4.0%
Newspaper Group $ 241 38.3% 0.0% 0.4% 3.2% 3.2% $ 266 3.2%
Distribution Group $ 120 19.1% 1.0% 1.0% 2.0% 2.5% $ 131 2.5%
Educational Publishing Group $ 56 8.9% 2.0% 3.0% 3.2% 3.5% $ 65 3.5%
Total $ 629 26.0% 1.0% 1.6% 3.1% 3.4% $ 712 3.4%
Print Sector
Newspaper Group $ 243 15.8% -6.0% -6.0% -6.0% -6.0% $ 178 -6.0%
Book, Catalogues and Magazine Group $ 483 31.3% 0.0% 1.0% 2.0% 2.0% $ 518 2.0%
Mexico Group $ 85 5.5% 15.0% 15.0% 15.0% 15.0% $ 171 15.0%
Direct Mail Group $ 280 18.2% -36.0% -30.0% 5.0% 5.0% $ 145.21 5.0%
Retail Group $ 451 29.2% -3.0% 1.0% 2.0% 3.0% $ 478 3.0%
Total $ 1,542 63.8% -7.5% -3.1% 2.1% 2.6% $ 1,490 2.9%
Marketing Communications
Interactive Marketing Group $ - 0.0% 0.0% 2.0% 2.0% 2.5% $ 11 2.5%
Direct Marketing Products -- Ontario $ 58 23.5% -5.0% -1.3% 1.0% 2.0% $ 57 2.0%
Direct Marketing Products -- Quebec $ 157 63.6% -5.0% -1.2% 1.0% 2.0% $ 155 2.0%
Other $ 32 13.0% -13.0% 0.0% 0.0% 0.0% $ 28 0.0%
Total $ 247 10.2% -2.0% -1.0% 0.9% 1.8% $ 251 1.8%
Total Total $ 2,418 -4.7% -1.5% 2.3% 2.8% $ 2,453 2.9%
32

33. Growth Rates (2)
4.00%
1.00%
Growth Rate
-2.00%
-5.00%
-8.00%
2009e 2010e 2011e 2012e 2013e
Media 1.04% 3.00% 3.60% 4.00% 4.00%
Printing -7.53% -3.06% 2.09% 2.65% 2.89%
Marketing -1.99% -0.95% 0.93% 1.79% 1.80%
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34. Sensitivity
EBIT 2% Terminal WACC 1%
Share Price Share Price
-2.0% $ 13.18 -1.0% $ 16.45
-1.0% $ 13.43 -0.5% $ 14.96
0.0% $ 13.67 0.0% $ 13.67
1.0% $ 13.92 0.5% $ 12.56
2.0% $ 14.17 1.0% $ 11.57
Tax Rate 2% WACC 1%
Share Price Share Price
-2.0% $ 14.38 -1.0% $ 14.64
-1.0% $ 14.02 -0.5% $ 14.15
0.0% $ 13.67 0.0% $ 13.67
1.0% $ 13.32 0.5% $ 13.21
2.0% $ 12.97 1.0% $ 12.75
CAPEX Spending 2% Terminal Growth Rate 1%
Share Price Share Price
-2.0% $ 13.85 -1.0% $ 9.83
-1.0% $ 13.76 -0.5% $ 11.63
0.0% $ 13.67 0.0% $ 13.67
1.0% $ 13.59 0.5% $ 16.04
2.0% $ 13.50 1.0% $ 18.79
34

35. SWOT Analysis
Strengths Weaknesses
•Top player in industry • Weakness in the market
•Long term contracts • Industry negative growth
•Consistent growth in next 5 years
Opportunities Threats
•Growth in Marketing and Media • Declining growth in printing
segments segment
•Expanding in US and Mexico Market •Increase competition from online
media and marketing
35

36. Revenues by sector
Transcontinental Revenues by groups
Digital Media
Education Publishing
Group, 0.5%
Group, 2.3% Newspaper Group, 8.9%
Distribution Group, 5.0%
Newspaper Group, 10.0% Book Group, 6.2%
Mexico Group, 3.5%
Magazine
Commercial Products
Group, 8.4%
Group, 11.1%
Direct Marketing
Group, 11.6%
Retail Group, 18.7%
Premedia Group, 1.2%
Catalogue and Magazine
Group, 12.7%
36

37. Forecast
CA$1,400
CA$1,200
CA$1,000
CA$800
CA$600
CA$400
CA$200
CA$0
2009 2010 2011 2012 2013
37

38. Management
Rémi Marcoux, C.M, O.Q, F.C.A, Executive Chairman of the Board
• Executive Chairman at Transcontinental since 2004 after being CEO
• Founded the Company in 1976
• Officer of the National Order of Québec
Francois Olivier, President and CEO
• CEO as of February 20th, 2008
• Focused on innovation, teamwork and customer satisfaction
• B.Sc from McGill University, Harvard program for management development
Benoit Huard, CFO
• CFO since 2006, Corporate treasurer since 2002
• Chartered Financial Accountant
• Senior positions in large public companies such as Quebecor
38

39. Revenue by sector/region
39

40. Levered/Unlevered Beta
Sector Company β D/E βu Tax rate Sector βu
Printing RRD 1.65 1.10 0.94 0.32
Consolidating Graphics 2.00 1.24 1.16 0.41
Bowne & Co 2.19 0.50 1.68 0.40 1.26
Media Media General 2.07 2.13 0.86 0.34
Time Warner Inc. 1.37 0.63 0.98 0.38
McGraw-Hill Co. 1.13 0.92 0.73 0.40 0.86
Marketing Acxiom 1.60 1.15 0.93 0.37
Harte Hanks 1.23 0.75 0.83 0.37 0.88
Unlevered TCL 0.99
Tax Rate 0.30
D/E 0.60
Leveraged TCL 1.41
40

41. Recent Acquisitions
Provider of multi-channel marketing
services
Custom marketing communications
A Database marketing company
Web-based platform for buying and selling
businesses
Provider of e-mail marketing solutions
41

42. Institutional Holders
Institution Shares % Held
Mackenzie Financial Corporation 10,127,289 15.66%
Franklin Templeton Investments Corp. 8,613,823 13.32%
Jarislowsky Fraser, Ltd. 8,230,272 12.73%
Bissett Investment Management Ltd. 5,462,975 8.45%
Caisse de Dépôt et Placement du Québec 3,054,334 4.72%
QV Investors Inc. 2,318,550 3.59%
Invesco Trimark Ltd. 2,154,200 3.33%
MFC Global Investment Management 2,003,512 3.10%
Howson Tattersall Investment Counsel Ltd. 1,848,648 2.86%
CPP Investment Board 1,713,000 2.65%
Source: Reuters
42

43. EV/EBITDA EV/EBITDA
2009E 2010E 2009E
P/E
2010E
Transcontinental 4.10x 3.93x 8.65x 8.76x
EV/EBITDA P/E
2009E 2010E 2009E 2010E
Publicis Groupe SA 4.91x 4.88x 9.08x 8.76x
CBC Corp 5.12x 4.43x 7.57x 6.67x
Viacom Inc. 6.08x 5.34x 10.77x 9.18x
Time Warner Inc. 5.60x 5.32x 9.57x 9.09x
Comcast Corporation 5.65x 5.37x 16.18x 13.75x
Media
CanWest Global Comm. 6.02x 5.77x 6.92x 6.92x
Glacier Ventures 5.60x 6.10x 5.02x 5.70x
Torstar Corporation 6.45x 6.16x 7.82x 7.06x
John Wiley & Sons Inc. 8.03x 6.69x 11.73x 9.75x
McGraw-Hill Co. 4.69x 4.09x 9.04x 7.92x
Media General 6.23x 8.58x 7.84x 7.50x
Average 5.85x 5.70x 9.23x 8.39x
Acxiom 4.52x 4.69x 11.19x 13.13x
Mktg
Dun and Bradstreet Corp 7.67x 7.09x 12.93x 11.40x
Harte Hanks 4.87x 4.63x 8.86x 7.98x
Average 5.69x 5.47x 10.99x 10.84x
Cenveo 5.63x 5.82x 4.05x 3.47x
Consolidated Graphics 4.21x 4.16x 7.49x 7.82x
Printing
R.R.Donnelley & Sons 4.00x 3.75x 5.19x 4.54x
Bowne & Co. 1.60x 2.19x 12.02x 4.70x
Deluxe Corp 4.91x 5.36x 6.13x 5.33x
Average 4.07x 4.26x 6.98x 5.17x
Blended Average SUM Weight EV/EBITDA
EBITDA from Media (2008) $ 117.60 30.6% 1.79x
EBITDA from Marketing (2008) $ 149.80 38.9% 2.21x
EBITDA from Printing (2008) $ 117.40 30.5% 1.24x
43
Total EBITDA (2008) $ 384.80 100.0% 5.24x

44. EV/EBITDA Multiples
EV/EBITDA P/E
2009E 2010E 2009E 2010E
Transcontinental 4.10x 3.93x 8.65x 8.76x
EV/EBITDA P/E
2009E 2010E 2009E 2010E
Time Warner Inc. 5.60x 5.32x 9.57x 9.09x
Publishing
McGraw-Hill Co. 4.69x 4.09x 9.04x 7.92x
Media General 6.23x 8.58x 7.84x 7.50x
Average 5.51x 6.00x 8.82x 8.17x
Acxiom 4.52x 4.69x 11.19x 13.13x
Mktg
Harte Hanks 4.87x 4.63x 8.86x 7.98x
Average 4.70x 4.66x 10.03x 10.56x
Consolidated Graphics 4.21x 4.16x 7.49x 7.82x
Printing
R.R.Donnelley & Sons 4.00x 3.75x 5.19x 4.54x
Bowne & Co. 1.60x 2.19x 12.02x 4.70x
Average 3.27x 3.37x 8.23x 5.69x
Blended Average SUM Weight EV/EBITDA
EBITDA from Media (2008) $ 117.60 30.6% 1.68x
EBITDA from Marketing (2008) $ 149.80 38.9% 1.83x
EBITDA from Printing (2008) $ 117.40 30.5% 1.00x
Total EBITDA (2008) $ 384.80 100.0% 4.51x
44

45. Income Statement
Income Statement (US$) 2008A 2009e 2010e 2011e 2012e 2013e
Total Sales $ 2,282 $ 2,364 $ 2,354 $ 2,402 $ 2,467 $ 2,535
Total COGS $ 1,781 $ 1,726 $ 1,716 $ 1,748 $ 1,793 $ 1,843
Gross Profit $ 648 $ 638 $ 638 $ 653 $ 673 $ 692
Total Expenses $ 284 $ 276 $ 275 $ 280 $ 288 $ 296
EBITDA $ 365 $ 362 $ 363 $ 373 $ 385 $ 396
EBIT $ 16 $ 234 $ 203 $ 223 $ 235 $ 246
Net Income $ 153 $ 129 $ 107 $ 122 $ 135 $ 149
Basic EPS $1.87 $1.57 $1.32 $1.49 $1.65 $1.83
45

46. Balance Sheet
Balance Sheet (US$): 2008A 2009e 2010e 2011e 2012e 2013e
Total Current Assets $ 446 $ 348 $ 399 $ 496 $ 357 $ 366
Total Assets $ 2,620 $ 2,706 $ 2,776 $ 2,873 $ 2,734 $ 2,743
Total Current Liabilities $ 745 $ 533 $ 531 $ 539 $ 788 $ 674
Long-Term Debt $ 602 $ 796 $ 789 $ 782 $ 286 $ 286
Total Current & L.T. Debt $ 1,514 $ 1,496 $ 1,486 $ 1,487 $ 1,240 $ 1,125
46

47. Cash Flow Statement
Cash Flow Statement
(US$):
2008A 2009e 2010e 2011e 2012e 2013e
Net Income $8 $ 129 $ 107 $ 122 $ 135 $ 149
Cash Flow from Operations $ 300 $ 257 $ 267 $ 271 $ 285 $ 299
Investment Activities: $ (328) $ (311) $ (180) $ (150) $ (150) $ (150)
Financing Activities: $ 79 $ (26) $ (34) $ (33) $ (522) $ (26)
47

48. Dividend Discount Model
BASE CASE
YEAR 2008 2009 2010 2011 2012 2013 PERPETUITY 20.073
DIVIDEND $ 0.31 0.31 0.31 0.32395 0.33691 0.3712 PV OF PERP = 12.424
DISCOUNT RATE 1 1.1275 1.27114 1.43309 1.6157
STOCK PRICE = 13.7285
RECESSION 2009 PICKS UP 2010
YEAR 2008 2009 2010 2011 2012 2013 PERPETUITY 18.002
DIVIDEND $ 0.31 0.248 0.2728 0.29053 0.30215 0.3329 PV OF PERP = 11.142
DISCOUNT RATE 1 1.1275 1.27114 1.43309 1.6157
STOCK PRICE = 12.2777
RECESSION 2009 WORSENS 2010
YEAR 2008 2009 2010 2011 2012 2013 PERPETUITY 12.97
DIVIDEND $ 0.31 0.248 0.1984 0.20931 0.21768 0.2399 PV OF PERP = 7.9211
DISCOUNT RATE 1 1.14 1.2882 1.45232 1.6373
STOCK PRICE = 8.80198
48

49. Thank You
49