1. Firm Analysis, Valuation and Recommendation
Prepared for Senior Management of Intueor Consulting Inc.
Firm Analysis, Valuation and Recommendation

2. Agenda I. Industry Overview II. Fundamental Analysis
III. Working Capital
IV. Cash Flow Management
V. Risk Assessment
VI. Valuation
Recommendation
Summary
Wednesday, May 22, 2019

3. I. Industry Overview
Wednesday, May 22, 2019

4. The Industry - Management Consulting
Revenue
Profit
Annual growth (09-14)
wages
Annual growth (14-19)
Business
$153.4bn
$18.7bn
5.1%
$69.5bn
3.3%
590,160
Intueor
Public Sector:
Plan, design & implement
Operate & Maintain
Administration (Human Resource, Finance)
Capital Programs
Transportation/Transit Operations
Administrative Functions
Strategy
Targeted public sector organizations to create and maximize Business Value
Wednesday, May 22, 2019

5. Benchmark Firms Private: Information Management Resources, Inc.
Client Base
Government entities and commercial clients
Services
Streamlining operations
Cost management
Return maximization on technology investment
Location
Aliso Viejo, California
Revenue
$8.2 Million (2013)
18.9% CAGR (3 Years)
Productivity
$117,143/Employee (2013)
70 Employees
Public: Booze Allen Hamilton
Leading consulting firm in public sector
Client Base
U.S Government
Civilian Agencies
Defense and Intelligence
Commercial entities
Energy/Financial/Health
High-tech manufacturing
Specialized services
Services
Management/engineering/IT/Product consulting
Strategic innovation
Financials
Market Capitalization $4.3B
Revenue 2013 $5.33B
Diluted EPS $1.54
Wednesday, May 22, 2019

6. II. Fundamental Analysis
Wednesday, May 22, 2019

7. DuPont Model
The core value of a firm, aside from being societal responsible, is the ability to generate return for its stakeholders.
Operating efficiency
Profit margin
Assets utilization efficiency
Assets turnover
Financial leverage
Equity Multipler
Return on assets
%Return on per dollar equity invested by stakeholders
Wednesday, May 22, 2019

8. DuPont Model
Comments
Profit margin is higher due to tax shield from the corporate structure
Intueor’s higher assets turnover is contributed by steady revenue and low capex
BAH has unusual heavy financial leverage, while Intueor has been stable with its debt level
Accounts payable is the major financial obligation
Wednesday, May 22, 2019

9. Profitability Metrics
EBITDA margin is in-line with net profit margin due to low Capex resulting in minimal depreciation and amortization
Higher ROE is a benefit from financial leverage of high accounts payable (cheap financing from supplier)
Wednesday, May 22, 2019

10. Efficiency Metrics
A/R DSO is 4-6x higher than A/P DSO due to the nature of conducting business with government entities
The cheap financing function of A/P is not utilized according to A/R and A/P as % of Sale
Wednesday, May 22, 2019

11. III. Working Capital Analysis
Wednesday, May 22, 2019

12. Working Capital Structure
Excessive accounts receivable indicates insufficient attention on the collection process
A/P should be utilized to increase cash management efficiency
Wednesday, May 22, 2019

13. Working Capital Schedule
Working capital level is ideal in year
Accounts receivable collection policy alert
Wednesday, May 22, 2019

14. IV. Cash Flow Analysis
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15. Net Income vs. Cash from Operation
In 2012, accounts receivable has decrease and accounts payable has increased, which indicated ideal cash management
has suffered from slow revenue growth (decline in 2014)
Accounts receivable increased $418,035 in 2014
Decrease in current liability totaled $248,655
Wednesday, May 22, 2019

16. V. Risk Analysis
Wednesday, May 22, 2019

17. Dimension of Risk Business Risk Geopolitical Risk Financial Risk
Future revenue growth uncertainty
Arising competition
Geopolitical Risk
New Administration in 2016
Micro-level political risk
Government Regulation
Financial Risk
Interest rate hike
Inadequate cash flow management
Firm-Specific Risk
Recruiting qualified employees
Expansion to private sector
Wednesday, May 22, 2019

18. VI. Valuation
Wednesday, May 22, 2019

19. Valuation Methodology
Assumptions
Based on industry projections (IBIS World)
Additional assumption based on historical performance
EBITDA multiple determined through guideline company data
Perpetuity method discount rates computed without mid-year convention
WACC according to industry figures
Cost of Equity
Beta estimated according to benchmark firm and adjusted to reflect the size of the firm
Risk free rate: 2.4%, market risk premium: 9.3%
Cost of Debt
Cost of debt assumed slightly below 30-year fixed mortgage
Marginal tax rate: 0.00%
Discounted Cash Flow
Multiple metrics: - EV / Revenue
Range of +/- 5% around chosen multiples (based on guideline transactions)
Guideline Transactions
Multiple metrics: - EV / Revenue
Metrics: metrics: - EV / EBITDA
Metrics: metrics :- P/E ttm
Range of +/- 5% around chosen multiples (based on guideline companies)
Guideline Public Companies
Wednesday, May 22, 2019

20. Intueor – Financial Data
Comments
Revenue has declined in 2014 because of unexpected events, future growth is promising
Revenue growth is conservatively forcasted
EBITDA is closely in-line with unlevered cash flow because of low CapEx
Wednesday, May 22, 2019

21. Intueor – Valuation Comments
EBITDA multiple
Perpetuity growth
WACC
Enterprise value
11.0x
1.5%
9.7%
$7,333.2 – $8,105.1
GPCM (P/E ttm) exceeds other methods because of taxation lowered their earning in comparison to Intueor
Target price range for acquisition is valued at $8.0 ~ 9.0 million
Comments
Wednesday, May 22, 2019

22. VII. Recommendation
Wednesday, May 22, 2019

23. Current Employee & Recruiting Accounts Receivable Collection
Recommendation
Revenue Growth
Current Employee & Recruiting
Expansion into private sector
Marketing
Raise service price
Further differentiation
Employee training for new business
Recruiting new employee to reduce outsourcing cost and build intangible value
Capital Investment
Accounts Receivable Collection
Increase financial leverage to purchase a office space
Tax treatment
Strictly enforce contract terms
Tighten credit policy to public sector clients
Differentiation Public vs. Private
Internal Policy
Long Term Goal
Travel expense and G&A has increase 1300% and 25% respectively over the past two years
Enforcing reimbursement policy
Rigorous spending guideline
The next generation
IPO
Merger & Acquisition
Wednesday, May 22, 2019

24. Contact Details Runhao Zeng (Phillip) Jiachen Zong (Jason)
Address:
24255 Pacific Coast Highway, Malibu, CA 90263
Tel: (213)
(213)
Runhao Zeng (Phillip)
(323)
Jiachen Zong (Jason)
(626)
Xi Chen (Christina)
(213)
Raghu Prasad Kandaswamy
(818)
Mingyan Yang (Eva)
Wednesday, May 22, 2019

25. Appendices
Wednesday, May 22, 2019

26. WACC Calculation
Back
Wednesday, May 22, 2019

27. WACC Sensitivity
Wednesday, May 22, 2019

28. DCF Calculation
Wednesday, May 22, 2019

29. Valuation
Wednesday, May 22, 2019

30. Multiples
Wednesday, May 22, 2019

31. Working Capital Schedule
Wednesday, May 22, 2019