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Bentonville, Arkansas Retail October 28, 2015 Exchange: NYSE Ticker: WMT Prince Iype Brendon Rossmeisl Senior Analyst Prince

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Bentonville, Arkansas Retail October 28, 2015 Exchange: NYSE Ticker: WMT Prince Iype Brendon Rossmeisl Senior Analyst Prince.Iype@orangevaluefund.com Junior Analyst Brendon.Rossmeisl@orangevaluefund.com Equity Research Report Company Description: Wal-Mart Stores, Inc. operates discount stores, supercenters and neighborhood markets. The company operates in 3 segments: Walmart US, Walmart International, and Sam’s Club. The company’s discount stores offer merchandise such as apparel, housewares small appliances, electronics, and hardware. The company also provides financial services and related products, including money orders, prepaid cards, wire transfers, money transfers, check cashing, and bill payment. In addition, it offers brand name merchandise, including hard goods, soft goods, and selected private-label items, such as Member’s Mark and its own proprietary brands, such as Daily Chef and Simply Right. Walmart markets offer full line supermarkets as well as a limited assortment of merchandise. Walmart operates in the hypermarkets and super center industry. As of September 23, 2015, it operated 11,532 stores under 65 banners in 28 countries; and e-commerce Websites in 11 countries. The company was founded in 1945. Compelling reasons it may make a good investment: ? Market leader with significant retail market share ? Cost leader compared to competitors ? Focus on growth in e-commerce ? Economies of scale globally ? AA Credit Rating ? Highest dividend yield among competitors ? Dividend is stable at roughly 3.0% ? During the recession its P/E went as low as 12x and it is currently below that level ? Any slow-down globally will force consumers to look into cheaper products ? Presence in emerging markets (China & India) ? Lowest P/B compared to its competitors ? Lowest P/E compared to its competitors ? Lowest P/Sales compared to its competitors ? Opened 316 stores last year and closed 3 ? Plans to continue expanding and provide new store formats to enter markets Recommendation: Buy Price as of October 28th, 2015 Buy Price Target 52-week range $57.64 $50-55 $58.37 – $90.97 Upside Investment Time Horizon 20%+ 2- 3 years+ Price Chart YTD Price Chart 95 STOCK PRICE Wal-Mart Stores Inc. 85 75 65 55 Selected Financial Data Shares Outstanding Market Capitalization Book Value per Share Tangible BV per Share Net Income (2014) Net Income (1st Half of this year) Revenue (2014) Revenue (1st Half of this year) Cash Price / Book Price / Earnings Price / Sales Price /FCF EBITDA/ Interest Net Debt/ EBITDA EV/EBITDA Inventory Turnover ROA ORANGE VALUE FUND 3.206B 184.8B 24.55 19.00 15.49B 6.82B 485.65B 235.06B 5.751B 2.4x 11.9x 0.4x 12.7x 13.91x 1.2x 6.6x 8.1x 8.1% 1 Table of Contents Cover Page ................................................................................................... 1 Extended Business Description ..................................................................... 3 Management Team ...................................................................................... 4 Industry Overview ....................................................................................... 5 Segments ..................................................................................................... 6 Equity Research Report Operational Description ............................................................................... 8 Top Shareholders ....................................................................................... 10 Properties .................................................................................................. 11 Debt Structure ........................................................................................... 12 Comparable Companies Analysis ............................................................... 13 Shareholder Wealth Creation .................................................................... 14 Valuation Rationale ................................................................................... 15 Appendix ................................................................................................... 16 ORANGE VALUE FUND 2 Extended Business Description Wal-Mart Stores, Inc. operates retail stores in various formats worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam’s Club. It operates discount stores, supermarkets, supercenters, hypermarkets, warehouse clubs, cash and carry stores, home improvement stores, specialty electronics stores, restaurants, apparel stores, drug stores, and convenience stores, as well as retail Websites, such as walmart.com and samsclub.com. Equity Research Report The company’s stores offer meat, produce, deli, bakery, dairy, frozen foods, alcoholic and nonalcoholic beverages, and floral and dry grocery; health and beauty aids, baby products, household chemicals, paper goods, and pet supplies; electronics, toys, cameras and supplies, photo processing services, cellular phones, cellular service plan contracts and prepaid services, movies, music, video games, and books; and pharmacy, optical, over-the-counter drugs, and clinical services. Its merchandise also include stationery, automotive accessories, hardware and paint, sporting goods, fabrics and crafts, and seasonal merchandise; apparel for women, girls, men, boys, and infants, as well as shoes, jewelry, and accessories; and home furnishings, housewares and small appliances, bedding, home décor, outdoor living, and horticulture products. The company also provides financial services and related products, including money orders, prepaid cards, wire transfers, money transfers, check cashing, and bill payment. In addition, it offers brand name merchandise, including hard goods, soft goods, and selected private-label items, such as Member’s Mark and its own proprietary brands, such as Daily Chef and Simply Right. Further, the company operates banks that provide consumer financing programs. As of September 23, 2015, it operated 11,532 stores under 65 banners in 28 countries; and e-commerce Websites in 11 countries. The company was founded in 1945 and is headquartered in Bentonville, Arkansas. ORANGE VALUE FUND 3 Management Team Equity Research Report Douglas McMillon – Chief Executive Officer/Director/President ? Douglas McMillon has served as the president, director, and Chief Operating Officer of Walmart since February 1st, 2014. Prior to this position he served as the president and CEO of Walmart International during a rapid growth period between February 1st, 2009 and January 2014. Mr. McMillon has also been an executive vice president for the company serving as the unit CEO of Walmart’s Sam’s Club, Walmart Mexico and Walmart Canada units. McMillon first started at Walmart in 1984 as an hourly associate in a distribution center while pursuing his MBA and gradually worked his way up in the company. Having a holistic view of how the company operates only adds to his leadership ability. 1 Gregory B. Penner – Chairman of the Board ? Elected as chairman in 2015, Penner has been with the company for 20 years. Leading up to his election as chairman, Penner occupied positions such as CFO for Walmart’s Japan unit, VP of finance and strategy and in 2008 was first elected to Walmart’s board as chairman of the technology and ecommerce committee. Penner is also the founder and general partner of Madrone Capital Partners, an investment firm, and currently sits on the board of Baidu, Inc. Prior to Walmart, Penner worked as a financial analyst at Goldman Sachs & Co, and as a general partner at Peninsula Capital. His extensive leadership and finance background will ensure his effectiveness as he adjusts to his new chairman role. Charles M. Holley, Jr. – Chief Financial Officer/Executive Vice President 1 ? Holley has served as Walmart’s CFO and executive vice president since December 2010. Prior to this position he served as Walmart’s senior vice president of finance starting in 2005, and then vice president of finance and treasurer since January 2007. Prior to his start at Walmart, Holley served as a managing director of finance at Tandy Corporation in the consumer product division. This gives him a solid background in the retail industry. Also, his 10 years that he spent at Ernst and Young prior to Tandy displays a thorough understanding of the fields of Accounting and Finance. Michael J. Bender – Chief Operating Officer of Global eCommerce ? Bender serves as the COO of Global eCommerce, effectively leading the strategy and execution of the company’s eCommerce operations. Having joined the company in 2009, he was recently promoted to this role after serving as president of Walmart West business unit, leading all aspects of the company’s operations in 22 states. Prior to Walmart, Bender served as an operations executive for Cardinal Health and Victoria’s Secret. Using his nearly 3 decades worth of executive experience, Mr. Bender will lead Walmart’s efforts to gain ground in the online retail market. Will be replaced on December 31, 2015 ORANGE VALUE FUND 4 Industry Overview Overview: This industry comprises large stores that primarily retail a general line of grocery products, along with merchandise items (e.g. apparel and appliances). Warehouse clubs offer customers a wide selection of goods, often in bulk, at discounted prices, in exchange for a membership fee paid by each customer. Supercenters are large discount department stores that also sell perishable groceries; however, unlike warehouse clubs, supercenters do not have membership requirements for customers. Equity Research Report Outlook: Over the past half-decade the performance of the entire department store industry has experienced a slowdown in sales. This can be linked to a slight shift of consumer spending toward online alternatives. However to combat this encroachment, most entities in the industry have started to increase their presence in online retail. By offering competitive online prices as well as convenient options such as same-day in store pickup, companies in the industry aim to recapture sales from consumers whom have taken their purchasing online. Competitive Landscape: Walmart currently dominates the retail industry with over 50% market share by sales in several categories. Their main strategy is centered on providing products at the lowest possible price. Their competitors in the retail industry include companies like Target Corp, Big Lots Inc, Costco Wholesale Corp, PriceSmart Inc and The Kroger Co. ORANGE VALUE FUND 5 Segments Walmart is engaged in retail and wholesale operations located in the U.S., Argentina, Brazil, Canada, Chile, China, India, Japan, Mexico and the United Kingdom, as well as countries located in Africa and Central America. The company’s operations are conducted in three business segments: Walmart U.S., Walmart International and Sam’s Club. Walmart United States: The Walmart U.S. segment includes the company’s mass merchant concept in the U.S. operating under the “Walmart” or “Wal-Mart” brands, as well as Walmart.com. Walmart International: The Walmart International segment consists of the company’s operations outside of the U.S., including various retail websites. Retail Wholesale Other2 Africa 302 Argentina 105 Brazil 468 Canada 394 Central America 689 Chile 377 China 400 India 0 Japan 372 Mexico 2120 United Kingdom 589 Total 5816 As of January 31, 2015 94 0 76 0 1 3 11 20 0 160 0 365 0 0 13 0 0 24 0 0 59 10 3 109 Equity Research Report Region/Country Total Total Unit Square Count Feet 396 21,223 105 8,119 557 33,028 394 50,927 690 11,094 404 14,762 411 68,269 20 1,083 431 24,429 2,290 98,419 592 36,277 6,290 367,630 Sam’s Club: The Sam’s Club segment includes the warehouse membership clubs within the U.S., as well as samsclub.com. Revenue Operating Profit Before Tax 58,020 1,976 6,171 136,160 288,049 21,336 Walmart United States Sam's Club 2 Walmart International Walmart United States Walmart International Sam's Club “Other” includes restaurants, drug stores, convenience stores, and banks. ORANGE VALUE FUND 6 Revenue Operating Profit Before Tax 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 25,000 20,000 15,000 10,000 5,000 0 Equity Research Report Walmart United States Walmart International Sam's Club Walmart United States Walmart International Sam's Club Segment Number of Stores # Stores Opened FY 2015 # Stores Closed FY 2015 Walmart United States 4,516 316 3 Walmart International 6,290 0 0 Sam's Club 647 12 0 Walmart’s United States segment currently boasts the highest operating profit before tax margin (7.5%), which is then followed by the international segment (4.5%) and finally the Sam’s Club segment (3.4%). ORANGE VALUE FUND 7 Operational Description Equity Research Report Physical: ? Walmart International - The international segment is comprised of physical stores operated by: wholly owned subsidiaries operating in Argentina, Brazil, Canada, Chile, China, India, Japan and the United Kingdom; majority owned subsidiaries operating in Africa, Central America, China and Mexico; and joint ventures and other controlled subsidiaries in China. ? Walmart U.S. - The United States segment operates retail stores in all 50 states, Washington D.C. and Puerto Rico, with supercenters in 49 states and Puerto Rico. The segment also operates discount stores in 42 states and Puerto Rico, and neighborhood markets in 31 states and Puerto Rico. ? Sam’s Club - The Sam’s Club segment operates as a membership only warehouse club, facility sized generally range between 71,000 and 190,000 square feet. Digital: ? All of Walmart’s segments operate e-commerce websites that allow customers to shop online. Walmart U.S. and Sam’s Club also offer convenient services such as in-store pickup, which allows customers to pick up their online purchases at Walmart stores on the same day. Merchandise: ? Walmart U.S./International- Walmart’s U.S. and International segments do business in 6 strategic merchandise units: o Grocery consists of a full line of grocery items o Health and Wellness includes pharmacy, optical services, over the counter drugs and clinical services o Entertainment consists of electronics, toys, cameras, cell phones and movies o Hardlines consist of stationary, automotive, hardware and paint, sporting goods and fabrics o Apparel includes apparel for men and women of all ages o Home includes home furnishings, housewares, bedding and small appliances ? Sam’s Club - Sam’s Club offers brand name merchandise and selected private label items such as “Member’s Mark” and its own proprietary brands such as “Daily Chef” and “Simply Right” in 5 merchandise categories: o Grocery and consumables includes a full line of grocery items in addition to paper goods, laundry, baby care and pet supplies o Fuel and other categories includes gasoline stations, tobacco, tools and power equipment o Home and apparel includes home improvement, outdoor living, furniture, apparel, jewelry, housewares and toys o Technology, office and entertainment includes electronics, software, office supplies and office furniture o Health and wellness includes pharmacy, optical and hearing services Distribution: ? Walmart U.S. - In fiscal year 2015 80% of the Walmart U.S. segment’s purchases of merchandise were shipped through their 134 distribution facilities located strategically around the United States. The composition of those distribution facilities is as follows: o Owned and operated: 102 o Owned and third party operated: 2 o Leased and operated: 6 o Leased and third party operated: 24 ORANGE VALUE FUND 8 Equity Research Report ? Sam’s Club - In fiscal year 2015 66% of the Sam’s Club segments non gas purchases were handled through Sam’s Club’s 24 dedicated distribution facilities strategically located throughout the United States. The composition of these facilities is as follows: o Owned and operated: 3 o Owned and third party operated: 3 o Leased and operated: 2 o Leased and third party operated: 16 ? Walmart International - Walmart utilizes a total of 156 distribution facilities located in Argentina, Brazil, Canada, Chile, China, India, Japan and the United Kingdom. These facilities process and distribute both imported and domestic products. During fiscal year 2015 these facilities handled approximately 80% of the segments purchases. The composition of these facilities is as follows: o Owned and operated: 41 o Owned and third party operated: 11 o Leased and operated: 70 o Leased and third party operated: 34 Walmart Sales Breakdown: Product Categories Walmart U.S. Sam’s Club Grocery 56% Grocery and Consumables 57% Health and Wellness 11% Fuel and Other 23% Entertainment 10% Home and Apparel 8% Hardlines 9% Technology, Office and Entertainment 7% Apparel 7% Health and Wellness 5% Home 7% Seeing how over half of Walmart’s revenue comes from the sale of groceries, they have a buffer to the encroachment of e-commerce sites such as Amazon. This implies that the company can rely on this steady stream of revenue and absorb the effects of Amazon’s competition while Walmart develops their own ecommerce capabilities. ORANGE VALUE FUND 9 Equity Research Report Top Shareholders Holder % Of CSO Owner Type Walton Enterprises, LLC Walton J.D., S. Robson 44.165 6.143 Corporations (Private) Individuals/Insiders Walton Family The Vanguard Group, Inc. 6.051 3.075 Corporations (Private) Traditional Investment Managers BlackRock, Inc. (NYSE:BLK) 2.666 Traditional Investment Managers State Street Global Advisors, Inc. Berkshire Hathaway Inc. (NYSE:BRK.A) 2.119 1.884 Traditional Investment Managers Insurance Companies Dodge & Cox Wellington Management Group LLP 0.957 0.657 Traditional Investment Managers Traditional Investment Managers Northern Trust Global Investments BNY Mellon Asset Management 0.618 0.544 Traditional Investment Managers Traditional Investment Managers Walton, Alice L. State Farm Insurance Companies, Asset Management Arm 0.526 0.524 Individuals/Insiders Traditional Investment Managers Barrow, Hanley, Mewhinney & Strauss, Inc. 0.519 Traditional Investment Managers Geode Capital Management, LLC Bill & Melinda Gates Foundation Asset Trust 0.409 0.362 Traditional Investment Managers Charitable Foundations Merrill Lynch & Co. Inc., Banking Investments Walter Scott & Partners Limited 0.35 0.33 Banks/Investment Banks Traditional Investment Managers Walton, Jim C. (Director and Member of Technology & Ecommerce Committee) 0.328 Individuals/Insiders Invesco Ltd. (NYSE:IVZ) 0.276 Traditional Investment Managers Fidelity Investments Grantham, Mayo, Van Otterloo & Co. LLC 0.265 0.259 Traditional Investment Managers Traditional Investment Managers Columbia Management Investment Advisers, LLC 0.252 Traditional Investment Managers Morgan Stanley, Investment Banking and Brokerage Investments 0.248 Banks/Investment Banks The Walton family comprise a collective 57.2% of the company. This shows that the company remains under the control of a family that is still very much invested in the profits, reputation, and legacy of the firm. ORANGE VALUE FUND 10 Properties Equity Research Report U.S. Walmart U.S. Sam’s Club Total Owned and Operated 3860 536 4396 International Africa Argentina Brazil Canada Central America Chile China India Japan Mexico United Kingdom Total Leased and Operated 656 111 767 Owned and Operated Leased and Operated 41 64 228 132 223 244 3 2 61 671 410 2079 355 41 329 262 467 160 408 18 370 1619 182 4211 According to Walmart’s latest annual filling, the cost-based value of the company’s owned land is $26.3B. This gives the company a lot of options in terms of creating value for shareholders. ORANGE VALUE FUND 11 Equity Research Report Debt Structure Principal Due (USD) Floating Rate Maturity Seniority Secured Convertible Repayment Currency NA NA NA Senior No No USD 4,725 3.0% 12.6% NA NA Senior Yes No USD Bonds and Notes 9,750 Weighted Average of 2.64% NA Vary (see chart) Senior No No USD Notes Issuances (EUR) Bonds and Notes 1,693 Weighted Average of 2.18% NA Vary (see chart) Senior No No EUR Secured Bond * Bonds and Notes 139 NA NA NA Senior Yes No USD Short-term Borrowings Other Borrowings 1,725 0.5% NA 2016 Senior No No USD Description Type Debt * Other Borrowings 34,314 Long-term Capital Lease and Financing Obligations Capital Lease Notes Issuances (USD) Coupon Rate Walmart Stores Inc. currently sports an interest coverage ratio of 14.4x, indicating that the company will have no difficulty servicing its debt capitalization. Also, the company’s current cash balance of $5.75B shows that the company will not have difficulty paying off their notes and bonds as they come to maturity. Long-Term Debt Maturity $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 ORANGE VALUE FUND 12 Comparable Companies Analysis Equity Research Report Company Name Big Lots (NYSE: BIG) Costco Wholesale Co.(NasdaqG S:COST) CVS Health Co. (NYSE:CVS) PriceSmart Inc. (NYSE: CVS) Target Corp. (NYSE:TGT) Tesco PLC (LSE:TSCO) The Kroger Co. (NYSE:KR) EV LTM Revenue LTM EBITDA TEV/EBITDA LTM TEV/Revenue LTM P/E LTM P/BV LTM LTM Total Debt/EBITDA LTM Net Debt/EBITDA LTM EBITDA/Interest 2,562 5,190 349 7.3x 0.5x 17.90x 3.70x 0.60x 0.50x 109.3x 69,255 116,199 4,751 14.6x 0.6x 30.10x 6.50x 1.40x 0.01x 38.3x 127,806 127,806 10,920 11.7x 0.9x 23.40x 3.10x 1.20x 1.10x 18.1x 2,494 2,726 179 13.9x 0.9x 28.40x 4.40x 0.60x NA 29.5x 57,878 73,550 7,353 7.9x 0.8x 17.60x 3.50x 1.70x 1.36x 12.2x 39,711 93,523 1,023 39.9x 0.4x NA 2.50x 18.90x 15.97x 1.2x 47,678 108,784 5,537 8.6x 0.4x 19.20x 6.20x 2.00x 1.99x 11.3x Wal-Mart Stores Inc. (NYSE:WMT) 231,983 485,621 35,267 6.6x 0.5x 11.90x 2.40 1.40x 1.25x 13.0x High 127,806 145,577 10,920 39.9x 0.9x 29.40x 6.50x 18.90x 15.97x 109.30x Low 2,494 2,726 179 7.3x 0.4x 16.70x 2.50x 0.60x 0.01x 1.20x Mean 49,626 77,935 4,301 14.8x 0.6x 23.00x 4.30x 3.80x 3.48x 31.40x Median 47,678 93,523 4,751 11.7x 0.6x 22.30x 3.70x 1.40x 1.22x 18.10x Looking at the comparable companies analysis, it becomes apparent that Walmart currently has one of the lowest valuations relative to its peers. Walmart’s valuation figures far from represent the firm’s extremely strong financial position and proven operational ability. Walmart also boasts a $0.49 quarterly dividend which at current market prices equates to a roughly 3.0% annual yield. This return combined with the company’s AA credit rating should carry investors through any short-term price downturn as we are currently witnessing. ORANGE VALUE FUND 13 Shareholder Wealth Creation Year Book Value Dividends 2007 2008 2009 2010 2011 2012 2013 2014 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 64,608 65,285 70,468 68,542 71,315 76,343 76,255 81,394 BV Growth BV+Div Growth 1% 8% -3% 4% 7% 0% 7% 7% 14% 4% 11% 15% 8% 15% 2.9% 26.0% 10.4% 3,746 4,217 4,437 5,048 5,361 6,139 6,185 ACGR TR Walmart Stores Inc.: Shareholder Wealth Creation Analysis BVPS BVPS + Div Share Price BVPS Price/sh Growth Growth Growth $ 16.3 50.74 $ 16.6 2% 8% 47.12 -7% $ 18.6 12% 19% 53.43 13% $ 19.5 5% 12% 56.07 5% $ 20.9 7% 15% 61.36 9% $ 23.0 10% 18% 69.95 14% $ 23.6 2% 11% 74.68 7% $ 25.2 7% 15% $ 84.98 14% 6.5% 55.1% 13.8% Div/Sh Sh+Div Growth $0.95 $1.11 $1.26 $1.48 $1.62 $1.90 $1.92 -5.3% 15.8% 13.0% 12.1% 16.6% 9.5% 16.4% 7.6% 67.5% P/B Shares OUT 3.1x 2.8x 2.9x 2.9x 2.9x 3.0x 3.2x 3.4x 3,973.00 3,925.00 3,786.00 3,516.00 3,418.00 3,314.00 3,233.00 3,228.00 10.9% Equity Research Report $20 Billion Share Repurchase Program On October 14, 2015, Walmart announced that its board of directors had authorized a $20B share repurchase program to be completed over the next 2 years. The board also scrapped the remainder of the previous $15B share repurchase program, of which $8.6B remained unused. Between 2013 and this announcement, Walmart repurchased $6.4B worth of shares through its previous share repurchase program. Over the previous 5 years, shares outstanding has dropped by 16%. The current planned $20B buyback would be an addition to the amount already repurchased, and would represent roughly 10% (340M shares) of the company’s current shares outstanding based on current market prices. It should be noted that the company currently only has a 42.6% public float due to the large ownership stakes of the members of the Walton family. Overall, the combination of the company’s relatively small public float percentage with this massive share repurchase program will consolidate the immense value of the company into a substantially reduced number of shares. Walmart Book Value Per Share Plus Dividend 20% 18.60% 18.16% 18% 16% 15.03% 14.60% 14% 11.52% 12% 10% 10.63% 8.15% 8% 6% 4% 2% 0% 2008 2009 2010 2011 2012 2013 2014 ORANGE VALUE FUND 14 Return On Equity 25% 24% 24% 23% 22% 22% 22% 21% 21% 20% 20% 20% 19% 18% Equity Research Report 2010 2011 2012 2013 2014 2015 17.0% 16.9% 2014 2015 Return On Investment 19.5% 19.0% 19.3% 19.2% 18.5% 18.6% 18.0% 18.2% 17.5% 17.0% 16.5% 16.0% 15.5% 2010 2011 2012 2013 Return On Assets 9.2% 9.07% 9.0% 8.8% 8.6% 8.4% 8.43% 8.37% 8.2% 8.12% 8.0% 8.03% 7.8% 7.83% 7.6% 7.4% 7.2% 2010 2011 2012 2013 2014 2015 ORANGE VALUE FUND 15 Valuation Rationale Recommendation: Purchase Walmart Common Stock at or below $55 Investment Horizon: 2 – 3 Years Equity Research Report We believe Walmart is cheap compared to its peers based on a number of factors. As the market leader with a significant retail market share and a strategy that is quite immune to economic slowdowns due to its cost leadership and economies of scale, we believe Walmart has dropped in value unnecessarily. As the common stock has devalued by roughly 30% in the markets YTD, we believe market participants are acting irrational based on Walmart’s success and safety. Compared to its competitors, Walmart has the lowest P/BV, P/E, and P/Sales. The firm continues to expand having opened 316 stores last year and only closing 3. This will contribute to the revenue growth moving forward. Its AA credit rating and manageable debt levels make it very safe in volatile times such as now. In addition, its dividend payout at roughly 3% (higher than peers) is very attractive and an easy source of additional value to shareholders. During the years surrounding the recession between 2008 and 2011, its P/E went as low as 12x and it is currently at roughly 11.9x. Additionally, with the Walton family continuing to hold a majority stake in the firm, we believe interests continue to be on the long-term success. Moving forward, we believe any slow-down in Europe or Asia will force consumers to look into cheaper/discount products that Walmart is known for. Its growing presence in emerging markets (China & India) allow it position itself for long-term growth through the growing middle classes in those regions. With the rise of online shopping, Walmart has responded through aggressive pricing and the rise of their own online establishment. As over 50% of Walmart’s sales come from groceries, online shopping will not have a significant impact on this in the near-term. Cheap prices will keep consumers coming to Wal-Mart and its strategy to target local areas has proven to be quite successful. Lastly, by being in areas that aren’t as desired, property prices for expansion and taxes remain lower. Recently, Walmart has announced that it is increasing minimum wage to $10 and $15 in other locations. This is a good thing as Walmart is positioning itself as a leader in the politics of minimum wage increases that are likely to impact all businesses in the coming years. In addition, someone making $10 or $15 an hour will be unlikely to suddenly start shopping at more expensive retailers. Walmart prices will continue to appeal to them and if anything, these employees will end up driving up sales further through their own purchases. We believe the stock is worth at least $75.00 currently based on how it is trading relative to peers now and in the past. This is a conservative measure based on the median of various ratios including P/BV, P/E, and EV/EBITDA. We also took into account the company’s ability to provide returns on assets, invested capital, and equity over the years even as the firm has matured considerably. Lastly, Walmart’s ability to grow book value has also been strong and will be something to keep an eye on moving forward. ORANGE VALUE FUND 16 Appendix Balance Sheet Balance Sheet Balance Sheet as of: Jan-31-2011 Jan-31-2012 Jan-31-2013 Jan-31-2014 Jan-31-2015 Cash and Cash Equivalents 7,395.0 6,550.0 7,781.0 7,281.0 9,135.0 Receivables 5,089.0 5,937.0 6,768.0 6,677.0 6,778.0 Inventories 36,437.0 40,714.0 43,803.0 44,858.0 45,141.0 Prepaid Expenses and Other Assets (current) 2,960.0 1,685.0 1,551.0 1,909.0 2,224.0 Current Assets of Discontinued Operations 131.0 89.0 37.0 460.0 - Total Current Assets 52,012.0 54,975.0 59,940.0 61,185.0 63,278.0 Property Under Capital Leases 5,905.0 5,936.0 5,899.0 5,589.0 5,239.0 Less-accumulated Amortization (3,125.0) (3,215.0) (3,147.0) (3,046.0) (2,864.0) Accumulated Depreciation (43,486.0) (45,399.0) (51,896.0) - - Property and Equipment 148,584.0 155,002.0 165,825.0 - - Property and Equipment, net - - - 115,364.0 114,280.0 Goodwill 16,763.0 20,651.0 20,497.0 19,510.0 18,102.0 Other Assets and Deferred Charges 4,129.0 5,456.0 5,987.0 6,149.0 5,671.0 Total Assets 180,782.0 193,406.0 203,105.0 204,751.0 203,706.0 Accounts Payable 33,676.0 36,608.0 38,080.0 37,415.0 38,410.0 Accrued Liabilities 18,701.0 18,154.0 18,808.0 18,793.0 19,152.0 Short-term Borrowings 1,031.0 4,047.0 6,805.0 7,670.0 1,592.0 Long-term Debt Due Within One Year 4,655.0 1,975.0 5,587.0 4,103.0 4,810.0 Obligations Under Capital Leases Due Within One Year Accrued Income Taxes 336.0 326.0 327.0 309.0 287.0 157.0 1,164.0 2,211.0 966.0 1,021.0 Current Liabilities of Discontinued Operations 47.0 26.0 - 89.0 - Total Current Liabilities 58,603.0 62,300.0 71,818.0 69,345.0 65,272.0 Long-term Debt 40,692.0 44,070.0 38,394.0 41,771.0 41,086.0 Long-term Obligations Under Capital Leases 3,150.0 3,009.0 3,023.0 2,788.0 2,606.0 Minority Interest 2,705.0 4,446.0 5,395.0 5,084.0 4,543.0 Redeemable Non-controlling Interests 408.0 404.0 519.0 1,491.0 - Deferred Income Taxes and Other 6,682.0 7,862.0 7,613.0 8,017.0 8,805.0 Common Stock - Par Value 352.0 342.0 332.0 323.0 323.0 Additional Paid in Capital 3,577.0 3,692.0 3,620.0 2,362.0 2,462.0 Retained Earnings 63,967.0 68,691.0 72,978.0 76,566.0 85,777.0 Accumulated Other Comprehensive Income (Loss) 646.0 (1,410.0) (587.0) (2,996.0) (7,168.0) Total Shareholders Equity 68,542.0 71,315.0 76,343.0 76,255.0 81,394.0 Total Liabilities & Shareholders Equity 180,782.0 193,406.0 203,105.0 204,751.0 203,706.0 Current Assets Equity Research Report Non Current Assets Current Liabilities Non Current Liabilities Shareholders' Equity ORANGE VALUE FUND 17 Income Statement Equity Research Report Income Statement For the Fiscal Period Ending 12 months Jan-31-2011 12 months Jan-31-2012 12 months Jan-31-2013 12 months Jan-31-2014 12 months Jan-31-2015 Revenues Membership and Other Income Net Sales Total Revenues 2,897.0 418,952.0 421,849.0 3,093.0 443,416.0 446,509.0 3,047.0 465,604.0 468,651.0 3,218.0 473,076.0 476,294.0 3,422.0 482,229.0 485,651.0 Expenses Cost of Sales Operating, Selling, General and Administrative Expenses Capital Leases Interests Debts Interest Income Earnings before Taxes (314,946.0) (81,361.0) (277.0) (1,928.0) 201.0 23,538.0 (334,993.0) (85,025.0) (286.0) (2,034.0) 161.0 24,332.0 (352,297.0) (88,629.0) (272.0) (1,977.0) 186.0 25,662.0 (358,069.0) (91,353.0) (263.0) (2,072.0) 119.0 24,656.0 (365,086.0) (93,418.0) (300.0) (2,161.0) 113.0 24,799.0 Taxes and Other Expenses Provision for Income Tax Provision for Income Tax Minority Interest (After Tax) Earnings of Discontinued Operations Net Income (Loss) (6,703.0) (876.0) (604.0) 1,034.0 16,389.0 (6,722.0) (1,202.0) (688.0) (21.0) 15,699.0 (7,976.0) 18.0 (757.0) 52.0 16,999.0 (8,619.0) 514.0 (673.0) 144.0 16,022.0 (8,504.0) 519.0 (736.0) 285.0 16,363.0 Supplementary Info Operating Income (Loss) Basic EPS - Continuing Operations Basic EPS - Discontinued Operations Basic Earnings Per Share – Total Diluted EPS - Continuing Operations Diluted EPS - Discontinued Operations Diluted Earnings Per Share – Total 25,542.0 4.2 0.28 4.48 4.18 0.29 4.47 26,491.0 (0.01) 4.54 4.53 (0.01) 4.52 27,725.0 0.01 5.04 0.01 5.02 26,872.0 4.9 4.88 27,147.0 5.07 5.05 ORANGE VALUE FUND 18 Cash Flow Statement Equity Research Report Cash Flow For the Fiscal Period Ending 12 months Jan-31-2011 12 months Jan-31-2012 12 months Jan-31-2013 12 months Jan-31-2014 12 months Jan-31-2015 Operating Activities Income from Continuing Operations Depreciation and Amortization Other Operating Activities Income (Loss) from Discontinued Operations, Net of Income Taxes Receivables, Net Inventories Change in Accounts Payable Accrued Income Taxes Deferred Income Taxes Accrued Liabilities Cash Flow from Operating Activities 16,993.0 7,641.0 1,087.0 (1,034.0) (733.0) (3,205.0) 2,676.0 651.0 (433.0) 23,643.0 16,387.0 8,106.0 468.0 21.0 (796.0) (3,727.0) 2,687.0 994.0 1,050.0 (935.0) 24,255.0 17,756.0 8,478.0 602.0 (52.0) (614.0) (2,759.0) 1,061.0 981.0 (133.0) 271.0 25,591.0 16,695.0 8,870.0 938.0 (144.0) (566.0) (1,667.0) 531.0 (1,224.0) (279.0) 103.0 23,257.0 17,099.0 9,173.0 785.0 (285.0) (569.0) (1,229.0) 2,678.0 166.0 (503.0) 1,249.0 28,564.0 Investing Activities Payments for Property, Plant. and Equipment Proceeds from the Disposal of Property and Equipment Investments and Business Acquisitions, Net of Cash Acquired Other Investing Activities Proceeds from Disposal of Certain Operations Cash Flow from Investing Activities (12,699.0) 489.0 (202.0) 219.0 (12,193.0) (13,510.0) 580.0 (3,548.0) (131.0) (16,609.0) (12,898.0) 532.0 (271.0) (12,637.0) (13,115.0) 727.0 (138.0) (12,526.0) (12,174.0) 570.0 (192.0) 671.0 (11,125.0) Financing Activities Payments of Long-term Debt Proceeds from Issuance of Long-term Debt Changes in Short-term Borrowings, Net Payment of Capital Lease Obligations Purchase of Company Stock Dividends Paid Other Financing Activities Purchase of Non-controlling Interest Dividends Paid to Non-controlling Interest Cash Flow from Financing Activities (4,080.0) 11,396.0 503.0 (363.0) (14,776.0) (4,437.0) (271.0) (12,028.0) (4,584.0) 5,050.0 3,019.0 (6,298.0) (5,048.0) (71.0) (526.0) (8,458.0) (1,478.0) 211.0 2,754.0 (7,600.0) (5,361.0) (58.0) (132.0) (282.0) (11,946.0) (4,968.0) 7,072.0 911.0 (6,683.0) (6,139.0) (260.0) (296.0) (426.0) (10,789.0) (3,904.0) 5,174.0 (6,288.0) (1,015.0) (6,185.0) (409.0) (1,844.0) (600.0) (15,071.0) Other Adjustments Foreign Exchange Rate Effect on Cash and Cash Equivalents Cash Flow Net Changes in Cash 66.0 (512.0) (33.0) (845.0) 223.0 1,231.0 (442.0) (500.0) (514.0) 1,854.0 ORANGE VALUE FUND 19 Adobe Systems Inc. (ADBE) Comparables Figure 11: Covered Subscription Software Comparables ADBE-US Rating Target Price Year End Shares Outstanding (M) Market Cap (M) Adobe Alarm .com Appfolio Callidus Softw are Cornerstone Ondem and Salesforce Everbridge Mindbody Oom a Paycom Softw are Shopify Synchronoss 2U Ultim ate Softw are Workday ADBE ALRM APPF CALD CSOD CRM EVBG MB OOMA PAYC SHOP SNCR TWOU ULTI WDAY WK NEUTRAL $27.00 Dec OUTPERFORM $27.00 Dec NEUTRAL $43.00 Dec NEUTRAL $94.00 Jan NEUTRAL $19.00 Dec OUTPERFORM OUTPERFORM $150.00 $37.00 Dec Dec OUTPERFORM OUTPERFORM OUTPERFORM $110.00 $28.00 $31.00 Jan Dec Dec NEUTRAL $12.00 Jan OUTPERFORM OUTPERFORM UNDERPERFORM OUTPERFORM OUTPERFORM $70.00 $95.00 $13.00 $54.00 $260.00 Dec Dec Dec Dec Dec Workiva 500.9 68,878 48.8 1,747 34.8 1,107 66.3 1,457 62.0 2,258 721.6 62,284 28.4 674 49.1 1,348 18.5 150 58.5 3,981 111.1 9,561 49.0 525 52.0 2,325 30.5 6,384 222.1 21,803 41.1 779 $2,763.5 $5.52 ($10.6) ($0.22) $52.3 $1.50 $183.2 $2.76 $290.4 $4.69 $1,598.5 $2.22 $43.7 $1.54 $203.4 $4.14 $53.3 $2.88 $61.4 $1.05 $881.7 $7.94 ($643.3) ($13.13) $142.9 $2.75 $83.9 $2.75 $1,574.3 $7.09 $43.9 $1.07 66,115 1,758 1,055 1,274 1,967 60,686 96 29% 10% 34% 19% 67% 29% 22% 63% 34% 14% (10%) 31% (2%) 23% (14%) Calendar Year ADBE ALRM APPF CALD 2017E Revenue (M) 2018E Revenue (M) 7,161 8,518 324 375 138 173 244 291 2017E Revenue Growth Yr/Yr 2018E Revenue Growth Yr/Yr 22.3% 18.9% 24.2% 15.7% 30.5% 25.9% 9.2x 7.8x 5.4x 4.7x 2017E Rec Revenue Gr Yr/Yr 2018E Rec Revenue Gr Yr/Yr 29.7% 21.4% 2017E EV/Recurring Sales 2018E EV/Recurring Sales Net Cash - MRQ (M) Net Cash per Share (MRQ) Enterprise Value (M) 630 1,145 3,920 8,679 1,169 2,182 6,300 20,229 735 Nmf (13%) 26% Nmf 54% 28% 8% 41% 29% (51%) 42% (10%) 43% 21% 50% 52% 66% 101% (16%) 9% (72%) 42% 8% 48% 33% (7%) 15% Nmf (17%) 49% 31% (22%) 39% CSOD CRM EVBG MB OOMA PAYC SHOP SNCR TWOU ULTI WDAY WK 482 549 10,285 12,284 102 128 181 227 114 127 428 534 625 863 717 791 271 352 971 1,189 2,050 2,564 205 239 17.9% 19.2% 13.9% 14.0% 22.6% 19.4% 32.1% 25.7% 30.1% 25.5% 9.5% 11.2% 29.9% 24.9% 60.5% 38.0% 17.1% 10.4% 31.4% 30.1% 24.3% 22.4% 30.2% 25.1% 14.7% 16.4% 23.6% 20.4% 7.7x 6.1x 5.2x 4.4x 4.1x 3.6x 5.9x 4.9x 6.2x 4.9x 6.3x 5.0x 0.8x 0.8x 9.2x 7.3x 13.9x 10.1x 1.6x 1.5x 8.1x 6.2x 6.5x 5.3x 9.9x 7.9x 3.6x 3.1x 5.9x 4.8x 33.8% 19.9% 26.8% 20.4% 21.2% 23.3% 13.9% 14.0% 22.1% 19.2% 32.1% 23.1% 29.4% 25.3% 11.7% 12.7% 29.9% 24.9% 52.1% 35.5% 21.3% 13.5% 31.4% 30.1% 25.3% 23.3% 33.0% 27.4% 16.0% 16.7% 26.9% 21.9% 11.1x 9.2x 7.6x 6.3x 19.0x 15.8x 6.5x 5.2x 5.1x 4.5x 6.4x 5.4x 6.4x 5.2x 10.7x 8.5x 0.9x 0.8x 9.3x 7.5x 30.2x 22.3x 2.3x 2.0x 8.1x 6.2x 7.7x 6.2x 11.8x 9.2x 4.4x 3.8x 9.2x 7.4x 2017E EV/EBITDA Multiple 2018E EV/EBITDA Multiple 22.9x 18.9x 26.6x 21.2x 69.1x 46.2x 36.6x 28.3x 32.4x 19.1x 31.2x 23.9x Nmf Nmf Nmf 59.1x Nmf 31.3x 33.1x 25.7x Nmf Nmf 9.0x 7.4x Nmf 113.5x 26.5x 21.0x 69.8x 50.7x Nmf Nmf 35.7x 35.9x 2017E EV/OCF Multiple 2018E EV/OCF Multiple 25.0x 20.5x 49.0x 39.6x 62.7x 44.0x 31.4x 22.2x 32.6x 17.7x 23.2x 18.5x 79.4x 48.1x Nmf 62.4x 56.6x 21.7x 33.4x 28.7x Nmf Nmf 8.7x 8.1x Nmf 89.5x 32.5x 26.6x 48.0x 37.6x Nmf 74.2x 40.2x 37.3x 2017E EV/FCF Multiple 2018E EV/FCF Multiple 27.2x 22.5x 67.6x 54.9x Nmf 97.7x 61.9x 36.2x 62.5x 25.8x 29.4x 22.6x Nmf Nmf Nmf Nmf Nmf 60.7x 52.7x 45.5x Nmf Nmf 16.7x 14.3x Nmf Nmf 59.6x 45.9x 77.3x 60.3x Nmf 97.8x 50.6x 48.7x 2017E FCF Yield 2018E FCF Yield 3.5% 4.3% 1.5% 1.8% 0.3% 1.0% 1.4% 2.4% 1.4% 3.4% 3.3% 4.3% Nmf 0.5% Nmf 0.5% Nmf 1.1% 1.9% 2.2% 0.0% 0.4% 13.3% 15.5% Nmf Nmf 1.7% 2.1% 1.2% 1.5% 0.3% 1.0% 2.5% 2.8% 2015 Price Change 2016 Price Change 2017 Price Change to Date 2017E EV/Sales Multiple 2018E EV/Sales Multiple Average* So urce: Credit Suisse estimates, co mpany filings, and Tho mso n Reuters * Includes all Subscriptio n So ftware co mpanies when averaging Revenue Gro wth Yr/Yr and EV/Sales M ultiple Source: Thomson Reuters, Company data, Credit Suisse estimates 19 June 2017 8