The The path to to financial truth. truth. evadimensions Review of Wal Mart de Mexico (WALMEXV MM) and Grupo Bimbo SA (BIMBOA MM) Craig Sterling Managing Director Head of Equity Research (212) 201-2334 csterling@evadimensions.com Timothy Stanish Equity Research (212) 201-2336 tstanish@evadimensions.com March 29, 2012 The Path to Financial Truth Financial intelligence for finding alpha EVA is a registered service mark of EVA Dimensions LLC (in the field of financial data, valuation analytics, and investment management) and EVA is a registered mark of EVA Dimensions (in financial data, software, valuation analytics, and investment management and research) and of Stern Stewart & Co. (in the field of of financial Stern and Stewart incentive & Co. consulting). (in the field EVA of Momentum financial and incentive are registered consulting). marks Copyright of EVA Dimensions. 2012 by EVA Copyright Dimension 2011 by LLC. EVA All Dimension. rights reserved All rights reserved.
Roper Industries (ROP) Summary Wal Mart De Mexico EVA Margins are turning and EVA Momentum is stable Market implied EVA Margins imply a return to early 2000 level profits. Grupo Bimbo SA EVA Margins turned up in the last period and EVA Momentum is strongly positive. Market implied EVA Margins are below historical implied EVA Margin expectations. 2
WAL MART DE MEXICO SA WALMEXV MM $58.3B mkt. cap. $3.28 Food & Staples Retailing SubSector Country 39 35 42 40 Consensus Sales and Market-Implied EVA Margin EVA Margins turned up in the most recent period and EVA Momentum has stabilized; market implied EVA Margins are for a return to early 2000s level of profits. 3
million WAL MART DE MEXICO SA WALMEXV MM $58.3B mkt. cap. $3.28 Food & Staples Retailing : Intrinsic Value vs. Current Value Ranking 70 18 95 Performance (P) 73 54 14 18 93 88 P1 Profitability EVA Margin (EVA/Sales) EVA Spread (EVA/Capital) P2 Trend EVA Momentum (vs Cap) 3 Year Trend (ΔEVA/Cap) Last Quarter (ΔEVA/Cap) Risk (R) Stock Price Volatility EVA Margin Variability WALMEXV MM 25th 50th 75th % 3.2% -4.2% 0.5% 5.0% 68 7.5% -3.4% 0.5% 5.6% 80 WALMEXV MM 25th 50th 75th % -0.5% -1.8% 0.5% 2.8% 36 1.5% -0.7% 0.5% 2.1% 68 0.7% -3.2% 0.1% 2.7% 58 WALMEXV MM 25th 50th 75th % 30% 32% 40% 50% 20 0.9% 2.6% 5.6% 12.8% 5 R2 Vulnerability Leveraged, negative cash flow firms are suspect Free Cash Flow Rate Op Cash Gen Return Total Debt/Total Capital Total Debt/EBITDAR Valuation (V) MVA Margin MVA Spread V2 Wealth Multiples EBITDAR Multiple NOPAT Multiple Future Growth Reliance Higher is better Financial strength in generating a return on capital over the full cost The growth rate in the firm's economic profit (its EVA) Lower is better R1 Volatility Variability in stock price and the EVA profit margin WALMEXV MM 25th 50th 75th % 15% 7% -1% -12% 13 16% 38% 16% 6% 50 17% 5% 26% 47% 39 0.7 0.8 2.1 3.9 23 Lower is better V1 Wealth Ratios Valuation multiples to book capital (as adjusted) WALMEXV MM 25th 50th 75th % 177% -9% 28% 113% 83 454% -10% 27% 105% 95 Valuation multiples to cash flow, earnings, EVA WALMEXV MM 25th 50th 75th % 20.0 5.2 7.5 10.9 93 40.1 13.5 19.7 29.9 85 52% -17% 23% 61% 70 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 Market Value Added vs. CVA and FVA $0 ($10,000) 3-31-1997 3-31-2000 3-31-2003 3-31-2006 3-31-2009 3-27-2012 Capital Future Value Added (MVA-CVA) Current Value Added (EVA/COC) Market Value The market is beginning to pay for future value creation (blue line below is rising). SubSector Country 39 35 42 40 4
WAL MART DE MEXICO SA WALMEXV MM $58.3B mkt. cap. $3.28 Food & Staples Retailing SubSector Country 39 35 42 40 WALMEXV MM - EVA Income Statement Fiscal Period: 2002TFQ4 2003TFQ4 2004TFQ4 2005TFQ4 2006TFQ4 2007TFQ4 2008TFQ4 2009TFQ4 2010TFQ4 2011TFQ4 Period Ending: 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 12/31/11 Trend Sales 10,149 10,723 12,593 15,466 18,357 20,534 17,642 20,631 27,015 27,303 11.6% CAGR Sales Growth Rate 5.0% 5.7% 17.4% 22.8% 18.7% 11.9% -14.1% 16.9% 30.9% 1.1% COGS, Adjusted 78.7% 77.4% 79.0% 79.0% 78.7% 78.6% 78.5% 78.6% 78.3% 78.0% SG&A, Adjusted 12.6% 13.6% 11.6% 11.4% 11.3% 11.1% 11.3% 1 11.4% 11.2% Cash Operating Costs 91.3% 90.9% 90.6% 90.4% 90.0% 89.7% 89.8% 89.7% 89.7% 89.2% EBITDAR Margin 8.7% 9.1% 9.4% 9.6% 10.1% 10.3% 10.2% 10.3% 10.4% 10.8% Cap Chrg: Working Capital 0.1% 0.2% 0.2% 0.1% 0.0% 0.1% 0.1% 0.1% 0.1% 0.1% Cap Chrg: Net PP&E, Adjusted 7.1% 6.5% 6.1% 5.7% 5.5% 5.7% 6.6% 5.3% 5.4% 5.8% EVA From Operations Margin 1.5% 2.3% 3.1% 3.8% 4.5% 4.5% 3.4% 5.0% 4.8% 4.9% Cap Chrg: Intangible Capital (R&D, Ad&Promo) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% EVA Before Tax Margin 1.5% 2.3% 3.1% 3.8% 4.5% 4.5% 3.4% 5.0% 4.8% 4.8% EVA Effective Tax Rate -2.1% 14.5% 22.9% 27.5% 30.1% 28.9% 23.7% 29.7% 30.6% 29.9% EVA After Tax Margin 1.6% 2.0% 2.4% 2.8% 3.2% 3.2% 2.6% 3.5% 3.3% 3.4% Other EVA 0.3% 0.3% 0.3% 0.7% 0.7% 0.6% 0.4% 0.5% 0.4% 0.2% EVA Excl. Goodwill & Special Items Margin 1.9% 2.3% 2.7% 3.4% 3.9% 3.8% 3.0% 3.9% 3.8% 3.6% Cap Chrg: Goodwill & Special Items -0.2% -0.2% -0.2% -0.1% -0.1% -0.1% -0.1% -0.1% 0.4% 0.4% EVA Margin 2.1% 2.5% 2.9% 3.6% 4.0% 3.9% 3.1% 4.0% 3.4% 3.2% EVA Momentum (Delta EVA/Trailing Sales) -0.1% 0.5% 0.9% 1.5% 1.2% 0.4% -1.3% 1.6% 0.4% -0.2% Goodwill charge has driven the majority of the decline in EVA Margins since 2009. EVA from Operations Margin has been relatively flat as improving EBITDAR Margins are offset by PPE Capital charge. 5
2007TFQ4 2008TFQ4 2009TFQ4 2010TFQ4 2011TFQ4 2012FQ4 2013FQ4 2014FQ4 2015FQ4 2016FQ4 EVA Margin EVA % of Sales BIMBOA MM Share Price (US$) 2007TFQ4 2008TFQ4 2009TFQ4 2010TFQ4 2011TFQ4 2012FQ4 2013FQ4 2014FQ4 2015FQ4 2016FQ4 Sales Growth GRUPO BIMBO SA DE CV BIMBOA MM $10.9B mkt. cap. $2.32 Food & Beverage 25.0% SubSector Country 13 13 17 14 EVA Margin vs. Share Price 4.0% 3.0% 2.0% $2.50 $2.00 20.0% 15.0% 10.0% 1 13.3% 17.6% 7.5% 14.9% 2 17.0% 13.0% 9.0% $1.50 5.0% 5.0% 0.0% 0.0% - $1.00-2.0% -3.0% $0.50 2.5% 2.2% -4.0% 12-31-2000 12-31-2002 12-31-2004 12-31-2006 12-31-2008 12-31-2010 $0.00 BIMBOA MM Share Price (US$) BIMBOA MM - EVA % of Sales EVA Momentum Implied EVA Margin Implied EVA Momentum EVA Margins have increased in the most recent period and EVA Momentum has been strongly positive for 2 quarters; market implied EVA Margins are in line with history but well below peak (see slide 7). 2.0% 1.5% 0.5% 0.0% 1.2% 0.1% 0.6% 0.8% 1.1% 1.3% 1.5% 6
GRUPO BIMBO SA DE CV BIMBOA MM $10.9B mkt. cap. $2.32 Food & Beverage SubSector Country 13 13 17 14 Current market implied EVA Margin Current actual EVA Margin Although the market is paying for in increase in EVA Margin, the chart above illustrates that the market consistently pays for an increase in EVA Margin and that current expectations are low compared with history. 7
Future Growth Reliance EVA Margin million GRUPO BIMBO SA DE CV BIMBOA MM $10.9B mkt. cap. $2.32 Food & Beverage : Intrinsic Value vs. Current Value Ranking 40 40 93 Performance (P) 45 36 18 69 76 77 P1 Profitability EVA Margin (EVA/Sales) EVA Spread (EVA/Capital) P2 Trend EVA Momentum (vs Cap) 3 Year Trend (ΔEVA/Cap) Last Quarter (ΔEVA/Cap) Risk (R) Stock Price Volatility EVA Margin Variability BIMBOA MM 25th 50th 75th % 0.6% -4.2% 0.5% 5.0% 51-3.4% 0.5% 5.6% 53 BIMBOA MM 25th 50th 75th % 0.9% -1.8% 0.5% 2.8% 56-0.5% -0.7% 0.5% 2.1% 29-0.1% -3.2% 0.1% 2.7% 47 BIMBOA MM 25th 50th 75th % 33% 32% 40% 50% 29 1.2% 2.6% 5.6% 12.8% 9 R2 Vulnerability Leveraged, negative cash flow firms are suspect Free Cash Flow Rate Op Cash Gen Return Total Debt/Total Capital Total Debt/EBITDAR Valuation (V) MVA Margin MVA Spread V2 Wealth Multiples EBITDAR Multiple NOPAT Multiple Future Growth Reliance Higher is better Financial strength in generating a return on capital over the full cost The growth rate in the firm's economic profit (its EVA) Lower is better R1 Volatility Variability in stock price and the EVA profit margin BIMBOA MM 25th 50th 75th % -4% 7% -1% -12% 56 9% 38% 16% 6% 66 48% 5% 26% 47% 77 2.8 0.8 2.1 3.9 62 Lower is better V1 Wealth Ratios Valuation multiples to book capital (as adjusted) BIMBOA MM 25th 50th 75th % 70% -9% 28% 113% 65 109% -10% 27% 105% 76 Valuation multiples to cash flow, earnings, EVA BIMBOA MM 25th 50th 75th % 11.9 5.2 7.5 10.9 80 37.4 13.5 19.7 29.9 83 42% -17% 23% 61% 64 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 ($2,000) ($4,000) Market Value Added vs. CVA and FVA $0 Capital Future Value Added (MVA-CVA) 3-31-2003 3-31-2006 3-31-2009 3-27-2012 Current Value Added (EVA/COC) Market Value Expectations for future value creation are positive (gray bars above) and in-line with history (blue line below). Future Growth Reliance 120% 100% 80% 60% 40% 20% SubSector Country 13 13 17 14 3.0% 2.0% 0.0% - -2.0% -3.0% 0% -4.0% 12-31-1998 12-31-2001 12-31-2004 12-31-2007 12-31-2010 Future Growth Reliance = FVA / Market Value BIMBOA MM - EVA % of Sales 8
GRUPO BIMBO SA DE CV BIMBOA MM $10.9B mkt. cap. $2.32 Food & Beverage SubSector Country 13 13 17 14 BIMBOA MM - EVA Income Statement Fiscal Period: 2002TFQ4 2003TFQ4 2004TFQ4 2005TFQ4 2006TFQ4 2007TFQ4 2008TFQ4 2009TFQ4 2010TFQ4 2011TFQ4 Period Ending: 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 12/31/11 Trend Sales 4,283 4,323 4,521 5,133 5,838 6,480 7,341 8,631 9,277 10,664 10.7% CAGR Sales Growth Rate 18.0% 0.9% 4.6% 13.5% 13.7% 1 13.3% 17.6% 7.5% 14.9% COGS, Adjusted 42.0% 42.9% 43.9% 42.7% 43.5% 42.4% 45.8% 43.9% 44.0% 45.8% SG&A, Adjusted 46.3% 46.1% 45.1% 44.7% 44.5% 44.6% 42.4% 42.2% 43.0% 43.0% Cash Operating Costs 88.3% 89.0% 88.9% 87.4% 88.0% 87.0% 88.2% 86.1% 87.0% 88.7% EBITDAR Margin 11.7% 1 11.1% 12.6% 12.0% 13.0% 11.8% 13.9% 13.0% 11.3% Cap Chrg: Working Capital 0.9% 0.9% 0.7% 0.6% 0.5% 0.5% 0.6% 0.8% 0.8% 0.7% Cap Chrg: Net PP&E, Adjusted 8.1% 7.3% 7.2% 6.4% 6.1% 8.8% 6.8% 5.4% 5.2% 5.0% EVA From Operations Margin 2.6% 2.8% 3.2% 5.7% 5.4% 3.8% 4.4% 7.7% 7.0% 5.5% Cap Chrg: Intangible Capital (R&D, Ad&Promo) 0.6% 0.5% 0.5% 0.5% 0.5% 0.4% 1.3% 1.8% 1.3% EVA Before Tax Margin 1.6% 2.2% 2.7% 5.1% 4.9% 3.3% 4.1% 6.4% 5.1% 4.3% EVA Effective Tax Rate 21.7% 33.1% 33.8% 36.2% 36.2% 33.9% 35.8% 37.4% 37.7% 36.8% EVA After Tax Margin 1.3% 1.5% 1.8% 3.3% 3.1% 2.2% 2.6% 4.0% 3.2% 2.7% Other EVA -2.5% -4.0% -0.9% -3.0% -0.6% 0.3% -1.1% -1.9% -2.2% -1.3% EVA Excl. Goodwill & Special Items Margin -1.3% -2.5% 0.9% 0.3% 2.5% 2.5% 1.5% 2.0% 1.4% Cap Chrg: Goodwill & Special Items 0.5% 0.5% 0.4% 0.3% 0.3% 0.3% 0.3% 0.9% 0.8% EVA Margin -1.8% -3.0% 0.6% 0.0% 2.2% 2.2% 1.2% 0.1% 0.6% EVA Momentum (Delta EVA/Trailing Sales) -2.0% -1.3% 3.6% -0.6% 2.6% 0.2% -0.9% 0.0% -0.9% 0.6% EBITDAR Margins declined in 2011 and PPE Charge improved. 9