Transcript: History Financial Data Collected from 2011 to 2013 Below -2.22 threshold, however certain variable discrepancies are observed IPO Forecast M-Score SGAI and AQI Moderate Increase DEPI, GMI and SGI Moderate Decrease Moderate Decrease in LVGI, Company notes a decrease use of Credit Facilities Large Fluctuation of TATA, 82.52% increase over last year Questions?? Substitutes: N/A Competition: Highly Competitive Market over saturated Declining market share Dooney & Burke Kate Spade Michael Koors Buyers: Recent changes in consumer behavior from financial crisis and technology Suppliers: Increased unit costs eroding margins Industry: Luxury Accessories 2000-2012 Non-Financial Analysis Historical Data Intrinsic Value Analysis Filing date stock price $52.70 Sixty day average $53.06 To compute a PEG ratio of 1, implicit g would be significantly higher than 7% Cost of Equity M-Score Variables Founded in Manhattan in 1941 High-quality Billfolds and Handbags Late 1960s expanded into small accessories and eyewear 1985 sale to Sara Lee for $30M 70% of Sales are to North American customers 420 Stores in Europe and Asia 544 Full Priced and Outlet Stores in the US Company announced commencement of semi-annual sales (30-50% discount) Company announced 70 North American store closings for FY 2015 Stock Price fell 31.35% since March 25, 2014 Forecast Horizon and Terminal Value Trends in Business and Strategy PE = 8.98 PB = 6.31 2000 IPO, spinoff from Sara Lee Initial Stock Price was approximately $16 per share Raised $118.08M "Old-World" US Firm, unlike increasing presence of Tech and service companies 2013 Financial Statement Valuation and Forecast Net Sales is highly correlated to Number of Stores and Square Footage Decreasing trend in Operating Income per Store and Net Sales per Store Equity Valuation CAPM Model Value of 10.32% Risk-free Rate 2.55% ß of 1.16 Risk Premium of 6.7% Market Cap of $9.35B Abnormal Earnings Enjoyed increasing year-over-year sales growth, store growth and stock appreciation However, failed to offer differentiated products, competition of similar but comprehensive luxury lifestyle brands increased Recent decrease in market share Optimistic Valuation Decline Stage Valuation Lower Growth Valuation
Transcript: Business Valuation Introduction Our team Robert Diaz Iliana Gonzalez Yamanica St. Marc Ada Stival Business Our Business Mini supermarket Price: $299,000 Gross Revenue: $1,041,000 FF&E: $80,000 Inventory: $140,000 Cash flow: $183,888 Pros Pros & Cons Low rent - $4253 Furniture & equipment included Training & Support - 14 days & $0 Lotto: $1700/mo Rent: $1000/mo Cons Cons Perishable items Inventory Specialization Valuation Method Valuation Method Cost Approach Method Replacement cost of asset Deduction for wear & tear Evaluate Cost of: Land Building Parking lot Research Building shell: $60.45/sq ft = $253,890 Store outfitting: $95,214 Appliances: $57,949 Parking lot: 10 spaces = $20,000 Depreciation: 3% per year * 5 years = (64,057.95) Total: $362,995 Research Conclusion Is it a good deal? MAYBE! Construct: $362,995 Buy: $299,000
Transcript: HERMES BIRKIN BAG QUESTION GROUP 1 HERMES A. SHAPE OF THE HANDBAG French luxury goods manufacturer whose handbags and purses are highly coveted Began to copyright the symbol approximately since 1968 BUNDLE OF IP RIGHT IN HERMES BIRKIN BAG 4 Application filing date : 2 December 1992 Registration Date : 23 November 1993 3 13 10 6 2. COPYRIGHT 3. INDUSTRIAL DESIGN 3. INDUSTRIAL DESIGN cont.. A. SHAPE OF THE HANDBAG Rectangular sides, rectangular bottom,dimpled triangular profile. Top of the bag consists of a rectangular flap Over the flap is a horizontal rectangular strap having an opening to receive a padlock eye. B. STRAP/TURN & LOCKPADLOCK CLOSURE Identify and explain the characteristics of the bundle of IP rights for a branded handbag. You may use a brand of your choice for illustration. COPYRIGHT Application filing date : 29 October 2009 Registration Date : 29 March 2011 HERMES BIRKIN BAG 1. TRADEMARK 2 GROUP 1 8 TRADEMARK PADLOCK which fits through the center eye of the turn lock KEY FOB affixed to a leather strap, one end of which is affixed to the bag by wrapping around the base of one end of the handle. 5 HERMES BIRKIN BAG THANK YOU Q & A 1 1. TRADEMARK cont.. A lock in the shape of a padlock forms the clasp for the bag at the center of the strap. 1. TRADEMARK cont.. 9 Rectangular straps which fit over the flap of the handbag, and whose ends are joined with rectangular hardware which includes a turn-lock and a padlock. 12 SYMBOL / LOGO INDUSTRIAL DESIGN BUSINESS VALUATION TUTORIAL Distinctive three LOBED FLAP DESIGN with keyhole shaped notches to fit around the base of the handle Dimpled TRIANGULAR PROFILE Closure which consists of two thin, HORIZONTAL STRAPS designed to fit over the flap, with metal plates at their end that fit over a circular turn lock SEE SU SIAN BEE 130017 NOR AFIQAH AZMY BEE 130013 SHARIFAH NAJA BEE 130018 AMIRUL HAZIQ BIN TAJUL ARIFFIN BEE 130002 PUTRA IRWAN SHAH BIN JALIL BEE 120030 LUQMAN HAKIM B ISKANDAR BEE 130009 11 7
Transcript: Valuation Assignment - Multibrand company that designs and markets a broad range of toys and consumer products - Action Figures, Art Activity Kits, Sports Activity Toys, Vehicles, Construction Toys, Pet Toys, etc. - Stock Price closed on 12/31/09 at $19.49 per share Target Company Estimate intrinsic value of Toy Co. Inc.'s equity on 12/31/09 using the DCF model. Treat all the results for the fiscal year ended 2010 - 2014 as projections. - Cost of Debt: Estimated borrowing rate is 6.125% with a marginal tax of 27.29%, resulting in an after-tax cost of debt of 4.5% - Cost of Equity: Levered equity beta for Toy Co. is .777; using the capital asset pricing model with a 10-year Treasury bond yield of 4.66% and a market risk premium of 7.67% produces and estimate of the levered cost of equity of 10.57% - Other: Diluted Shares of Common Equity outstanding on 12/31/09 = 422,050,500 shares; Closing Stock Price = $19.49; Debt Value Outstanding 12/31/09 = $618,100,000 - WACC: Using the target debt to value ratio of 6.99%, the WACC is approximately 10.14% Mini-Case: TM Toys Inc. Conclusion Toys-and-games Industry - $60 Billion Industry - Dominated by: - Mattel (Barbie, Hot Wheels, Fisher Price) - Hasbro(G.I. Joe, Tonka, Playskool) - Achieve success through scoring the next big hit: "must-have" toys Data
Transcript: Nobody knows babies like we do! Quality products . Good Customer service. Every Kid really loves this store.. BABYLOU ABOUT US About Us BabyLou was established in 2004. It has been more than a decade since we started, where we have ensured to take care of every need and want of every child and infant under one roof, true to the caption “NO BODY KNOWS BABIES LIKE WE DO”. Our benchmark is to provide 100% customer service and satisfaction and continue to deliver the same with a wide range of toys, garments and Baby Products. Play and Create We Are Best 01 02 03 Block games Building Blocks help Kids to use their brain. PLAY TO LEARN in Crusing Adventures Our Discoveries Enjoy a sunny vacation aboard a luxury yacht with the LEGO® Creator 3in1 31083 Cruising Adventures set. This ship has all the comforts you need, including a well-equipped cabin and a toilet. Sail away to a sunny bay and take the cool water scooter to the beach. Build a sandcastle, enjoy a picnic, go surfing or check out the cute sea creatures before you head back to the yacht for a spot of fishing. Escape into the mountains Disney Little Princes in Also available for your Babies..... Also... Out of The World… Our reponsibility BABYLOU…. Our Responsibility All children have the right to fun, creative and engaging play experiences. Play is essential because when children play, they learn. As a provider of play experiences, we must ensure that our behaviour and actions are responsible towards all children and towards our stakeholders, society and the environment. We are committed to continue earning the trust our stakeholders place in us, and we are always inspired by children to be the best we can be. Innovate for children We aim to inspire children through our unique playful learning experiences and to play an active role in making a global difference on product safety while being dedicated promoters of responsibility towards children.
Transcript: Decomposition of return on equity /ROE/ Solution: Introduction C. Estimate the value of Hugo Boss’ equity on April 1, 2009 using the above forecasts and assumptions. Check that the discounted cash flow model, the abnormal earnings model and the abnormal earnings growth model yield the same outcome. Solution: Bargaining power of suppliers/Low/ Team 1: N.Sodontuya /103035176/ G.Dolgorsuren /103035156/ N.Buyandelger /103035162/ E.Turmunkh /103035173/ Decomposing Profitability: Alternative Approach Asustek Founded in 1989 Distinguishing operating, investment and financing components in ROE Starite Company is valued at €20 per share. Analysts expect that it will generate free cash flows to equity of €4 per share for the foreseeable future. What is the firm's implied cost of equity capital? Content Problem 1: Bargaining power of buyers /Medium to High/ Problem 2: A. Calculate free cash flows to equity, abnormal earnings, and abnormal earnings growth for the years 2009 – 2011. Rivalry in existing firms /High/ Decomposing Profitability: Traditional Approach Definitions of accounting items used in ratio analysis B. Assume that in 2012 Hugo Boss AG liquidates all its assets at their book values, uses the proceeds to pay off debt and pays out the remainder to its equity holders. What does this assumption imply about the company’s: a. Free cash flow to equity holders in 2012 and beyond? b. Abnormal earnings in 2012 and beyond? c. Abnormal earnings growth in 2012 and beyond? Introduction Strategy analysis Decomposition of ROE Case Problems Threat of new entrants /High/ Solution: Threat of substitute products/Medium/ Strategy Analysis Rivalry in existing firms /High/ One of top 3 consumer notebook brand
Transcript: Lululemon Business Valuation TRAVYON AMIR LuluLemon 1Yr Stats FINANCIAL DATA CURRENT STOCK PRICE: $332.10 MKT CAP: $43.30B 52 WK RANGE: $128.85 - $399.90 "Quotes" "We are very pleased with the momentum that continued to gain across all of our regions, especially driven by digital." - Calvin McDonald CEO, LuluLemon Athletica MARKET ANALYSIS COMPETITIVE ANALYSIS COMPETITIVE ANALYSIS Competitor A Name Strengths Weaknesses Put your logo here Competitor C Name Strengths Weaknesses Competitor B Name Strengths Weaknesses PRODUCT PLAN FEATURES FEATURES TEAM MARKETING FINANCIAL FUNDING REQUEST FUNDING REQUEST $10,000,000 We will need Over 5 years PROJECTION PROJECTION
Transcript: What is business valuation? by Tatiana Svetlanská The Traditional Venture Capital Method - uses the firm´s net income to get the explicit value in the projection period. It obtains the continuing or residual value in the implicit period by applying a P/E to the projected earnings. It uses very high discount rate in discounting the value into the present time. The First Chicago Method - uses the firm´s cash flows during the projection period using three selected scenarios representing three performance states for the firm: best, moderate and worse states (success, neutral or sideways and failure states). For these states it obtains continuing or residual value in the implicit period by applying proper multiplier to the financial projection. It calculates the expected cash flows for the firm by taking probability-weighted sum of three scenarios. It also obtains the present value for the two periods cash flows using a discount rate equal to the opportunity cost of capital The Multiplier Approach - considers value as a plain multiple of a selected major variable. This variable, such as firm´s cash flow is multiplied by a factor to reach an approximate value of the firm. Cash flow here refer to the firm´s ability to pay for the company´s debt obligations and equity payments such as dividends. The multiplier is determinated by several factors related to the company´s strength and growth (status, market conditions). It is number between 3-10. V= m[EBITDA + Ps - Pb] V/estimated value of a business; m/multiplier; Ps/payment to seller; Pb/payment to buyer Thank you! The Capitalization Approach - major variables can be projected for a certain future period and discounted into their present value using a firm capitalization rate to estimate the firm´s value. V= PV(FCFt) + PV(RES) Business related determinats - current and reliable value for the firm in cases of financing, selling or merging the comapny, as well as in cases of selling stock to employees and other similliar events - firm valuation is also required by federal and state authorities - for tax purposes, inheritance, property transfer, going public... Valuation techniques Varieties of the Capitalization Approach FCF= EBIT + depreciation - [tax rate + capital exps + increase in operating working capital] RES - is the present value of the residual. This is the period beyond the explicit period (5 years) and into the future. The residual or the implicit period is usually summed up in one discounted value. Since the projection period is 5 years, FCF n+1 would be FCF 5+1 = FCF6. - type of business and industry, - size and performance, - history, current and projected state, - development stage and growth rate, - management and control, - business statistics, - reason of valuation. Valuation tools There are two capitalization rates; the overall rate and the equity rate. The overall capitalization rate is usually used for discounting the future income before interest and after taxes. The equity capitalization rate is used to discount the firm´s future net value. To estimate future income or earnings stream we can employ simple econometric method of least squares regression, exponetial curve fitting, geometric progressions or weighted average. ..any dollar spent on the business should continue to yield more than dollar throughout the future of the business, and any sure dollar is more preferred than any speculative dollar. - Valuation of a business would eventually come down to assesing the ability of the business to generate cash flow from the point of sale and on into the future. Market Price of Shares - market price of the firm´s stock compare to similar firm stock´s market price, - no market restrictions - freedom of information to all investors, - practically it is very difficult to find companies that are similar. Capitalization of Major Variables - obtaing present value of a stream of future cash flow. Income, earnings, cash flow, dividends, sales and revenues can all be capitalized and serve as indicator for firm´s value. The capitalization rate would implicitly count for the characteristics of firm. Sales revenue is a big determinant of value for some firms such as those in technology, internet, media and food services (for instatnce number of visitors of page, price-earning ratio) Different firms use different multipliers and benchmarks depending on many factors related to both internal and external status. Book Value of Assets and Shares - value documented in the firm´s records - old and common tools for valuation, - criticized for inaccuracy and lack of connection to the market value, - no practical significance unless all assets are appraised at the current market prices, and intangible assets are involved. Business Valuation The common length of projection is 5 years. Value of business
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