1. Starbucks Corporation
NASDAQ: SBUX
Steven Xu, Yuki Yao, Tahir Masood, Simon Wang, Ola Salami, Jessica Lau

2. Investment Highlights
Current Price: $57.26 (As of closing 09/16)
Target Price: $63.25
Recommendation: BUY
Sensitivity Analysis:

3. Global Economy Review
• Global growth is expected to be 2.8% in 2015, and will pick up to 3.2% in
2016–17, broadly in line with previous forecasts.
• Developing economies are facing two transitions:
1)Appreciation in the U.S. dollar and is exerting downward pressure on
capital flows to developing countries
2)Lower oil prices benefits oil-importing countries while reducing activity in
oil-exporting countries.
• The continued growth in real terms in the USA brought more disposable
income to Americans, rising demands for consumer goods and services.

4. Industry Overview
• Starbucks operate in a perfect competition market.
Competitors include but not limited to as McDonald's,
Yum Brands, Darden restaurant, Autogrill Spa.
• Industry sales revenue rised from a mere $6B in 1970
to almost $200B in 2015
• This industry is continuously growing with future
opportunities for Starbucks
Figure 1. Major Players in Industry
Source: External Data

5. Company Overview
• Starbucks Corporation, doing business as Starbucks Coffee, is an
American global coffee company and coffeehouse chain based in Seattle,
Washington. Starbucks is the largest coffeehouse company in the world,
with 21,536 stores in 64 countries. It is listed on New York stock exchange
(NYSE) with a current market capitalization $83.9 billion (stc)
• Starbucks enjoyed positive results in recent years based on strong
momentum in the US and organic growth in major emerging markets.

6. Current Strategy
Delivering a superior
customer experience.
47% of the customer
chooses Starbucks
because of their
connection experience
with the barista. Be the employer of choice

7. Current Strategy
Committing to deliver
100% ethically sourced
coffee.
Working directly with
farmers and ensure a
sustainable supply of
quality coffee. Coffee leadership

8. Current Strategy
With forcing on the
footprint in Asia,
Starbucks is increasing
the scale with in the
market in China, India
and Japan.
Grow the store portfolio
with disciplined expansion

9. Current Strategy
Create new occasions
Providing wine, beer and
shareable plates to
attract more customers.

10. Current Strategy
Build other brands
Teavana
Evolution Fresh
Bay Bread

11. Current Strategy
Extend digital engagement 1/7 Adults in US received
Starbucks gift card from
holiday in end of 2014
8 million payment per
week by mobile pay

12. Investment Strategy
• BUY recommendation -- $63.25
– Strong financial position and dividend growth
– Optimistic outlook in CAP region
– Sensitivity Analysis
Target Price
FCFF $63.30
FCFE $62.42
DDM $64.05
Target Price (Average) $63.25

13. Valuation - DCF
Starbucks 2012 – 2015 Quarterly Segment Report
- Different Growth Patterns
for different Segments
- Americas shows Stable
Growth
- EMEA shows Low growth
- CAP shows High growth
- Channel Development and
All Other Segments shows
same pattern as Americas
Source: Starbucks Corp. Quarterly Report

14. Valuation – DCF(Cont.)
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Starbucks Sales Revenue Growth
Model
Sales Growth
Rate - America
Sales Growth
Rate - EMEA
Sales Growth
Rate - CAP
Sales Growth
Rate -
Development
Channel
Sales Growth
Rate - Others
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
Starbucks Cost Inflation Model
Americas Cost
Inflation
EMEA Cost
Inflation
CAP Cost
Inflation
Channel
Development
Cost Inflation
Other Cost
Inflation
Forecast Revenue Based on EACH Segment Forecast Fixed Cost Based on Blended Rate
- Americas, Channel
Development and All
Other Segments:
3-Stage Model
- EMEA: 1-Stage Model
- CAP: 3-Stage Model
- Variable Cost
follows revenue
growth: Blended
Growth Rate
- Fixed Cost follows
inflation rate: use
Blended Inflation
Rate
Source: Team research Source: IMF inflation rate forecast

15. Valuation – DCF(Cont.)
Starbucks: WACC
Risk-free rate 2.13%
Beta 0.87
Market risk premium 6.90%
Cost of equity 6.26%
Cost of debt 4.26%
Tax Rate 35%
After-tax cost of debt 2.77%
Weight of equity 96.41%
Weight of debt 3.59%
WACC 6.14%

16. Valuation - DDM
• 10 years, 3-stage DDM model
Year 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E
DPS 0.64 0.80 1.00 1.26 1.54 1.83 2.12 2.39 2.61 2.78 2.87
Terminal
Value
93.61
PV 0.75 0.89 1.05 1.21 1.35 1.47 1.56 1.61 1.61 52.55
• Using Required Rate of Return = 6.26%
• Intrinsic Value = $64.05

17. Financial Analysis
• Stable Net Revenue Growth in Short-Term
• Substantial Growth in Mid-Term

18. Financial Analysis (Cont.)
Strong Financial Flexibility
• To service debt
• Be able to respond to one-time negative event

19. Financial Analysis (Cont.)
ROE Decomposition
• Stable net profit margin
• Equity increases at an accelerated rate
We anticipate:
• Acquisition
• Shares buy-back program
• Undertake projects to explore growth opportunity
ROE Decomposition 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E
Net Profit Margin 12.13% 11.87% 11.73% 11.47% 11.55% 11.60% 11.63% 11.61% 11.60% 11.25%
Asset Turnover 1.36x 1.27x 1.20x 1.14x 1.09x 1.04x 1.00x 0.95x 0.90x 0.86x
Financial Leverage 1.84x 1.68x 1.56x 1.48x 1.41x 1.36x 1.32x 1.28x 1.25x 1.23x
ROE 30.45% 25.30% 21.95% 19.33% 17.80% 16.46% 15.27% 14.16% 13.17% 11.93%

20. Risk Analysis
Identify risks:
• Market Risk
• Economic Risk
• Operational Risk

21. Q & A

22. Appendix I- Blended Rate
30%
40%
50%
60%
70%
80%
90%
100%
Startbucks Projected Sales Revenue
Weight
All Other Revenue
Weight
Channel Development
Revenue Weight
CAP Revenue Weight
EMEA Revenue Weight
Americas Revenue
Weight
Americas,
72.84%
EMEA,
7.87%
CAP, 6.87%
Development
Channel,
9.40%
All other,
3.02%
2014 Starbucks Sales Weight by
Region
Blended Rate Calculation
Source: Starbucks Corp. Annual Report Source: Team research

23. Appendix II – Initial/Terminal Rate
Initial Rate and Terminal Rate Estimation
2010 2011 2012 2013 2014 Average
Americas
Sales Growth 7% 8% 8% 7% 6% 7%
Change in transactions 3% 5% 6% 5% 2% 4%
Change in ticket 3% 2% 2% 2% 3% 2%
EMEA
Sales Growth 5% 5% 0% 0% 5% 3%
Change in transactions 6% 3% 0% 2% 3% 3%
Change in ticket -1% 0% 0% -2% 2% 0%
CAP
Sales Growth 11% 22% 15% 9% 7% 13%
Change in transactions 9% 20% 11% 7% 6% 11%
Change in ticket 2% 2% 3% 2% 0% 2%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
Starbucks Cost Inflation Model
Americas Cost
Inflation
EMEA Cost
Inflation
CAP Cost Inflation
Channel
Development Cost
Inflation
Other Cost Inflation
Source: IMF inflation rate forecastSource: Starbucks 2010 to 2014 Annual Report

24. Appendix III – CAPEX
69
247
508
680
698
36 104 104
100
171
109 266
266
588
742
0
200
400
600
800
2010 2011 2012 2013 2014
Starbucks New Stores Open
During the year
Americas
EMEA
CAP
(Million) 2,010 2,011 2,012 2,013 2,014
Total Capex 441 532 850 1,151 1,161
Main Capex 253 259 271 297 320
New Capex 188 273 579 855 840
Blended Growth rate
New Stores 223 145 1,063 1,701 1,599
Total Stores 16,858 17,003 18,066 19,767 21,366
Major Event (478)
Cost Inflation
Maintenance / Store 0.015 0.015 0.015 0.015 0.015
Cost / New Store 0.842 0.439 0.545 0.502 0.526
(Million) 2,010 2,011 2,012 2,013 2,014 2,015 2,016 2,017 2,018 2,019 2,020 2,021 2,022 2,023 2,024
TotalCapex 441 532 850 1,151 1,161 1,368 1,491 1,629 1,784 1,948 2,117 2,290 2,465 2,639 2,811
MainCapex 253 259 271 297 320 347 382 420 463 509 559 613 670 732 798
NewCapex 188 273 579 855 840 1,021 1,109 1,209 1,320 1,439 1,558 1,677 1,795 1,907 2,013
Blended Growth rate 6.44% 6.50% 6.57% 6.63% 6.71% 6.08% 5.43% 4.76% 4.06% 3.36%
NewStores 223 145 1,063 1,701 1,599 1,702 1,813 1,933 2,062 2,201 2,335 2,462 2,580 2,685 2,776
TotalStores 16,858 17,003 18,066 19,767 21,366 23,068 24,881 26,814 28,876 31,077 33,412 35,874 38,454 41,139 43,915
MajorEvent (478)
CostInflation 0.25% 1.98% 2.19% 2.41% 2.08% 2.09% 2.09% 2.10% 2.10% 2.11%
Maintenance/Store 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.016 0.016 0.016 0.017 0.017 0.017 0.018 0.018
Cost/NewStore 0.842 0.439 0.545 0.502 0.526 0.600 0.612 0.625 0.640 0.654 0.667 0.681 0.696 0.710 0.725
CAPEX ESTIMATION
2
1
3
4
1. Estimate stable Maintenance Capex
per existing store
2. Calculate Total Maintenance CAPEX
3. Calculate CAPEX for Expansion
4. Get average CAPEX/New Store
5. Forecast with cost inflation growth

25. Appendix IV – Operation Forecast
• Increasing Operational Efficiency

26. Appendix V – Other Growth
Growing 18% year over
year on the aisle in
grocery store.
Strategic partnership
with Tingyi (China)
Consumer product
brand growth

27. Appendix VI – Balance Sheet

28. Appendix VII – Income Statement

29. Appendix VIII – Cash Flow