sector alaa hachem, global equity strategist ariane laurin, fixed … · alaa hachem, global equity...

Desautels Capital Management

Recruitment Workshop

Sector

Alaa Hachem, Global Equity Strategist

Ariane Laurin, Fixed Income Strategist

February 6, 2018

1 Desautels Capital Management

Table of Contents

I. Overview of HIM and DCM

II. Type of Candidates We Look For

III. Application and Interview Process

IV. Sample Stock Pitch

V. Q&A

SECTION I

Overview of HIM and DCM


HIM ProgramOverview

Two-year Program – 45 Credits

Honours in Investment Management Degree

1

Required Classes Strict Course Structure

▪ Financial Statement Analysis

▪ Financial Reporting Valuation

▪ Corporate Finance

▪ Investment Management

▪ Applied Corporate Finance

▪ Financial Derivatives

▪ Market Risk Models

▪ Fixed Income Analysis

▪ Alternative Investments

▪ International Finance

▪ Applied Investments

▪ Advanced Business Statistics

▪ Honours IM Research Project (x2)

▪ Limited ability to pursue minors

or concentrations

▪ No possibility for exchange

2

Sample Schedule3

Tuesday Wednesday Thursday FridayMonday

7:30 – 8:30

Guest speaker

7:30 – 8:30

HIM Meeting

4:00 – 6:00

HIM Meeting

1:00 – 2:00

Working Session

10:00 – 10:30

Sector Meeting

4:00 – 5:00

Sector Meeting

Schedule comprised of HIM group meetings, sector meetings and guest speakers. Students prepare for meetings during

their own time by doing research, writing reports and preparing presentations for the fund.


DCM OverviewStructure

Global Equity Fund

▪ Strategists and Risk Manager

▪ Investment Committee

▪ AUM: ~500K

▪ Generalist Coverage

▪ Approach: both bottom-up

fundamental and macro ideas

▪ AUM: ~2.9M

▪ 7 Sector Verticals

▪ Approach: bottom-up,

fundamental analysis

▪ Economic Analyst

▪ Accounting Intern

▪ Marketing Intern

▪ Information Systems Intern

Fixed Income Strategist

Senior Analyst Senior Analyst

Junior Analyst Junior Analyst

Global Equity Strategist

Senior Analyst Senior Analyst

Junior Analyst Junior Analyst

Risk Manager

Junior RM Junior RM

Fixed Income Fund Risk Management

Desautels Capital Management Interns


DCM OverviewStructure

Financials TMT Consumers Energy

Industrials Materials Fixed IncomeHealthcare

Mackenzie Chisholm

Joe Derksen

Antoine Francoeur

Emilie Granger

Victoria Perlman

Kyle Costanzo

Thomas Milne

Sunny Wu

Sabrina Frias

Noah Gillard

Alexandra Ma

Tejas Saggi

Alexander Bibic

Robert Chen

Daniel Milne

Eric Van Hees

David Meyers

Thomas Boucher-Charest

Ariane Laurin

Victoire Gekas

Matei Popescu

Ludovic Van den Bergen

Jaskrit Singh

Ian Jiang

Charles Feng

George Koutsos

Noah Petkau


DCM OverviewA Cycle of Learning

Apply to HIM

Junior Year Senior Year Alumni

Learnings Networks &

Mentorship

SECTION II

Type of Candidates We Look For


Who Makes Up DCM?Not Your Average Finance Nerds

Average GPA

3.89

Spoken Languages

12

Female

30%

Entrepreneurs

7DJ!

1

Varsity Athletes

4

Awards & Scholarships

14

Academic Competitions

17


Who Makes Up DCM?Common Qualities

▪ Team player

▪ Intellectually curious

▪ Open-minded and eager to learn

▪ Genuine interest in investing and financial markets

▪ Hardworking and dedicated with a clear understanding of the work expectations

1

2

3

4

5


Where Do Our Students Go?Growing Network of Alumni

Current Students And Alumni Placement

HIM Students And Alumni Represent McGill At The World’s Top Institutions

SECTION III

Application and Interview Process


Application & Interview ProcessImportant Dates

Application Deadline: March 9th 2018 at 4:59 pm

Email a single PDF of your application to [email protected]

▪ Application Cover Pages

▪ Cover Letter (1 page, single space)

▪ Completed program questionnaire

▪ Updated copy of CV & transcript

Complete Application Package

Next Steps

▪ Will be notified about interviews shortly after (with Vadim & 2 HIM students)

▪ Interview is both technical & behavioural

‒ Technical: 7 minute stock pitch and Q&A, and other potential technical finance questions

‒ Behavioural: Introduction, why HIM, etc.


Stock PitchTips

Equity

Fixed Income

▪ Financials: Plymouth Industrial Reit Inc.

(NYSEAMERICAN:PLYM)

▪ TMT: Meet Group Inc. (NASDAQ:MEET)

▪ Consumers: Retimans Canada (TSE: RET.A)

▪ Energy: Pengrowth (TSE:PFG)

▪ Healthcare: Accuray Inc. (NASDAQ:ARAY)

▪ Industrials: Logistec Corp. (TSX: LGT.B)

▪ Materials: Sherritt International (TSX:S)

▪ Cameco Corporation: 3.750% 14/11/22

▪ Videotron: 5.625% 15/06/25

▪ Select only one

▪ Duration should be 5 – 7 minutes

▪ Pitch should be done individually

▪ Judged based on:

‒ Quality of analysis / insights

‒ How you answer questions

▪ Possible recommendations: Buy, Sell, Hold

▪ Must include the following

‒ Company overview

‒ Annotated price chart

‒ Business model / Industry analysis

‒ Investment thesis

‒ Valuation

‒ Risks and Catalysts


Interview PreparationTips

Technical Questions Behavioural Questions

▪ Stock Pitch

‒ Understand the company & drivers well

‒ Include value-added analysis

‒ Ask yourself WHY

▪ Finance Theory

‒ Review your notes from finance classes

▪ Markets and News

‒ Make sure to read market news

‒ Be able to explain recent market trends

▪ Interest in the program and motivation

‒ Understand the structure of the program

‒ Have strong reasons for wanting to join

▪ Past experiences

‒ Ability to talk about your past work and

extracurricular activities

‒ Explain what you have learned from them

▪ Personality

‒ Strengths, weaknesses, role in group work, etc.

‒ What do you bring to the team?

Do not learn answers by heart and be genuine!

SECTION IV

Sample Stock Pitch


69%

4%

22%

5%

Concerts Sponsorship & Advertising Ticketing Artist Nation

18%

33%

48%

1%

Corporate Overview

Business Overview Public Markets Summary

Live Nation Entertainment

Operating Performance Breakdown

▪ World’s largest ticket seller and promoter of live

entertainment

‒ Formed from the merger of Live Nation (largest

promoter) and TicketMaster (largest ticket seller)

▪ Primarily operates in live music but dabbles in college

sports and sells tickets for other forms of live

entertainment

▪ Four business segments: Concerts, Ticketing,

Sponsorship and Advertising, and Artist Nation

Source: Capital IQ 11/04/2017, Company filings.

2016 Revenue

$US8,355M

2016 EBITDA

$US592M

Live Nation Entertainment ($US)

Current Price $43.82

Diluted Shares Outstanding (M) 206.14

Market Cap ($USM) $9,033

Add: Total Debt 2312.2

Add: Preferred Shares 0

Add: Minority Interest 605.8

Less: Total Cash 1801

Enterprise Value ($USM) $10,150

Margin differential between

segments results in weighting

differences between revenue

and EBITDA


0,000

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

0%

10%

20%

30%

40%

50%

60%

70%

Nov 16 Jan 17 Mar 17 May 17 Jul 17 Sep 17 Nov 17

Volume (000's) LYV S&P 500

Outperformance of Earnings Estimates Biggest Driver of 62% Gain Over Last 12 months(in $ millions, unless noted)

Strong fundamentals driving shareholder value

Source: Bloomberg

+62%

+23%

Positive earnings surprise

Negative earnings surpriseReport released that

Amazon will potentially

enter ticketing business

Northcoast (equity

research) downgrades

to neutral

LYV wins promotion

business of U2 tour

(biggest tour of the year)Amazon in talks to offer

event ticketing in the US

Corporate Overview


Investment Theses Margin Expansion, Valuation Result In Strong Investment Opportunity (in $ millions, unless noted)

Ancillary revenue growth

outpacing non-ancillary

revenue growth, resulting in a

margin expansion within the

concerts segment

Secondary ticketing growth

outpacing primary ticketing

growth, resulting in a margin

expansion within the ticketing

segment

Ticketing segment growth

outpacing concerts segment

growth, resulting in an overall

mix shift towards higher

margin business segments

The company continues to trade at a discount to peers despite having superior fundamentals

driven by a vertically integrated business model2

The market does not recognize that Live Nation’s margins are poised to expand through1

A B C


Ancillary Revenue Growth Will Drive Margin ExpansionAncillary Revenue Margins Trump Those of Non-Ancillary Revenue

Ancillary Offers Greater Profit Potential Average Ticket Prices Growth

(in $ millions, unless noted)

By growing ancillary revenue at a greater rate than non-ancillary revenue, LYV can expand their concerts segment margins

Source: Barron’s, Company filings, WSJ

A

What is Ancillary Revenue?

Ancillary Revenue

Merchandise VIP Experiences Food & Beverage Alcohol

▪ Venues and artists looking for alternative

ways to monetize during live events

▪ Fans are looking to maximize their

concert experience

▪ Live-Nation introduced several initiatives

to grow this segment especially through

their festival and amphitheatre venues

Line-Skipping &

Delivery

$62

$66

$68$69

$71

$74

$77

2010 2011 2012 2013 2014 2015 2016

50%

1%

Ancillary Revenue Other

Other revenue is

composed of face

value of tickets


US Secondary Ticketing Gross Transaction Volume

Source: Bloomberg, IBISWorld, Research and Markets

US Ticketing Industry Expected to Grow at 2.6% CAGR Over Next Five Years

$5.2B

$5.3B

$5.4B

$5.6B

$5.8B

$5.9B

2017 2018E 2019E 2020E 2021E 2022E

$5.7B

$6.8B

$8.1B

$9.6B

$11.5B

$13.6B

2016 2017E 2018E 2019E 2020E 2021E

Ticketmaster11%

StubHub50%

Other39%

US Secondary Ticketing Market Share (2016A)

Growth in Secondary Ticketing Will Drive Margin ExpansionSecondary Ticketing Expected to Grow at Almost 8x Greater CAGR Than Overall

B



Margin Expansion Driven By Mix Shift Towards Ticketing

Venue Revenue Sources

Venues Are Inherently Incentivized to Maximize The Number of Concerts They Host

Designated Venues So Little Room For Growth Venues Are Looking To Catch Growth in Concerts


Structure of venue business model results in natural incentive to grow number of concerts hosted in order to maximize

profitsSource: Company filings, IBISWorld

C

Ticketing agents remit a

portion of service fees

charged to customers on

primary tickets to venues

Concert promoters remit

a portion of the face

value of tickets sold to

venues

“Incidental Revenue”

Venues are

incentivized to

maximize the no. of

events hosted

because ticketing

revenue is

incidental

70,818

72,459

76,573

79,791

2013 2014 2015 2016

No. Concerts in North America


ValuationComparable Companies Analysis Shows LYV Trades At a Discount On Forward Multiples(in $ millions, unless noted)

LYV trades at a discount on both a forward EV / Sales and EV / EBITDA basis, perhaps because of a lower ROIC

Source: Bloomberg

2

EV/Sales EV/EBITDA

Company

Market

Cap.

EV

($ mm) LTM 2018E LTM 2018E

Sales

Growth

2018E

EBITDA

Margin

ROIC

LTM

Madison Square Garden Company 5,203 4,253 3.2x 2.7x nmf 23.5x 19% 5% -2%World Wrestling Entertainment 2,022 1,952 2.5x 2.4x 14.4x 16.9x 5% 17% 14%International Speedway Corp 1,742 1,741 2.6x 2.6x 7.9x 8.1x 2% 33% 3%CTS Eventim AG 3,383 3,055 3.4x 3.2x 15.0x 14.0x 7% 23% 21%

Mean 3,087 2,750 2.9x 2.7x 12.4x 15.6x 8% 19% 9%Median 2,703 2,504 2.9x 2.6x 14.4x 15.5x 6% 20% 9%

Live Nation Entertainment ValuationLive Nation Entertainment 8,400 9,147 1.0x 0.9x 14.3x 11.3x 10% 7% 7%

Higher growth than peers, but

could lower ROIC explain

public market discount?

Reminder: HIM Meet & Greet Tuesday 6:00pm-7:00pm

Q&A

sector alaa hachem, global equity strategist ariane laurin, fixed … · alaa hachem, global equity...

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