Security

Comparables Analysis

GNC is compared to some peers of relative similar size with similar drivers of future revenue growth. Those competitors include Vitamin Shoppe (VSI), Nu Skin Enterprises (NUS), Sally Beauty Holdings (SBH) and Herbalife (HFL) based on market capitalization, operation metrics, profitability and capital structure.

The three multiples we include are based on forward looking (2012) EV/EBIT, EV/EBITDA and P/E multiples. We assign weights of 40%, 40% and 20% to each of them respectively. The multiples target price is calculated based on the average forecasted EV, EBIT and Earning Per share of GNC.

The multiples target price is $41.25

DCF Model

After the regression analysis, we found the main drivers of GNC revenue growth are the aging population and number of people without health insurance. We assumed that the growth of aging population is a triangle distribution with min of -0.5%, mean of 0.65% and max of 1.5%. The growth rate of people without health insurance also follows a triangle distribution with min of –2.67%, mean of 2.05% and max of 9.38% from 2012 to 2016.

By using monte-carlo simulation, we forecast the revenue growth of GNC from 2012 to 2016, COGS and other operating expenses all as percentages of revenue. The assumptions for the DCF model and WACC calculation is shown in the table below:

Assumption | 　 |

Tax rate | 35% |

Risk Free Rate | 1.97% |

Beta | 0.74 |

Market Risk Premium | 7% |

Terminal Growth Rate | 2% |

Based on the DCF calculation, the Monte-Carlo DCF target price is $51, and we assign 50% to each model and the final target price is $46.12.

Dear Margaret:

I'm so excited to hear from you and happy to know you are having a lot of fun these days! I am flying back to Chengdu on Christmas Eve, and this is my first time come back home since I came to Boston in the summer of 2011.

I still miss my final year of undergraduate study in Glasgow; I really saw and learnt a lot from the people I met. I...