Company Product Market Competitors DCF Snapshot Overview Analysis & Risks Analysis Company Snapshot Company Introduction Sub-brand introduction

Est. 1966 Est. 1991 Acquired 1987 Employees & Revenue Quick insights about the overall operation

Number of Employees: 18,600 / Outside US:11,400. Stock Price Stock Price development over time

From this year

Stock Price: $ 290.73 Market Cap: $ 289 bn 06.March 2020 Shareholder Structure Shareholder Breakdown and Weighting Company Outlook Strategy to be followed Company Outlook Technology improvement through M&A

• Mastercard Track Business Payment Service™ • Commercial Cards

• False declines • Fraud prevention Overview Technology improvement through M&A

• Anti-money laundering • Credit risk prediction • Cybersecurity • Fraud risk management

• Biometric Authentication Product Overview Product overview Main & secondary businesses

Processing & Transaction Fees Secondary Businesses • Domestic and international fee business • Consists of consulting, cyber & • to payment network intelligence, data analytics • Transaction processing fee business • Pillar grew by 24% in 2019 • charging fees • Some 16% of total revenue • Average fee is btw. 2 - 3% • Core products are consumer credit/debit, prepaid, commercial payment products • some 84% of total revenue Strategy Prospective success

Growth Strategy Product Diversification • Focus on growing core • Building new businesses apart business globally from core business by • Entering new markets to acquisition over organic growth increase acceptance and • Providing new services such as strengthen competitive ability data analytics & consulting

Customer Diversification • Working with new customers, e.g. governments, financial technology companies • Broadening financial inclusion for the unbanked & underbanked History Acquisition History

• Acquired in the 4th quarter 2019 • Expected to be acquired by the first • Develops mobile application software quarter of 2020 • Enhanced cybersecurity capabilities • Offers solutions for , insurance, healthcare, energy and defense industries

• Global payments company with significant cross-border network reach • Builds on strength in payments and drives improved transparency and certainty in cross-border transactions Market Analysis Electronic Payment Processing Market Market Analysis

• Mastercard is present within card networks and electronic payment processing, and non-card payments • Mastercard places third in terms of revenue size Electronic Payment Processing Market Focus Top 3 Companies in Payment Processing

Mastercard VISA Electronic Payment Processing Market Focus Top 3 Companies in Payment Processing

Mastercard VISA American Express Electronic Payment Processing Market Growth CAGR

Emerging economies

Latin-America

North-America

APAC

EMEA

0,00% 5,00% 10,00% 15,00% 20,00%

• Growth of emerging economies within this sector up 22% over the last 5 years • this growth will remain well above 14% CAGR for the next 5 years, well above GDP growth • Cross-border volume growth of 18% YOY Payment Industry Trends Growth of the middle class and spending patterns

• Growth of the global middle class will reach 5.3 billion by 2030 • 88% of additional middle class will be Asian • China and India will represent over 54.3% of the global middle class by 2030.

• Middle class spending is expected to grow from about $37 trillion in 2017 to $64 trillion by 2030

• Active users within the online transaction population within emerging markets will increase by at least 15% over the next 10 years. Payment Industry Trends

• Contactless penetration is set to bring mobile in-store payments to prominence

• Surging e-commerce will eat away at in- store payments' share of overall retail

• New payment tools as voice assistant, wearables and more will increasingly grown in consumer popularity

• Mobile P2P payments, digital remittances, and digital business payments will have an impact on the payment ecosystem Cyber Security Trends

Demand for cyber security increases with demand for online transactions

• Security breaches have increased by 11% since 2018 and 67% since 2014

• 83% of enterprise workloads will move to the cloud by the year 2020

• Financial and Manufacturing services have the highest percent of exposed sensitive files at 21%

• The industry takes in the highest cost from cybercrime at an average of $18.3 million per company surveyed Competitors and Risks Peer Group Analysis Used to assess Mastercard's current performance

MasterCard Visa American Express Discover

Market Cap. (06.03.2020) $ 289 bn $ 389 bn $ 93.5 bn $ 20.5 bn

Revenue (2019) $ 16.88 bn $ 22.97 bn $ 47.02 bn $ 13.99 bn

Transactions (2018) 90.2 bn 165.3 bn 8.3 bn 2.8 bn

Employees (2019) ca. 18 600 ca. 19 500 ca. 59 000 ca. 17 200 Key Performance Overview

Sales Growth[2019] Net margin [2019]

13% 12% 64,2%

48%

7%

25,6%

14,3%

Mastercard Visa American Express Mastercard Visa American Express Discover Financial Incorporated (MA) Services -2% Incorporated (MA) Services P/S and P/E ratios To determine if Mastercard is over/undervalued

Price to sales [2019] Price to earnings [2019] 37,6 18,1 17,0 33,5

15,6

9,3 2,2 2,0

Mastercard Visa American Express Discover Financial Mastercard Visa American Express Discover Financial Incorporated (MA) Services Incorporated (MA) Services Other Ratios

Debt-to-equity Ratio [2019] Current Ratio [2019] 279% 1,84 228% 1,56 1,42 1,3 144%

48,23%

Mastercard Visa American Express Discover Financial Mastercard Visa American Express Discover Financial Incorporated (MA) Services Incorporated (MA) Services Growth Indicators

EBITDA Growth [2019] EPS Growth [2019] 17,1% 42%

13%

20% 7% 17%

0% 1%

Mastercard Visa American Express Discover Financial Mastercard A Visa A American Express Discover Financial Incorporated (MA) Services Services Dividend Yield

Dividend Yield [2019]

3,0%

1,7%

0,6% 0,7%

Mastercard A Visa A American Express Discover Financial Services Risk Assessment

ER 2 IR 1 ER 3 IR 2 ER 1 ER 4 IR 4 IR 3

ER 1: Recession IR 1: Information/ Cyber Security

ER 2: Data/Privacy Regulation IR 2: Competition/ Pricing Pressure

ER 3: Financial Regulation IR 3: Debt

ER 4: Currency Fluctuations IR 4: Dependency on large customers DCF Analysis Company valuation (Free Cash Flows) Revenue to Free Cash Flows

Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Revenue 9.667 10.776 12.497 14.950 16.883 18.909 21.178 23.084 24.931 26.676 Growth rate (%) 11% 16% 20% 13% 12% 12% 9% 8% 7% COGS - - - - - 0 0 0 0 0 COGS % of Sales 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Gross profit 9.667 10.776 12.497 14.950 16.883 18.909 21.178 23.084 24.931 26.676 Gross margin (%) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% SG&A 4.295 4.519 5.182 6.134 6.559 7.719 8.683 9.464 10.222 10.937 SG&A % of sales 44% 42% 41% 41% 39% 41% 41% 41% 41% 41% EBITDA 5.372 6.257 7.315 8.816 10.324 11.190 12.495 13.620 14.709 15.739 EBITDA margin (%) 56% 58% 59% 59% 61% 59% 59% 59% 59% 59% Less: Depreciation 366 373 436 459 621 645 723 788 851 910 Depreciation % of revenue 4% 3% 3% 3% 4% 3% 3% 3% 3% 3% EBIT 5.006 5.884 6.879 8.357 9.703 10.545 11.772 12.832 13.858 14.829 EBIT margin (%) 52% 55% 55% 56% 57% 56% 56% 56% 56% 56% Taxes 951 1.118 1.307 1.588 1.844 2.004 2.237 2.438 2.633 2.817 EBIAT (Earnings before interest after tax) 4.055 4.766 5.572 6.769 7.859 8.541 9.536 10.394 11.225 12.011

Plus: Depreciation & amortization 366 373 436 459 621 645 723 788 851 910 Less: Capital expenditures 342 382 423 504 728 698 781 852 920 984 Less: Change in net working capital - 470 577 1.803 - 15 1.376 798 880 1.125 1.313 Unlevered Free Cash Flow 4.763 5.991 7.008 9.535 9.193 11.261 11.838 12.913 14.121 15.219 FCF to sales (%) 49% 56% 56% 64% 54% 60% 56% 56% 57% 57% Company valuation (WACC) Anything important to mention for the WACC

Total capitalization Comparable Companies Unlevered Beta Total debt 8633 Predicted Market Market Debt/ Marginal Unlevered Company Levered Beta Value of Debt Value of Equity Equity Tax Rate Beta Shareholder equity (Market Cap) 290.831 Visa 1 16729 413050 4,1% 19% 0,968175366 Total capitalization 299463,54 American Express 1,28 58.420,0 92.011,6 63,5% 15% 0,830655447 Discover Financial Services 1,21 20930 20930 100,0% 21% 0,675977654 Target Capital structure Debt-to-total capitalization 3% Equity-to-total capitalization 97% Mean 55,8% 0,82 Median 63,5% 0,83 Cost of debt Interest expense 4% Company Relevered Beta Tax rate 19% Mean Target Target After-tax cost of debt 2,9% Unlevered Debt/ Marginal Relevered Beta Equity Tax rate Beta Cost of equity Relevered Beta 0,824936155 4% 18% 0,851994061 Risk free rate 1,56%

Market risk premium 5,20% WACC Sensitivity Analysis (Equity Risk) Levered beta 0,85 Equity Risk Premium Size premium 5,90% 4% 5% 6% 7% 8% 1,252 6,44% 7,66% 8,87% 10,09% 11,30% Cost of Equity 5,99% 1,052 5,67% 6,69% 7,71% 8,73% 9,75% 0,852 4,90% 5,72% 6,55% 7,38% 8,20% Beta WACC 5,90% 0,652 4,12% 4,75% 5,39% 6,02% 6,65% 0,452 3,35% 3,79% 4,23% 4,66% 5,10% Company valuation (Share price calculation)

WACC 5,90% Discount period 1 2 3 4 5 Discount factor 0,94 0,89 0,84 0,80 0,75 Present Value of Free Cash Flow 10.634 10.556 10.874 11.229 11.428

Terminal value (TV) 398.380 Perpetual growth rate 2% TV discount factor 0,75 Present value TV 299.150 Implied EV/EBITDA Present value Free cash flow projection 54.721 Enterprise value 373.169 TV % Total value 85% EBITDA (LTM) 8.816 Enterprise value 353.871 EV/EBITDA 42,33x Less: Total debt - 8.633 Less: Capital Leases - 656 : Cash and Cash equivalents 7.572 Less: Noncontrolling interest - 98 Less: Preferred securities Plus: LT Investments 914 Terminal growth rate Less: Pensions - - 1,6% 1,8% 2,0% 2,2% 2,4% 5% 415 439 467 498 534 Equity value 352.970 Shares outstanding 1.022 5,4% 360 377 397 419 444 Implied share price 345 WACC 6% 317 330 345 361 380

Current share price 273 6,4% 283 294 305 318 331 Implied upside 27% 7% 256 264 273 283 294

Implied EV/EBITDA Enterprise value 353.871 EBITDA (LTM) 8.816 EV/EBITDA 40,14x Analyst Consensus 25% proposed upside mean from analysts Company Summarized value proposition

Key takeaways

Business • Diversification • Acquisitions in future Final Recommendation (27% upside) Strategy orientated markets 400,00 350,00 300,00 Industry • Data Security • “War on Cash” Outlook 250,00 • Emerging Markets 200,00 150,00 • Susceptible to recession 100,00 Risks • Increasing Data Threat 50,00 • (well prepared) 0,00 2015 2016 2017 2018 2019 2020 2021 2022

Price Implied Upside Intrinsic • Low Risk, Safe Return Valuation • Implied share price $345