10/30/2018 Kathleen Cai, Oufan Jin, Xiaoling Zeng

Agenda Executive Summary and Portfolio Weight Macroeconomics and Industry Overview Company and SWOT Analysis Valuation Analysis Summary and Appendix

Macroeconomics Overview Proposed Recommendation Executive Summary The macroeconomics condition is volatile with Trade War and the uncertainty of foreign currency exchange rate, while the general economics perform well and the raw materials price maintain stable. Macroeconomics Overview Crown Craft sits in a highly competitive retail environment, while experiencing a continued growth in online baby product sales. However, the declining birth rate poses a challenging factor to this industry overall. Industry Overview Crown Craft, Inc. is one of America’s largest producers of infant bedding, toddler bedding, bibs and developmental toys. The firm operates through three subsidiaries and sale of products are generally made directly to retailers. Company Overview After conducting Comparable Companies Analysis and Discounted Cash Flow Analysis, we came to a final enterprise value range of $38 to $65 million, implying a share price range of $4 to $5.6. We recommend a hold. Proposed Recommendation

Portfolio Yield By Cost Portfolio Weight By Value

Stock Market Prospects Current Market Price of $5.21 (as of 10/29/2018) 52 Week range of $5.00 - $7.5375 (10/11/18-1/17/18) Relatively poor performance compared to Nasdaq index Bought in at $9.37 for 1,000 shares Two Years Stock Price Performance Source: Yahoo Finance

Stock Market Prospects, Con’t Dividend yield of 6.15% (FWD 0.32) Revenue continuously missed the expectation over the past 4Qs Actual EPS over the past 4Qs continuously lower than expected EPS TTM EPS (as of 10/30/2018) is $0.275 and PE ratio is 19x Dividends over the past 5 years Expected EPS vs Actual EPS Source: Yahoo Finance Source: Yahoo Finance

Macroeconomic Overview Source: United States Census Source: Bureau of Labor Statistics Source: United States Census

Macroeconomics Overview Current Trade War between U.S and China Volatility of foreign currency exchange rate Cotton price mainly stay stable Wage in China continue to raise Foreign Currency Exchange Rate Historical Price of Cotton Source: OANDA Source: MacroTrend

Industry Overview

Rivalry Porter’s Five Forces Analysis Rivalry: strong Barriers to Entry Supplier Power Threat of substitutes Buyer Power Rivalry: strong Limited market place Barrier to entry: medium Multiple distribution channel require Suppliers Power: weak Low cost to switch suppliers Threat of substitutes: weak Product differentiation and limited substitutes Buyers power: high Buyers have many choices in the market

Company History

Company Overview Business Description Dividend Focus Global View Crown Craft is one of America’s largest producers of infant, toddler and juvenile consumer products Through years of development, the firm owns attractive lines of leading name-brands and private label merchandise It sits in the traditional stable niche of the retail industry and seeks to continue growth 27 4 373 22 Global View Product Description 34 Three pillars of Infant product: crib bedding, infant bedding & Creative and stylish blankest and accessories Neat solution products: Neat solutions for massy occasions (reusable bibs and disposable bibs) Accessories: floor topper, multi-use pads, potty topper

Subsidiaries Source: Crown Craft Inc. Investor conference presentation

Insider Holding Insider Breakdown source: Nasdaq

Sales Breakdown and Customer Overview Source: Crown Craft Inc. Investor conference presentation

S W T O T SWOT Analysis Weakness Strength Low market share Strong reliance of license Agreement Diversify products Product design Multiple distribution channel S W Expand international market E-Commercial Opportunities T O Closure of Toys R US Expired Licensed Agreement with Disney Large amount of debt Threat T

Comparable Company Analysis Summer Infant Inc. Summer Infant is an American retail company that provide baby clothes and wide range of accessories Carter’s Inc. Carter’s is a major American manufacturer and retailers of children’s apparel mainly focusing in U.S Dorel Industries Inc. Dorel Industries Inc. design and manufacture for three areas: juvenile products, bicycles and home furnishings Children’s Place Inc. Children’s Place Inc. is an American specialty retailer of children’s apparel and accessories Citi Trends Inc. Citi Trends is an American retail clothing company that provide fashion & home goods, women and kids clothes Source: Capital IQ

Comparable Company Analysis

Financial Analysis Return and Gross Margin Asset Turnover and Quick Ratio

Financial Projections Creative team for design (primarily internally) Brand recognition Strong intellectual property to drive sales Recent acquisition of Carousel (August 2017) and Sassy (Dec 15, 2017) Sassy: developmental toy, feeding and baby care product line Carosel: a manufacturer and online retailer of premium infant, toddler/kids' bedding and nursery décor Overall sluggish retail environment for baby products and in general Toys ‘R’ Us filing bankruptcy Declining birth rate High competition with other retailers and manufactures in quality, design, price, brand name recognition, service and packaging Expiration of licensed products with Walt Disney Position Factors Negative Factors

Financial Statement Trend Demonstration Income Statement Projections Asset Information

Key Information of Financial Statements Free Cash Flow Cash Ratio Working Capital Dividend Yield Edit

Other Key Ratios P/E Ratio Earnings per Share Return on Equity Quick Ratio

Income Statement Projections (in ‘000s)

Balance Sheet Projections (in ‘000s)

Statement of Cash Flow Projections (in ‘000s)

Discounted Cash Flow Analysis (in ‘000s) Assuming a WACC of 11.1% after including 2% size premium Assuming an EBITDA exit multiple of 6.0x Perpetual growth rate of 3% Highlighted an enterprise valuation range of $41.6 - $48.5mm

Valuation Output (in ‘000s) Recommendation: HOLD (Downgrade to SELL if growth doesn’t match expectations) edit

Appendix

Fixed and Intangibles Asset Schedule (in ‘000s)

Working Capital Schedule (in ‘000s)

Equity Schedule (in ‘000s)

Debt Schedule (in ‘000s)

Interest Expense Schedule (in ‘000s)

Comparable Analysis (in millons)

WACC Calculation (in ‘000s)

Discounted Cash Flow Analysis (in ‘000s)