Golden Gate University – Student Research Financial Sector, Consumer Financial Services

New York Stock Exchange

Visa Inc.

CURRENT PRICE: $71.04 (2/17/2015) RECOMMENDATION: BUY

HIGHLIGHTS

We initiate coverage on Visa Inc. with a Buy recommendation based on a target price of $93.52 offering a 31.6% upside from its closing price of $71.04 on February 17, 2016. Our recommendation is primarily driven by: • Competitive position - Visa has grown quickly as the youngest, but strongest firm

in the payments industry. It's 58% market share has proven its adaptability in an

increasingly technology heavy industry and it is positioned to outpace its competitors

with increasing regulatory headwinds.

• Growth drivers - Emerging market growth, cash and check market penetration,

e-commerce, and mobile payments provide numerous growth opportunities for

Visa's highly scalable business model. Its recent acquisition of Visa Europe is a

definite increase in value that will begin bearing fruit in August 2016.

• Mobile payments - Mobile payments is the primary means of penetrating the cash

and check payments that still encompass 85% of total payments. Though relatively

few consumers use mobile payments at this point in time, the number is increasing

at amazing rates and will continue to do so as smartphones saturate all economies.

• Valuation - Our cautious valuation indicates steady if not robust growth at an

intrinsic value of $88.72 - $93.52. We evaluated Visa primarily with a discounted

cash flow analysis and a comparable analysis which both factor in a comprehensive

revenue model.

• Main risks - Ongoing anti-trust litigation and the constantly changing regulatory

environment, though historically overcome with favorable outcomes, impede Visa's

long term growth. The current macroeconomic environment, if it continues on its

negative trend, will pose a significant obstacle to growth and market value in the short

and medium term.

Type Public

Traded as NYSE: V

Industry Financial Services

Founded 1958

Headquarters Foster City, California

Website www.visa.com

Key Statistics

52 Week Range $60.00 -81.01 Price $71.04

Shares O/S 1.93B

Market Cap 159.02B

Dividend Yield 17.9%

Vol/Avg 2.76M/13.4M

EV/Rev (ttm) 11.91

EV/EBITDA (ttm) 17.66

P/E 27.55

Beta 1.06

Key Financial and Ratios 2015 2016E 2017E 2018E 2019E 2020E Total Revenue 15,425 15,974 18,262 19,703 21,226 22,865 Net Operating Income 9,439 9,589 10,963 11,828 12,742 13,726

Net Profit Margin 40.7% 37.7% 38.3% 38.6% 38.9% 39.1%

FCF 6,061 6,210 7,172 7,930 8,620 9,326

Long term Debt 14,910 15,877 15,877 14,127 14,127 14,127

EPS 2.55 2.45 2.85 3.10 3.36 3.64

Stock price movement over 5 years

Source: Bloomberg

Business Description

Visa Inc. is a global financial services firm that is headquartered in Foster City,

California. It processes electronic payments through its Visa branded credit and

debit cards over its global network (VisaNet). Visa does not issue cards or extend

credit, it provides its products and services as the bridge between card issuers,

merchants, and the merchant's bank.

Visa, then under the name of BankAmericard, was launched in 1958 as a Bank

of America (BofA) credit card project. The BankAmericard had a rough start,

causing BofA to lose $8.8mm from delinquent accounts after the mass mailing of

unsolicited cards. After salvaging the project by implementing financial controls,

an alliance of banks was formed to compete against its main competitor:

Mastercard.

After reorganizing of the alliance and brand image, BankAmericard became Visa

Inc. in 1976 and eventually offered its initial public offering in 2007. In the process

leading up to the IPO, Visa Europe became a separate company which held a

put option to sell itself back to Visa Inc.

Revenue

Visa's revenue is directly related to the payment volume and processed

transactions. The top-line has a positive relationship with consumer spending and

GDP and is further reduced with the strong dollar. The electronic payment industry

developed dramatically in the last five years and has a high probability of

maintaining this momentum in the following five years. This is attributed to the

switching from paper-based to the cashless consumption habit for both the

consumer and commerce side.

The Visa Europe acquisition is an important growth driver to Visa. Inc. In 2015,

Visa Europe has 1.8 Trillion of payment volume, which equals to 36% of the

payment volume of Visa Inc. In addition, the revenue per dollar volume of Visa

Europe is only 35% of that of Visa Inc. in the same year. This indicate a large

upward possibility of Visa Europe‘s revenue. However, the extent of regulatory

change escalated significantly in 2015. The possibility Visa could increase their

pricing under such dynamic and strict regulation is challenging. On the other

hand, the operating margin of Visa Europe (25% in 2015) is also much lower

than that of Visa Inc. (65% in 2015). These shows the possibility of increasing

EPS of the consolidated company by reducing administrative expenses of Visa

Europe. This may be realized as the Visa Europe shifts from a member owned

entity to a private owned entity.

The predicted revenues of Visa from 2016 to 2020 are the result of averaging the

forecasted revenue by geography, operating segment and historical CAGR.

in $ billion 2012 2013 2014 2015

Visa Net rev ex other revenue 9.72 11.06 11.93 13.06

Visa payment volume 3,900 4,197 4,680 4,931

$ revenue per $ purchase 0.00249 0.00264 0.00255 0.00265

VE net rev ex other revenue 1.44 1.57 1.76 1.58

VE payment volume 1,582 1,710 1,922 1,724

VE $ revenue per $ purchase 0.00091 0.00092 0.00092 0.00092

Percentage 37% 35% 36% 35%

0.0% 5.0%10.0% 15.0%

20.0%

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

12.2%

12.6%

12.7%

13.1%

13.6%

14.0%

14.5%

14.9%

15.3%

15.7%

Market share in US

Porter’s 5 Forces Analysis

Bargaining power of customers

Revenue by geography

The geographic revenue in 2015 was derived from the “Revenue exposure by

region” charts of FactSet. We calculated the US region revenue by using the

forecasted US payment industry revenues from 2016-2020 and multiplying them

by the estimated market share of Visa in US in the same period. Since the

management said they expect future revenue growth derived from overall

payment market expansion, rather than from taking market share from its

competitors, we did not project significant market share growth in the next five

years. To be specific,

Visa counted as 13.6% of US payment industry revenue in 2015 and we think that

number will increase to 15.7% in 2020. Historical market share growth rate has

been used in this model. For the Asia Pacific, Africa/Middle East, Europe, and the

rest of America regions revenue forecast, a series of regional CAGRs have been

applied.

Revenue by operating segment

Both data processing revenue and International service revenue growth rate

come, and the growth rate of service revenue is derived from the last 2 years

CAGR. Adjustment has been made according to the USAA and Costco contracts

that starting from the second half of 2016.

Revenue forecast by historical growth rate

Visa’s revenue has experienced double-digit (a 10.9% CAGR) growth in the last

4 years (2011-2015). Since the appreciation of US dollar acted as a big negative

influencer in last two years and the regulatory changed frequently, we employed

the last 2 year CAGR to get the future revenue. We picked the middle point of the

company guidance of the Clients Incentive value (18% of the gross revenue)

instead of using the historical CAGR.

Visa Europe revenue

Visa Europe gave a 5% revenue growth rate outlook for 2016. For the subsequent

years, we adopt the forecasted CAGR of the European payment industry and

adjusted it based on the growth rate of the last 4 years. Because the acquisition

will close on April 1st, 2016 if none of the party want to close it earlier the 2016

VE revenue has been adjusted to consolidate with Visa Inc. revenue.

The operating income from the USAA and Costco deals has been added in the

service revenue since 2016.

In the last two years, revenue per transaction declined slightly, a 1.6% decline in

2015 compared to 2014, and the revenue per cross-border volume has increased

significantly during the same period.

0%

10%

20%

30%

40%

50%

60%

70%

2012 2013 2014 2015

Operating Margin

Visa Europe Visa Percentage

00.5

11.5

22.5

33.5

44.5

5

Costco add-on

USAA add-on

Totalpayment

vol

Service revadd-on

ADD-ONS

From 4/16

Growth Drivers

E-commerce Growth - Global e-commerce sales have steadily grown at 20% per

year and Visa credit and debit cards are the payment method of choice for 24 out

of the 29 largest countries in the world in terms of GDP. The increasing share of

mobile commerce, a subset of e-commerce, allows Visa to further penetrate

payments in less developed markets where consumers have phones, but no

personal computers.

Mobile Payments - Mobile payments is the primary means of penetrating the cash

and check payments that still encompass 85% of total payments. Though

relatively few consumers use mobile payments at this point in time, the number is

increasing at amazing rates and will continue to do so as smartphones saturate

all economies. In the United States, contactless mobile payment usage has

increased from .5% to 5% over 1.5 years, according to Deloitte research. Outside

of the United States, particularly in emerging markets, where consumer credit

systems are not as developed, mobile payments provide a convenient and secure

option that can be penetrated through Visa debit cards.

Visa Europe - The accretive acquisition of Vise Europe will add $2,135MM of net

revenue in 2017, according to consensus estimates. The cost to integrate Visa

Europe will be minimal since Visa Inc. will directly implement its existing products

and services to optimize the European region. Visa Inc. is expected to raise Visa

Europe's 26% operating margin in line with its own at 66%. Visa Europe is

projected for full integration by 2020.

Competitive Positioning

Adaptability - As a young and nimble company, Visa is able to adapt to the rapid

evolution of the payments industry. Without consumer debt to manage, and the

accompanying regulatory requirements, like American Express and Discover

Financial Services, Visa is able to focus on adding value through the convenience

and security of its products. Furthermore, as compared to MasterCard, Visa's

headquarter location in the heart of the San Francisco Bay Area allows the firm to

recruit from the world's top software development talent.

Market Leading Network - As Visa increases its partnerships around the world,

VisaNet is steadily developing into an essential link within global commerce. The

literal and figurative network effect that Visa is building coerces merchants to join

the network. As the number of Visa card usage increases, merchants are more

likely to see a negative impact on sales if they choose not to participate.

Risks

Litigation - Being the largest payment network in an industry with only two major

players, Visa is consistently targeted with litigation. In 2003 Visa was targeted for

charging excessive debit card fees. Visa settled with $2BN plus reduced debit card

fees. The Payment Card Interchange Fee and Merchant Discount Antitrust

Litigation filed in 2012 alleged that the Visa fixed prices with banks even after its

IPO. Once worth as much as $7.25BN, the settlement concluded with $5.7BN.

Wal-Mart Stores Inc. was able to opt-out and appeal this settlement to extract an

additional $5BN. Furthermore, in November 2015, Visa was included in a suit

against online sports gambling sites for collecting transaction fees; demanding

restitution for all the money players lost and the associated transaction fees.

Developing economies

Digital currency

Mobile payments

Product and service

expansion

Increased litigation is a significant risk to Visa's bottom line, but its low capital

expenditure spending decreases risk of default.

Regulation - Increased regulatory scrutiny is a significant risk to Visa's top line

and long term growth. Starting December 2015, Visa Europe's domestic credit

card interchange fee was capped at 0.3% from a previous average of 1.1%. Prior

to this, Europe cross border fees were reduced to 0.3% and both US and Europe

debit card fees were capped at 0.2%. Commercial card fees are the only

remaining fees left uncapped. Aside from fees, regulations have given merchants

more power to pass on fees to consumers and limit card fees through transaction

minimums. The new US RFID requirement will also increase expenses for the

electronic payments industry. However, given Visa's competitive position, this

may provide an opportunity for market share capture.

Valuation

We derived our target price by using the Discounted Free Cash Flow to Firm method. DCF Model A discounted cash flow analysis was used to estimate the intrinsic value of Visa’s share price due to the predictability of cash flows in relation to growth and profitability. This method involves estimating the firm’s value and adjusting it for net debt to arrive at equity value. The primary model is forecasted five years, mainly because of Visa Inc.’s acquisition announcement of Visa Europe, the success of which will result in realisation of synergies over a period of 5 years after which a stability is expected to be attained. This model is driven by free cash flow. The base case for this model was formulated using guidance from historical performance, industry outlook, an assessment of Visa’s competitive positioning, and company guidance on acquisition, revenue, and earnings growth. The DCF is most sensitive to the following factors, the derivations of which are explained below: Weighted Average Cost of Capital (WACC) The cost of equity was calculated using the CAPM. The risk free rate of 1.71% was based on the current yield of 10-year US government bonds (December 2015, Bloomberg). Beta of 1.06 was computed by regressing historical returns with the S&P 500 Index returns from January 2006 to December 2015. The average market return of 7.25% was computed based on geometric mean of US market return during the period of 2006-2015 based on Aswath Damodaran’s report. Applying CAPM to the components above resulted in a cost of equity of 7.58%. With a cost of debt of 4.22%, which has been raised post the announcement of acquisition of Visa Europe, and based on the market value-weighted target capital structure, the WACC is 5.1%. Revenue Growth Revenue growth is based on the robust model for calculation of revenue growth estimation based on geography, historical growth, operating segment and add-ons.

WACC Analysis

Risk Free Rate 1.71%

Beta 1.06

Avg Market Return 7.25%

2015 TTM tax rate 28.51%

Cost of debt 4.22%

Cost of Equity 7.58%

WACC 5.12%

Loan Schedule Principal Eff Int. rate

Exp 2017 1,750 1.36%

Exp 2020 3,000 2.30%

Exp 2022 2,250 2.89%

Exp 2025 4,000 3.26%

Exp 2035 1,500 4.23%

Exp 2045 3,500 4.37%

WACC Analysis

Risk Free Rate 1.71%

Beta 1.06

Avg Market Return 7.25%

2015 TTM tax rate 28.51%

Cost of debt 4.22%

Cost of Equity 7.58%

WACC 5.12%

Discount Rate (WACC) 5.12%

Terminal Growth rate 2.13%

Corporation Value 275,555

Cash 12,837

Debt 15,877

Equity 272,515

IV/share 93.52

Depreciation and Capital Expenditure Visa, being a payment industry player, has depreciation and amortization based on property, equipment and technology. Technology consists of both purchased and internally developed software. Internally developed software primarily represents software utilized by the VisaNet electronic payments network. Historically, the company has not observed any impairment related to the Company’s indefinite-lived or finite-lived intangible assets. Thus, the depreciation & amortization and rate of capital expenditure has been calculated based on the company’s guidance, historical trends and industry trends. Terminal Growth As the industry and market is maturing but with continued signs of improvement, terminal growth rate was based on the degradation factor and expected inflation rate, thus the terminal growth calculated as 2.13% for the year 2021 and thereafter.

Ratio Analysis

Visa's Net income increased 15.2% to $1.19 billion in Oct- 2013 from $1.04 billion in Oct-2012.

As of Sep 30, 2013, cash and cash equivalents and available-for-sale investment securities amounted to $4.26 billion, up from $2.82 billion as of Sep 30, 2012.

Nevertheless, long-term debt remained nil at fiscal 2013-end, while total assets declined to $35.96 billion from $40.01 billion at fiscal 2012-end.

Distinct Growth in 2013 was driven by higher card spending and strong performance across all segments.

Service revenues increased 9.6% year over year to $1.39 billion and are recognized based on payments volume in the prior quarter.

Data processing revenues grew 11.7% from the prior-year (2012) period to $1.19

billion in 2013.

0

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4000

6000

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2015 2016E 2017E 2018E 2019E 2020E

Free Cash Flow Projection

FCF

0

20

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60

Profitability

Net Margin %

Return on Assets %

Return on Equity %

Return on Invested Capital %

-100

0

100

200

300Growth

Revenue % (yoy)

Operating Income %(yoy)

Net Income % (yoy)

Profitability 2015-09 2014-09 2013-09 2012-09 2011-09 2010-09 2009-09

Net Margin % 45.59 42.81 42.28 20.57 39.73 36.78 34.05

Return on Assets % 16.06 14.59 13.11 5.73 10.71 9.03 7.0

Return on Equity % 22.1 20.04 18.28 7.93 14.19 12.31 10.62

Return on Invested Capital % 22.1 20.04 18.28 7.93 14.26 12.47 10.91

GROWTH RATIOS 2015-09 2014-09 2013-09 2012-09 2011-09 2010-09 2009-09

REVENUE % (YOY) 9.27 7.85 13.02 13.42 13.92 16.7 10.35

Operating Income% (YOY) 17.76 6.33 238.43 -60.8 18.89 29.71 30.94

EPS % (YOY) 19.72 13.57 140.19 -38.76 28.68 96.57 112.5

Client incentives which are a contra-revenue item, came in at $680 million in

2013, and accounted for 18.6% of gross revenues. International transaction

revenues, which are driven by cross-border payments volume, rose 12.9% over

the prior-year quarter to $899 million. Other revenues, earned through Visa

Europe’s licensing fee, were $183 million, improving 6.4% from $172 million in

the year-ago quarter. Net operating revenue in the fiscal first quarter of 2014 was

$3.2 billion, an increase of 11% over the prior year, driven by strong growth in

service revenues, data processing revenues and international transaction

revenues. The strengthening of the U.S. dollar impacted net operating revenues

by 2 percentage points of negative growth during the quarter.

However the effect of exchange rate movements was substantially mitigated

through their hedging program. Total operating expenses inched up 1% year over

year to $1.22 billion in 2013. Consequently, Visa’s operating income grew 15%

to $1.75 billion, while operating margin rose to 58.9% in 2013 from 55.7% in 2012

period.

Visa Inc's diluted earnings per share for the three months ended in Dec 2015 was

$0.80. Its diluted earnings per share for the trailing twelve months (TTM) ended

in Dec 2015 was $2.74. During past 12months Visa Inc's average earnings per

share Growth rate was 22.09% per year. During the past 3 yrs, the average

earnings per share growth rate were 57.8% per year. During the past 5 years the

average earnings per share growth rate was 32.68%.

The dip in free cash flow by almost half the amount in 2013, was due to stock

buy-back. During the three months ended December 31, 2013, the Company

repurchased 5.5 million shares of class A common stock, at an average price of

$199.56 per share, using $1.1 billion of cash on hand. At December 31, 2013, the

Company had $4.2 billion of remaining funds, authorized by the board of

directors, available for share repurchase under the current program.

Competitors Analysis

AS OF DEC 2015

Source: Morningstar

Ticker Share Price Mkt Cap (In mil)

P/Rev P/E P/B EV/Ebitda EV/Rev NI (In mil)

EPS

V 72.03 155,286 12.4 25.9 5.3 54.6 42.7 6,700 0.8

MA 87.21 95,723 10.1 25.7 15.9 73.6 42.5 3,808 0.9

AXP 53.61 52,342 1.6 9.5 2.5 73.05 73.1 5,711 1.3

DFS 46.44 19,523 2.4 9.4 1.8 59.9 59.9 2,201 1.4

0

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2000

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6000

7000

2015 2014 2013 2012 2011 2010 2009

Historical Net Income

0

0.5

1

1.5

2

2.5

3

2015 2014 2013 2012 2011 2010 2009

Liquidity Ratios

Current Ratio Quick Ratio

The payment card industry in terms of transactions is dominated by Visa and

MasterCard, who make up 58% and 26% of the market, respectively. The tough

part when comparing these two giants is getting an apples to apples comparison

on their market shares because their data points do not align, with the most

significant problem arising out of MasterCard not reporting the transaction and

volume figures of its Maestro branded debit cards, despite there being more

Maestro debit cards outstanding (701M) than MasterCard branded debit cards

(665M). A rough estimate indicates that MasterCard's overall transaction count

could be ~50% more than what is shown in the figure above, increasing

MasterCard's market share to 35% and decreasing Visa's to 51%. The Visa and

MasterCard data points that are the least susceptible to speculation in regards to

their comparability are those related to US credit and total cards outstanding. The

charts shown earlier demonstrate that Visa is going strong in US credit, with a

faster growing and larger market share of both total volume and cards issued

compared to MasterCard. When excluding US Credit, Visa and Visa Europe still

have 34% more cards outstanding, but MasterCard has been issuing cards at a

CAGR of 8.3% since 2011, compared to 6.5% for Visa. This indicates that

MasterCard could be doing any of the following or a combination thereof: a)

focusing on gaining clients at a faster pace outside of the US; b) more effectively

incentivizing their international clients to issue cards (over the last 3 years ending

Dec 31, MasterCard's client incentives were 26% of gross revenues vs. 17% for

Visa); and/or c) simply piggy-backing off of Visa's market penetration, but this may

be unlikely as MasterCard claims to be in over 210 countries and territories, about

the same as Visa, which claims to be in over 200. MasterCard seems to be gaining

strength in faster card issuing areas and it also recently beat out Visa for contracts

with two major issuers: Citi and Brazil's Itau.

Macroeconomic risk to the industry

Macroeconomics - Slowing macroeconomic growth is a significant risk to Visa's

short and medium term revenues. Emerging markets, the main growth regions

after the 2008 financial crisis, are seeing a significant reduction in growth as they

transition away from exports and bottoming commodity prices. Furthermore,

recent turmoil in the financial markets has led to an additional reduction in

forecasts. Having a high correlation with discretionary spending, the payments

industry will experience a significant impact. The tightening of U.S. monetary

policy when the remaining world is loosening will further exacerbate the situation

for Visa's international revenues.

58%26%

16%

MARKET SHARE

Visa MasterCard Others

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

20

07

20

08

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09

20

10

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11

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12

20

13

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14

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15

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E

United States Europe

International World

0

0.005

0.01

0.015

0

0.5

1

1.5

2

2.5

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017E

JPY

/USD

Stan

dar

d S

cale

Annual Mean FX

EUR/USD GBP/USD CAD/USD AUD/USD JPY/USD

Appendices:

HISTORICAL DATA

2013-06 2013-12 2014-03 2014-06 2014-12 2015-03 2015-06 2015-12

REVENUE 3,001$ 3,155$ 3,163$ 3,155$ 3,382$ 3,409$ 3,518$ 3,565$

NET INCOME 1,225$ 1,407$ 1,598$ 1,360$ 1,569$ 1,550$ 1,697$ 1,941$

O/S SHARES 2060 2020 2004 1984 1976 1963 1955 1937

EPS 0.47 0.55 0.63 0.54 0.64 0.63 0.69 0.80

SHARE PRICE 45.69$ 55.67$ 53.97$ 52.68$ 65.55$ 65.41$ 67.15$ 77.55$

MKT CAP 94,121.40 112,453.40 108,155.88 104,517.12 129,526.80 128,399.83 131,278.25 150,214.35

LESS CASH 2,058$ 2,121$ 1,820$ 2,058$ 2,085$ 2,039$ 2,147$ 12,837$

ADD DEBT 14,910

EV 92063 110332 106336 102459 127442 126361 129131 152287

EBITDA 1929 2184 2155 2129 2358 2406 2392 2788

EV/EBITDA 48 51 49 48 54 53 54 54.6

EV/REV 31 35 34 32 38 37 37 42.7

P/REV 0.0152 0.0176 0.0171 0.0167 0.0194 0.0192 0.0191 0.0218

P/E 97 101 86 98 102 104 97 97

2013-06 2013-12 2014-03 2014-06 2014-12 2015-03 2015-06 2015-12

REV 2,126$ 2,177$ 2,377$ 2,503$ 2,416$ 2,230$ 2,390$ 2,530$

NET INCOME 623$ 870$ 931$ 1,015$ 801$ 1,020$ 921$ 977$

O/S SHARES 1210 1214 1185 1157 1153 1148 1138 1130

EPS 0.51 0.73 0.8 0.88 0.69 0.89 0.81 0.86

SHARE PRICE 57.45$ 83.55$ 74.70$ 73.47$ 86.16$ 86.39$ 93.48$ 97.36$

MKT CAP 69515 101430 88520 85005 99342 99176 106380 110017

LESS CASH 3,413$ 3,599$ 4,019$ 2,878$ 5,137$ 4,207$ 3,361$ 5,747$

ADD DEBT 0 0 1494 1494 1494 1494 1494 3287

EV 66102 97831 85995 83621 95699 96463 104513 107557

EBITDA 1299 989 1360 1469 1107 1444 1350 1461

EV/EBITDA 51 99 63 57 86 67 77 73.6

EV/REV 31 45 36 33 40 43 44 42.5

P/REV 0.027 0.038 0.031 0.029 0.036 0.039 0.039 0.038

P/EPS 113 114 93 83 125 97 115 113

2013-06 2013-12 2014-03 2014-06 2014-12 2015-03 2015-06 2015-12

REV 8,301$ 8,547$ 8,199$ 8,657$ 8,329$ 7,950$ 8,284$ 8,193$

NET INCOME 1,405$ 1,308$ 1,432$ 1,529$ 1,477$ 1,525$ 1,473$ 1,266$

O/S SHARES 1090 1067 1060 1052 1041 1019 1009 994

EPS 1.28 1.23 1.34 1.44 1.41 1.49 1.43 1.24

SHARE PRICE 75.52$ 90.73$ 90.03$ 94.87$ 93.04$ 78.12$ 77.72$ 69.55$

MKT CAP 626891.52 775469.31 738155.97 821289.59 774930.16 621054 643832.48 569823.15

LESS CASH 23,129$ 19,486$ 20,740$ 18,430$ 22,288$ 23,572$ 21,071$ 19,938$

ADD DEBT 52675 55330 54095 54836 57955 54712 52740 48653

EV 656437.52 811313.31 771510.97 857695.59 810597.16 652194 675501.48 598538.15

EBITDA 7881 8301 8547 8199 8329 7950 8284 8193

EV/EBITDA 83.3 97.7 90.3 104.6 97.3 82.0 81.5 73.05

EV/REV 79.1 94.9 94.1 99.1 97.3 82.0 81.5 73.1

P/REV 0.0091 0.0106 0.0110 0.0110 0.0112 0.0098 0.0094 0.0085

P/EPS 59 74 67 66 66 52 54 56

2013-06 2013-12 2014-03 2014-06 2014-12 2015-03 2015-06 2015-12

REV 2,041$ 2,062$ 2,078$ 2,172$ 2,190$ 2,171$ 2,175$ 2,188$

NET INCOME 602$ 593$ 631$ 644$ 644$ 586$ 599$ 612$

O/S SHARES 489 482 471 466 460 448 441 433

EPS 1.2 1.2 1.31 1.35 1.37 1.28 1.33 1.38

SHARE PRICE 47.64$ 55.95$ 58.19$ 61.98$ 65.49$ 56.35$ 57.62$ 53.62$

MKT CAP 97233.24 115368.9 120918.82 134620.56 143423.1 122335.85 125323.5 117320.56

LESS CASH 5,744$ 6,554$ 8,731$ 6,879$ 7,284$ 11,814$ 10,595$ 10,250$

ADD DEBT 18033 20474 20182 20057 20918 22544 22924 24099

EV 109522.24 129288.9 132369.82 147798.56 157057.1 133065.85 137652.5 131169.56

EBITDA 1964 2041 2062 2078 2190 2171 2175 2188

EV/EBITDA 55.8 63.3 64.2 71.1 71.7 61.3 63.3 59.9

EV/REV 53.7 62.7 63.7 68.0 71.7 61.3 63.3 59.9

P/REV 0.023 0.027 0.028 0.029 0.030 0.026 0.026 0.025

P/EPS 39.7 46.6 44.4 45.9 47.8 44.0 43.3 38.9

Master card

VISA

AMEX

DFS

Projected Financial Statement

2015 2016E 2017E 2018E 2019E 2020E

Total operating revenues 15,425 15,974 18,262 19,703 21,226 22,865

Operating Expenses:

Personnel 2,599 2,692 2,733 2,820 2,846 2,892

Marketing 954 983 1,692 2,213 2,577 2,999

Network and processing 608 632 697 730 780 820

Professional fees 345 362 394 412 489 513

Depreciation and amortization

635 667 690 553 519 518

General and administrative 831 1,032 1,076 1,128 1,254 1,378

Litigation provision 14 17 17 19 19 19

Total operating expenses 5,986 6,385 7,299 7,875 8,484 9,139

Operating income 9,439 9,589 10,963 11,828 12,742 13,726

Non-operating (expense) income

(523) (505) (455) (405) (365) (324)

Transaction related cost* (150) (150) (150) (150) (150)

Income before income taxes

8,916 8,934 10,357 11,273 12,227 13,251

Income tax provision** 2,640 2,904 3,367 3,664 3,975 4,308

Net income 6,276 6,209 6,990 7,608 8,252 8,943

Cash and cash equivalents 8,553 8,131 9,660 8,278 10,804 11,638

Long term debt 14,910 15,877 15,877 15,877 14,127 14,127

*Integration related cost

** Visa Europe has a tax rate of 35%

Note: Projected statements have been prepared based on pro forma financial statements (Visa Inc and Visa Europe

consolidated) as press released by Visa (www.pressreleases.visa.com)

2013-06 2013-12 2014-03 2014-06 2014-12 2015-03 2015-06 2015-12

VISA EV/EBITDA 47.7 50.5 49.3 48.1 54.0 52.5 54.0 54.6

MA EV/EBITDA 50.9 98.9 63.2 56.9 86.4 66.8 77.4 73.6 Avg multiple VISA EBITDAEV DEBT EV-DEBT ADD CASH TARGET PRICE

MEDIAN 49.3 74.7 56.3 52.5 70.2 59.7 65.7 64.1 61.6 2788 171,659.64 14,910 156,749.64 169,586.6 87.6

VISA EV/REV 30.7 35.0 33.6 32.5 37.7 37.1 36.7 42.7

MA EV/REV 31.1 44.9 36.2 33.4 39.6 43.3 43.7 42.5 Avg multiple VISA REV EV DEBT EV-DEBT ADD CASH TARGET PRICE

MEDIAN 30.9 40.0 34.9 32.9 38.6 40.2 40.2 42.6 37.5 3565 133,830.15 14,910 118,920.15 131,757.15 68.02

VISA P/REV 0.015 0.018 0.017 0.017 0.019 0.019 0.019 0.022

MA P/REV 0.027 0.038 0.031 0.029 0.036 0.039 0.039 0.038 Avg multiple REV VISA TARGET PRICE

MEDIAN 0.021 0.028 0.024 0.023 0.028 0.029 0.029 0.030 0.027 3565 94.52

VISA P/E 97.2 101.2 85.7 97.6 102.4 103.8 97.32 96.94

MA P/EPS 113 114.5 93.4 83.5 124.9 97.1 115.4074 113.2093 Avg multiple EPS VISA TARGET PRICE

MEDIAN 105 108 90 91 114 100 106 105 102 0.8 81.83

Calculation of Free Cash Flow (DCF model):

2015 2016E 2017E 2018E 2019E 2020E

Revenues 15,425 15,974 18,262 19,703 21,226 22,865

Net Margin 40.7% 37.7% 38.3% 38.6% 38.9% 39.1%

Net Income 6,276 6,030 6,990 7,608 8,252 8,944

Op Income 9,439 9,589 10,963 11,828 12,742 13,726

D&A 635 667 690 553 519 518

Capex 1,583 1,769 1,862 2,048 1,871 1901

FCF 6,061 6,210 7,172 7,930 8,620 9,326

Current WACC 5.12% Terminal

Growth 2.13%

2015E 2016E 2017E 2018E 2019E 2020E TV (g=2.13%)

FCF 6,061 6,210 7,172 7,930 8,620 9,326 3,18,391

PV 6,061 5,908 6,491 6,826 7,059 7,265 2,35,945

Corporation Value 2,75,555

Calculation Revenue growth:

Revenue by geography (in $mil) FY15 FY16 FY17 FY18 FY19 FY20 5Y CAGR

Total Opreating Revenue of Visa Inc. 13,880 15,009 16,092 17,185 18,315 19,493

US 7,872 7,872 8,373 8,834 9,277 9,709 5.6%

Rest of America 797 845 896 949 1,006 1,067 6.0%

Africa/ Middle East 708 779 857 942 1,036 1,140 10.0%

Asia Pacific 2,790 3,069 3,376 3,713 4,085 4,493 10.0%

Euroup 2,179 2,310 2,449 2,595 2,751 2,916 6.0%

Visa Europe add-on - 954 2,022 2,144 2,272 2,409 6.0%

TotaL operating revenue including VE 13,880 15,963 18,114 19,329 20,587 21,902

Revenue by opreating segment (in $mil) FY15 FY16 FY17 FY18 FY19 FY20 5Y CAGR

Total operating revenue 13,880 14,916 16,088 17,353 18,718 20,191

Service revenues 6,302 6,973 7,566 8,209 8,907 9,664 8.5%

Data processing revenues 5,552 5,996 6,476 6,994 7,553 8,158 8.0%

International transaction revenues 4,064 4,348 4,653 4,979 5,327 5,700 7.0%

Other revenues 823 872 925 980 1,039 1,101 5.9%

Client incentives (2,861) (3,274) (3,531) (3,809) (4,109) (4,432)

Total operating revenue including VE 15,870 18,148 19,577 21,119 22,784

Glossary:

Payments volume: The total monetary value of transactions of goods and services that are purchased with cards in a

certain period. For Visa, it includes purchases made through its brands such as Visa, Visa Electron and Interlink.

Cash volume: An aggregate dollar amount of cash disbursements acquired with cards in a certain period, it contains cash

access transactions, balance access transactions, balance transfer and convenience checks.

Total volume: The sum total of payment volume and cash volume.

Nominal volume: An aggregate dollar amount of card purchases that is calculated by applying an established U.S.

dollar/local currency exchange rate for each local currency in which Visa Inc. volumes are reported. These exchange rates

are calculated on a quarterly basis using the established exchange rate for each quarter.

Constant volume: the purchase volume reported by using local currency information to remove the effect of the foreign

exchange rate volatility in evaluating performance.

Point-of-sale (POS) volume: A representation of the amount spent at retailers, without any cash access transaction volume.

POS volume is similar to payment volume.

Processed transactions: All transactions processed on Visa’s networks, includes transactions that are made on Visa, Visa

Electron, Interlink and PLUS cards.

Total transactions: The sum total of payment transactions and cash transactions.

Revenue forecast by historical growth rate FY15 FY16 FY17 FY18 FY19 FY20 2Y CAGR

Total operating revenues 13,880 15,070 16,423 17,896 19,503 21,255

Service revenues 6,302 6,974 7,568 8,212 8,911 9,669 9%

Data processing revenues 5,552 6,072 6,640 7,262 7,942 8,686 9%

International transaction revenues 4,064 4,450 4,873 5,337 5,844 6,400 10%

Other revenues 823 882 946 1,014 1,087 1,166 7%

Client incentives (2,861) (3,308) (3,605) (3,928) (4,281) (4,666)

Total operating revenue including VE 13,880 16,024 18,482 20,121 21,905 23,848

(in $mil) FY15 FY16 FY17 FY18 FY19 FY20

Visa Europe revenue forecast 1,817 1,908 2,060 2,224 2,401 2,593

Visa Europe add-on revenue 0 954 2,060 2,224 2,401 2,593

Credit Ratings 9/30/2015

Standard and Poor’s Moody’s

Debt type Rating Outlook Rating Outlook

Short-term unsecured A-1 Stable P-1 Stable

Long-term unsecured A+ Stable A1 Stable

Title of Securities: 1.200% Senior 2.200% Senior 2.800% Senior 3.150% Senior 4.150% Senior 4.300% Senior

Notes due 2017 Notes due 2020 Notes due 2022 Notes due 2025 Notes due 2035 Notes due 2045

Aggregate principal $1,750,000,000 $3,000,000,000 $2,250,000,000 $4,000,000,000 $1,500,000,000 $3,500,000,000

amount sold:

Maturity date: December 14, December 14, December 14, December 14, December 14, December 14,

2017 2020 2022 2025 2035 2045

Public offering 99.947% of the 99.915% of the 99.861% of the 99.634% of the 99.865% of the 99.833% of the

price: principal principal principal principal principal principal

amount amount amount amount amount amount

Interest payment Semi-annually Semi-annually Semi-annually Semi-annually Semi-annually Semi-annually

dates: on each on each on each on each on each on each

June 14 and June 14 and June 14 and June 14 and June 14 and June 14 and

December 14, December 14, December 14, December 14, December 14, December 14,

commencing commencing commencing commencing commencing commencing

on June 14, on June 14, on June 14, on June 14, on June 14, on June 14,

2016 2016 2016 2016 2016 2016

Interest rate: 1.200% 2.200% 2.800% 3.150% 4.150% 4.300%

Key

Executives

Executive Visa Career History Description

Charles W. Scharf,

Director and Chief

Executive Officer, 50

Chief Executive Officer

and director since 2012, a

director of Visa Inc. from

2007 to 2011 and director

of Visa U.S.A. from 2003

to 2007

Previously, Mr. Scharf was a Managing Director of One Equity Partners, the private investment arm of JPMorgan Chase & Co. From 2004 to 2011, Mr. Scharf served as Chief

Executive Officer of Retail Financial Services at JPMorgan Chase & Co. and from 2002 to

2004 he served as Chief Executive Officer of the retail division of Bank One Corporation. Mr. Scharf also served in multiple Chief Financial Officer positions at Bank One

Corporation, Citigroup, Inc., and Salomon Smith Barney. He was a member of the

Supervisory Board of SMARTRAC N.V., and a director of Travelers Property Casualty Corporation. He currently serves as a director of Microsoft Corporation and as a member of

the Board of Trustees of Johns Hopkins University. Mr. Scharf holds a Bachelor of Arts

degree from Johns Hopkins University and a Master of Business Administration degree from New York University.

Vasant M. Prabhu,

Executive Vice

President and Chief

Financial Officer, 55

Chief Financial Officer

since February 2015

Former Chief Financial Officer for NBC Universal where he oversaw the company's financial planning and operations and played a key role in NBC Universal's strategic

business initiatives. Also managed the Operations and Technical Services division. Held

numerous executive positions at Starwood Hotels & Resorts Worldwide, Inc., Safeway, Inc., and the Information and Media Group, The McGraw-Hill Companies. Held senior

positions at PepsiCo. He Started his career at Booz, Allen & Hamilton, where he rose to

become a Partner serving Media and Consumer companies. Member of the Board of Directors of Mattel, Inc. Received his M.B.A. from the University of Chicago and a B.S. in

Engineering from the Indian Institute of Technology.

William M. Sheedy,

Executive Vice

President, Corporate

Strategy, M&A and

Government

Relations, 48

Global Executive,

Corporate Strategy, M&A

and Government Relations

since 2013 and a variety

of leadership roles since

2006.

From 1990 until joining Visa U.S.A. in 1993, he was employed as a Senior Financial

Manager in Corporate Finance at Ford Motor Company's First Nationwide Bank. Mr. Sheedy holds a Bachelor of Science degree in Finance from West Virginia University and a

Master of Business Administration degree from the University of Notre Dame.

Rajat Taneja,

Executive Vice

President,

Technology, 51

Executive Vice President,

Technology since

November 2013

Mr. Taneja was Executive Vice President and Chief Technology Officer of Electronic Arts Inc., an interactive entertainment software company, from October 2011 until November

2013. From 1996 until 2011, he worked at Microsoft Corporation, a global device

manufacturer and software solutions provider, including most recently as the Corporate Vice President, Commerce Division in 2011 and the General Manager and Corporate Vice

President, Online Services Division from 2007 to 2011. Mr. Taneja holds a Bachelor of Engineering degree in Electrical Engineering from Jadavpur University and a Master of

Business Administration degree from Washington State University. Currently on the Board

of Directors for Ellie Mae, Inc.

Kelly Mahon Tullier,

Executive Vice

President, General

Counsel and

Corporate Secretary,

49

Executive Vice President

and General Counsel of

Visa Inc. since 2014, and

Deputy General Counsel

from June 2014 to October

2014.

Prior to joining Visa Inc., Ms. Mahon Tullier was the Senior Vice President and Deputy General Counsel of PepsiCo Inc. and the Senior Vice President and General Counsel of

PepsiCo's Asia Pacific, Middle East and Africa Sector. She also served as the Vice

President and General Counsel of Frito-Lay, Inc., the Vice President and Assistant General Counsel of Frito-Lay, and the Vice President and Trademark Counsel of Frito-Lay. Before

joining Frito-Lay, Ms. Mahon Tullier was an Associate at Baker Botts LLP, an international

law firm and a Judicial Clerk for Judge Sidney A. Fitzwater of the U.S. District Court for the Northern District of Texas. Ms. Mahon Tullier holds a Bachelor of Arts degree in

Political Science, with a minor in English Literature, from Louisiana State University and a

Juris Doctor degree from Cornell Law School.

Mary Ellen Richey,

Vice Chairman, Risk

and Public Policy, 66

Vice Chairman, Risk and

Public Policy of Visa Inc.

since September 2014 and

Executive Vice President

and Chief Legal Officer

from January 2014 until

September 2014 and Chief

Enterprise Risk Officer

from 2007 until 2014.

Previously, Ms. Richey served as the Senior Vice President of Enterprise Risk Management and Executive Vice President of Card Services at Washington Mutual Inc. She served as

Vice Chairman of Providian Financial Corporation until its acquisition by Washington

Mutual. At Providian, Ms. Richey also served as the Vice Chairman, Enterprise Risk

Management and Chief Legal Officer, General Counsel, Chief Enterprise Risk Officer, and

Corporate Secretary. Ms. Richey was a member of the board of directors of Monitise plc.

She received a B.A. in Linguistics and Far Eastern Languages from Harvard University and a J.D. from Stanford Law School, and served as a law clerk for Associate Justice Lewis F.

Powell, Jr. of the United States Supreme Court.

Insider Holdings

Title Total

Shares

TTM Change

%

Shares O/S

%

Market

Value

William M. Sheedy 235528 179.24 0.0001 $ 16,126,602

Executive Vice President, Corporate Strategy, M&A

and Government Relations

Charles W. Scharf 233844 226.83 0.0001 $ 16,011,298

Director and Chief Executive Officer

Rajat Taneja 115947 223.91 0.0001 $ 7,938,891

Executive Vice President, Technology

Vasant M. Prabhu 95461 237.88 0 $ 6,536,214

Executive Vice President and Chief Financial Officer

Cathy E. Minehan 75612 315.84 0 $ 5,177,153

Independent Director

Kelly Mahon Tullier 70241 239.48 0 $ 4,809,401

Executive Vice President, General Counsel and

Corporate Secretary

Ryan Mcinerney 62810 136.27 0 $ 4,300,600

President

John A.c. Swainson 62472 319.33 0 $ 4,277,457

Independent Director

David J. Pang 61612 319.61 0 $ 4,218,573

Independent Director

Robert W. Matschullat 57368 300 0 $ 3,927,986

Chairman of the Board

Mary Ellen Richey 31260 194.02 0 $ 2,140,372

Vice Chairman, Risk and Public Policy

Suzanne Nora Johnson 18675 12.23 0 $ 1,278,677

Independent Director

Alfred F. Kelly 6300 300 0 $ 431,361

Independent Director

Mary B. Cranston 887 -71.3 0 $ 60,732

Independent Director

All Key Insiders 1128017 2.2886 0.0003 $ 77,235,324

Main resources

Boston Consulting Group--Global Payment Report (October, 2015)

McKinsey & Co-- Global Payment Report (October, 2015)

A.T. Kearny report--https://www.atkearney.com/paper/-/asset_publisher/dVxv4Hz2h8bS/content/winning-the-growth-

challenge-in-payments/10192

IBISWorld--52232 Credit Card Processing & Money Transferring in the US Industry Report (November, 2015)

Visa Europe annual report (2011-2015)

Visa Inc. Operational Performance Data

Insider Holdings Date Shares Held Change(Shares) Change(%)

Value(in

1,000s)

VANGUARD GROUP INC. 12/31/2015 114,903,414 2,667,567 2.38 8,091,498

FMR LLC. 12/31/2015 109,633,954 3,657,018 3.45 7,720,423

PRICE T ROWE ASSOCIATES INC. 09/30/2015 81,881,728 -8,846,382 -9.75 5,766,111

STATE STREET CORP. 9/30/2015 76,397,655 80,617 0.11 5,379,923

BLACKROCK INSTITUTIONAL TRUST CO.

N.A. 12/31/2015 52,202,177 279,396 0.54 3,676,077

MASSACHUSETTS FINANCIAL SERVICES

CO. 12/31/2015 48,144,036 -6,254,964 -11.5 3,390,303

SANDS CAPITAL MANAGEMENT LLC. 12/31/2015 44,284,945 -1,986,897 -4.29 3,118,546

CAPITAL WORLD INVESTORS 12/31/2015 42,874,040 452,115 1.07 3,019,190

MORGAN STANLEY 12/31/2015 31,698,355 4,002,722 14.45 2,232,198

JPMORGAN CHASE & CO. 12/31/2015 30,695,949 901,155 3.03 2,161,609

JENNISON ASSOCIATES LLC. 12/31/2015 27,460,581 -594,850 -2.12 1,933,774

BLACKROCK FUND ADVISORS 12/31/2015 26,691,452 1,933,151 7.81 1,879,612

BANK OF NEW YORK MELLON CORP. 12/31/2015 23,624,961 -652,738 -2.69 1,663,670

AMERIPRISE FINANCIAL INC. 12/31/2015 23,309,044 -223,676 -0.95 1,641,423

NORTHERN TRUST CORP. 12/31/2015 21,659,184 -1,370,228 -5.95 1,525,240