Team 3-TTT Cop. PRE

Present byYaoping (Michelle) Tan MSASiyi (Lucy) Lu MSGFJiefei (Faye) Zheng MSSDMiaolai (Mila) Zhou MSA

TTT corporation

http://www.rapidesign.cn/

Recommendation

BUY

Target Price: Upside:

$35 62%

0

10

20

30

40

HTZ

62%

Dollar and ThriftyBrand Expansion

Consistent growth of travel industry

Expected spin-off ofEquipment Rental

Company Profile52 Week Range ($) 18.50- 31.61

LTM Return 45%

Average Volume (Day) 11.3M

Dividend Yield 0.0%

Shares Outstanding 447.68 M

Market Cap ($) 9.9 B

Highlights IndustryOverview

Company Overview

FinancialAnalysis

Valuation InvestmentRisk

Appendix

Source: Stock price quote, yahoo finance

Source: Morningstar

Dollar Thrifty Synergy

5%

Enterprise Hertz Avis Dollar Thrifty

Fox Advantage Others

Hertz: 24.50%Hertz: 18.65%

5.85% mkt share 21.05%48.81%19.79%

7.02%

5.11%

0.0

2,000.0

4,000.0

6,000.0

8,000.0

10,000.0

12,000.0

14,000.0

16,000.0

car rental revenue projection (2014-2018)

$ in million CAGR: 8%Growth rate: 48.9%

CAGR: 3.82%

2011 Car rental market share 2014

49.19%

3.67%


Company Overview

FinancialAnalysis


Appendix

Source: Auto Rental News Source: HTZ 10-k, Team estimate

Recommendation

BUY


$35 62%

0

10

20

30

40

HTZ

62%





LTM Return 45%


Dividend Yield 0.0%




Company Overview

FinancialAnalysis


Appendix


Source: Morningstar

Airport revenue projection

2016E2014E 2017E 2018E2015E

Airport revenue growth rate (2014-2018)

CAGR: 8.63%

4.50%

4.60%

4.70%

4.80%

4.90%

5.00%

5.10%

5.20%

5.30%

5.40%

5.50%

4.85%

5.39% 5.39% 5.39% 5.39%

2014E 2017E 2018E2015E 2016E

Airport Volume growth rate (2014-2018)

0.0

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

6,000.0

7,000.0

8,000.0


Company Overview

FinancialAnalysis


Appendix

Source: Team estimateSource: Team estimate

Recommendation

BUY


$35 62%

0

10

20

30

40

HTZ

62%





LTM Return 45%


Dividend Yield 0.0%




Company Overview

FinancialAnalysis


Appendix


Source: Morningstar

Equipment spin-off synergy

Debt-to-equity ratio


Company Overview

FinancialAnalysis


Appendix

5.9x5.4x

4.8x

5.9x

4.2x

3.3x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

Debt to Equity Ratio

2013 2014E 2015E 2016E 2017E 2018E

4.8-3.3=1.5Year

Hertz SG&A margin

Equipment SG&A margin

2011 6.8% 13.0%

2012 8.9% 14.0%

2013 7.7% 16.0%

2014 7.7% 16.0%

2015 7.7% 16.0%

2016 5.5% 0.0%

2017 5.5% 0.0%

2018 5.5% 0.0%

SG&A margin

1.5%

Source: Team estimate Source: Team estimate

Business Overview

Dollar Thrifty Dollar Thrifty

Hertz

Hertz

HertzHertz

Hertz

Hertz

Highlights:

Equipmentleading provider, 145

countries

1st airport,2nd off airport

business growth pricing power high efficiency+ +

Dollar Thrifty overseasexpansion

=

New CEO

Stock price


Company Overview

FinancialAnalysis


Appendix

Source: Team estimate

Market Leader in Airport Market

39.10%36.10%

2014 2018E

• US airport market is $12.96 bil in size• Dollar Thrifty provides Hertz established

brands in fast growing U.S. airport segment

Industry3.32%

Hertz8.63%

5.31% higherrevenue growth

Hertz Airport Revenue Forecast ($mil)

0.0

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

6,000.0

7,000.0

2011 2012 2013 2014E 2015E 2016E 2017E 2018ESource: HTZ 10-k, Team estimate


Company Overview

FinancialAnalysis


Appendix

Tremendous Opportunities in Off-Airport Rental Market

Source: Auto Rental News

Labor Cost

SG&A

Utilization

Off-Airport On-Airport

$4.09 $4.47

$1.63 $3.12

84.3% 82.1%

Comparison

8% lower

48% lower

2.2% higher

Utilization Growth2%

Joint Venture20%

25% Car-sharing Industry


Hertz US Off-Airport Rental Growth11.85%


0.00%

20.00%

40.00%

60.00%

80.00%

2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E

US Off-airport Rental Locations Growth Rate

Hertz Industry


Company Overview

FinancialAnalysis


Appendix

Competitive Positioning

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

2007 2008 2009 2010 2011 2012 2013 2014

Others

Advantage

Fox

Budget

Dollar Thrifty

Avis

National/Alamo

Hertz

Enterprise

Industry Consolidation

Stable Oligopoly market brings high pricing power


Source: Team analysis


Company Overview

FinancialAnalysis


Appendix

Revenue Expansion

2013-2015:7.43%2016-2018:9.97%

Rising CAGRUnlock substantial value toconcentrate on car rental

Divesture

Car rental revenue expansionDivest HERC in 2015

0

5000

10000

15000

All otheroperationsEquipment rental

car rental

Source: 10-K; Team estimate


Company Overview

FinancialAnalysis


Appendix

Margin Expansion

2013 2018E

Grossmargin

Hertz 48.51% 51.5%

Avis 49.01% 48.94%

EBITmargin

Hertz 12.7% 15.05%

Avis 9.27% 14.58%

Net incomemargin

Hertz 3.21% 6.08%

Avis 0.2% 5.56%

-20%

0%

20%

40%

60%

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

E

20

15

E

20

16

E

20

17

E

20

18

E

grossmargin

operatingmargin

net incomemargin

Revenue growth

Depreciation rise in 2014Cost efficiency

Higher direct expense

Lower depreciationHigher SG&AHigher interest expenseHigher tax


Company Overview

FinancialAnalysis


Appendix

Margin Expansion

ROE 13.17

%

ROA 1.45%

tax burden 52.21%

interest burden 48.49%

EBIT margin 12.7%

total asset turnover

0.45

leverage 9.1

ROE 22.69%

ROA 3.5%

tax burden 55.5%

interest burden 72.8%

EBIT margin 15.05%

total asset

turnover 0.58

leverage 6.49

2013 2018

Debt decrease

0

2

4

6

8

2013 2014E 2015E 2016E 2017E 2018E

Debt/Equity

Source: Team estimate


Company Overview

FinancialAnalysis


Appendix

Cash Flow

2013-2018 CAGR:CFO: 8.18%NI:

0

1000

2000

3000

4000

5000

6000

7000

8000

CFO CapEX

0

1000

2000

3000

4000

5000

6000

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

1000000

fleet CapEX

CFO can cover CapEx More than 90% CapExtranslate into fleet

Source: Team Estimate Source: Team Estimate


Company Overview

FinancialAnalysis


Appendix

Revenue and Cost per Share EPS Growth

Revenue Growth + Cost Efficiencies + Repurchases = $1.28 Increase in EPS between 2013 and 2018

Repurchases: $0.17

Rev. growth: $0.45

Efficiencies: $0.66

Earning Growth

0

0.3

0.6

0.9

1.2

1.5

1.8

2.1

2.4

2013 2018E

22

24

26

28

30

32

34

36

2014 2015 2016 2017 2018

Costs per share Revenue per share

Target Price: $35

2014E 2015E 2016E 2017E 2018ETeam Estimates 0.36 0.87 1.30 1.69 2.04

Concensus 0.69 1.32 1.54 2.03 2.14


Company Overview

FinancialAnalysis


Appendix

Source: Team Estimate

Revenue Growth

Booming travel industry

Rapid off-airport location expansion

Strong price power- Oligopoly market

Scenario Analysis: 3 Cases

2018 Forecast Base Bull BearU.S.- Airport Volume 5.3% 6.0% 4.5%

Price 3.2% 4.2% 2.4%

U.S.- Off-airportVolume 11.0% 16.6% 5.3%Price 0.8% 1.8% 0.0%

International Volume 6.6% 7.6% 5.6%Price 1.6% 2.6% 0.0%

0.0%

5.0%

10.0%

15.0%

2014E 2015E 2016E 2017E 2018E

Volume Increasing

U.S. Airport U.S. Off-airprot International

0%

2%

4%

6%

8%

10%

2014 2015 2016 2017 2018

Fleet Change

U.S. International

Target Price: $35

Source: 10-K, Team Estimate


Company Overview

FinancialAnalysis


Appendix

Source: Team EstimateSource: Team Estimate

Cost Efficiency

Improving fleet utilization

Higher profit margin after the spin-off

Scenario Analysis: 3 Cases

2018 Forecast Base Bull BearDirect operating exp. % of sales 48.5% 48.0% 49.0%SG&A % of sales 5.5% 5.4% 5.6%Depreciation % of sales 28.6% 26.7% 30.5%Utilization U.S. 82.0% 85.0% 79.0%

International 79.0% 83.0% 75.0%

3%

4%

5%

6%

7%

8%

25%

30%

35%

40%

45%

50%

55%

2014 2015 2016 2017 2018

Cost Margin

COGS Depreciation SG&A % sales

260

270

280

290

300

310

70%72%74%76%78%80%82%84%

2013 2014 2015 2016 2017 2018

Utilization

Utilization Transactions per fleet

Target Price: $35

Source: 10-K, Team Estimate


Company Overview

FinancialAnalysis


Appendix

Source: Team EstimateSource: Team Estimate

DCF Analysis

Higher interest rate

Lower debt to equity ratio

WACC= 8.2%7.7%

7.8% 7.8%

8.2%8.3%

7.5%

7.7%

7.9%

8.1%

8.3%

8.5%

2014E 2015E 2016E 2017E 2018E

Target Price: $35

Equity ValuePerpetuity Growth MethodWACC 8.2%Net present value of FCF $6,111.2Terminal growth rate 2.0%Terminal value $35,551.8PV of terminal value 25,938.9Less: LT debt (15,637.6)Add: Cash 998.1Equity Value 16,412.6Diluted shares 468.0Stock Price $35.1

0

5

10

15

20

25

30

35

40

Cash: 6.1%

Term Value: 56.7%

NPV of FCF: 37.2%


Company Overview

FinancialAnalysis


Appendix

Source: Team Estimate

Scenario and Sensitivity Analysis

Terminal Growth Rate

1.5% 2.0% 2.5%

WACC 7.2% 42.21 48.54 56.21

7.7% 35.98 41.21 47.45

8.2% 30.68 35.07 40.23

8.7% 26.12 29.85 34.18

9.2% 22.16 25.35 29.03

Target Price: $35

13200

13700

14200

14700

2015 2016 2017 2018

Base Bull Bear

Terminal Value SensitivityScenario Analysis- Revenue Per Fleet

Stronger car rental pricing and higher utilization Increase in WACC to 9.2% still leaves valuation OVER current market price


Company Overview

FinancialAnalysis


Appendix

2/4/2015 stock price: $21.46Source: Team Estimate Source: Team Estimate

Investment Risks

Price Risk Competitor Risk

Market Risk

Aggressive pricing plan

Price-sensitive customers

Ambition to expand off-airport business

Enterprise takes 48.49% market share in off-airport market

Lower residual fleet value

Proceeds from disposal is the second largest cash inflow


Company Overview

FinancialAnalysis


Appendix

Thank You

Q&A

http://www.rapidesign.cn/

• Hertz On-airport Revenue

• Global Car Rental Market

• US Car Rental Market

• - On-Airport

• - Off-Airport

• Global Equipment Market

• Gross Margin

• Major Suppliers

• Business/Leisure

• Joint Venture

• Auto Manufactuer

• Car-sharing Market

• Hertz 24/7

• Porter’s Five Force

• Fleet Utilization

Appendix

• Spin-off of HERC• Debt and Debt Cost• Cost Efficiency• International Revenue• Long-term growth rate inflation• Revenue Breakdown• Stock Price• Revenue Per Fleet• Transaction Days• Interest Rate• D/E• DCF Analysis• WACC

• P/E Multiples & EV/EBITDA Multiples

• Price Sensitivity• Revenue Assumption• Equipment Segment

• Forecast Cost Margin

• Shares Repurchase

On-Airport revenue

Airport revenue($ in millions) 2014E 2015E 2016E 2017E 2018E

market share growth rate

bear 1.50% 1.50% 1.50% 1.50% 1.50%

base 2.00% 2.00% 2.00% 2.00% 2.00%

bull 2.50% 2.50% 2.50% 2.50% 2.50%

market size growth rate

bear 2.79% 3.01% 3.01% 3.01% 3.01%

base 2.79% 3.32% 3.32% 3.32% 3.32%

bull 2.79% 3.63% 3.63% 3.63% 3.63%

price growth rate

bear 0.00% 3.00% 3.00% 3.00% 3.00%

base 0.00% 4.00% 4.00% 4.00% 4.00%

bull 0.00% 5.00% 5.00% 5.00% 5.00%

revenue

bear 4882.83 5258.41 5662.88 6098.46 6567.54

base 4906.89 5378.04 5894.43 6460.41 7080.73

bull 4930.94 5499.57 6133.77 6841.10 7630.00

On-Airport Revenue


Company Overview

FinancialAnalysis


Appendix

Global Car Rental Market

US On-

Airport

31%

US Off-

Airport

29%

EU On-

Airport

13%

EU Off-

Airport

20%

Asia On-

Airport

6%

Asia Off-

Airport

1%

Global Car Rental Market (by segments)

Source: Company filings, Gabelli & Company est.

Enterpr

ise

29%

Hertz

19%Avis

14%

Others

38%

Global Car Rental Market (by companies)

Source: IBISWORLD.com

The global rental car market is approximately $49 billion in size and is segmented between on-airport and off-airport markets.


Company Overview

FinancialAnalysis


AppendixHighlights IndustryOverview

Company Overview

FinancialAnalysis


Appendix

US Car Rental Market

14.90% 15.94% 17.54% 19.29%21.22%

36.10% 36.82% 37.56% 38.31% 39.08%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

2014E 2015E 2016E 2017E 2018E

Hertz US Car Rental Market Share Forecast

Off-airport

On-Airport

Source: Annual Report, Team estimates

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

2011 2012 2013 2014E 2015E 2016E 2017E

On-Airport

Off-Airport

Source: Annual Report, Team estimates

Hertz US Car Rental Market Revenue


Company Overview

FinancialAnalysis


AppendixHighlights IndustryOverview

Company Overview

FinancialAnalysis


Appendix

US On-airport Car Rental Market

On-airport rental car volumes are mostly driven by overnight visitors flows which is expected to expand at a CAGR of 5.4% from 2013 to 2018. Declining oil price (-24.13%), and growing real GDP (3.3%) also contribute to the on-airport car rental market growth.

Source: Statista.com


Company Overview

FinancialAnalysis


Appendix

US Off-Airport Car Rental Market

0

5000

10000

15000

20000

25000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

US Car Rental Locations



Company Overview

FinancialAnalysis


Appendix

Global Equipment Market

77%

10%

9%

3% 1%

Global Equipment Rental Size in 2014

US

China

France

Spain

Saudi Arabia-2.5%

4%4.5%

4.5% 5%5.5%

6% 6%

7.5%

Estimated construction industry growth rates in selected regions in 2013

Source: KHL GroupSource: Bloomberg


Company Overview

FinancialAnalysis


Appendix

Gross Margin

gross magin 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E

htz 44.1% 43.9% 44.5% 46.5% 42.2% 42.5% 43.4% 45.0% 46.8% 46.6% 45.9% 49.0%

htz-equipment 42.9% 46.9% 48.4%

Dollar thrifty 27.5% 48.4% 45.3% 50.2% 49.6% 47.7% 50.3% 51.5% 51.5%

avis 48.3% 40.8% 41.4% 49.3% 49.3% 47.4% 48.6% 49.5% 48.7% 48.0% 48.7% 49.5%

Source: Annual Report


Company Overview

FinancialAnalysis


Appendix

Major Suppliers of Hertz

Source: Bloomberg

Suppliers CAPEX of HertzGeneral Motors Co. 24.88%Ford Motor Co. 15.42%Nissan Motor Co. Ltd 12.34%Toyota Motor Cord 10.57%Fiat Chrysler Automobiles 6.15%

YTD 2013 Q2 YTD 2014 Q2 Change

USA 2,284,001 2,163,319 -5.3%

Main Suppliers and their CAPEX of Hertz

Source: OICA.net

US Production Statics


Company Overview

FinancialAnalysis


Appendix

Business/Leisure

Hertz Revenue by Customers

In 2013, Dollar has approximately 1,400 locations in key leisure destinations across 75 countries.

2011 2012 2013

US International US International US International

Business 43% 54% 41% 55% 35% 46%

Leisure 57% 46% 58% 45% 65% 54%

Source: Hertz Annual Report


Company Overview

FinancialAnalysis


Appendix

Joint Venture with CAR

• China car rental market will grow at 15% annually.

• In 2014, CAR operated in 70 major cities, at 52 airports across China with over 717 service locations, serving more than 1 million individual customers and nearly 10,000 corporate clients.

• Hertz now have 300 Chinese locations co-branded as “CAR Powered By Hertz.”

Source: CAR official website


Company Overview

FinancialAnalysis


Appendix

Hertz Fleet Utilization

1) Synergies from Dollar Thrifty – opposite demand schedules means that Hertz's excess supply of weekend cars get used at Dollar Thrifty2) Technological Changes – kiosks, Hertz On Demand, and mobile apps, reduce the need for staffed locations and expand hours to 24/73) Major restructurings of GM, Chrysler, and Ford,auto manufacturers have become much morerational with their production This has significantlymitigated over-fleeting in the car rental market andincreased utilization

68.0%

70.0%

72.0%

74.0%

76.0%

78.0%

80.0%

82.0%

84.0%

86.0%

DollarThrifty

Hertz(including DTR)


Company Overview

FinancialAnalysis


Appendix

Auto Manufacturer Influence

Historically, the major auto manufacturers (GM, Chrysler, Ford) overproduced cars and used the rental car market as a means to unload excess production. This resulted in consistent over-fleeting and under-utilization in the car rental market.In order to increase utilization, car rental companies were incentivized to lower prices,

ultimately resulting in a highly competitive pricing environment marked by low returns.Hertz said its over-fleeting situation in the third and fourth quarters of 2013 was caused in part by integration issues with Dollar Thrifty, combined with weaker-than-expected demand in July and August as well as the government sequestration in September and October.As a result of the major restructurings of GM, Chrysler, and Ford, auto manufacturers have become much more rational with their productionThis has significantly mitigated over-fleeting in the car rental market and increased utilization– Car rental utilization rates across the industry are at their all-time high– High utilization dis-incentivizes car rental companies from competing on price– Renewed focus on returns and profitability


Company Overview

FinancialAnalysis


Appendix

Car-sharing Market

Car-sharing market is a emerging market where people rent cars for short periods of time, often by the hour. There were an estimated 1.7 million car-sharing members in 27 countries and there were over 800,000 members in US, the US car-sharing market in estimated to grow at a CAGR of 24.66% which is much higher than traditional car-rental market. The main factors driving the growth of car-sharing are the rising levels of traffic congestion and the increasing costs of personal vehicle ownership. As of November 2014, the world's largest car-sharing networks across North America and Europe are Zipcar with 767,000 members and 11,000 vehicles, and Car2Go with over 900,000 members and 12,000 cars.


Company Overview

FinancialAnalysis


Appendix

Hertz 24/7

Hertz operated a car-sharing decision since 2008 and later improved and renamed it “Hertz 24/7” in 2013. The car-sharing market is founded by Zipcar, which is later acquired by Avis Budget Group. This is a new way for Hertz to gain market share in car rental market in the role of fast follower because Hertz has a hands-free audio kit system that Zipcar does not have, which is a competitive advantage over Zipcar. The stock price of Hertz jumped 6.8% to $23.41 on the day of announcing Hertz 24/7, which is the highest price in more than five years.


Company Overview

FinancialAnalysis


Appendix

Porter’s Five Force Model

1.17

0.95

2.85

1.76

1.31

0

0.5

1

1.5

2

2.5

3

Threat ofnew

entrants

Power ofSuppliers

Power ofBuyer

Threat ofSubstitut

es

Rivalry

Service %of Revenue (FY2013)

Threat of new entrants

Power of Suppliers

Power of Buyer

Threat of Substitutes

Rivalry

On-ariport

59%0.59 0.59 1.77 1.18 0.59

Off-airport

22%0.44 0.22 0.66 0.44 0.44

Equipment

14%0.14 0.14 0.42 0.14 0.28

Total1.17 0.95 2.85 1.76 1.31

The Scale of Competitive Interaction1:Low 2: Moderate Low 3:Moderate 4:Moderate High 5:High

Over Score: 1.61


Company Overview

FinancialAnalysis


Appendix

Spin off HERC Cut debt

1.5 Billion

Operating

Debt rating

Interest expense

Focus solely on car rental

Investors’ confidenceBuyback stock

1 billion

Outstanding shares: 60m

SG&A

00.10.20.30.40.50.60.70.80.9

1

2011 2012 2013 2014E 2015E

car equipment


Company Overview

FinancialAnalysis


Appendix

Debt and debt cost

2013-2018 CAGR:CFO: 8.18%NI:

Debt will be pay down significantly in 2016, 2017Debt/EBITDA decreases constantly

Interest expense decrease even though interest rate growth slightly

-5000

-4000

-3000

-2000

-1000

0

1000

2000

00.5

11.5

22.5

33.5

44.5

5

2011 2012 2013 2014E2015E2016E2017E2018E

Debt/ EBITDA Debt paydown

3.5

3.6

3.7

3.8

3.9

4

4.1

4.2

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

2013 2014E 2015E 2016E 2017E 2018E

Interest expenses Interest rate


Company Overview

FinancialAnalysis


Appendix

Cost efficiency

Acquisition of Dollar Trifty

+

Cost synergy

−

Direct operating

SG&ASelf-serve kiosks:increases fleer utilization

Cut personal-related expense


Company Overview

FinancialAnalysis


Appendix

International Revenue

Market size

Internationalrevenue

(more than 70% from EU)

。

Market share

price

2011 2012 2013 2014E 2015E 2016E 2017E 2018E

$ M 12000 13000 13400 13400 13668 13941 14220 14504

%y% 8% 3% 0 2% 2% 2% 2%

2011 2012 2013 2014E 2015E 2016E 2017E 2018E

% 20.6 15.9 14.1 15 15.4 16.3 17.2 18

%y% -23% -1.1% 6% 3% 6% 5% 5%

2011 2012 2013 2014E 2015E 2016E 2017E 2018E

%y% 1.8% 1.7% 1.6% 0% 2% 2% 2% 2%


Company Overview

FinancialAnalysis


Appendix

Long-term growth rate inflation

U.S. inflation rate

Europe inflation rate

Others ~ China inflation rate

U.S international total

Europe others

% 70% 21% 9% 100%

Long-term

2.15% 1.8% 1.5% 2.0%

Source: inflationdata.com

Source: European Central Bank

Source : IMF


Company Overview

FinancialAnalysis


Appendix

Appendix: Revenue Breakdown

Source: Team Estimates

19.4% 19.7% 20.2% 20.7% 21.3%

27.4% 26.9% 26.8% 26.5% 26.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

2014E 2015E 2016E 2017E 2018E

Segement Revenue Contribution

U.S. Airport U.S. Off-airprot International


Company Overview

FinancialAnalysis


Appendix

Appendix: stock price quotes

0

5

10

15

20

25

30

35

11

/16

/06

2/1

6/0

7

5/1

6/0

7

8/1

6/0

7

11

/16

/07

2/1

6/0

8

5/1

6/0

8

8/1

6/0

8

11

/16

/08

2/1

6/0

9

5/1

6/0

9

8/1

6/0

9

11

/16

/09

2/1

6/1

0

5/1

6/1

0

8/1

6/1

0

11

/16

/10

2/1

6/1

1

5/1

6/1

1

8/1

6/1

1

11

/16

/11

2/1

6/1

2

5/1

6/1

2

8/1

6/1

2

11

/16

/12

2/1

6/1

3

5/1

6/1

3

8/1

6/1

3

11

/16

/13

2/1

6/1

4

5/1

6/1

4

8/1

6/1

4

11

/16

/14

HTZ

July 11, 2014,acquisition of DollarThrifty

Jun 6,2014, disclosedaccounting problems to

Aug 20, 2014, “well-below” forecastperformance in 2014

Dec 16,2008,launched car

sharing program

2007-2008,financial

crisis


Company Overview

FinancialAnalysis


Appendix

Appendix: Revenue Per Fleet

Source: 10-K; Team Estimates

70%

72%

74%

76%

78%

80%

82%

84%

86%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Utilization

Hertz Dollar Thrifty


Company Overview

FinancialAnalysis


Appendix

Appendix: Revenue Per Fleet


10000

11000

12000

13000

14000

15000

16000

2014 2015 2016 2017 2018

Revenue Per Fleet

U.S. International


Company Overview

FinancialAnalysis


Appendix

Appendix: Transaction Days


70%

72%

74%

76%

78%

80%

82%

84%

250

260

270

280

290

300

310

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Transaction Days Per Fleet

Total U.S. International utilization


Company Overview

FinancialAnalysis


Appendix

Appendix: Interest rate

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

0

2

4

6

8

10

12

14

16

19

62

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

Market yield on U.S. Treasury securities at 30-year

USA GDP growth (annual %)

Source: World Bank; Federal Reserve Board; Team Estimates

3

3.2

3.4

3.6

3.8

4

4.2

4.4

2013 2014E 2015E 2016E 2017E 2018E

Interest Rate

HTZ interest rate 30 Yr. Treasury Yield



Company Overview

FinancialAnalysis


Appendix

Appendix: Debt/ Equity


2000

2500

3000

3500

4000

4500

12000

13000

14000

15000

16000

17000

18000

2013 2014E 2015E 2016E 2017E 2018E

Debt Equity


5.9x5.4x

4.8x

5.9x

4.2x

3.3x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

Debt to Equity Ratio

2013 2014E 2015E 2016E 2017E 2018E


Company Overview

FinancialAnalysis


Appendix

Appendix: DCF Analysis

CAGR 8.0%

Equity ValuePerpetuity Growth MethodWACC 8.2%Net present value of FCF $6,111.2Terminal growth rate 2.0%Terminal value $35,551.8PV of terminal value 25,938.9Less: LT debt (15,637.6)Add: Cash 998.1Equity Value 16,412.6Diluted shares 468.0Stock Price $35.1 0

5

10

15

20

25

30

35

40

Cash: 6.1%

Term Value: 56.7%

NPV of FCF: 37.2%

2014 2015 2016 2017 2018Net Income 170.6 412.5 541.3 708.1 863.5EBIT 934.6 1,399.7 1,582.3 1,850.3 2,137.1Depreciation & Amortization 3,661.1 3,784.0 3,644.5 3,896.5 4,183.3Proceeds from disposal 7,337.1 8,369.0 7,276.0 7,646.9 8,227.1Capital Expenditures (11,040.2) (12,385.9) (11,389.2) (12,255.8) (13,197.6)FCF 1,275.8 1,737.6 1,762.6 1,802.6 2,161.0


Company Overview

FinancialAnalysis


Appendix

Appendix: WACC

Source: Bloomberg; Team Estimates

Hertz Global Holdings Inc. Standalone WACC in 2018Cost of Debt:

Historical weighted average cost of debt 4.17%

Marginal tax rate 44.50%

After-tax cost of debt: 4.17% x (1 - 44.50%) = 2.31%

Cost of Equity:

Yield on the 30-year U.S. Government Bond 3.74%

Levered beta based on target company 1.51

Market risk premium 7.74%

Size premium 0.76%

Cost of equity = 3.74% + (1.51 x 7.74%) + 0.76% = 16.19%

Percentage of Capital

Total debt $16,635.7 56.9%

Market value of equity $11,417.8 43.1%

Total capital $28,053.5 100.0%

Weighted Average Cost of Capital:

WACC = (2.31% x 56.9%) + (16.19% x 43.1%) = 8.30%


Company Overview

FinancialAnalysis


Appendix

Appendix: P/E Multiples & EV/EBITDA Multiples

Source: Bloomberg; Team Estimates

2015E P/E EV/EBITDAAvis 16.6 18.6

United Rental 10.4 5.4Ryder 13.5 5.1

Ashtead 17.1 7.7Sixt SE 13.8 5.4

Average 14.3 8.5Median 13.8 5.4

HTZ 16.6 6.7Premium to

Peers 20.0% 24.0%Source: Bloomberg; Team Estimates

P/E Multiples EV/EBITDA Multiples Average

2015 Earnings 412.5 2015 EBITDA 5183.7

2015 # of shares 472.0 EV/EBITDA Multiple 472.0

2015 EPS 0.87Enterprise Value (Net of Debt) 34933.1

P/E Multiple 16.6 2015 # of shares 6.7

Price based on P/E 14.5Price based on EV/EBITDA 41.3 27.9


Company Overview

FinancialAnalysis


Appendix

Appendix: Price sensitivity

Source: Team Market Research


Company Overview

FinancialAnalysis


Appendix

2018 Forecast Base Bull BearU.S.- Airport Change of market share 2.0% 2.5% 1.5%

U.S. travel passengers 3.2% 3.5% 3.0%Price 3.2% 4.2% 2.4%

U.S.- Off-airport change of market share 8.8% 13.8% 3.8%Locations 2.0% 2.5% 1.5%Price 0.8% 1.8% 0.0%

International Volume 6.6% 7.6% 5.6%Price 1.6% 2.6% 0.0%

Direct operating exp. % of sales 48.5% 48.0% 49.0%SG&A % of sales 5.5% 5.4% 5.6%Depreciation % of sales 28.6% 26.7% 30.5%

Utilization U.S. 82.0% 85.0% 79.0%International 79.0% 83.0% 75.0%

Appendix: Revenue Assumption

Source: Team EstimatesHighlights Industry

OverviewCompany Overview

FinancialAnalysis


Appendix

Appendix: Equipment Segment

2011 2012 2013 2014E 2015ECost Margin COGS as % of sales 57.1% 53.1% 51.6% 51.6% 51.6%SG&A as % of sales 13.0% 14.0% 16.0% 16.0% 16.0%Depreciation as % of sales 23.8% 22.1% 21.6% 21.2% 18.8%

Diluted EPS( in dollars per share) -0.01 0.07 0.08 0.10 0.17



Company Overview

FinancialAnalysis


Appendix

Appendix: Forecast Cost Margin



Company Overview

FinancialAnalysis


Appendix

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

2011 2012 2013 2014E 2015E

Cost Margin

Hertz COGS margin Equipment COGS as % of sales

Hertz SG&A as % of sales Equipment SG&A margin

Appendix: Share Repurchase



Company Overview

FinancialAnalysis


Appendix

0

100

200

300

400

500

2015 2016

Share Repurchase

Diluted shares outstanding Shares repurchased

0.87

0.17

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

2015 2016

EPS from share repurchase

Team 3-TTT Cop. PRE

Documents

yahoo finance source

dollar thrifty synergy

auto rental news source

e airport volume growth

target price

stock price quote

market cap

car rental market share