Applied Portfolio Management Final Presentation

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Applied Portfolio ManagementFinal Presentation
Group 3 Matt Brunner Scott Ferguson Trevor
Nohe Dieter Schrader
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Investment Thesis

• Sustainable double-digit revenue growth for the
  next few years along with a steady increase in
  operating margins.
• Non-GAAP adjustment for the net cost of
  commodities sold
• Integrated platform of services and products for
  its customers.

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Overview

• FCStone Group, Inc. (NasdaqGS FCSX)
• Headquarted Des Moines, Iowa
• Provides commodity risk management and trading
  services
• March 16 IPO

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Business Segments

• Commodity and Risk Management Services
• 68 of income
• 21.9M in income 2006, up 95.5
• Access to products
• OTC trading and exchange-trade
• Consultation
• IRMP
• Clearing and Execution Services
• Futures Commissions Merchant (FCM)
• Professional floor trader market share

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Business Segment (contd.)

• Financial Services
• FCStone Financial, LLC
• Finance commercial grain-related companies
• FCStone Merchant Services, LLC
• Finance other commodity driven companies
• Green Diesel, LLC
• Grain Merchandising
• Using industry knowledge to match buyers and
  sellers of grains

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Risks
Competition -Smaller companies focused on
personalized service -Large firms with greater
execution capabilities and market presence -FC
Stone educates customers about advantages of risk
management -Revenues realized less
volatile Commodity Price Risk -CRM and Clearing
and Execution benefit from higher volatility and
higher commodity prices -Subsidization -Ethanol
Driven corn production prices and profit
margin -Investment in Green Diesel LLC
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Risks
Interest and Foreign Exchange Rate
Risk -Financing segment provides loans against
the physical grain inventories. -Use of
sale/repurchase agreements -Higher short-term
interest rates affect interest earned on funds
invested and interest expense -FX risk not
material Liquidity Risk -498.8 million
available under current credit agreements, 217.6
outstanding -34.7 million net increase in cash
and cash equivalents -Lines of credit and annual
cash flows from operations sufficient to support
additional growth
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Relative Valuation
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DCF Valuation

• Net of Cost of Commodities Sold (Non-GAAP
  adjustment)
• High Growth Rates
• Shares Outstanding
• WACC

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BUY FCStone, Inc.
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