Centene Cash Flow Projections

Revenue
Growth
EBIT

margin
tax rate
Less taxes EBIT*(1-t)

Historical
2010

6632.00

967.00
0.1458082027
0.1035
866.9155

Adjustments for Non-Cash Expenses

D&A
Restructuring, impairment and other charges
Loss on retirement of debt
Stock compensation charges
Equity in earnings of affiliated companies
Dividends received from affiliated companies
Deferred tax provision
Restructuring payments
Employee benefit payments (in excess of) less than expense
Gains on translated earnings contracts
Unrealized translation losses on transactions
Contingent consideration fair value adjustment
Total

margin
CAPEX
WC
Changess in WC
Free cash flow

854

854
0.1287696019
-1007
-0.1518395657
6873

713.9155

CNOOC Sensitivity Table Valuation

Terminal Growth

Exit Multiple

2011

2012

2013

2014

Projected
2015

7890.00
8012.00
7819.00
9715.00 $ 10,743.69
0.18968637 0.01546261 -0.024088867 0.242486251
10.6%
1193.00
1179.00
1371.00
1931.00 1758.2549438
0.15120406 0.14715427 0.175342115 0.198764797
0.16
0.1888
0.172
0.207
0.307
35.00%
967.7616
976.212
1087.203
1338.183 1142.8657135

957

997
133
26
70
-810
1,090
18
-15
178
241

1002
67

1200
71

54
-547
630
189
-35
52
-435
96

58
-266
1,704
612
-39
-52
-1,369
431

957
1928
1073
2350
1,869.03
0.12129278 0.24063904 0.137229825 0.241893978 0.1739650444
-2432
-1801
-1019
-1076
6580
-293

7739
1159

7145
-594

7914
769

-800.2384

2262.212

547.203

3381.183

sitivity Table Valuation

WACC

0.5%
1.0%
1.5%
2.0%
2.5%
3.0%

7.0%

7.5%

8.2%

9.0%

$72.37
$76.81
$82.05
$88.35
$96.04
$105.65

$68.58
$72.40
$76.86
$82.13
$88.45
$96.18

$64.07
$67.22
$70.85
$75.06
$80.02
$85.92

$59.77
$62.36
$65.30
$68.66
$72.53
$77.05

WACC

14.0x
17.0x
20.0x
23.0x
27.0x

7.0%

7.5%

8.2%

9.0%

$48.12
$58.43
$68.74
$79.05
$92.80

$47.23
$57.35
$67.47
$77.59
$91.08

$46.02
$55.88
$65.74
$75.60
$88.75

$44.68
$54.26
$63.83
$73.41
$86.17

Centene - DCF Assumptions & Ou

2016

2017

2018

2019

$ 11,882.52 $ 13,142.07 $ 14,535.13 $ 16,075.85 Effective Tax Rate:

10.6%
10.6%
10.6%
10.6%
Discount Rate (WACC):

1944.629968 2150.760744 2378.741383 2630.88797

0.16
0.16
0.16
0.16 Perpetual Growth Method
35.00%
35.00%
35.00%
35.00%
1264.009479 1397.994484 1546.181899 1710.077181 Terminal Growth Rate:
Terminal Value:
PV of Terminal Value:
Sum of PV of Cash Flows:
Enterprise Value:

Equity Value:
Implied Share Price:
Exit Multiple Method:

2,067.14
2,286.26
2,528.60
2,796.64 Exit Multiple:
0.173965044 0.173965044 0.173965044 0.173965044 Exit Multiple Value:
Dicsounted Value:

Enterprise Value:
Equity Value:
Implied Share Price
WACC Calculation:
Percentage Equity:
Percentage Debt:
Beta:
Risk-Free Rate:
Market Return:
Cost of Debt:

WACC:

10.0%

$55.35
$57.43
$59.76
$62.37
$65.34
$68.73

10.0%

$43.08
$52.31
$61.54
$70.77
$83.08

tene - DCF Assumptions & Output

ctive Tax Rate:

39.0%

Industry Average is 3.3percent

ount Rate (WACC):

10.0%

petual Growth Method

minal Growth Rate:

minal Value:

f Terminal Value:
of PV of Cash Flows:

rprise Value:

Cash:
Debt:

ied Share Price:

3.0%
1,640
881
759
$6.43

Multiple Method:
27.0x

Multiple Value:

ounted Value:

erprise Value:

ity Value:

lied Share Price

CC Calculation:
entage Equity:
entage Debt:

-Free Rate:
ket Return:

0
$0.00

66.4%
33.6%
1.12
2.7%
9.0%
5.0%

10.0%

O43*O39+(O41+O40*(O42-O41))*O38

is 3.3percent

Revenue
Premium
Service
Premiu
Premium t

4,192
92
4,284
164

4,948
104
5,052
159

7,569
113
7,682
428

10,153
373
10,526
337

14,198
1,469
15,667
893

Centene Income Statement

Revenue
Premium
Service
Premium and Service Revenues
Premium tax
Total Revenues
Operatin Expenses
Medical Costs
Cost of Services
G&A expenses
Premium tax expense
Health insurer fee expense
Impairment loss
Total Operating Expenses
Earnings From Operations(EBITDA)
Other Income(expense)
Investment and other income
Debt extinguishment costs
Interest expense
Earnings from continuing operations, before income tax exp
Income tax expense (benefit)
Earnings from continuing operations, net of income tax expense
Discontinued operations
Net earnings (loss)
(Earnings) loss attributable to noncontrolling interests
Net earnings attributable to Centene

Historical
2010

2011

2012

2013

2014

$ 4,448.00 $ 5,211.00 $ 8,110.00 $ 10,863.00 $ 16,560.00

4,192
4,948
7,569
10,153
14,198
92
104
113
373
1,469
4,284
5,052
7,682
10,526
15,667
164
159
428
337
893
4,448
5,211
8,110
10,863
16,560
3,584
64
478
165
-

4,191
78
578
161
5,008
203

15

13
-8
-20
0.111111111
188
71
117
-9
108
3
111

154
60
94
4
98
-3
95

8,995
327
931
333

28
8,002
108

10,586
277

12,678
1,280
1,314
698
126
16,096
464

35

19

28

4,291
157

-18

6,781
88
677
428

-20
0
123
47
76
-87
-11
13
2

-27
-35
0.35 0.296296296
269
457
107
196
162
261
4
3
166
264
-1
7
165
271

Projected
2015

2016

2017

2018

2019

Debt
Senior notes
senior notes
interest rate swaps
revolving credit agreement
Mortgage notes payable
total

Amount

rate
425
300
11
75
70

proportion
0.0575 0.48240636
0.0475 0.34052213
0.0306 0.01248581
0.0191 0.08513053
0.0514 0.07945516

881

Cost of Debt

BETA
Google
Reutars
Nasdaq
yahoo
mornign star
the street

Equity Value

0.05000522

1.13
1.12
0.67
0.44
0.44
0.89

1,744 0.66438095

Other Stuff
YoY Revenue Growth Rate
Centene

Centene

Revenue
Premium
Service
Premium and Service
Premium tax
Total Revenues
Operatin Expenses
Medical Costs
Cost of Services
G&A expenses

2010
Centene Revenue
$
Growth Rate
Centene
WCG($4B)
MOH($3B)
UNT($1.5B)
MGLN($1.6B)
UAM($770M)
HNT ($4.3B)
UnitedHealth($107B)
Aetna($35B)
Cigna($31B)
Rough Average
Centene

2011
4.40 $

Total Revenues
Revenue Growth Rate

4448

5211
0.17153777

4,192
92
4,284
164
4,448

4,948
104
5,052
159
5,211

7,569
113
7,682
428
8,110

3,584
64
478

4,191
78
578

6,781
88
677

5.20
17%
12%
16%
9%
-4%
-62%
-12%
8%
-1%
2%
-1%
17%

Premium Revenue
Medical Costs
Medical Loss Ratio

2010
$
$

2011
2012
4,192.00 $ 4,948.00 $ 7,569.00
3,584.00 $ 4,191.00 $ 6,781.00
85%
85%
90%

2012
$

2013
8.10 $

2014
10.90 $ 16.50

56%
21%
26%
37%
-8%
-4%
-5%
9%
37%
32%
20%
56%

34%
52%
28%
35%
9%
46%
2% crash
4%
6%
-1%
-5%
-2%
27%
11%
7%
29%
22%
11%
8%
13%
22%
34%
52%

8110
0.5563231625

10863
16560
0.33945746 0.524441
0.28
0.35

10,153
373
10,526
337
10,863

14,198
1,469
15,667
893
16,560

8,995
327
931

12,678
1,280
1,314

2010
Centene Re $ 4,448.00
Earnings Growth Rate
Centene
Molina
WCG
UnitedHealth
Aetna
Cigna

Rough Average
Centene

2013
2,014
$ 10,153.00 $ 14,198.00
$
8,995.00 $ 12,678.00
89%
89%

2014 Q1
2014 Q2
Centene EPS
0.29
0.4
WCG
MOH

2011
2012
2013
2014
$ 5,211.00 $ 8,110.00 $ 10,863.00 $ 16,560.00
17%
16%
12%
8%
-1%
-5%

-11000%
26%
21%
9%
37%
21%

8800%
88%
28%
11%
29%
-12%

64%
63%
35%
7%
22%
41%

8%
17%

-1814%
56%

1491%
34%

39%
52%

http://amigobulls.com/stocks/UNH/income-statement/annual

2014 Q3

2014 Q4
0.67 . 87

Current Price Price Target

0.29
Centene
WCG
MOH

2014 P/E
52.7
49.2

2015 Forward P/E

27x
27x

2010
2011
Revenue
$ 4,448.00 $ 5,211.00
Premium
4,192
4,948
Service
92
104
Premium and Service Revenues
4,284
5,052
Premium tax
164
159
EPS

2012
2013
2014
$ 8,110.00 $ 10,863.00 $ 16,560.00
7,569
10,153
14,198
113
373
1,469
7,682
10,526
15,667
428
337
893