MII Pitch - FungPoindexterShoko

American Tower Corporation

Michigan Interactive Investments 2016 Stock Pitch Competition

Julian Fung Michael Poindexter David Shoko

Compelling Valuation Strong Growth Drivers Market leader in Tower Industry

Robust Business Model

Highlights

American Tower is Poised for Steady Long-Term Growth

Introduction

Company Overview

Industry Overview

Investment Thesis Valuation Summary

BUYCurrent Price:

$112.63(As of 9/28/2016)

Target Price:$132.58Upside:+17.7%

• One of largest Wireless Communications and Broadcast Operator

• Over 144,000 towers globally

• 700+ Distributed Antenna Services (DAS)

• Business segments:• Global rental & management • Network development services

Business Description

Introduction

Company Overview

Industry Overview


Business Description

Introduction

Company Overview

Industry Overview


AT&T (U.S.) 17%

Verizon 15%

Sprint 10%

T-Mobile 8%

Other U.S.(2) 8%

International Tenant

Revenue 28%

International Pass-through Revenue

13%

Property Revenue by Customer (1)

16%

9%

Total Revenue by Segment

US Latin America Asia EMEA

17% 58%

Business Model

• Recurring revenue streams• Non-cancellable • Initial 10 year contract;

5 year renewals

• Low variable cost • Accommodating

additional tenants

Introduction

Company Overview

Industry Overview


$9

$10

$14

$19

$20

$23

$27

$32

AMT Non-CancellableLease Revenue

($ in Billions, As of Period End)

$30

3%

13%

24%

8%

17%

25%

13%

21%

32%

12%

23%

33%

0%5%10%15%20%25%30%35%40%

One Tenant Two Tenants Three Tenants

Sample Return on Investments(2)

Domestic Market Africa IndiaLatAm

American Tower History

Introduction

Company Overview

Industry Overview


American Tower Today

Introduction

Company Overview

Industry Overview


Industry OverviewPorter’s Five Forces

Degree of Rivalry – MODERATELY HIGH

New Entrants – LOW

Substitutes – LOW

Supplier Power – LOW

Buyer Power - MODERATE

Introduction

Company Overview

Industry Overview


Degree of Rivalry

New Entrants

SubstitutesSupplier Power

Buyer Power

0

5

Industry OverviewSWOT Analysis

Introduction

Company Overview

Industry Overview


•

Strengths Weaknesses• Global presence

• Recurring revenue model

• Large asset base

• Client base

• Inability to control demand

Opportunities Threats• Smartphone and data

demand

• 5G

• Increasing telecom investments

• Spectrum availability

• Mergers

• New technologies could impact demand

Growth/Demand Drivers• Increasing mobile data traffic:

• 3G/4G deployment & enhancements• 50% market share through 2025

• 5G roadmap

• Expanding global presence:• Verizon acquisition• India tower acquisition

• September REIT split$1,426

$4,680

07 08 09 10 11 12 13 14 15

Total Property Revenue($ in Millions)

Introduction

Company Overview

Industry Overview


Growth/Demand Drivers• Consistent U.S. demand

• 13% CAGR• Low churn rate (1-2%)

• Strong international growth• 24% CAGR

19,606

40,089

$890 $965 $1,041$1,178

$1,314$1,497

$1,680

$1,999

2007 2008 2009 2010 2011 2012 2013 2014 2015

U.S. Property Operating Profit($ in Millions)Operating Profit Tower Count

~2.4 Tenants per Tower ~2.2 Tenants per Tower

$2,340

International Property Operating Profit ($ in Millions)

Operating Profit Tower Count

$140 $166 $172$217

$338

$705

$574

$453

$805

2007 2008 2009 2010 2011 2012 2013 2014 2015

3,201

60,042

~1.8 Tenants per Tower ~1.6 Tenants per Tower

Introduction

Company Overview

Industry Overview


Dividends

Introduction

Company Overview

Industry Overview


Quarter Common Stock

Q2 2016 $0.53Q1 2016 $0.51Q4 2015 $0.49Q3 2015 $0.46Q2 2015 $0.44Q1 2015 $0.42

Investments Thesis

• Market leader in the tower industry space

• Acquisitions create greater economies of scale

• Increase deployment 3G/4G networks across the world

• Introduction of 5G network is a huge growth catalyst

• Healthy cash flow provides room for dividend growth

Introduction

Company Overview

Industry Overview


Investment Risks

• A network carrier merger would affect revenues

• Reduction in CapEx spending by carriers

• Acquisition integration risk

• Rise in interest rates adversely affects the REIT

sector

• Loss in Credit RatingIntroduction

Company Overview

Industry Overview


Valuation

Introduction

Company Overview

Industry Overview


DCF$131.16

50%

P/FFOMultiple $133.98

25%

Target Price:

$132.58

• Discounted Cash Flow (50%):• Net Operating

Income(NOI)• Free Cash Flow

Relative Multiple Valuation (50%):

• P/FFO* (25%)• EV/EBITDA (25%)

Use of Funds From Operations (FFO) - Depreciation not a business cost for REITs*

EV/EBITDA

Multiple $134.03

25%

Discounted Cash Flow Valuation

Assumptions:

• Projected High Growth Rate of 8% • Terminal growth of 4%

Introduction

Company Overview

Industry Overview


WACC:6.18%

DCF (50%): $131.16

Relative Valuation

Assumptions (next year):

• Adjusted FFO: $6.45 (High CapEx by AMT)• FFO: $3.30

Introduction

Company Overview

Industry Overview


Multiples (50%): $134.01

Compelling Valuation Strong Growth Drivers Market leader in Tower Industry

Robust Business Model

Highlights

BUY

Introduction

Company Overview

Industry Overview


American Tower is Poised for Steady Long-Term Growth

Current Price:$112.63

(As of 9/28/2016)

Target Price:$132.58Upside:+17.7%

MII Pitch - FungPoindexterShoko

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