J.P.Morgan Investment Banking Pitch Book
PRELIMINARY VALUATION ANALYSIS
Preliminary valuation summary
Equity value per share
52-week trading range
Analyst price targets
Publicly-traded comparables
Precedent transactions
Sum of the parts
Discounted cash flow analysis
Strategic buyer/
break-even accretion
LBO analysis
$52.49
$35
Current price:
$67.37
$71.00
$55
$74.00
I
$70.28
I
$80.00
I
↓
I
1
$77.50
$87.00
$81.00
$92.50
$84.00
$91.00
$75
$95.00
$88.50
$95
$102.50
$109.50
$113.00
$115
$135
Valuation comments
■ Current market values do not
reflect future value potential of
the business
■ Value of non-cash flow
generating assets (i.e.
undeveloped land) is not
reflected in valuation metrics
other than sum of the parts
EBITDA multiple approach is less
relevant in valuing KZL due to
low corporate tax rate and
significant JV equity earnings
contribution
Lack of good comparable
precedent transactions
■ DCF, LBO, and sum of the parts
metrics best reflect future
growth of company
Note: Valuation based on equity analyst projections and JPMorgan assumptions; Current price and 52-week trading range are as of 2/16/06; Publicly-traded comps valuation range based on 22-25x 2006E
EPS of $3.36; Precedent transactions range based on 11.5-13.5x 2006E EBITDA pro forma for 35% tax impact ($330mm); Sum of the parts detail in appendix; Discounted cash flow range based on 9-10%
WACC, 3% perpetuity growth rate, detail in appendix; Strategic buyer range includes MGM Mirage, Harrah's, Las Vegas Sands, and Wynn Resorts based on ability to pay at breakeven accretion/dilution
with full synergies; LBO analysis range based on 20-25% required return, 2.75-3.25 % exit perpe tuity growth rate on $397mm of terminal free cash flow in 2011, 70% pro forma debt to total
capitalization assumption; does not include any tax synergies related to Kerzner's U.S. NOLS
JPMorgan
KERZNER INTERNATIONAL
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