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St. 7
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Asset Analysis Focus and Boyars Micro Cap Focus are not investment advisory bulletins, recommending the purchase or sale of any
security. Rather they should be used as a guide in aiding the investment community to better understand the intrinsic worth of a corporation.
Our services are not intended to replace fundamental research, but should be used in conjunction with it. Additional information is available
on request. The statistical and other information contained in this document has been obtained from official reports, current manuals and
other sources which we believe reliable. While we cannot guarantee its entire accuracy or completeness, we believe it may be accepted as
substantially correct. Boyar's Intrinsic Value Research LLC its officers, directors and employees may at times have a position in any security
mentioned herein. Boyar's Intrinsic Value Research LLC Copyright 2014.


About Boyars Intrinsic Value Research LLC ................................... 3

A recent full-length Asset Analysis Focus report

eBay, Inc. ......................................................................... 10

Lessons Learned Over Forty Years:
Investing in Companies with Significant Hidden Assets
(Particularly Real Estate) .. 27

Target Corporation ........................................................... 30
Kohls Corporation ........................................................... 30

Examples from the 2014 Forgotten Forty

About The Forgotten Forty ............................................................. 33

Hanesbrands, Inc. ............................................................ 34
Laboratory Corporation of America Holdings ................... 35
Live Nation Entertainment, Inc. ........................................ 36
Molson Coors Brewing Company .................................... 37

Introducing Boyars European Focus

About Boyars European Focus ....................................... 38
Davide Campari-Milano S.p.A. ......................................... 39

Mark Boyar has been publishing Asset Analysis Focus (AAF) since 1975. AAF, which is published by Boyars Intrinsic
Value Research LLC, focuses on U.S. equity securities and looks at a corporation and its asset base in the same
manner an acquisition minded business executive would. AAF seeks to identify companies trading at a substantial
discount to their intrinsic or private market value.

AAFs Research Approach & Methodology:

AAF takes a companys financial statements, tears them apart and reconstructs them in accordance with economic
reality as opposed to generally accepted accounting principles. Asset Analysis Focus seeks possible investment
opportunities across the market capitalization spectrum and within a diverse range of industries. A large number of the
companies featured in AAF are not widely followed by Wall Street. It is interesting to note that approximately 40
percent of the companies profiled in AAF since 1975 have been acquired.* Stock selection strategies employed by
Asset Analysis Focus include:

Hidden Asset Method
Business Value Method
Restructuring Plays, Breakups and Spinoffs
Franchise Approach
Fallen Angels
Catalysts and Special Situations (Event Driven)

Why Subscribe to Asset Analysis Focus Now?

We believe this is an opportune time to consider subscribing to Asset Analysis Focus. While the major indices have
advanced dramatically since their March 2009 lows, we continue to identify companies that are trading at levels that
are significantly below our estimates of their intrinsic or private market values.

We have made a concerted effort to bring more new ideas to our subscribers. By way of example, below is a list of all
the new ideas (presented by market cap at the time of publication) we have generated for our subscribers since 2011.

Large Cap Mid Cap Small Cap Micro Cap
($10 billion+) ($2 billion-$9.9 billion) ($500 million-$1.9 billion) (sub $500 million)
Bed Bath and Beyond Inc. Davide Campari-Milano S.p.A. Crocs, Inc. A.T. Cross Company
Campbell Soup Company Energizer Holdings, Inc. Crown Media Holdings Inc. Core-Mark Holdings Company Inc.
Cisco Systems, Inc. Equifax Inc. Dole Food Company, Inc. Cowen Group, Inc.
Coach, Inc. Expedia, Inc. Heckmann Corporation Crown Crafts, Inc.
Constellation Brands, Inc. GNC Holdings, Inc. Howard Hughes Corporation Douglas Dynamics, Inc.
CVS Caremark Corporation Hanesbrands Inc. Liquidity Services, Inc. Inventure Foods Inc.
Devon Energy Corporation HealthSouth Corporation Live Nation Entertainment, Inc. Kirklands Inc.
DirecTV Legg Mason,Inc. Post Holdings Inc. Lydall, Inc.
eBay, Inc. Mohawk Industries, Inc. Trustmark Corporation Martha Stewart Living Omnimedia
Kohls Corporation Regal Entertainment Group United Online, Inc. Outdoor Channel Holdings Inc.
Pair Trade: Short - Netflix, Inc. /
Long - Time Warner, Inc. Scotts Miracle-Gro Company Watsco, Inc. Pope Resources
SLM Corporation Staples Inc. Whistler Blackcomb Holdings Inc. Winnebago Industries Inc.
Target Corporation Starz

XO Group Inc.
The Charles Schwab Corp. W.R. Berkley Corporation

The Allstate Corporation Vulcan Materials Company

Tyco International, Ltd. TRW Automotive Holdings Corp.

Vivendi S.A. Whirlpool Corporation

Wells Fargo & Company Xylem Inc.

Yahoo! Inc.



While the major indices have performed well since the market bottomed in March of 2009, the companies
featured in Asset Analysis Focus have outperformed the S&P 500 by almost 3% per year since 2009.**
Below are the top performing stocks featured in Asset Analysis Focus organized by year since 2009.

Rank Security Return S&P 500 Outperformance
1 CBS Corporation 1230.91% 162.64% 1068.27%
2 Saks Incorporated 764.86% 124.44% 640.37%
3 Boston Beer Co. Inc. 728.57% 121.20% 607.37%
4 Time Warner Inc. 351.69 133.77 217.91
5 Comcast Corporation 311.31 110.05 201.26
Rank Security Return S&P 500 Outperformance
1 Discover Financial Services 351.96% 78.02% 273.94%
2 Epoch Holding Corp.* 196.57% 41.50% 155.07%
3 Comcast Corporation 172.95% 63.09% 109.85%
4 The Madison Square Garden Co. 170.84% 64.55% 106.28%
5 McGraw Hill Financial, Inc. 173.09% 71.60% 101.49%
Rank Security Return S&P 500 Outperformance
1 Hanesbrands Inc. 335.04% 48.57% 286.47%
2 Expedia Inc. 233.78% 54.05% 179.73%
3 Mohawk Industries Inc. 183.31% 64.61% 118.70%
4 Time Warner Inc. 166.27% 48.57% 117.71%
5 Whirpool Corporation 167.77% 64.61% 103.16%
Rank Security Return S&P 500 Outperformance
1 Hanesbrands Inc. 260.15% 45.27% 214.89%
2 Live Nation Entertainment, Inc. 146.91% 37.08% 109.84%
3 Core-Mark Holding Company, Inc. 132.46% 47.11% 85.35%
4 Liberty Interactive Corporation 95.81 41.37 54.44%
5 Legg Mason Inc. 86.22% 36.72% 49.51%

A Subscription to Asset Analysis Focus Includes:

Seven issues each featuring in-depth reports on three companies we believe to be undervalued.
Most issues contain a profile of a large, medium, and small capitalization stock. Featured stocks come
from a wide variety of industries.

The Summer Issue, which profiles an industry or area of the economy that is out of favor on Wall
Street. Our selection has at times been highly controversial, but in most instances, over the long term, has
proven to be prophetic.

The Forgotten Forty. Every December, Boyars Intrinsic Value Research produces The Forgotten
Forty. The Forgotten Forty, contains our investment theses on the forty companies in our universe that in
our opinion have the greatest potential for capital appreciation in the coming year due to a catalyst or
corporate action we believe is likely to occur to help unlock shareholder value.

If you would like to learn more about subscribing to Asset Analysis Focus please contact me directly at
212-995-8300 ext 215 or email me at


Jonathan Boyar

*Past performance is no guarantee of future results.
The micro cap names with the exception of Douglas Dynamics and Core-Mark Holdings Company Inc., were included in Boyars Micro Cap Focus, a
separate service offered by Boyars Intrinsic Value Research LLC.
Crown Media Holdings and United Online, Inc., were featured in Boyars Micro Cap Focus.
**This represents the average annualized performance for all regular Asset Analysis reports by year of publication from their respective publication dates
starting in 2009 through June 2013. The S&P 500 results are not inclusive of dividends.

Epoch Holding Corp. was acquired by TD Bank on 3/27/13; the return shown here stops at this latter date.
Rank Security Return S&P 500 Outperformance
1 Live Nation Entertainment, Inc. 87.63% 23.04% 64.60%
2 Core-Mark Holding Company, Inc. 80.29% 21.15% 59.14%
3 Constellation Brands Inc. 41.55% 13.73% 27.82%
4 DirecTV 37.70% 9.91% 27.79%
5 Devon Energy Corpoaration 44.19% 19.68% 24.51%

Companies profiled in Asset Analysis Focus since 2009
Ticker Company Review Type Date of Issue Price at Date Current Price Price (%)
OEH Ori ent-Express Hotel s Ltd New 1/30/09 6.32 13.38 111.71%
TWX Ti me Warner Inc Update 1/30/09 9.33 42.14 351.69%
BEN Frankl i n Resources Inc New 2/27/09 15.27 56.82 272.16%
CBS CBS Corp Update 2/27/09 4.27 56.83 1230.91%
MDS Mi das, Inc Update 2/27/09 7.35 11.50 56.46%
WU Western Uni on Co New 3/30/09 12.00 17.47 45.58%
SKS Saks Inc Update 3/30/09 1.85 16.00 764.86%
UPS Uni ted Parcel Servi ce Inc Update 3/30/09 48.61 97.09 99.73%
KSWS K Swi ss Inc New 4/30/09 10.04 4.74 -52.79%
SAM Boston Beer Company Inc Update 4/30/09 26.60 220.40 728.57%
BMY Bri stol -Myers Squi bb Co Update 4/30/09 19.20 50.62 163.65%
UNG Uni ted States Natural Gas Fund, LP New 5/29/09 14.60 2.64 -81.93%
CMCSK Comcast Corp Update 5/29/09 13.00 53.47 311.31%
DBD Di ebol d Inc Update 5/29/09 24.72 37.68 52.43%
WEN The Wendy's Co New 6/30/09 4.00 8.15 103.75%
HNZ H. J. Hei nz Company Update 6/30/09 35.70 72.50 103.08%
HD Home Depot Inc Update 6/30/09 23.63 80.85 242.15%
ELY Cal l away Gol f Company New 10/2/09 7.32 7.60 3.83%
ISCA Internati onal Speedway Corporati on New 10/2/09 27.09 30.32 11.92%
MAR Marri ott Internati onal Inc New 10/2/09 25.61 70.47 175.15%
POOL Pool Corp New 10/2/09 21.38 54.76 156.13%
BK Bank of New York Mel l on Corp Update 10/30/09 26.66 39.04 46.44%
BR Broadri dge Fi nanci al Sol uti ons Inc Update 10/30/09 20.81 40.37 93.99%
CVC Cabl evi si on Systems Corp Update 10/30/09 22.96 49.02 113.51%
AOL AOL Inc New 1/28/10 23.37 41.63 78.11%
IILG Interval Lei sure Group Inc New 1/28/10 12.79 21.18 65.60%
DFS Di scover Fi nanci al Servi ces Update 1/28/10 13.51 61.06 351.96%
EPHC Epoch Hol di ng Corporati on New 2/26/10 10.20 30.25 196.57%
KRFT Kraft Foods Group Inc New 2/26/10 28.43 53.70 88.90%
DIS Wal t Di sney Co Update 2/26/10 31.24 85.88 174.90%
MSG The Madi son Square Garden Co New 3/30/10 21.91 59.34 170.84%
AMP Ameri pri se Fi nanci al Inc Update 3/30/10 45.27 119.60 164.19%
TRV Travel ers Compani es Inc Update 3/30/10 53.93 89.56 66.07%
BAC Bank of Ameri ca Corp New 4/28/10 17.78 15.25 -14.23%
WTW Wei ght Watchers Internati onal Inc New 4/28/10 26.67 21.69 -18.67%
MDP Meredi th Corp Update 4/28/10 36.26 45.92 26.64%
ASCMA Ascent Capi tal Group Inc New 5/28/10 26.49 61.98 133.98%
GRMN Garmi n Ltd New 5/28/10 33.58 55.02 63.84%
PLL Pal l Corp Update 5/28/10 34.05 77.47 127.52%
CLX The Cl orox Co Update 6/29/10 62.73 86.87 38.48%
PLA Pl ayboy Enterpri ses, Inc Update 6/29/10 4.08 6.15 50.74%
WU Western Uni on Co Update 6/29/10 14.94 17.47 16.93%
SYY Sysco Corp New 9/15/10 29.01 35.69 23.03%
WM Waste Management Inc New 9/15/10 34.53 44.89 30.00%
MHFI The McGraw-Hi l l Compani es, Inc New 9/15/10 30.29 82.72 173.09%
TAP Mol son Coors Brewi ng Co New 9/15/10 45.13 67.53 49.63%
MKC McCormi ck & Company Inc New 9/15/10 40.95 65.78 60.63%
BMS Bemi s Company Inc New 9/15/10 31.09 39.01 25.47%
SNA Snap-On Inc New 9/15/10 45.51 120.20 164.12%
WDFC WD-40 Company New 9/15/10 36.28 66.76 84.01%
LH Laboratory Corporati on of Ameri ca Hol di ngs New 10/28/10 81.32 103.69 27.51%
CMCSK Comcast Corp Update 10/28/10 19.59 53.47 172.95%
WEN The Wendy's Co Update 10/28/10 4.64 8.15 75.65%
CSCO Ci sco Systems Inc New 1/27/11 21.44 25.23 17.68%
HBI Hanesbrands Inc New 1/27/11 22.46 97.71 335.04%
NFLX Netfl i x Inc New-Pai r Trade 1/27/11 210.87 422.72 -100.46%
TWX Ti me Warner Inc New-Pai r Trade 1/27/11 32.31 86.03 166.27%
Pai r Trade Performance Cal cul ati on 1/27/11 65.81%
YHOO Yahoo! Inc New 2/28/11 16.40 35.81 118.35%
DBD Di ebol d Inc Update 2/28/11 35.16 37.68 7.17%
MDS Mi das, Inc Update 2/28/11 7.71 11.50 49.16%
CVS CVS Caremark Corp New 3/30/11 33.64 76.36 126.99%


Companies profiled in Asset Analysis Focus since 2009
Ticker Company Review Type Date of Issue Price at Date Current Price Price (%)
TRMK Trustmark Corp Update 3/30/11 23.28 23.03 -1.07%
IILG Interval Lei sure Group Inc Update 3/30/11 16.30 21.18 29.94%
CVC Cabl evi si on Systems Corp Update 4/29/11 35.23 34.19 -2.96%
EPHC Epoch Hol di ng Corporati on Update 4/29/11 17.34 30.25 74.45%
ISCA Internati onal Speedway Corporati on Update 4/29/11 30.60 30.32 -0.92%
NES Nuverra Envi ronmental Sol uti ons, Inc. New 5/31/11 60.00 18.62 -68.97%
HD Home Depot Inc Update 5/31/11 36.28 80.85 122.85%
MSG The Madi son Square Garden Co Update 5/31/11 27.51 59.34 115.70%
SMG Scotts Mi racl e-Gro Co New 6/28/11 51.49 53.20 3.32%
ELY Cal l away Gol f Company Update 6/28/11 6.34 7.60 19.87%
HNZ H. J. Hei nz Company Update 6/28/11 53.13 72.50 36.46%
EFX Equi fax Inc New 9/13/11 31.01 76.09 145.37%
MHK Mohawk Industri es Inc New 9/13/11 44.04 124.77 183.31%
WSO Watsco Inc New 9/13/11 57.25 94.57 65.19%
WHR Whi rl pool Corp New 9/13/11 53.27 142.64 167.77%
CPB Campbel l Soup Co New 10/31/11 33.25 41.59 25.08%
EXPE Expedi a Inc New 10/31/11 26.26 87.65 233.78%
PLL Pal l Corp Update 10/31/11 51.17 77.47 51.40%
CORE Core-Mark Hol di ng Company, Inc New 1/31/12 40.61 94.40 132.46%
XYL Xyl em Inc New 1/31/12 25.91 35.29 36.20%
BK Bank of New York Mel l on Corp Update 2/29/12 22.11 39.04 76.57%
LH Laboratory Corporati on of Ameri ca Hol di ngs Update 2/29/12 89.89 103.69 15.35%
LINTA Li berty Interacti ve Corp Update 2/29/12 18.76 36.73 95.81%
ENR Energi zer Hol di ngs Inc New 3/30/12 74.18 114.76 54.70%
LYV Li ve Nati on Entertai nment Inc New 3/30/12 9.40 23.21 146.91%
TAP Mol son Coors Brewi ng Co Update 3/30/12 45.23 67.53 49.30%
WDFC WD-40 Company Update 3/30/12 45.35 66.76 47.21%
PLOW Dougl as Dynami cs, Inc New 4/30/12 14.13 16.70 18.19%
MDP Meredi th Corp Update 4/30/12 28.83 45.92 59.28%
CVC Cabl evi si on Systems Corp Update 5/30/12 11.43 19.22 68.15%
ELY Cal l away Gol f Company Update 5/30/12 5.50 7.60 38.18%
DELL Del l Inc Update 5/30/12 12.56 13.88 10.51%
DVN Devon Energy Corp New 6/28/12 56.85 75.50 32.81%
POST Post Hol di ngs Inc New 6/28/12 30.85 44.92 45.61%
HBI Hanesbrands Inc Bri ef Update 6/28/12 27.13 97.71 260.15%
PLL Pal l Corp Bri ef Update 6/28/12 53.06 77.47 46.00%
SMG Scotts Mi racl e-Gro Co Bri ef Update 6/28/12 40.42 53.20 31.62%
BBBY Bed Bath & Beyond Inc New 9/12/12 69.77 63.29 -9.29%
DOLE Dol e Food Company, Inc New 9/12/12 14.07 13.50 -4.05%
LMCA Li berty Medi a Corporati on New 9/12/12 102.52 169.56 65.39%
VIA Vi acom Inc New 9/12/12 50.81 83.14 63.63%
DTV Di recTV New 10/31/12 51.14 86.05 68.26%
LM Legg Mason Inc New 10/31/12 25.48 47.45 86.22%
WM Waste Management Inc Update 10/31/12 32.74 44.89 37.11%
TYC Tyco Internati onal Ltd New 1/29/13 30.51 43.15 41.43%
VIV.PA Vi vendi S.A. New 1/29/13 16.02 19.77 23.41%
WU Western Uni on Co Update 1/29/13 14.06 17.47 24.25%
DOLE Dol e Food Company, Inc Bri ef Update 2/27/13 11.26 13.50 19.89%
ISCA Internati onal Speedway Corporati on Bri ef Update 2/27/13 30.57 30.32 -0.82%
KSS Kohl 's Corp New 2/27/13 46.62 53.54 14.84%
RGC Regal Entertai nment Group New 2/27/13 15.60 19.46 24.74%
LYV Li ve Nati on Entertai nment Inc Bri ef Update 3/28/13 12.37 23.21 87.63%
SPLS Stapl es Inc New 3/28/13 13.42 11.59 -13.64%
TAP Mol son Coors Brewi ng Co Bri ef Update 3/28/13 48.93 67.53 38.01%
WTW Wei ght Watchers Internati onal Inc Update 3/28/13 42.11 21.69 -48.49%
COH Coach Inc New 4/29/13 58.27 34.56 -40.69%
CORE Core-Mark Hol di ng Company, Inc Update 4/29/13 52.36 94.40 80.29%
XYL Xyl em Inc Update 4/29/13 28.25 35.29 24.92%


Companies profiled in Asset Analysis Focus since 2009
Ticker Company Review Type Date of Issue Price at Date Current Price Price (%)
CROX Crocs Inc New 5/31/13 17.64 15.87 -10.03%
DFS Di scover Fi nanci al Servi ces Update 5/31/13 47.41 61.06 28.79%
WRB W. R. Berkl ey Corp New 5/31/13 40.97 44.61 8.88%
DVN Devon Energy Corp Update 6/27/13 52.36 75.50 44.19%
LINTA Li berty Interacti ve Corp Update 6/27/13 22.81 28.05 22.97%
SMG Scotts Mi racl e-Gro Co Update 6/27/13 48.27 53.20 10.21%
STZ Constel l ati on Brands, Inc. New 9/16/13 58.82 83.26 41.55%
SCHW The Charl es Schwab Corporati on New 9/16/13 22.08 27.75 25.68%
SLM SLM Corporati on New 9/16/13 24.83 26.06 4.95%
VMC Vul can Materi al s New 9/16/13 52.35 63.13 20.59%
WB.T Whi stl er Bl acomb Hol di ngs, Inc. New 10/31/13 14.50 17.36 19.72%
DTV Di recTV Update 10/31/13 62.49 86.05 37.70%
LM Legg Mason Inc. Update 10/31/13 38.47 47.45 23.34%
LH Laboratory Corporati on of Ameri ca Hol di ngs Update 1/30/14 89.06 103.69 16.43%
LQDT Li qui di ty Servi ces,Inc. New 1/30/14 23.50 13.49 -42.60%
STRZA Starz New 1/30/14 27.98 28.51 1.89%
BBBY Bed Bath & Beyond Inc Update 2/28/14 67.82 63.29 -6.68%
MSG The Madi son Square Garden Co Update 2/28/14 57.01 59.34 4.09%
TWX Ti me Warner Inc Update 2/28/14 67.13 86.03 28.16%
CPR Davi de Campari -Mi l ano S.p.A. New 3/31/14 5.95 5.84 -1.85%
SPLS Stapl es Inc Update 3/31/14 11.34 11.59 2.20%
TGT Target Corp. New 3/31/14 60.51 59.59 -1.52%
ALL The Al l state Corporati on New 4/29/14 56.89 58.45 2.74%
CMCSK Comcast Corp Update 4/29/14 50.85 53.47 5.15%
HLS Heal thSouth Corporati on New 4/29/14 33.98 38.33 12.80%
COH Coach Inc Update 5/30/14 40.72 34.56 -15.13%
ELY Cal l away Gol f Company Update 5/30/14 8.02 7.60 -5.24%
VIV.PA Vi vendi S.A. Update 5/30/14 19.24 19.77 2.75%
EBAY eBay Inc. New 6/30/14 50.06 52.83 5.53%
GNC GNC Hol di ngs Corp. New 6/30/14 34.10 32.81 -3.78%
TRW TRW Automoti ve Hol di ngs Corp. New 6/30/14 89.52 102.29 14.26%

Performance includes special dividends and spinoffs but not regular dividends.
Past performance is no guarantee of future results. These results are unaudited. The results are as of July 31
, 2014.
Stocks profiled less than one year ago are not annualized.

The following pages contain a recent example of a typical
Asset Analysis Focus report.

eBay Inc. ($50.06)
eBay owns a leading global online marketplace ( and the worlds most popular online payment processor
(PayPal) that collectively enabled greater than $200 billion in commerce volume in 2013. eBay has grown revenues at a
12.4% CAGR in its Marketplaces segment and a 25.2% CAGR at PayPal over the past 10 years. Both businesses sport
attractive high-margin, fee-based revenue models, which has led to adjusted EPS increasing at a 17.7% CAGR over the
past 10 years to $2.71 in 2013. However, eBay shares are roughly flat over the past 12 months due to a confluence of
negative headlines including a security breach at, a failed campaign for a split-up by an activist investor, and
reduced Company guidance for 2014-2015. In our view, these issues should not derail eBays long-term opportunities.
Global ecommerce volume is projected to increase at a 15%-plus CAGR for the foreseeable future and we believe eBay
maintains lasting advantages given its network scale and global reach. We also prefer eBays marketplace model
versus Amazons fulfillment model, given the operating margin differential (40% Marketplaces margin vs. ~1% at
Amazon) and low inventory risk/capital requirements. PayPal already touches nearly 20% of ecommerce transactions
and should benefit from the same tailwinds, with additional upside from the traditional retail payments business. Yet at
only 10x forward EBITDA, eBay trades at a large discount to both its historical averages and its ecommerce and
payments peers. Utilizing a sum-of-the-parts valuation, our forward looking estimate of eBays intrinsic value is
approximately $80 per share. If the current discount persists, eBay could reconsider separating the valuable PayPal
division from eBay. In the interim, eBay possesses a growing free cash flow stream (7% free cash flow yield ex-net
cash) and an overcapitalized balance sheet ($7 per share in net cash) and recently increased its share repurchase
authorization by $5 billion.

June 30, 2014
Volume XL, Issue VI

eBay Inc.
Nasdaq: EBAY
Dow Jones Indus: 16,826.60
S&P 500: 1,960.23
Russell 2000: 1,192.96 Trigger: No
Index Component: S&P 500 Type of Situation: Business Value, Consumer Franchise

Price: $ 50.06
Shares Outstanding (MM): 1,276
Fully Diluted (MM) (% Increase): 1,327 (4%)
Average Daily Volume (MM): 12.9
Market Cap (MM): $ 66,430
Enterprise Value (MM): $ 57,503
Percentage Closely Held: Insiders 9%
52-Week High/Low: $ 59.30/48.25
Trailing Twelve Months
Price/Earnings: NM
Price/Stated Book Value: 3.6x
Long-Term Debt (MM): $ 4,128
Implied Upside to Estimate of
Intrinsic Value: 60%
Dividend: NM
Payout NM
Yield NM
Net Revenue Per Share:
TTM $ 12.48
2013 $ 12.22
2012 $ 10.72
2011 $ 8.87
Earnings Per Share:
2013 $ 2.18
2012 $ 1.99
2011 $ 2.46

Fiscal Year Ends:
Company Address:
December 31
2065 Hamilton Avenue
San Jose, CA 95125
John J. Donahoe
Clients of Boyar Asset Management, Inc. do not own of eBay Inc.
common stock
Analysts employed by Boyars Intrinsic Value Research LLC do not own
shares of eBay Inc. common stock.

eBay (EBAY or the Company) owns a
leading global online marketplace ( and the
worlds most popular online payment processor
(PayPal) that collectively enabled greater than
$200 billion in commerce volume in 2013. One of the
few success stories from the late-1990s technology
bubble, eBay has grown revenues at a 12.4% CAGR
over the past 10 years in its Marketplaces segment to
$8.3 billion in 2013 and at a 25.2% CAGR at PayPal to
$6.6 billion. Both businesses sport attractive high
margin, fee-based revenue models, which has led to
adjusted EPS increasing at a 17.7% CAGR over the
past 10 years to $2.71 in 2013. However, eBay shares
are roughly flat over the past 12 months and down 15%
from early 2014 highs due to a confluence of negative
headlines including a security breach at, a
failed campaign for a split-up by an activist investor
(Carl Icahn), and a recently reduced 2014-2015 outlook
by eBay management.
In our view, these recent headwinds should not
derail eBays long-term opportunities and are more than
reflected in the current valuation. Global ecommerce
volume is projected to increase at a 15%-plus CAGR for
the foreseeable future, and despite the competitiveness
of ecommerce, we believe maintains lasting
advantages given its sheer scale and global reach. We
also prefer eBays marketplace model versus Amazons
eBay Inc.

fulfillment model, given the operating margin differential (40% Marketplaces margin vs. ~1% at Amazon) and low
inventory risk/capital requirements. PayPal already touches nearly 20% of ecommerce transactions and should
benefit from the same tailwinds, with additional upside should mobile payment growth and retail acceptance
gains enable PayPal to make deeper incursions into the traditional retail payments business. Even if eBays
historical growth decelerates more than currently projected, the Company should still grow the top and bottom
lines at or very close to double-digit annual rates.
In our view, these factors are no longer reflected in eBays current valuation. At only 10x forward
EBITDA and less than 17x 2014E adjusted EPS, eBay trades at a large discount to both its historical average
range and its ecommerce and payments peers. Utilizing a sum-of-the-parts valuation with relatively conservative
projections and still-discounted multiples (10x Marketplaces and 14x Payments) to 2016E EBITDA, our forward-
looking estimate of eBays intrinsic value is approximately $80 per share. If the current discount persists, we
believe eBays management could come under renewed pressure to separate the valuable PayPal division from
eBay. A spinoff would give PayPal the currency to incentivize management, attract new talent and pursue
attractive M&A opportunities, and PayPal would likely command a premium multiple as an independent
company given its dominance in the electronic payments market. Alternatively, should a separation fail to
materialize over the next 2-3 years, eBay is well positioned to return capital to shareholders en masse. The
Company possesses a growing free cash flow stream (7% free cash flow yield ex-net cash) and an
overcapitalized balance sheet ($7 per share in net cash) and recently increased its share repurchase
authorization by $5 billion while repurchasing $1.8 billion (2% of shares at <$55/share) in 1Q 2014 alone.
eBay was founded by computer programmer Pierre Omidyar in San Jose, California in 1995 as an
online consumer-to-consumer auction site. When Meg Whitman joined as CEO in March 1998, eBay still had
only 30 employees and $4.7 million in revenue. To support its growth ambitions, eBay completed an IPO in
September 1998 at $18 per share ($0.75/share, split-adjusted) and eBay would soon become an Internet
legend. eBay shares were immediately off to the races, closing up close to 200% on their first day of trading and
peaking at well over $600 per share (>$25, split adjusted) by April 1999. Although eBay shares did not
completely avoid the impact of the tech bubbles burst, over her 10 year tenure, Ms. Whitman helped guide the
Company into a leading online marketplace, expanding beyond its roots into international markets, higher price
tag items, business-to-consumer ecommerce, and fixed price sales. The Company also executed several large-
scale acquisitions over time. In July 2002, eBay announced the acquisition of global online payments platform
PayPal for $1.5 billion in what would become a transformative deal. PayPal also acquired leading voice-over-IP
software provider Skype for $2.6 billion in 2005, but the business was fully divested by 2011. More recently, the
Company acquired ecommerce services provider GSI Commerce for $2.4 billion in 2011.
Business Overview
eBay operates one of the worlds leading online marketplaces ( and online payments
platforms (PayPal), producing $16.0 billion in net revenues off of $205 billion in total enabled commerce volume
(ECV) in 2013, excluding motor vehicle and real estate gross merchandise volume (GMV). eBay has a global
footprint, with $8.3 billion or 52% of revenues generated outside the U.S. in 2013. eBay reports financial results
in three business segments: Marketplaces, Payments, and Enterprise, as detailed below.
eBay Historical Revenue by Geography ($ millions)
Year Ended December 31,
Net Revenues ($MM) 2011 2012 2013
U.S. $ 5,484 $ 6,778 $ 7,712
Germany 1,539 1,679 1,539
United Kingdom 1,572 1,889 1,572
Rest of world 3,057 3,726 3,057
Total net revenues $ 11,652 $ 14,072 $ 16,047

eBay Inc.

Marketplaces (52% of revenues)
eBay reported 128 million active users and 550 million listings globally in its Marketplaces segment as of
year-end 2013, which makes its a top-3 global online marketplace. eBays Marketplaces segment primarily
consists of the flagship ecommerce platform and its localized sister sites, most prominently in
Germany ( and the U.K. ( According to Alexa, is the #7 ranked website in the
U.S. and a top-ten website in several international locales. The Marketplaces segment also includes other online
shopping properties such as, GittiGidiyor (a 93% owned Turkish online marketplace), the StubHub
secondary ticket marketplace (est. $300 million or greater annual revenue), classified services websites
including and, and an advertising services business. eBay also owns a
minority stake in Craigslist, although it that has produced more in legal fees than equity income over the years.
eBay is a trading platform that facilitates transactions between buyers and sellers on its sites, rather
than acting as a direct e-retailer and fulfillment provider. Thus, the Marketplaces business primarily generates
fee revenue based on a percentage rate (take rate) of the gross merchandise volume of transactions
completed on its online properties. Although historically operated as a live online auction-style
marketplace for consumers or small merchants to sell to other consumers, today a majority of merchandise is
sold under a fixed price format from a wide spectrum of merchants and individuals and across a wide range of
prices. eBay also generates revenues from advertising and marketing services. Marketplaces is eBays largest
segment from a financial perspective, generating $8.3 billion in revenues (52% of Company-wide, segment-level
revenues) and $3.4 billion in operating income (67%) in 2013. Representative of eBays global reach, 60% of
GMV was international and 17% was cross-border in 2013.
Payments: PayPal (41% of revenues)
eBays Payments segment includes PayPal, the leading digital payments network. PayPal acts as an
intermediary between customers and merchants to facilitate digital payments via customers linked bank
accounts, credit cards, debit cards, or PayPal balances, through both online and mobile channels. PayPal is
also expanding toward an omni-channel acceptance model. PayPal is enabled as a form of payment at over
1.9 million physical retail locations (via mobile device, PayPal debit card, and/or customer log-in at the point of
sale device), primarily via its merchant acquisition partnership with Discover Financial Services. PayPal offers
small businesses a mobile payments processing solution with the PayPal Here card reader and linked mobile
app/software. The Payments segment also includes Bill Me Later (acquired for $1.2 billion in 2008), a service
which enables merchants to offer customers credit for online and mobile purchases. Bill Me Later is also offered
directly to eligible Bill Me Later/PayPal members as a payment option at and other eligible merchants.
eBay utilizes a third party financial institution (Comenity Capital Bank) to determine customer creditworthiness
and extend credit but eBay maintains most receivables and customer servicing requirements.
PayPal has 148 million active accounts covering over 200 markets and 26 currencies and processed
$180 billion in net total payments volume (TPV) during 2013, composed of $54 billion in on-eBay TPV and
$125 billion in merchant services (third party, i.e. off eBay markets) TPV. This includes $27 billion in mobile
payments volume. PayPal primarily generates revenue through a take rate on net enabled TVP. PayPals
standard merchant fees are 2.9% plus $0.30 per transaction in the U.S., with higher rates for international
transactions and discounts available based on merchant volume. PayPal contributed $6.6 billion or 41% of
eBays revenue in 2013. PayPal is a popular form of digital payment internationally, especially for cross-border
transactions. Approximately 48% of PayPals enabled TPV came from outside the U.S. including 25% across
borders (seller to buyer) in 2013.
In December 2013, PayPal completed the acquisition of Braintree for $713 million. Braintrees one-click
mobile app/online payment software and well-regarded APIs have helped the company win high-profile clients
such as Uber, OpenTable, and Airbnb. Braintree also operates the popular peer-to-peer mobile/online payment
service Venmo.
Enterprise (7% of revenues)
The Enterprise segment consists of the formerly named GSI Commerce, an end-to-end ecommerce and
marketing services provider to large general merchandise retailers. GSI was acquired for $2.4 billion (~$2 billion
after divestitures) in June 2011. The Enterprise business is a small contributor to eBays consolidated financials,
with $1.1 billion in revenues (7% of total segment-level revenues) and $91 million (2%) operating income in 2013.
eBay Inc.

eBay Historical Financial Performance by Segment
($ millions)
Revenues: 2011 2012 2013
Net transaction revenues $5,431 $6,078 $6,795
Marketing services and other revenues $1,211 $1,320 $1,489
$6,642 $7,398 $8,284
Net transactions revenues $4,123 $5,146 $6,096
Marketing services and other revenues $289 $428 $532
$4,412 $5,574 $6,628
Net transaction revenues $460 $850 $898
Marketing services and other revenues $130 $233 $214
$590 $1,083 $1,112
Corporate and other:
Marketing services and other revenues $8 $39 $55

Eliminations ($22) ($32)
Total consolidated net revenues $11,652 $14,072 $16,047

Operating income (loss):
Marketplaces $2,631 $2,943 $3,351
Payments $978 $1,359 $1,588
Enterprise $83 $128 $91
Corporate and other ($1,319) ($1,542) ($1,659)
Total operating income $2,373 $2,888 $3,371

Historical Financial Performance and Current Outlook: eBay in Transition?
After establishing itself as a dominant online marketplace by the turn of the century, as well
as PayPal have continued to benefit from the still-ongoing secular growth in global ecommerce volume. This is
reflected in eBays impressive long-term financial track record. Looking back over the past 10 years, eBays
Marketplaces revenue grew at a 12.4% CAGR to $8.3 billion in 2013 while Payments revenues increased at a
tremendous 25.2% CAGR to $6.6 billion. Total revenues and Payments revenues increased every year
including through the global recession, while Marketplaces revenues declined only one year during the timespan
(by 4.9% in 2009). Earnings growth has generally kept pace with revenues over the long term, with adjusted
EPS increasing at a 17.7% CAGR over the past 10 years to $2.71 in 2013. Not surprisingly, eBays growth rate
has slowed somewhat in recent years, although the Company has continued to post double digit organic
revenue growth. Company-wide organic revenues increased at an approximately 15% CAGR over the past 12
quarters. In 2013, total revenues increased 14% organically to $16.0 billion while non-GAAP EPS increased
15% to $2.71.
eBay Inc.

Historical Marketplaces and Payments Segment Revenue and Operating Margins, 2003-2013
($ millions)

Recent results and Company forecasts have created some investor concern over eBays future growth
prospects. In January 2014, management provided initial guidance for 2014 and downwardly revised targets for
their 3 year (2013-2015) financial roadmap that was previously revealed at the Companys March 2013 analyst
day. For 2014, eBay guided for $18.0-$18.5 billion in revenues. This represents 12%-15% Y/Y growth or roughly
in line with 2013 growth rates at the medianbut presumably translates to slightly lower organic growth based
on the consolidation of Braintree results beginning in mid-December 2013. The Companys Non-GAAP EPS
guidance of $2.95-$3.00 (including $0.03/share of dilution from the December 2013 Braintree acquisition) also
implies modest profit margin declines in 2014. Looking to 2015, the Company revised its forecast to
$20.5-$21.5 billion in revenue and non-GAAP EPS growth greater than 10% Y/Yimplying a wide range of
revenue growth rates within double digit levels in 2015 but potential for some additional margin contraction. As
illustrated in the following graphic, eBays lowered 2015 forecasts reflect reduced revenue expectations at as well as margin declines at PayPal.
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013






Marketplaces ($MM) Payments ($MM)
Marketplaces % Growth Payments % Growth
Marketplaces Operating Margins Payments Operating Margins
eBay Inc.

eBay Scraps 3-Year Plan

Source: eBay Company presentation January 22, 2014

Marketplaces Slowdown: Temporary Transition?
The Companys recent slower pace of growth and lowered guidance primarily reflects lower revenue
growth in the Marketplaces segment. Marketplaces revenue growth continued its modest deceleration from
16.1% in 2011 and 11.4% in 2012 to 11% organic growth in 2013 and 9% in 1Q 2014. Marketplaces results
could also be disrupted in 2Q-3Q 2014 by a pair of events in late May: Google released a periodic update to its
search rankings that reportedly had a meaningful impact on eBays search engine optimization (SEO) results.
Around the same time, eBay reported a cyber attack had obtained a large number" of customers basic account
information (email, password, date of birth, address, etc.) and urged all users to change their passwords. Traffic
statistics from Alexa (illustrated below) suggest these events may have had a meaningful impact on traffic to However, we would expect any impact to be temporary. Google search algorithm changes are a
recurring theme for ecommerce companies and eBay has a sophisticated SEO/advertising unit that has dealt
with similar issues in the past. Regarding the security breach, it is important to note that customers financial
information was not stolen and there was no report that stolen passwords were successfully unencrypted, so the
magnitude of customer disruption (and media attention) is not comparable to an event like the recent Target
breach. % of Visitors Sourced from Search Engine Global Traffic Ranking

eBay Inc.

In our view, a more medium-termbut not permanentcontributor to a slowdown at the Marketplaces
business is its ongoing transition in sales mix. Historically an auction based marketplace, for years eBay has
been steadily increasing its fixed price listings with eBay.coms buy it now feature. As illustrated in the
following charts, fixed price sales continued to grow close to 20% through 2013, while auction GMV growth
actually turned negative during 2H 2013. Fixed price sales represented 73% of GMV in 4Q 2013 vs. just 60% as
recently as 3Q 2010 and below 50% at the start of 2009, so the transition is already well on its way and the drag
from auction sales should decline going forward. The Marketplaces segment has also been negatively impacted
by declining vehicle transactions. Vehicles GMV of $1.6 billion in 4Q13 represented a decline of 17.7% from 2
years earlier. But the vehicles business is transitioning to a lead generation-based revenue model and is already
a much less meaningful contributor at just 7% of Marketplaces GMV in 4Q13. However, in the interim these
trends should continue to produce revenues/margin pressure in the Marketplaces segment.

Fixed Price GMV Auction GMV Vehicles GMV
($ billions) ($ billions) ($ billions)

Source: Company presentation

Fixed Price Trading % Total Marketplaces GMV Vehicles GMV





Vehicles GMV % change, Y/Y
eBay Inc.

PayPal Payments Volume Continues to Shine
The Payments business has also showed some signs of an inevitable slowdown, but it continues to
grow revenues and transaction volume at extremely attractive ~25% average annual rates. Operating leverage
has led to operating margin expansion from 21.0% in 2010 to 24.0% in 2013. However, as noted eBays
updated 2015 projections no longer include additional margin expansion at PayPal. In large part, this may be
linked to the Marketplaces slowdown. PayPals results are still closely intertwined to, which
contributes 29% of TPV and closer to 50% of profits at PayPal. While PayPal has an impressive record of
growing its penetration at eBay, at close to 80% of transactions today there is little room for additional
penetration gains to combat any slowdown in eBay sales trends. On the other hand, PayPals external merchant
services payment volume has shown no signs of slowing down. Merchant services net payment volume growth
averaged 30% over the past 5 quarters, and has grown from a 54% to 71% share of PayPals TPV over the past
5 years.
PayPal Historical Quarterly Net Total Payments Volume & External Share

As illustrated below, PayPals take rates and gross margin rates (take rates less expense and loss
rates) average attractive levels of ~3.6% and 65%, respectively. However, they have shown some modest (100-
150 bps or less for gross margins) declines over the past year. In addition to the lower contribution from (higher margin) sales, this likely reflects a greater contribution to new transaction volume from large
merchants. Larger merchants produce lower take rates versus PayPals primary traditional customers, small to
medium sized businesses. In our view, modest take rate dilution is without doubt a worthwhile tradeoff for
gaining traction in the previously underpenetrated but attractive large merchant space.

Payments Historical Quarterly Transaction Rates
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
Take Rate 3.63% 3.73% 3.78% 3.71% 3.87% 3.94% 3.89% 3.72% 3.77% 3.79% 3.70% 3.53% 3.55%
Expense Rate 1.11% 1.11% 1.14% 1.04% 1.07% 1.07% 1.07% 1.03% 1.05% 1.04% 1.05% 0.97% 0.99%
Loss Rate 0.21% 0.25% 0.31% 0.27% 0.26% 0.26% 0.30% 0.28% 0.29% 0.31% 0.30% 0.32% 0.27%
Margin Rate 63.7% 63.6% 61.5% 64.8% 65.6% 66.3% 64.8% 64.7% 64.4% 64.4% 63.4% 63.5% 64.6%






Net TPV Merchant Services share
eBay Inc.

eBay Management: Shareholders (and executives) Growing Restless?
eBay shares have experienced increased volatility in 2014 due to shareholder activism and managerial
uncertainty. In January 2014, it was revealed that (in)famous corporate raider Carl Icahn had acquired a 1%
stake in eBay and was proposing the nomination of two of his associates to eBays board as well as the
separation of PayPal from eBay. While the news initially propelled eBay shares upward, the ensuing extended,
muddy proxy battle only produced a dtente that disappointed investors and created new questions about the
competence or strategic vision of eBays board and management, while deflating eBays share price. Although
ostensibly unrelated, the announced departure of PayPal president David Marcus in June 2014 further elevated
investors concerns over the future direction of PayPal and extended the recent selloff in eBay shares.
Mr. Marcus had an impressive record as an entrepreneur and had been on the job for little more than 2 years
before deciding to depart to run Facebooks upstart messaging business (which does not encompass Whats
App)widely viewed as a step down. However, we would note Mr. Marcus had previously expressed hesitation
in leaving his familiar startup culture, and some reports (disputed by eBay) also suggest Mr. Marcus departure
was not necessarily voluntary.
We provide greater detail on Mr. Icahns proxy battle and our opinion on PayPals future as a part of
eBay later in this report. But in short, while we do not believe Mr. Icahns presence (which tends to have a highly
uncertain duration) alone is enough to produce lasting change at eBay, the spotlight on eBays management
combined with additional shareholder pressure could be a positive. We would note that Mr. Marcus departure
was not the first significant departure at eBay in recent years; eBays upper management has experienced a
surge in churn since Meg Whitmans departure in 2008. One-time CEO heir apparent Bill Cobb departed
alongside Ms. Whitman in January 2008. Mr. Marcus predecessor at PayPal, Scott Thompson, left after 4 years
on the job in 2012 for a short lived tenure as Yahoo CEO. eBays Marketplaces president position remained
unfilled for more than a year after Lorrie Norrington departed for personal reasons, until Thomson Reuters
executive Devin Wenig took over in September 2011. eBay also just named longtime IBM executive Craig
Hayman as new president of eBay Enterprise on June 24, 2014.
eBay CEO and board member John Donahoe is well tenured by comparison, having served in his
current capacity since Ms. Whitmans departure in 2008. He has achieved a fairly strong track record of
operational success and shareholder value creation since being elevated to CEO, although we would note the
timing of this promotion arguably helped set the bar low. Prior to becoming president of eBay Marketplaces in
2005, Mr. Donahoe was Worldwide Managing Director at Bain & Co from 1999. His background has likely
steered the management teams focus on key metrics like free cash flow and ROIC, which have improved nicely
under his watch. However, his lack of industry experience, conservative approach to capital allocation and
strategic realignment, and the recent earnings guidance hiccups suggest there could be room for improvement.
Regarding eBays board and insider ownership, we would note that founder and chairman Pierre Omiday still
holds approximately 8.5% of eBay shares. Outside of Mr. Omiday and Mr. Donahoe, the board contains 9
outsiders with fairly strong corporate backgrounds. Executives and directors collectively hold 9% ownership of
eBay, including Mr. Donahoes 2.7 million shares and vested options.
Longer-Term Outlook: Attractive Competitive Position with Secular Tailwinds
Admittedly, eBays historical growth rates will not be easily replicable longer term and results could be
choppier going forward. However, we believe the Company is still attractively positioned on two fronts
(Marketplaces and Payments) to capitalize on multiple secular investment themes.
Ecommerce Growth
First and foremost is the broad trend of retail sales migrating from traditional brick and mortar stores to
online channels. According to the U.S. Department of Commerce, domestic ecommerce sales increased 16.5%
to $264 billion in 2013. Importantly, we believe the transition is still in the early innings. Last years U.S.
ecommerce sales growth rate was nearly identical to the 16.6% CAGR in sales over the past 10 years. As
illustrated in the following chart, ecommerce penetration within the U.S. continues to climb at a steady rate and
still represented only 6.2% of total retail sales in 1Q 2014 (up ~70 bps Y/Y), according to the Department of
eBay Inc.

Quarterly U.S. Retail Ecommerce Sales Penetration, 1Q05-1Q14 (% Total Retail Sales)

Source: Census Bureau, U.S. Department of Commerce

The long term outlook looks at least equally bright from a global perspective. According to eMarketer,
global ecommerce sales (business to consumer) increased 18.3% to $1.3 trillion in 2013 and are projected to
grow at a 17.4% CAGR from 2012-2017 to $2.4 billion. Not surprisingly, the fastest growth is projected to come
from the Asia-Pacific region and other emerging markets.
Worldwide Ecommerce Sales, 2012-2017E ($ trillions)

Note: CAGR (2012-2017)=17.4%; includes products and services ordered and
leisure and unmanaged business travel sales booked using the internet via any
device, regardless of the method of payment or fulfillment.
Source: eMarketer, January 2014

The ecommerce sector is often (sometimes fairly, in our view) critiqued as an unattractive investment
area given the lack of barriers to entry, intense price competition, and/or the growing dominance of Amazon.
However, we believe eBay is unique given its marketplace model, its leading scale, and the increasing ubiquity
of PayPal. As a global marketplace linking buyers and sellers, this creates an attractive network effect and eBay
has been a dominant online marketplace almost since its founding. Today, has well over 100 million
members, approximately 650 million live listings at a time and processes upwards of $80 million in GMV at an
annual rate. In addition to the sheer scale of buyers and sellers/product listings, additional network effects
include eBays vast ratings/reviews database of both buyers and sellers, as well as lower customer acquisition
costs and higher conversion rates than smaller competitors. At the same time, eBay.coms scale and network
effects allow the Company to offer volume incentives for merchants.
eBay Inc.

Despite these advantages, eBay is likely facing increased investor scrutiny as it moves away from the
auction model toward a fixed price listing model that puts it in more direct competition with Amazon as well as
growing global e-retailers like Etsy, Alibaba, Mercadolibre, etc. Amazon in particular is an ecommerce
behemoth, generating $74 billion in sales in 2013. Its razor-thin pricing strategy (1% operating margins) and
heavy investment in sales, fulfillment, and web services infrastructure also create formidable competitive
pressures for any e-retailer. However, we believe eBay can continue to thrive in an Amazon-dominated
ecommerce market. The marketplace has been criticized for excessive clutter rather than a more
streamlined/curated merchandise offering for longer than we can remember, but we believe its breadth of
product offerings is an advantage vs. Amazon. Amazons product concentration in large branded merchants
and its direct fulfillment model can put it in competition with smaller selling merchants, while eBay offers a bigger
marketplace for small and medium sized merchant customers selling unique products. Furthermore, we would
note that today ~70% of eBay listings are new merchandise and top sellers now account for 47% of sales, which
helps to provide some consistency. While Amazons Prime membership program (including free 2-day shipping)
has been viewed as a threat to the industry, we would note that eBay has also worked hard to promote free
shipping among sellers and 55% now offer free shipping.
From an investment perspective, we also prefer eBays marketplace business model which (unlike
Amazon) provides an attractive, high margin fee-based revenue stream and effectively eliminates inventory risk
while allowing the business to rapidly grow without excessive capital investment requirements. In fact, eBay
continues to gain ecommerce share albeit at a slower rate than Amazon. Including PayPal merchant services,
eBays global ECV (Company-wide) increased 72% over the past 3 years alone to $205 billion in 2013 and its
ecommerce share grew 150 bps 18.4% according to the Company. Yet eBays total enabled commerce
penetration is only 2.0% of total retail sales volume globally. Even if eBay cedes share to ecommerce
competitors in the coming years, we believe the outsized long-term ecommerce sales growth opportunity
provides plenty of cushion for eBay to grow sales and profitability at above-market levels (and well higher than
implied by the current share price).
eBay Enabled Commerce Volume and Market Share ($ billions)

Source: Company presentation.

Cashless Transactions Support PayPal
Another powerful theme is the transition from cash transactions to a cashless global economy.
Credit/debit card adoption and increased merchant acceptance at point-of-sale terminals has been the primary
long-term driver of cashless transaction share gains over the past decades. However, this theme increasingly
overlaps with ecommerce, as electronic commerce naturally produces cashless transactions. In addition to
traditional ecommerce growth, electronic payments may be approaching a watershed as smart phones and
connected devices support retail channel blurring via mobile payment for both in-store transactions and at
home for delivery or local pickup. This has produced a plethora of upstart mobile and electronic digital wallet
competitors in addition to the traditional payment networks (dominated by Visa and MasterCard) including the
cellular phone carriers, Square, Google Wallet, Amazon, and Apple. However, in our view, the electronic
eBay Inc.

payments business presents huge network effects and barriers to entry in the form of merchant acceptance,
customer adoption, regulatory requirements, security requirements, etc. We would cite the Isis (mobile carriers
and payment networks) and MCX (Merchant Customer Exchange; large merchants including Wal-Mart and
Target) joint ventures as examples of seemingly promising digital wallet alternatives that have failed to gain
critical mass years after launching. PayPal has a huge leg up against competition as it already has over 100
million digital wallet customers and handles approximately 1 in every 6 ecommerce transactions. Below, we
highlight some additional details on PayPals advantages and long-term opportunities:
Merchant Acquisition: PayPal is already linked to millions of small and medium sized merchants.
Its ease of registration, no setup fees, and no monthly fees are a competitive advantage against
typical merchant acquirers/processors.
Security: PayPal provides both buyer and seller protection against the vast majority of purchases.
Its customer account-based network helps limit fraud by providing an additional layer of protection
beyond a simple credit/debit card.
Customer Financial Flexibility: PayPal enables customers to link multiple bank accounts and
credit and debit cards across banks/card issuers as well as Bill Me Later to one payment source.
Mobile Commerce: PayPal is already a leader in the fledgling mobile commerce industry. PayPal
processed an estimated $27 billion in mobile payments volume last year out of a $235 billion market
according to Gartner. Gartner projects mobile volume will reach $720 billion by 2017.
December 2013 acquisition of Braintree further fortified PayPals position in mobile.
Gaining Retail Channel Acceptance: PayPal and Discover formed a partnership in 2012 that has
already enabled PayPal as a payment source at 2 million retail locations. The PayPal Here
app/mobile payments provides another means for small retailers to accept payment via PayPal or
plastic. The point-of-sale business is estimated at $8 trillion as of 2010, providing an addressable
market magnitudes larger than ecommerce alone.
Superior Conversion Rates: PayPals simple customer checkout and multitude of payment options
directly translate to superior conversion rates for merchants. According to a Nielsen Online Buyers
Insights study completed in November 2013, businesses see an average 15% increase in total
customer spend during the 52 week period pre-/post-PayPal integration.
Credit Expansion Optionality: PayPal currently has a small consumer lending portfolio through Bill
Me Later. Combined with PayPals growing acceptance, this could arguably support a broader
lending business. eBay is also in the preliminary stage of testing working capital loans to small
merchants. At ~$5 trillion, credit is a huge addressable market in the long-term.
Cross-Border Trade Advantage
With a majority of revenue generated outside the U.S., eBay and PayPal are particularly well positioned
to capture additional ecommerce and facilitate more payments internationally. The Company has faced difficulty
penetrating China but already has a strong presence in South Korea and growing sales in India, Brazil, and
Russia among other countries. eBay Marketplaces stated goal is 6.5x user growth and 4x sales growth in BRIC
and other emerging markets between 2012-2015. PayPal gives eBay a major competitive advantage in cross
border trade, as its established payment network enables buyers and sellers to seamlessly transact across over
20 currencies, and PayPals seller verification standards provide an added layer of protection. PayPal enabled
$36 billion in cross-border trade in 2012, up from $22 billion just two years earlier. eBay has also established a
global shipping program to allow U.S. sellers to easily reach international buyers in 54 countries while avoiding
the hassles of international shipping, customs forms, remittances, etc.
Outsized Free Cash Flow with Balance Sheet Flexibility
eBay sports an attractive free cash flow profile and rock solid balance sheet. As noted, eBays
marketplace model reduces inventory risks and working capital fluctuations. Combined with PayPals growing
high margin, fee-based revenue stream this has produced a steadily increasing source of operating cash flow.

eBay Inc.

eBay historically averages annual capital expenditures of a fairly high 6-9% of revenues (management projects
7-9% in 2014), but much of this is growth-supporting infrastructure investments and free cash flow still averages
~20%-plus of revenues (23% in 2013) given eBays high operating margins. Free cash flow totaled $3.7 billion
($2.85/share) in 2013, or $3.1 billion ($2.39/share) after taking out non-cash equity compensation expenses.
Management expects free cash flow to exceed $11 billion in total between 2013-2015.
eBay Historical Free Cash Flow ($ millions)
Fiscal year ended December 31,
2010 2011 2012 2013
Operating Cash Flow
2,746 3,274 3,838 4,995
PPE Purchases
(724) (964) (1,257.0) (1,250.0)
Free Cash Flow
2,021.9 2,310.2 2,581.0 3,745.0

Much of eBays free cash flow has slowly piled up on its balance sheet, and today the Company is
almost indisputably overcapitalized. eBay held $7.8 billion in cash and short-term investments plus $5.2 billion in
long term investments (primarily corporate debt) vs. $4.1 billion in debt, or net cash and investments of $8.9
billion ($7 per share) on March 31, 2014. Most of the cash is held overseas. It should be noted that eBay does
take on a modest level of balance sheet risk with its Bill Me Later financing service. Loan portfolio receivables
were $2.7 billion net of loan loss reserves as of March 31, 2014. eBays exposure is fairly small compared to its
balance sheet/earnings power, and as illustrated below, the portfolio quickly recovered from the financial
crisis/global recession and has maintained healthy-risk adjusted margins of ~16% versus 4-6% charge-off rates
in recent years. The Company believes its vast transaction database at and PayPal, plus credit score
checks and other typical lending standards, help maintain credit performance. The portfolios average FICO is a
healthy 685 with 91% of receivables current. The nature of Bill Me Laters credit issuanceshort term lending,
periodic review, low average transaction values and credit extensionalso provide safety.
eBay Loan Portfolio Historical Performance

Although eBay made a few larger acquisitions over the years, the Company has not been nearly as
acquisitive as technology peers like Google, Facebook, HP, etc. Further, the Companys acquisition track record
is fairly strong on balance. Clearly, the PayPal acquisition was a home run (our intrinsic value estimate is >30x
the Companys acquisition price) and this more than compensates for any subsequent errors. The $2.6 billion
Skype acquisition eventually produced a respectable ~50% gain over almost 5 years despite the inopportune
sale of a 70% stake in 2009. Bill Me Later was a nice addition that helped eBay to expand its ECV. The
$2 billion acquisition of GSI Commerce in 2011, however, has yet to produce remarkable returns. It is too early
Risk adjusted margin Net charge-of f rate 90-day delinquency rate
eBay Inc.

to assess the most recent acquisition of Braintree, but the acquisition did secure the Company ownership of the
top-regarded startup in the mobile payments field.
eBay management has historically taken a fairly conservative approach to return of capital to
shareholders. The Company has never paid a dividend but historically repurchased shares to offset dilution, or
about 2% per year. The Company spent $1.3 billion to repurchase 25 million shares (2% pre-dilution) in 2013
and $898 million in 2012 to keep the share count approximately flat. Encouragingly, it appears the Company is
finally poised to begin meaningfully shrinking the share count in 2014. The board increased the Companys
share repurchase authorization by $5 billion to $5.6 billion in January 2014, and the Company stated it plans to
opportunistically reduce share count. eBay already spent $1.8 billion to repurchase 33.1 million shares (2% at
$54.64/share) during 1Q14. Given eBay shares recent performance and our perception of their discount to
intrinsic value, we are encouraged to see management take a more aggressive approach to repurchases today.
With net cash equal to nearly 20% of the Companys current market capitalization, we believe eBay has room to
return at least that level of cash to shareholders in the short term.
Given the Companys relatively stable historical financial performance and outsized cash generation,
arguably eBay could even support a modest level of leverage. While we are not overly optimistic eBay will
consider such a move given its track record, pressure from Carl Icahn and other shareholders could help speed
share repurchases, similar to what has happened at Apple since shareholders entered into the discussion.
Interestingly, eBay also took a $3 billion tax liability charge against foreign earnings during 1Q14 in anticipation
of repatriating $9 billion ($6 billion net) of foreign earnings. Although encouraged by the implications for share
repurchases, we would seriously question the tax efficiency of such a move versus taking out a low-cost
borrowing facility against the foreign cash as many other companies have done. Furthermore, although
discussions of a repatriation tax holiday have dragged on for 5-plus years, it was recently reported that
legislative discussions are progressing. In any case, we would note that eBay had not repatriated any of this
cash as of 1Q14 so there is still hope the Company will defer the tax liability indefinitely.
Assessing the Case for PayPal Separation
Rumors and discussions of eBay exploring a separation of PayPal have surfaced on and off over the
years. In fact, at Asset Analysis Focus we even considered eBay for inclusion in the summer 2012 issue on
candidates for corporate action but ultimately determined eBays reasonable valuation combined with an
uncertain timeline for a split-up did not offer a sufficient margin of safety. Revisiting eBay nearly two years later,
we believe the situation is very different today. eBays continued growth combined with a flat share price has
created a markedly more compelling valuation, as detailed in the following section. At the same time, eBays
lengthy proxy fight with Carl Icahn has brought the question of separating PayPal to the forefront this year.
Below, we detail the impact of the proxy campaign and assess the pros and cons of a PayPal spinoff as well as
the prospects for a separation to actually occur.
On January 22, 2014, eBay revealed corporate raider Carl Icahn had built a 1% stake in eBay and the
Company received a notice from Icahn nominating two of his associates to the board and submitting a non-
binding proposal to spin off PayPal into an independent company. eBay initially responded to Icahns spinoff
Regarding Mr. Icahns separation proposal, eBays Board of Directors routinely
assesses the companys strategic direction and has explored in depth a spinoff or separation of
PayPal. eBays Board of Directors has concluded that the company and its shareholders are
best served by the current strategic direction of the company and does not believe that breaking
up the company is the best way to maximize shareholder value. As part of eBay Inc., PayPal is
able to leverage the companys technology capabilities, commerce platforms and relationships
with retailers, brands and large merchants worldwide. Payment is part of commerce, and as part
of eBay, PayPal drives commerce innovation in payments at global scale, creating value for
consumers, merchants and shareholders.
A proxy battle soon ensued, with Mr. Icahn calling eBays board incompetent and extensively
highlighting the purported conflicts of interest of two eBay board members: Marc Andreessen, whose venture
capital firm held a minority stake in the private equity consortium that acquired a majority of Skype from eBay in
2009, and Scott Cook, co-founder and board member of Intuitwhich has some smaller business lines in or
eBay Inc.

near competition with PayPal in payment processing. eBay refuted these charges and further detailed their
opposition to separating PayPal from eBay. The Company noted PayPal generates upward of 30% of its
revenues and ~50% of profits from on-eBay activity. Finally after much more mudslinging, in April the two sides
reached a compromise. eBay agreed to appoint CVS chairman and former AT&T CEO David Dorman to the
board, while Mr. Icahn withdrew his proxy contests. However, Mr. Icahn vowed to continue to push for a
separation via confidential discussions and has publicly supported a 20% IPO of PayPal as an alternative to a
full separation.
The perspective of former PayPal insiders on a separation from eBay has been mixed. On the one
hand, former PayPal co-founder Elon Musk stated, It doesnt make sense that a global payment system is a
subsidiary of an auction website. Its as if Target owned Visa or something [PayPal] will get cut to pieces by
Amazon Payments, or by others like Apple and by startups if it continues to be part of eBay.
Former PayPal
COO and Yammer founder David Sacks also suggested, If you allowed PayPal to pursue its own destiny there
are moves it could make to become the largest financial company in the world.
On the other hand, both
PayPal co-founder Peter Thiel and LinkedIn CEO and former PayPal EVP Reid Hoffman disagreed somewhat.
Mr. Thiel suggested, This is not the right time for the companies to be split up, but there will be a lot of time to
revisit it.
Mr. Hoffman was more forcefully opposed, noting,
At the time, I was working as PayPals Executive Vice President and helped engineer that deal. We
had taken PayPal public earlier that year and had plenty of capital, but we felt that joining eBay would be
advantageous for long-term innovation. There were massive synergies between eBays peer-to-peer
marketplace and PayPals easy-to-use payments mechanism. Working as a team, we could share data and
analytics about customer acquisition and fraud activity, we could grow our user base faster and less
expensively, and we could create higher profit margins in a marketplace where a huge number of higher value
transactions would be taking place on a consistent basis. Twelve years later, the synergies that led to our deal
with eBay are no less relevant

Our take: PayPal should be given a separate stock currency, at the least, and eventually become an
independent company in time. Given eBays languishing share price and the business potentially divergent
growth prospects over the coming years, a separation is likely to unlock meaningful shareholder value in short
order. There are also numerous long-term benefits from a separation. As Asset Analysis Focus has detailed,
spinoffs (and to a lesser extent, their parents) tend to outperform over the long term. A separation better aligns
management incentives with shareholders by creating a more direct link between performance and share
price/management and employee compensation. This could be particularly relevant in the case of PayPal, which
must compete for the best engineering and programming talent to maintain its edge. Separate stock currencies
and balance sheets also give each company the flexibility to pursue M&A, reinvest in the business, return capital
to shareholders, and take on leverage as optimal for their respective situations. With PayPal approaching
$7 billion in annual revenues and healthy profit margins (24% operating margins in 2013), there is no longer a
legitimate case to be made that PayPal requires eBays balance sheet to support its growth.
On the other hand, we would concede that PayPals business model is still highly connected to The relationship clearly creates revenue synergies by allowing eBay to promote PayPal as a
preferred payment method (PayPal now accounts for close to 80% of eBay transactions), and the ease of use of
PayPals linked wallet helps customer conversion at eBay. However, PayPals reliance on eBay is declining
fairly rapidly as it gains broader penetration. Furthermore, it is possible that eBays ownership of PayPal deters
some competing ecommerce retailers/marketplaces from forming a partnership with PayPal. Nor does eBay
appear to have a viable alternative digital wallet provider to PayPal. Presumably, the relationship could be
solidified with a long-term contractual arrangement prior to any separation.

eBay Inc.

In any case, while a full separation from eBay may be best deferred for another 2-3 years to allow
PayPal to continue to reduce its customer concentration at eBay, this does not mean more immediate action
cannot be taken. For example, John Malones Liberty entities have frequently used tracking stocks as a means
to highlight value, to allow savvy shareholders (including management/the Company via share repurchases) to
selectively take advantage of any mispricing in the separate securities, and as a prelude to a hard spinoff or
other legal separation down the line. Alternatively, another reasonable action is a ~20% carve-out IPO a la
Mr. Icahns proposalif PayPal is able to garner a full valuation in the offering. This is uncertain, and the
Company is hardly in need of raising additional cash, but nonetheless it could be a positive step toward an
eventual spinoff.
What is the likelihood that eBays current executive team takes any of these actions? eBay has stated
that it would continue to regularly consider strategic alternatives, and we would remind investors that the
Company separated Skype in 2009 after considering a three-way split. We would also note that Mr. Icahns
nominee for eBays board, David Dorman, was formerly Motorola chairman and presided over its breakup into
two companies and the later sale of Motorola Mobility to Google at an excessive price. Finally, we could hold out
the possibility that the PayPal leadership void created by Mr. Marcus departure could turn out to be positive
rather than a negative. As a ship without a captain, PayPal could receive additional scrutiny from eBays board
as to the formers strategic fit within the larger organization. If eBay elects to do nothing, the board could face
more intense shareholder opposition in the coming years.
Valuation and Conclusion: Sum of the Parts Discount has Widened
eBay shares have recovered well since the financial crisis, rallying nearly 200% over the past 5 years
and briefly exceeding their all-time highs on the way to nearly $60 in March 2014. However, shares have
recently pulled back nearly 20% primarily attributable to Carl Icahns failure to win a spinoff of PayPal and the
subsequent departure of the units head, as well as a more moderate 2014-2015 financial outlook from eBay
management. In our view, these recent negative headlines present an attractive opportunity for long-term
investors. At the current price, eBay trades at only 12.2x TTM EV/TTM EBITDA and only 10x consensus
2014E EBITDA, or <17x 2014 adjusted P/E based on Company guidance. By comparison, eBay has historically
traded at average multiples of 20x EBITDA or higher prior to the recession and traded above 16x EBITDA and
20x forward P/E as recently as late 2012-early 2013. eBay also trades at a wide discount to peers, and our
estimate of the Companys intrinsic value, based on a sum-of-the-parts valuation method. For example, Amazon
and Latin American online marketplace Mercadolibre each currently trades at 33x EV/EBITDA and Chinese
ecommerce giant Alibaba could command a valuation approaching $200 billion or between ~30x-40x EBITDA in
an upcoming IPO. There are no pure play publicly traded comps to PayPal, but we would highlight payment
networks Visa and Mastercard and point-of-sale terminal provider Verifone all trade at ~14x-15x 2014E
EV/EBITDA. Visa acquired CyberSource, a leading security and fraud management solution for merchants
online payments, for $2 billion or 25x 2011E EPS in April 2011.
eBay Historical EV/EBITDA Trading Multiple

eBay Inc.

In our view, the discount is unwarranted considering both and PayPal are leaders in their
respective businesses, they continue to grow revenues, operating income and free cash flow at double-digit
annual rates, and each business has attractive long-term tailwinds from the ongoing explosion in ecommerce.
eBay is a top-3 global marketplace with huge network effects as evidenced in its structurally high margins
(~40%) and an international business that already accounts for a majority of GMV. PayPal touches nearly 20%
of ecommerce transactions, has a great runway for continuing its 20%-plus annual growth rate, and possesses
huge optionality value if it can successfully expand in mobile payments, penetrate retail point-of-sale channels,
break the Visa/MasterCard payment processing network near-duopoly, and/or intelligently grow its credit
business. Nonetheless, we conservatively assume eBays results come in near the bottom end of the
Companys updated 2015 guidance before continuing a gradual slowdown in 2016, and we value eBays
Marketplaces and Payments business at discounted 10x and 14x multiples to 2016E EBITDA to provide an
additional margin of safety. Allocating 25% of D&A to the corporate level and the remainder to eBays segments
proportionally to segment revenues and applying lower multiples to Enterprise (9x) and Corporate (9x), we
derive a forward-looking intrinsic value estimate of $80 per share for eBay, implying 60% upside to our estimate
over the next 2-3 years.
EBAY Estimate of Intrinsic Value ($ millions) Per Share
Marketplaces @10x 2016E EBITDA $ 48,807 $ 39.86
Payments @14x 2016E EBITDA $ 46,128 $ 37.67
GSI @9x 2016E EBITDA $ 2,130 $ 1.74
Corporate @9x 2016E EBITDA $ (14,000) $ (11.43)
2016E Enterprise Value $ 83,064 $ 67.84

plus 2016E Net Cash $ 14,986

Equity Value $ 98,050

2016E Diluted Shares Outstanding 1,225

per share $ 80.07
current price $ 50.06
implied upside 60.0%

In our view, there are multiple potential catalysts for eBay to close the current discount to intrinsic value.
Despite the recent end to the proxy war with Carl Icahn, a separation of PayPal remains a topic of conversation
and we would not be surprised to see eBays wounded board eventually bow to shareholder pressure and
announce a spinoff or partial IPO in the next few years. We believe PayPal could command a valuation at least
in line with Visa and Mastercard as a standalone publicly traded entity and potentially far higher. Absent a
break-up in the interim, large-scale share repurchases should be highly accretive for long-term shareholders.
eBay holds $7 per share in net cash and sports an attractive current free cash flow yield (backing out the net
cash) of ~7% that continues to rapidly expand. The Company drastically stepped up share repurchases in 1Q14
($1.8 billion or 2% of shares acquired during the quarter) and recently expanded its buyback authorization while
preparing to repatriate $9 billion in foreign earnings presumably in advance of returning capital to shareholders.
Risks that eBay may not achieve our estimate of the Companys intrinsic value include, but are not
limited to, general economic weakness impacting the Companys businesses; excessive price competition from
other electronic retailers and online marketplaces; entry of new electronic and mobile payment competitors;
failure of fixed price listings to replace auction-style sales declines at; misallocation of corporate
capital; failure to eventually execute a separation of PayPal; and recent or future executive personnel losses.
Analyst Certification
Asset Analysis Focus certifies that the views expressed in this report accurately reflect the personal
views of our analysts about the subject securities and issuers mentioned. We also certify that no part of our
analysts compensation was, is, or will be, directly or indirectly, related to the specific views expressed in this report.

Lessons Learned Over Forty Years:
Investing in Companies with Significant Hidden Assets
(Particularly Real Estate)


Lessons Learned: Hidden Assets
One of the more successful approaches that we have utilized throughout the years is the Hidden Asset
approach especially when the value of the company's real estate is a large percentage of the companys market
capitalization. Below please find historical examples of how we have utilized this technique followed by
summaries of two companies in our coverage universe that we believe are presently intrinsically
undervalued and whose owned real estate we believe comprises a significant portion of the companys
market capitalization providing investors with a margin of safety.
Examples of the Hidden Asset Method
In 1978, we profiled Alexanders Inc., which was a regional department store chain, with 12 locations in
New York and New Jersey. The companys common shares were trading at roughly $8 and had a stock market
capitalization of just over $24 million and an enterprise value of slightly more than $72 million. Cash flow per
share was $2.11, while stated book value per share exceeded $12.
Seven of the twelve locations were owned by the company. The most valuable being one square city
block located on Lexington Avenue and 58th Street in Manhattan. That site now contains the Bloomberg
corporate headquarters as well as One Beacon Court which is one of New York Citys most prestigious
residential addresses. There are presently three apartments for sale in that building that are 1,729, 2,669, and
3,058 square feet each that have asking prices of $6.8 million, $13.9 million, and $18.5 million respectively. One
apartment that was 9,000 square feet was recently being offered for $115 million but has since been taken off
the market.
Although Alexanders other owned locations were not nearly as valuable, they were in their own right
trophy properties. The Paramus New Jersey property and the Rego Park Queens location were gems.
Ultimately Alexanders was acquired by Vornado not for its operating businesses but for its real estate.
Other examples that we profiled through the years included businesses like Wrather Corporation which
owned a significant stake in Teleprompter which was one of the largest cable operators at the time as well as
the rights to the Lone Ranger and Lassie. Its crown jewel, however, was the Disneyland hotel in Anaheim,
California which was contiguous to the Disneyland resort. It also had the exclusive rights to build additional
Disney hotels in California. We originally profiled the company in August of 1977 when it was trading at $2.50
per share and in August of 1988 it was acquired for $23.25 per share.
Beneficial Standard was a California based insurance company that owned an extensive portfolio of real
estate properties that included shopping centers located in Marina Del Rey, California and Palm Springs
California, among others. It also owned office buildings located primarily in Los Angeles. We advocated splitting
the company in two parts, insurance and real estate, which they eventually did. Subsequently, both entities were
Both McDonalds and The Home Depot have large real estate components. When both companies fell
on hard times and their common shares plummeted in value, their real estate holdings relative to their
depressed market prices were quite significant. For example, we estimated that Home Depots owned real
estate represented ~45% of the market value of the entire entity when we profiled it in May of 2011.
At one point Tiffany and Companys Manhattan store was worth more than the entire market value of
the whole entity. In 2009, at the height of the financial crisis Saks Fifth Avenues common shares fell to $1.85:
The Companys Manhattan store alone which was unencumbered was worth more than the market
capitalization of the entire entity. Saks was recently acquired for $16 per share.
Tishman Realty & Construction: Why Reading Footnotes is Critically Important
We have included an excerpt from an early edition of Asset Analysis Focus which featured Tishman
Realty & Construction which owned a significant number of office buildings located primarily in New York City,
Los Angeles and Chicago. The title of the report was Generally Accepted Accounting Principles Versus
Economic Reality.
Prior to the great recession of the early 1970s a large number of gigantic office towers were built on
Avenue of the Americas in NYC. As the economy continued to sour and with New York on the verge of
bankruptcy it was becoming increasingly more difficult to find tenants to occupy the enormous amount of
available space.
Tishman had just completed construction on a large building located on Avenue of The Americas. The
company concluded that it would take many years to fill the space, so they elected to give the keys to the bank,
becoming the first major developer to walk away from a project since the Great Depression. Generally accepted
accounting principles dictated that Tishman had to write this asset down to zero. This mandated write down
totally eliminated the companys retained earnings.
Since the company had no retained earnings it could no longer pay a dividend, and the shares
plummeted in price reaching a low of $8.75 per share. Unfortunately, generally accepted accounting principles
forces a company to immediately write down a property it abandons to its estimated disposal value. However,
the same accounting practices did not permit Tishman to write up its operating assets to an estimate of their
present market values which in this case was significantly more than their acquisition cost.
As of September 30, 1974 the company owned all or portions of more than 23 buildings that were fully
functioning, and as a group, showed positive cash flow that same year. In the companys fiscal 1974 annual
report, dated September 30
Tishman once again reiterated its belief that, the companys developed properties
are carried on its balance sheet at far less than market value. At the time Asset Analysis Focus estimated that
Tishmans private market value exceeded $25 per share.
Early on, we learned the importance of thoroughly reading the footnotes contained in 10-Ks. In fact, it is
a good idea to read the footnotes first, and to try and avoid companies that have a plethora of footnotes.
On page 4 of the Tishmans 10-K and with further reference in the footnotes the following appeared:
The Registrant has been studying the possibility of restructuring the registrant in a form that
would be more beneficial to the shareholders and more reflective of underlying asset values.
In 1977 the company commenced a plan of complete liquidation. By 1978 the company had distributed $13.75
in cash, and an interest in a limited partnership that was valued at $7.50, for a total of $21.25.

An investor can learn two very important lessons from the Tishman saga:
(1) The importance of real estate ownership by a company, especially when it is a large component
relative to a companys market capitalization. By marking the assets to the market, it not only more
accurately values the company, but it also creates a margin of safety.
(2) The importance of assiduously reading footnotes.
Retailers: A Current Opportunity to Invest in two Intrinsically Undervalued Companies with Significant
Real Estate Holdings

In the current environment, the battered retail industry is one of the few areas of the market where we
are finding significant mispricing between current market prices and our intrinsic value estimates. In our view,
the bear case for retailers is well known and goes something like this: Consumer purchases that were
traditionally made at brick and mortar retailers will increasingly be made online (i.e. at Amazon, et al.). As sales
migrate to online retailers, traditional retailers will experience margin compression as a result of fixed cost
deleveraging. While clearly the Amazon threat cannot be taken lightly, we think in certain instances, the Wall
Street community is extrapolating current trends into eternity. We admit that the retail business is certainly not
without its challenges; however we have in our opinion identified a basket of retailers that we believe are selling
significantly below our estimate of intrinsic value. Two of these retailers not only pay an above market dividend
(that we believe to be sustainable), but own real estate that we estimate comprises a significant portion of the
companys market capitalization. Below please find a brief summary of our investment thesis on Target and

Target Corp. (TGT: $60.70)
Target is a name that was initially featured in our March 2014 issue. Since the report was released, the
CEO was forced to resign (a positive change in our view) as their recent foray into Canada, which was done
under the previous CEOs watch, has been nothing short of an unmitigated disaster. We think with the right
leadership (and we believe there will be no shortage of qualified retail veterans clamoring for this position), this
ship could be righted. In addition, on June 11, 2014 the company announced a 20% increase in their dividend,
making the yield ~3.40%, which should help to create a floor on the stock price. In 2007 activist investor William
Ackman conducted a highly public campaign where he proposed that the company monetize their real estate
holdings (he estimated company-owned real estate was worth $42 billion. Currently the market capitalization of
Target is ~$38 billion). Shareholders supported management, and Ackmans proposal was defeated in 2009. It
is now 5 years later, and the companys stock price has achieved only modest gains and has significantly trailed
the broader market. Although the company does face near-term challenges, we believe the shares offer a very
attractive opportunity for long-term investors.

Kohls Corp. (KSS: $59.47)
Kohls shares have not participated in the stock market rally. The shares are currently yielding
approximately 2.90% and we believe the companys intrinsic value is ~$72 per share. Importantly, we estimate
approximately 50% of the companys current market capitalization is represented by company owned real
estate, giving investors a margin of safety. It is worth noting that roughly 52% of the companys sales are from
private or exclusive brands (up from 42% in 2009) which should help mitigate the Amazon threat. If share price
performance results continue to be disappointing, KSS could attract the attention of private equity investors, due
to the companys low valuation, unique offerings, owned real estate, and solid balance sheet.

To receive Asset Analysis Focus's report on Target or Kohls please email




Every December, Boyars Intrinsic Value Research produces The Forgotten Forty. The Forgotten Forty contains our
investment theses on the forty companies in our universe that in our opinion have the greatest potential for capital
appreciation in the coming year due to a catalyst or corporate action we believe is likely to occur to help unlock
shareholder value. Over the past decade, The Forgotten Forty has significantly outperformed the S&P 500.

The following pages contain 4 of the 40 reports that were in last years Forgotten Forty.

To purchase this report or to learn more about The Forgotten Forty please contact Jonathan Boyar at
212-995-8300 ext. 215 or

*Past performance is no guarantee of future results. These results are not audited.
Forgotten Forty S&P 500
The Forgotten Forty Results for 2012-2013*

Hanesbrands Inc.

Balance Sheet Data

Catalysts/ Highlights
(in millions) 9/30/13 2012 2011
Realization of synergies from recently
completed Maidenform Brands acquisition
Increased returns to shareholders via
dividends and share buybacks with
leverage within targeted range
Ongoing beneficiary of low cost supply
chain, new product introductions, lower
commodity prices which should continue to
aid profitability and FCF generation
Cash $ 132 $ 43 $ 35
Current Assets 2,257 2,028 2,331
TOTAL ASSETS $ 3,835 $ 3,632 $ 4,035

Current Liabilities $ 914 $ 876 $ 934
Long Term Debt 1,250 1,318 1,808
Shareholders Equity 1,152 887 681
$ 3,835 $ 3,632 $ 4,035

Fiscal Year Ending
December 31
P&L Analysis
($ in millions except per share items)
2012 2011 2010 2009
Revenues 4,526 4,434 4,146 3,746
Net Income 165 267 211 51
Earnings Per Share 2.32 2.44 1.97 0.45
Dividends Per Share NA NA NA NA
Price Range 37.04-21.96 33.36-21.74 31.45-20.95 26.61-5.14

Hanesbrands was one of the top performers (+87%) in last years Forgotten Forty. Despite the strong performance,
we believe that there are a number of factors that support its inclusion again. HBIs valuation remains attractive with shares
currently trading at a reasonable 13x this years projected FCF. In addition, we see a number of near-term catalysts including
ongoing benefits as HBI leverages its new low-cost global supply chain, realization of synergies from the recent acquisition of
Maidenform Brands (MB), further traction with innovative new products, an improved commodity price environment, and the
prospect for not only increased, but outsized, returns to shareholders with leverage at targeted levels.
HBIs results are just now starting to reflect the benefits of its low cost global supply chain, created subsequent to its
2006 spinoff. While elevated cotton costs masked HBIs progress in recent years, the retreat of cotton costs (average cotton
costs in 2Q 2013 were $0.93 vs. $1.84 in the year-ago quarter) has enabled the HBIs profitability to expand markedly even in
the face of a still-challenging U.S. retailing environment. HBI boosted its full year 2013 outlook twice in 2013, with its current
expectation for EPS of $3.75 to $3.85, well up from its initial EPS projection ($3.25 to $3.40). Notably, HBI should achieve its
12%-14% annual operating margin target in 2013 about a year earlier than expected. Thanks to improved profitability, HBI
projects its 2013 FCF will be between $475-$525 million (+7% FCF yield) vs. its initial $350-$450 million target. It should be
noted that HBIs FCF includes $38 million in pension contributions and $30-$40 million of unplanned MB acquisition expenses.
Successful recent innovations including ComfortBlend, Smart Size, and X-Temp have also aided profitability. HBIs
new products, which command premium pricing, have been strong contributors to HBIs margin expansion. For example,
X-Temp (technology that automatically adjusts cooling and moisture control in socks and underwear) products carry a 50%
premium at retail vs. HBIs core cotton products and a ~20% premium over HBIs ComfortBlend products. Early results of its
X-Temp underwear and socks have exceeded HBIs expectations.
During 2013, HBI acquired MB, a marketer of intimate apparel (bras, shapewear, panties, etc.) for ~$583 million.
While the deal does not look inexpensive on the surface (9.5x EBITDA), management believes that factoring in potential
synergies, the transaction multiple declines to less than 7.0x EBITDA. We wouldnt be surprised if these synergy projections
ultimately proved conservative as MB becomes fully integrated within HBIs supply chain. As HBI CEO Noll recently stated,
The simplest way to conceptualize this integration is that we bought the brand and the business, but we are going to close the
company. MBs business complements HBIs portfolio nicely as users of its average figure products tend to skew younger
than HBIs full figured Playtex and Bali brands. Given MBs outsourced business model, synergies will not be immediately
realized. Nevertheless, the deal is expected to deliver an after-tax rate of return in the mid-teens and be accretive in 2014.
Once synergies are fully realized (~3 years) the transaction is expected to add $0.60 to EPS and $65 million to FCF. HBI
intends to finance the transaction with its 2013 FCF and revolver capacity, which the Company expects to fully pay down
within 18 months. The MB transaction also diversifies HBI away from volatile cotton.
Hanesbrands has made significant progress reducing leverage subsequent to the financial crisis, when the
Companys debt (total debt/EBITDA) was over 5x. Despite additional debt taken on to fund the MB acquisition, HBI expects to
end 2013 with long-term debt of ~$1.4-$1.5 billion implying a total debt/EBITDA ratio of ~2.1x, well within the Companys
1.5x-2.5x targeted levels. HBIs improved financial flexibility has not only allowed the Company to pursue attractive bolt on
acquisitions (MB and Gear for Sports), but also allowed it to begin returning excess capital to shareholders. During 2013, the
Company initiated a dividend (as we previously speculated), though we would not be surprised if it were increased from the
current payout ratio of just 25%. In addition, we believe that the Company could institute a meaningful share buyback program,
and recent comments by CEO Noll give us comfort this could become a reality.
Over the next couple of years, we believe HBIs true earnings power will emerge as it continues to leverage its
unrivaled supply chain, derives benefits from new product innovation and realizes full synergies from its acquisition of MB.
Accordingly, we estimate that the Companys EPS could approach, if not exceed, $5.25. Assuming no multiple expansion from
current levels, our estimate of HBIs intrinsic value is $89 a share, 32% above the current stock price.

Symbol: HBI

Exchange: NYSE
Current Price: $67.20
Current Yield: 1.2%
Current Dividend: $0.80
Shares Outstanding (MM): 102.0
Major Shareholders: Insiders: 4.6%
Average Daily Trading Volume (MM): 0.7
52-Week Price Range: $71.80-$34.74
Price/Earnings Ratio: 18.0x
Stated Book Value Per Share: $11.29

Laboratory Corporation of America Holdings

Balance Sheet Data Catalysts/Highlights
(in millions) 9/30/13 2012 2011 LH possesses a strong competitive position
in an industry with attractive long-term
growth prospects.
The Company continues to be a solid free
cash flow generator, financing share
repurchases, debt reduction, and bolt-on
Recent pull-back is an attractive buying
opportunity, stock offers upside potential of
at least 45%.
Cash $ 174 $ 467 $ 159
Current Assets 1,213 1,392 1,085
TOTAL ASSETS $ 6,687 $ 6,795 $ 6,137

Current Liabilities $ 681 $ 1,029 $ 797
Long Term Debt 2,554 2,175 2,086
Shareholders Equity 2,566 2,717 2,504
$ 6,687 $ 6,795 $ 6,137

Fiscal Year Ending
December 31
P&L Analysis
(in millions except per share items)
2012 2011 2010 2009
Revenues 5,671 5,542 5,004 4,695
Net Income 583 520 585 543
Earnings Per Share 5.99 5.11 5.29 4.98
Dividends Per Share Nil Nil Nil Nil
Price Range 95.30-81.56 100.94-74.57 89.48-69.49 76.74-53.25

Laboratory Corporation of America is the second largest independent clinical laboratory in the $60 billion U.S. lab market,
providing laboratory testing services primarily to physicians, hospitals and managed care organizations. LH has far-reaching
operational scale, with a national infrastructure that serves patients in all 50 states (consisting of 50 primary labs and over 1,800
patient service centers). The firm generates over $5 billion in annual revenue, and it serves a relatively diverse range of customers
(no individual customer accounts for more than 10% of sales). LH has an impressive record of growth during recent years, increasing
sales and EPS at 5-year CAGRs of 7% and 10% respectively. However, more recent comparisons have been less robust due to a mix
of industry and economic factors. Although near-term results may remain somewhat muted, we continue to regard LH as a well
positioned operator in the U.S. lab industry with meaningful long-term growth opportunities.
The reduced prospects for strong near-term growth for LH have become apparent as the Company has reported its results
and provided future financial guidance to investors. In October 2013, LH reported 3Q EPS of $1.80, in-line with investor expectations,
but representing year-over-year growth of only 2%. Overall revenue growth for the period was 3%, and LHs operating margin came in
at 17% (down 120 basis points relative to 3Q-2012), reflecting a challenging pricing environment. Management has continued to
reiterate its 2013 guidance of 3% revenue growth and EPS in the $6.90-$7.15 range, but a December announcement detailing initial
guidance for 2014 caused the stock to decline over 10%, reflecting investor disappointment. For 2014, the Company expects 2%
revenue growth and EPS of roughly $6.50 (about $1.00 short of general expectations). The guidance illustrates managements
continued concerns regarding near-term industry conditions and the ramifications for the Companys sales and margins.
The overall sector backdrop has been less conducive to LH achieving the impressive growth of the past. Near-term
uncertainty related to issues such as government reimbursements (related to scheduled cuts in Medicare reimbursement fees) and
general implementation of healthcare reforms have been among the primary concerns cited by management. Additionally, the
weakness of the U.S. economy has negatively impacted consumer demand for some types of healthcare services, as individuals
delay or forgo medical visits due to concerns related to potential costs. Yet this trend should abate as economic conditions improve.
Moreover the prospect of healthcare reform in the U.S. market, combined with an aging population, should provide long-term tailwinds
for volume growth during the coming years as a larger number of customers access the healthcare system. We would also highlight a
continued opportunity for consolidation for LH within this highly fragmented industry (consisting of 5,000 independent labs), which
should be a potential source of growth and enhanced profitability over the long-term. Much of LHs consolidation will likely be focused
on the continued growth of its specialty testing businesses such as genomic and esoteric, which enjoy superior pricing and margins
relative to other areas. Specialty now accounts for over 35% of revenue.
Despite challenging market conditions, LabCorp continues to possess a solid financial position. As of the most recent
quarter, the Company had about $2.5 billion in net debt and it has been generating over $700 million in annual free cash flow during
recent years (implying a free cash flow yield of 9%). LH does not pay a dividend, but it does return capital to shareholders via a stock
repurchase program. LH has reduced its share count by approximately 20% since 2008, and it had a remaining authorization of
$1.3 billion as of the most recent quarter (representing 17% of the current market capitalization). Historically, LH has allocated a
comparable level of capital to M&A activity. Given the fragmented nature of the lab sector, we would expect this to remain a recurring
theme going forward (likely bolt-on in nature). Debt reduction will be another ongoing initiative. The firms Debt/EBITDA stands at
roughly 2.0x, toward the upper end of its targeted range.
We believe the near-term headwinds being faced by LH do not undermine the Companys long-term outlook or competitive
position, and we regard the stocks recent pull-back as an attractive entry point for patient, value-oriented investors. Moreover, as the
year progresses we believe investors may increasingly start to focus on LHs long-term earnings power instead of 2014s challenging
environment. In the near term, the Companys ongoing share repurchase activity should provide meaningful valuation support.
Our estimate of intrinsic value assumes the stock can trade at an EV/EBITDA multiple of 9.0x, consistent with its historical range.
Applying this multiple to 2015 projections produces an intrinsic value of $130 per share, implying return potential of over 45% from the
current price. This estimate could prove to be conservative over the long term, and potential profit enhancements from future M&A
could be a source of upside as this industry continues to consolidate.

Symbol: LH

Exchange: NYSE
Current Price: $87.75
Current Yield: N/A
Current Dividend: Nil
Shares Outstanding (MM): 87.4
Major Shareholders: Insiders < 1.0%
Average Daily Trading Volume (MM): 0.67
52-Week Price Range: $108.00-$84.91
Price/Earnings Ratio: 13.3x
Stated Book Value Per Share: $29.22
Live Nation Entertainment, Inc.

Balance Sheet Data Catalysts/ Highlights
(in millions) 9/30/2013 2012 2011
Ticketing projects and Concerts growth
could produce double-digit AOI gains
FCF acceleration and deleveraging
portends possible initiation of share
Liberty Media may increase its stake in LYV
or seek alternatives for the Company
Cash $ 1,303 $ 1,001 $ 844
Current Assets 2,365 1,813 566
TOTAL ASSETS $ 5,776 $ 5,291 $ 5,077

Current Liabilities $ 2,234 $ 1,768 $ 1,493
Long Term Debt 1,804 1,740 1,705
Shareholders Equity 1,489 1,355 1,616
$ 5,776 $ 5,291 $ 5,077

Fiscal Year Ending
December 31
P&L Analysis
($ in millions except per share items)
2012 2011 2010 2009
Revenues 5,819 5,384 5,064 4,181
Net Income

(163) (83) (228) (60)
Earnings Per Share (0.87) (0.46) (1.36) (1.65)
Dividends Per Share NA NA NA NA
Price Range 10.88-8.21 12.26-7.33 16.70-8.42 8.90-2.52

Live Nation was a top performer from last years Forgotten Forty, advancing 99% on the heels of a reacceleration in
concert demand and strong execution in the first year of the Companys 3-year, 30-35% AOI growth strategic plan (AOI up 9%
YTD 3Q 2013). As we have discussed previously, concert attendance is a highly discretionary consumer expense. Weak
consumer demand globally as well as burdensome contracts kept AOI contribution margins below 1% between 2009-2012 in
LYVs key Concerts division (67% of revenue in 2012). However, there have been real signs of improvement in 2013 YTD with
LYV recording a 17% increase in global concert attendance to 44.7 million. This was achieved without significant discounting;
LYV recorded a corresponding 16% increase in Concerts segment revenue to $3.4 billion YTD 3Q13. Amphitheatres have
driven the majority of attendance growth in 2013, but the Company has also grown its festival business to over 4 million
attendees across 61 festivals globally YTD. Most encouragingly, Concerts AOI increased 66% to $100.2 million YTD and
management expects AOI to double for the full year. This also translates into Sponsorship and Advertising demand, with
segment revenue up 15% and AOI up 12% to $154.3 million YTD.
Despite the stock performance, we believe LYV is still in the early stage of recognizing its potential as envisioned at
the time of the Ticketmaster merger in January 2010. The Ticketing division has been a laggard in 2013, with 2% top-line
growth and a 4% decline in AOI to $217.4 million YTD. However, we expect to see a reacceleration in profitability growth next
year as the Company completes the Ticketmaster platform upgrade. The upgrade is expected to generate $0.35/ticket in cost
savings, which would translate to upwards of $50 million annually. Ticketmaster also recently beta-launched its new
secondary ticketing platform across 50 sports teams and over 100 concert venues. The new platform integrates primary and
secondary tickets on the same website/search results. This enables LYV to capitalize on traffic generated at the
venue/Ticketmaster website that previously might have been lost when no primary tickets were available. With only
~$25 million in AOI from the secondary market versus an estimated $4 billion in annual sales industry-wide, the upside from
market share gains is meaningful. Additionally, LYV is seeing increased demand for primary tickets under the new system by
highlighting their value vs. marked-up secondary tickets. According to the Company, preliminary results showed a 10%
increase in primary ticket volume and a 60% increase in total ticket sales under the new system.
There have also been several recent corporate events at Live Nation that we generally view favorably. A year ago,
LYV investors received a New Years Eve surprise when Chairman Irving Azoff announced his immediate resignation. While
Mr. Azoff is well-regarded in the industry, we generally viewed the departure favorably as it portended the more aggressive
ticketing re-platform as well as an increased role for Liberty Media. LMC increased its LYV ownership to 27% in repurchase
transactions with Mr. Azoff and MSG, and LMC CEO Greg Maffei replaced Mr. Azoff as chairman in March 2013. In June, LYV
prevailed in arbitration against CTS Eventim related to Live Nations decision to abandon a ticketing software contract
following the Ticketmaster merger. LYV shares immediately surged 16.8% in response to the removal of a major overhang.
LYV also refinanced its debt in August, which will generate ~$12 million in annual cash interest savings. The completion of the
ticketing platform upgrade and related growth capital expenditures could add up to another ~$60 million in free cash flow on
an annual basis by late 2014. Although LYV has historically recorded annual GAAP net losses due to excess D&A and other
non-cash charges, FCF growth has accelerated to reach $228.6 million ($1.16/share) TTM 3Q 2013 vs. just $155.4 million in
2011 excluding working capital swings. If LYV can reach the midpoint of its 2015 AOI growth target, combined with the
aforementioned benefits, we believe free cash flow could reach ~$385 million by 2015. At 13x 2015E FCF, we estimate LYVs
intrinsic value approaches $24/share, implying nearly 30% upside from current levels. Importantly, barring any incremental
capital deployment, net leverage could fall from 2.5x to below 1x by the close of 2015. Historically LYVs free cash flow has
primarily been applied toward debt reduction and acquisitions. While smaller-scale acquisitions of festivals/promoters and/or
upstart ticketing competitors are possible, we believe LYV may be on the precipice of initiating its first return of capital program
since the merger. We are particularly optimistic LYV could become a large-scale repurchaser of shares over the next
1-2 years under the stewardship of LMC and its mantra of leveraged ROE. Finally, we would not dismiss the possibility LMC
continues to increase its stake and/or pushes LYV to explore strategic alternatives at some point down the road.

Symbol: LYV

Exchange: NYSE
Current Price: $18.51
Current Yield: NA
Current Dividend: NA
Shares Outstanding (MM): 202.1
Major Shareholders: Liberty Media 25%
Average Daily Trading Volume (MM): 1.2
52-Week Price Range: $19.62-$8.98
Price/Earnings Ratio: NA
Stated Book Value Per Share: $7.37

Molson Coors Brewing Company

Balance Sheet Data Catalysts/Highlights
(in millions) 9/30/13 2012 2011 TAP remains a well positioned player within the
brewing industry, illustrated by strong market share
and global distribution capabilities.
TAPs financial results should be poised for
improvement as industry conditions normalize and
growth initiatives gain traction.
The Company has been reducing the financial
leverage incurred from M&A, and resumption of
share repurchase activity should be feasible in
12-18 months.
Cash $ 407 $ 624 $ 1,079
Goodwill 2,415 2,453 1,453
TOTAL ASSETS $ 15,773 $ 16,212 $ 12,424

Long Term Debt $ 3,254 $ 3,423 $ 1,915
Shareholders Equity 8,319 7,967 7,648
$ 15,773 $ 16,212 $ 12,424

Fiscal Year Ending
December 31
P&L Analysis
($ in millions except per share items)
2012 2011 2010 2009
Revenues 3,917 3,516 3,254 3,032
Net Income 442 675 670 729
Earnings Per Share 2.53 3.62 3.57 3.92
Dividends Per Share 1.28 1.24 1.08 0.92
Price Range 46.35-37.96 50.44-37.99 51.11-38.44 51.33-30.76

Molson Coors Brewing is among the leading players in the world brewing market, with a strong global presence and
a diverse portfolio of well established brands. Today, the firm holds the second largest market share position in Canada, the
second largest share position in the United States, and the second largest share position in the United Kingdom. Its well
established portfolio of brands includes globally recognized names such as Coors Light, Molson Canadian, and Carling. The
firm also possesses a meaningful presence in the growing markets of Central and Eastern Europe via its 2012 acquisition of
Over the past decade, cost reduction and efficiency initiatives have been key issues of emphasis for the
management team at TAP. These efforts have yielded significant benefits; Molson Coors has achieved $1.1 billion in
cumulative annualized cost savings since 2005. Looking ahead, the Company believes it can reduce its cost structure by an
additional $40-$60 million per year for the next five years, partially driven by synergies from the StarBev acquisition. Yet, TAP
will need to accelerate its sales growth during the coming years as cost reduction opportunities become fully realized. Part of
this sales growth should be derived from its $3.5 billion acquisition of StarBev. StarBev possesses a top-three market share
position in 9 countries throughout the Eastern and Central European region. The acquisition makes TAP the third largest
brewer in the region, with a market share of over 20%. According to a report published by Bernstein Research, the Central
and Eastern European region accounts for 7% of the global population, and 11% of global beer revenue (over $18 billion per
year). The rising incomes, growing economies, and overall emergence of middle class consumers within this region suggest
that this area will become increasingly important in the future. Annual per capita beer consumption in the region stands at
approximately 50 liters, compared to 70 liters in North America and Western Europe, representing another potential driver of
future sales growth.
Overall conditions within the more mature markets such as North America and the United Kingdom remain relatively
challenging, characterized by lackluster consumer demand. In part, this has been an ongoing issue for several decades, due
to a secular shift from beer to wine and spirits (reflecting changes in demographics and consumer preferences). However, the
emergence of craft brewing has represented an important exception to this difficult backdrop. The craft brew category enjoys
favorable pricing and demographics, and has been growing at double-digit annual rates for many years. Although craft
brewers only represent about 5% of the beer marketplace, TAP has clearly taken notice of this trend, and has become the
#1 provider of craft brews via brands such as Blue Moon and Leinenkugels. In addition, TAP possesses other meaningful
opportunities for organic growth. Innovation in both new and existing TAP products should continue to be an ongoing initiative
at the Company in the near-term. Longer-term, its exposure to growing markets such as China and India should eventually
become meaningful drivers of overall Company results.
Prior to acquiring StarBev, TAP had been returning significant capital to shareholders via share repurchase and a
growing dividend. However, TAP suspended its share repurchase program following the acquisition of StarBev (a deal
financed by a combination of cash and debt), in order to maintain its investment grade credit rating. Consistent with this
priority, TAP has been allocating a meaningful portion of it free cash flow toward debt reduction. TAP typically generates
$700 million-$800 million in annual free cash flow (implying a free cash flow yield of about 8%). As of the most recent quarter,
net debt stood at $3.5 billion (down 20% since consummation of the StarBev deal). Once Company leverage returns to
pre-acquisition levels (expected to occur in the next 12-18 months), TAP will likely consider resuming its past pattern of share
repurchase and dividend increases.
Assuming industry conditions reach a more normalized state during the next 2-3 years, TAP should be well
positioned for growth in profits and cash flow. In order to estimate an intrinsic value for Molson Coors in 2-3 years, we have
assumed TAP can trade at 11.0x EV/EBITDA, a multiple that is toward the lower end of precedent industry transactions
(transactions have typically been priced within the 10x-15x range from an EV/EBITDA perspective). After taking into account
our estimate of normalized EBITDA in 2015, our assumed multiple produces an estimated intrinsic value of about $70 per TAP
share. This estimate implies total return potential of over 30%.

Symbol: TAP

Exchange: NYSE
Current Price: $53.42
Current Yield: 2.4%
Current Dividend: $1.28
Shares Outstanding (MM): 185
Major Shareholders: Insiders own 19%
Average Daily Trading Volume (MM): 1.0
52-Week Price Range: $56.26-$41.26
Price/Earnings Ratio: 12.9x
Stated Book Value Per Share: 45.07

6 East 32
Street 7
Floor New York, NY 10016 P. 212.995.8300 F. 212.995.5636

Boyar's Intrinsic Value Research has always covered a diverse range of U.S. based companies from small
capitalization stocks such as Callaway Golf to large capitalization names such as Bank of America and Microsoft.
We will to continue to do this through our flagship publication Asset Analysis Focus.
At Boyar Research we pride ourselves on our ability to identify areas of the equity market that are undervalued, and
create publications to help take advantage of unique opportunities in the marketplace for our subscribers.
In 2010 for example, we began publishing Boyar's Micro Cap Focus when we thought certain micro cap stocks were
particularly undervalued. We are quite satisfied with the results thus far, as the companies featured in this
publication have gained approximately 112% on average versus 37% for the Russell Microcap Value Index.

We now believe it is an opportune time to consider investing in certain European equities and have decided to
launch Boyars European Focus to identify what we believe are intrinsically undervalued European companies. The
Campari report found on the following pages is a representative sample of what you can expect to receive if you
subscribe to this service. In addition, we do have other experience profiling European companies. For example, in
our January 2013 issue we featured Vivendi which has returned 34% versus 16% for the CAC 40
Why have we decided to launch Boyars European Focus? We feel the current environment presents an
unusual opportunity both for ourselves and for our readers. Expanding our universe to include European equities
will create additional opportunities to find overlooked, undervalued, and under researched businesses. While most
European indexes have kept pace with the U.S., there are pockets of stocks in certain industries and countries that
have yet to fully recover from the global recession. Additionally, in todays increasingly integrated global
marketplace many European listed companies have similar characteristics as U.S. based companies that Boyar
publications have already researched. Consequently, we believe our intrinsic value approach to stock market
investing will easily translate abroad.

To purchase this service or to learn more about Boyars European Focus please contact Jonathan Boyar at
212-995-8300 ext. 215 or

Past performance is no guarantee of future results. This represents the average performance for all Boyars Micro Cap Focus reports from their respective
publication dates. The results are as of July 31
2014. These figures are unaudited.
Past performance is no guarantee of future results.
March 31, 2014
Volume XL, Issue III

Davide Campari-Milano S.p.A.
Dow Jones Indus: 16,457.66
S&P 500: 1,872.34
Russell 2000: 1,173.04 Trigger: No
Index Component: NA Type of Situation: Business Value, Consumer Franchise

Price: 5.95
Shares Outstanding (MM): 576.3
Fully Diluted (MM) (% Increase): 586.3 (1.7%)
Average Daily Volume (MM): 1.2

Market Cap (MM): 3,456
Enterprise Value (MM): 4,309
Percentage Closely Held: 51% Alicros S.p.A.
52-Week High/Low: 6.64/5.46
5-Year High/Low: 6.64/2.34
Trailing Twelve Months
Price/Earnings: 23.1x
Price/Stated Book Value: 2.5x
Long-Term Debt (MM): 1,127
Implied Upside to Estimate of
Intrinsic Value: 47%
Dividend: 0.08
Payout 31%
Yield 1.1%
Net Revenue Per Share:
2013 2.62
2012 2.29
2011 2.16
Earnings Per Share:
2013 0.26
2012 0.27
2011 0.27

Fiscal Year Ends:
Company Address:

Managing Director/CEO:
December 31
Via Franco Sacchetti, 20
20099 Sesto San Giovanni
Milano 720-852-7700 ITALY
Bob Kunze-Concewitz
Clients of Boyar Asset Management, Inc. do not own shares of Davide
Campari-Milano S.p.A. common stock..
Analysts employed by Boyars Intrinsic Value Research LLC do not own
shares of CPR common stock.

Davide Campari-Milano S.p.A. (Campari Group,
Campari, CPR or the Company) is the sixth largest
spirits company worldwide. Over the past 20 years,
Campari has grown from a niche Italian aperitif
producer into a diverse spirits Company with over 50
brands distributed in 190 countries. Today, no single
brand contributes more than 10% of sales and more
than three-quarters of sales are generated outside Italy.
The Company has achieved an impressive 10% CAGR
in revenue since its IPO in 2001 and we believe
Camparis portfolio is well-positioned to capitalize on
current trends including global spirits consumption
growth, international adoption of U.S. whiskies, and a
resurgence in the classic cocktail culture. CPRs Wild
Turkey whiskey, Aperol and Campari bitters, and
Cinzano vermouth are particularly well-positioned.
Integration of recently-acquired premium rum and
Canadian whisky portfolios will further enhance the
Companys portfolio in globally underpenetrated
categories. The Company has also built an impressive
emerging markets footprint, which contributed 29% of
revenue in 2013.
We are attracted by the spirit industrys
economies of scale, strong brand equity, pricing power
and recession-proof demand, as well as the
aforementioned long-term demand drivers. Campari
historically generates mid-20s percentage EBITDA
margins with relatively low (1.5%-3% of sales) capital

Davide Campari-Milano S.p.A.

requirements. Following the recent spate of acquisitions as well as numerous investments in production and
bottling facilities around the globe, Campari is making great strides in internalizing its route to market. This
should improve Camparis selling power and margin profile over time while further enhancing the synergies from
any additional acquisitions. Despite these dynamics, Campari shares currently trade hands at relatively modest
2.8x 2013 EV/Sales and 12.7x 2013 EV/EBITDA versus 4.3x and 14.8x average multiples among its closest
peer group. In our view, near-term headwinds in Italy and some smaller markets as well as disappointments in
integrating the 2012 Jamaican acquisition are overshadowing the Companys long-term track record of profitable
growthwhich we believe is intact and even enhanced today. Integration progress and any macroeconomic
improvements could be catalysts for a re-rating of Campari shares in the coming years. In the meantime,
Campari has ample free cash flow and borrowing capacity to continue to pursue modestly-sized and priced
acquisitions. Longer-term, we would not dismiss the possibility that the second generation of Camparis
controlling Garavoglia family consider a sale. Consolidation has continued at a frenzied pace in the industry for
well over a decade, with recent transactions completed at an average 15x EBITDA multiple and reaching
19.5x EBITDA in the case of Suntorys pending Beam acquisition. Nonetheless assuming a discounted
14x 2016 EV/EBITDA multiple, we derive a forward-looking intrinsic value estimate of 8.74 per share for
CPRimplying 47% upside from the current price.
History & Business Overview
Davide Campari-Milano S.p.A. traces its beginnings to 1860, when Italian drink master Gaspare
Campari created the eponymous bitter aperitif at his bar in Novara. He soon opened the Caffe Campari in
Milans central gallery, where the drink gained widespread popularity and is credited with establishing the
Milanese social cocktail ritual. Famous posters and advertisements commissioned to well-known artists helped
turn Campari into a premier Italian brand by the early 1900s. Son Davide Campari helped focus the business on
the most successful Campari aperitif and the Cordial Campari spinoff, and he soon began to build Campari into
an internationally distributed liquor. The Campari product line was extended in 1932 with the introduction of
Campari Soda, the worlds first pre-mixed, single serve bottle marketed worldwide, which featured a distinctive
bottle designed by Fortunado Despero. Chemist Domenico Garavoglia joined the Company in 1952 and would
guard the secret Campari recipe and eventually lead the Company until his death in 1992.
Under Garavoglias
leadership, Campari would continue to expand its reach, eventually reaching distribution in over 190 countries.
Garavoglia inherited control of the Company after the last living Campari heir passed away in 1982.
As the spirits industry began a still-ongoing wave of international consolidation in the 1990s, Campari
decided to join the fray in 1995 with the acquisition of Dutch company BolsWessanens Italian soft drinks
business. In exchange for a 35% stake in the Company, Campari acquired a portfolio including the non-alcoholic
aperitif Crodino, Lemonsoda, and Cynar brands. Campari followed that up with the acquisition of Cinzano
sparkling wine and vermouth, plus Greek liquor Ouzo12, from Diageo for 122.7 million in 1999. Campari also
acquired a portfolio of local Brazilian brands from Diageo for $105 million in early 2001. To support additional
growth and provide an exit for minority shareholders, Campari completed its initial public offering on July 6,
2001. Led by Deutsche Bank and UBS and listed on the Italian Stock Exchange (Borsa Italiana), Campari sold
13.7 million existing shares at 31 per share (1.55 per share, split adjusted). The IPO allowed Wessanen to
exit its position in Campari, and the Company did not raise any money through primary share issuance. The
Garavoglia family maintained its 51% ownership after the IPO, but the IPO was not without its drama as one of
Domenicos daughters waged a lawsuit alleging the family had long misrepresented the Companys financials
and attempted to force her to sell her stake in the run-up to the IPO. The lawsuit ultimately ended in a
100 million judgment in her favor.
As detailed later, Camparis growth accelerated following the IPO through
global expansion of acquired portfolios. Today Campari is a truly international Company with a broad wine and
spirits portfolio; Campari and Campari Soda have declined from 43% of net sales in 2000 to just 14% in 2013.
Business Description
Campari has grown far beyond its 19
century roots as creator of the eponymous aperitif in Italy. Today
Campari is the sixth largest company in the worldwide premium spirits industry, featuring a portfolio of over
50 brands with a footprint including 4 wineries, spirits production facilities in 17 countries, and an increasingly
expansive internal distribution reach globally. Through a combination of organic growth and acquisitions,

Davide Campari-Milano S.p.A.

Campari is now operationally diverse from both a geographical and product perspective. Following realignment
in 2012, Campari operates through 4 geographical business units: Italy, Rest of Europe, Americas, and Rest of
World & GTR (global travel retail; encompasses world-wide duty free sales). Italys contribution to Company-
wide sales has declined from 57.4% as recently as 2000 to slightly less than 25% of Company-wide sales in
2013 and continues to decline as a percentage of sales. The United States is Camparis second largest country
by sales, contributing 20.5% of revenue in 2013. As a whole, the Americas is now Camparis largest operating
segment, contributing approximately 41% of sales. Europe ex-Italy contributes another 24% while Rest of World
and GTR account for the final 10% of sales. The Americas segment contributes a moderately lower percentage
to Camparis bottom line (34.8% of EBIT in 2013) primarily due to inclusion of the lower-margin Jamaican
contract manufacturing and consumer distribution businesses, but the Americas unit is still the largest profit
center. Including Jamaica (8% of sales), emerging markets contributed a healthy 29% of sales in 2013.
Campari Revenues and EBIT by Region, 2013
Revenues EBIT
USA 20.5%
Jamaica 8.2%
Brazil 5.4%
Argentina 2.5%
Canada 2.0%
Other America 2.3%
Total Americas 40.9% 34.8%
Revenues EBIT
Italy 24.7% 25.7%
Germany 10.4%
Russia 5.2%
Other Europe 8.6%
Rest of Europe 24.2% 27.6%
Australia 5.0%
Other 5.2%
ROW GTR 10.2% 11.9%
From a product perspective, spirits contributed approximately 73% of CPRs sales in 2013. Camparis
spirits portfolio is diverse including a range of aperitifs, whiskies, rum, and vodka. Wine (still and sparkling)
contributed 15% of sales and is primarily sold in Europe outside Italy. Soft drinks, primarily sold in Italy,
represented another 6% of sales while other sources (other finished products, raw materials, semi-finished
goods, third-party bottling, etc.) accounted for the final 6%.
Campari Revenue by Category, 2013 (1.52 billion)

Camparis top 6 franchises accounted for 53% of sales, with no single franchise responsible for greater
than 10% of sales. These top six franchises are Campari, Aperol, Skyy, Wild Turkey, Lascelles de Mercatos
rum portfolio, and Cinzano. Below, we provide additional detail on Camparis portfolio of brands.

Soft Drinks
Davide Campari-Milano S.p.A.

Campari (10% of 2013 sales): Nicknamed red passion, the bitter liqueur Campari is still produced
according to the secret recipe that dates to 1860 and combines bitter herbs, plants, and fruit with
alcohol and water. Campari is consumed as a traditional aperitif, alone or as an ingredient in classic
cocktails like the Negroni as well as in long drinks. and classic cocktails like the Negroni. Camparis
core markets are Italy, Germany and Brazil, followed by growing United States and Argentina
markets and France. CPR also introduced pre-mixed, ready-to-serve (RTS) Campari Orange
Passion single-serve bottles in 2013.
Campari Soda (4%): The Campari Soda brand is utilized for the Companys original single-serve,
pre-mixed aperitif, combining Campari and carbonated soda in distinctive overturned chalice glass
bottles since 1932. Campari Soda is almost exclusively (~98%) sold in Italy.
Aperol (9%): Aperol is a low alcohol (~11% ABV), light, bittersweet, orange hued liquor infused with
a blend of herbs, roots, and oranges according to the Barbieri brothers original 1919 recipe. Aperol
is a popular aperitif and ingredient in cocktails such as the Aperol Spritz. Campari also sells RTS
Aperol Spritz bottles. Italy is still Aperols core market, followed by Germany and Austria.
SKYY (10%): SKYY is Camparis primary vodka brand. Quadruple distilled, triple filtered and sold in
the distinctive blue tinted bottles, SKYY is the best-selling vodka in the premium category in the
U.S. and number five globally. Established in the U.S. in 1992, SKYY generates 77% of sales in the
U.S., followed by Brazil (4% of brand sales), Canada, and Italy. The Company has expanded its
presence in the flavored vodka category through the SKYY Infusions line featuring 9 flavors.
Wild Turkey (10%): Wild Turkey is a Kentucky bourbon whiskey distiller and bottler with over 150
years of heritage. Wild Turkey generates ~50% of sales from traditional bourbon and rye whiskies
and the other ~50% of sales from its American Honey flavored whiskey and a range of pre-mixed
RTS products including Wild Turkey & Cola and Wild Turkey & Dry RTS drinks. The U.S. remains
Wild Turkeys largest market, followed by Australia (the exclusive home of the RTS line) and Japan.
Cinzano (8%): Cinzano Sparkling Wines (4% of CPR sales) produces a range of dry and sweet
Italian sparkling wines including Asti, Prosecco, Gran Cinzano, and Ros. Cinzano Vermouth (3% of
sales) is the second most popular Italian vermouth brand after Martini and Rosso. Cinzanos core
markets are Russia (Cizanos largest vermouth market), Italy, Germany, and Argentina.
Lascelles deMercato (6%): Campari acquired Jamaicas oldest rum distiller Lascelles deMercato
(LdM) in December 2012. LdMs core brands are the Appleton Estate super premium line of rums,
Appleton Special/White mixing rums, J. Wray & Nephew overproof rums, and Magnum tonic wine.
LdM also holds Jamaican brand rights to Captain Morgan and distributes over 80 third party wine
and spirits brands in Jamaica. LdM generates 50% of sales in Jamaica, another ~30% of sales
spread across North America and the Caribbean, 5% in the U.K. and the remainder across the
Crodino (4%): Crodino is a non-alcoholic, orange colored aperitif composed of herbs, plants, mixed
fruit and sugar. Produced since 1964 (acquired by Campari in 1995) and sold in single-serve glass
bottles, Crodino is Italys most popular non-alcoholic aperitif.
Other Brands: Camparis smaller brands include Frangelico hazelnut liqueur and Carolans Irish
cream liqueur (combined 3%); a portfolio of local Brazilian branded spirits (4%); Mondoro,
Riccadonna, and Odessa sparkling wines (3%); Sella&Mosca and third party still wines (2%);
Lemonsoda Italian soft drinks (2%); Espolon and Cabo Wabo premium tequila (1%); and Glen Grant
and Old Smuggler Scotch whisky (~1%). Smaller brands include Irish Mist whiskey and Sagatiba
cachaa. Campari also holds regional marketing and distribution licenses to a variety of third party
brands (agency brands) including Bowmore, Glen Gariouch, Tullamore Dew and Yamazaki whiskeys.
Shareholders and Management
Campari remains under the control of the Garavoglia family via its family holding company Alicros.
Domenico Garavoglias wife Anna Rosa Magno Garavoglia (age 80) remains the family matriarch, while son
Luca Garvagolia (age 45) has served as chairman of Campari since 1994. Bob Kunze-Concewitz (age 46) has
served as CEO since 2007. Prior to joining Campari as Group Marketing Officer in 2005, Mr. Kunze-Concewitz
served as Corporate Marketing Director, Global Prestige Division of Proctor and Gamble.
Davide Campari-Milano S.p.A.

Successful Acquisition Strategy in Industry with Strong Economies of Scale
Camparis brand portfolio and operational footprint has dramatically expanded over the past 15 years
from a niche Italian aperitif company into a diversified global wine and spirits company. In large part, this
transition has been fueled by acquisitions. Over the past 16 years, Campari has executed 18 acquisitions, which
are collectively responsible for roughly 50% of the Companys growth over that timeframe. While value investors
may be justifiably wary of a M&A-fueled growth strategy, we are comforted by Camparis strong execution track
record as well as favorable industry dynamics. The entire spirits industrywhich historically was highly
fragmentedhas been undergoing an extended period of consolidation over the past 15 years. Economies of
scale are powerful in the industry for multiple reasons including the importance of large-scale, national/global
advertising and marketing in building brand awareness and consumption (A&P expense is typically ~15%-plus
of revenue among global spirits companies); essential route-to-market advantages of a large-scale sales and
distribution network; and the upfront investment requirements to build scalable production facilities as well as
aged liquor inventories. Although concentration is far higher within certain categories, the industry as a whole
still remains highly fragmented despite the rash of M&A activity, offering attractive incremental consolidation
potential. According to IWSR data, the top 25 spirits companies collectively hold less than a 30% share of the
global distilled spirits market by volume.
Campari has a track record indicating the Company is a disciplined acquirer. The Company has focused
on purchasing premium brands whose products are highly regarded and well-placed in attractive
categories/geographies but remain underpenetrated. The Company has also been an opportunistic acquirer of
assets from distressed sellers or forced sellers due to regulatory (antitrust) concerns. In many cases, these
smaller assets are overlooked by Camparis larger multinational peers. This has helped Campari complete
acquisitions at average multiples well below broader industry M&A transactions, which have hovered around
~15x EV/EBITDA in recent years and recently reached as high as 19.5x EBITDA in the case of Suntorys
pending $15.4 billion acquisition of Beam. As illustrated in the following table, Camparis major acquisitions were
transacted at an average ~11.5x EV/EBITDA. Management cites a firm 10% ROI hurdle for any acquisition, and
we believe the Company has achieved significantly higher long-term ROI from several sizable acquisitions.
Campari has demonstrated an ability to generate outsized long-term growth from acquired brands by leveraging
its sales/distribution network and marketing reach to expand in un-penetrated or under-penetrated markets.
Product line expansion has also helped to generate incremental growth in many cases. We would also
emphasize that the Company has maintained a reasonably healthy balance sheet throughout its history as a
public company, with leverage ratios (net debt to EBITDA) ranging from 1x-3x and currently reaching
approximately 2.9x pro forma for the recently-announced Forty Creek acquisition. Below, we detail several of
Camparis transactions as well as the M&A strategy and outlook going forward.
Campari Major Transactions, 2001-2014
Year Acquisition Country Key Brands
Consideration Profit Revenue
Local Currency
Paid Multiple Basis
2014 Forty Creek Distillery Ltd. Canada Forty Creek Canadian Whisky $CAN 185.6 14.5x
FY Mar 2013E
2012 Lascelles deMercado Jamaica
Appleton Estate, Appleton
Special - White, Wray &
Nephew, Coruba rum 11-Dec-12 $US 409 15.0x
TTM June 2012
Carolans, Frangelico,
Irish Mist
from William Grant & Sons Ireland
Carolans, Frangelico,
Irish Mist liqueurs 1-Oct-10 129 7.5x
pro forma 2.6x
Wild Turkey and
American Honey USA
Wild Turkey Bourbon,
American Honey liqueur 29-May-09 $US 581 12.0x
2007 Cabo Wabo Tequila USA Cabo Wabo tequila 2-Jan-08 $US 80.8 11.8x 2007E EBITDA NA
2006 Skyy Spirits LLC USA SKYY vodka 2-Nov-06 $US 62.0 NA Est. EBIT NA
Glen Grant and Old
from Pernod Ricard UK
Glen Grant and Old Smuggler
scotch whisky 15-Mar-06 130 9.0x
2004 direct
contribution profit 3.3x
2005 Skyy Spirits LLC USA SKYY vodka 25-Feb-05 $US 156.6 <10x Est. EBIT NA
2003 Barbero1891 SpA Italy
Aperol and AperolSoda
aperitifs, Mondoro sparkling
wine, Enrico Serafino wines 3-Dec-2003 170 11.8x
FY Feb 2004
2001 Skyy Spirits LLC USA SKYY vodka 15-Jan-02 $US 207.5 11.5x 2002E EBIT 3.7x
Davide Campari-Milano S.p.A.

SKYY was Camparis first major acquisition in the alcoholic beverage industry in the modern era. SKYY
was independently developed by Maurice Kanbar as an ultra-distilled premium vodka and launched in the U.S.
in 1992. Campari acquired SKYY over time in a series of transactions, first acquiring a 9% minority interest in
1998. Campari acquired another 50% in 2001 for $207.5 million or ~11.5x forward pretax profits, while also
obtaining options to purchase the remainder at a reasonable 10x pretax profits, which were exercised in
2005-2006. SKYY recorded doubled-digit annual sales growth in each of its first 12 years, to become a top 5
premium vodka brand in the U.S. by the time it was wholly-owned by Campari. While organic growth rates to
single-digits in recent years, the SKYY franchise still averaged ~5% annual organic sales growth over the past
3 years. We estimate Campari generated an adequate, if not stellar, IRR from the SKYY investments. However,
this overlooks the vital strategic value of the acquisition for Campari: gaining critical mass in the attractive U.S.
spirits market. Campari handed SKYY U.S. distribution rights to its brands in 1999, which helped accelerate
adoption of Campari as well as subsequently-acquired brands.

To receive this report in its entirety or to learn more about Boyars European Focus
please contact Jonathan Boyar at 212-995-8300 ext. 215 or