GROUP OF COMPANIES · Unemployment Rates 0 5 10 15 20 25 30 2010 2011 2012 2013 2014 2015 2016...

University of

Piraeus

Athens, February 2015

Ioannou Natalia

Kobotis Alexandros

Mertiti Eleftheria

Moustakis Ioannis

Papathanasiou Konstantinos

Air Transport Sector, Airline Industry

VALUATION ANALYSI

University of Piraeus

Athens, March 2018

Kalapothakos Nikolaos

Kapsiotis Filippos

Kerma Rey

Papadopoulou Georgia

Stylianos Panagiotis

CFA Research Challenge 2018

VALUATION ANALYSIS

GROUP OF COMPANIES

0

2

4

6

8

10

12

14

S h a r e P r i c e

Current Price as

of 8/3 : €5.58

Target Price

Recommendation

0

2

4

6

8

10

12

14

S h a r e P r i c e

Current Price as

of 8/3 : €5.58

Recommendation

0

2

4

6

8

10

12

14

Current Price as

of 8/3 : €5.58

12m-Target Price

€7.43

S h a r e P r i c e

Recommendation

0

2

4

6

8

10

12

14

S h a r e P r i c e

Current Price as

of 8/3 : €5.58

12m-Target Price

Key Drivers:☞ Expected increase in Greek GDP ☞ Increased market share☞ Store expansion

€7.43

Recommendation

➢ 5 operating countries

➢ 7 IKEA stores

➢ 128 Intersport & Athlete’s Foot stores

➢ 178 expected stores by 2022

Greece

68%

Bulgaria

12%

Cyprus

11%

Romania

5%

Turkey

4%

Revenue by country 2016A

1 IKEA

7 INTERSPORT

1 IKEA

4 INTERSPORT

5 IKEA

50 INTERSPORT

12 ATHLETE'S FOOT

29 INTERSPORT

24 INTERSPORT

2 ATHLETE'S FOOT

1950: Establishment

1988: IPO

1999: Franchise agreement

2014: Abandons Wholesale

2014: Franchise agreement

Industry Overview

& Competitiveness

Company

Analysis RisksFinancial

Analysis

Business

Description Valuation

Business Description

Industry Overview

& Competitiveness

Key Drivers

Retail Sales Index

100.0

129.5

143.3149.6

101.2

75.6 71.0 72.2

89.196.4

86.5

146.6

172.9

213.0

0.0

50.0

100.0

150.0

200.0

250.0

2009 2010 2011 2012 2013 2014 2015 2016 2017

Bulgaria

Greece

Cyprus

Romania

Turkey

Key Points

➢ Significant deterioration in Greece’s retail

index

➢ Turkey, Romania and Bulgaria on the rise

Company


Analysis

Business


Unemployment Rates

0

5

10

15

20

25

30

2010 2011 2012 2013 2014 2015 2016 2017e 2018e 2019e

Greece Bulgaria Romania Cyprus

GDP Growth Rates

-15

-10

-5

0

5

10

15

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Greece Bulgaria Romania Cyprus Turkey

Key Points

➢ GDP growth rates return to positive levels for

Greece

➢ High correlation (more than > 0.70) with retail

sales

➢ Although unemployment is still high in

Greece, it started to downfall

Macro Drivers

Industry Overview

& Competitiveness

0

1

2

3

4

5Bargaining Power of byers

Threat of substitution

Threat of new entrantsExisting Rivarly

Power of suppliers

Price takers, but low switching costs

No immediate substitute – rapid growth of

online shopping

Considerable requirements for capital,

high taxation and underperformance of

retail industry

Strong relationships with IKEA and

Intersport

Strong competition with the arrival of JYSK.

Price war continuous

• Bargaining Power of Byers – Moderate

• Threat of Substitution – Very Low

• Threat of New Entrants – Low

• Existing Rivalry – High

• Power of Suppliers – Moderate

1 5

Very Low Very High

Porter’s Five Forces

Industry Overview

& Competitiveness

€1352

€1443

€1372

€1367

Companies IKEA MARMARIDIS JYSK PRAKTIKER

No. of Goods 7/7 4/7 6/7 7/7

Basket Comparison

IKEA Marmaridis

JYSK PRAKTIKER

Key Points

➢ We chose 7 common goods frequently seen in

students apartments

➢ We calculated the average price of these 7

goods for each company

➢ Summing these individuals prices we ended up

with these representative baskets

➢ Ikea offers the widest variety of products in the

lowest prices.

Industry Overview

& Competitiveness

Company


Analysis

Business


Industry Overview

& Competitiveness

Group’s Future

(€20,000)

(€10,000)

€0

€10,000

€20,000

€30,000

€40,000

€50,000

€60,000

€70,000

2012 A 2013 A 2014 A 2015 A 2016 A 2017 E 2018 E 2019 E 2020 E 2021 E 2022 E

Net Income/Loss EBITDA Operating Profit/(Loss)

050000100000150000200000250000300000350000

020406080

100120140160

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Greece Romania Bulgaria Cyprus Turkey sales

Intersport’s Store Expansion Plan

Key Points

➢ Intersport’s 5Y CAGR: 10.2%

➢ IKEA’S 5Y CAGR: 3%

➢ Chain of stores (Intersport & Athlete’s Foot:

178 stores by 2022

➢ Strategic expansion in Turkey, with a total of

46 store

➢ Net Income (2022E): € 27 mil.

Valuation

BUY

Discounted Cash Flows to

the Firm Model

12-month target price of

€7.43

Valuation Model

Industry Overview

& Competitiveness

Company


Analysis

Business


3.45%

4.3%

2.9%

3.9%

2.17% 2.61%

Terminal Growth Rate

Industry Overview

& Competitiveness

Company


Analysis

Business


Beta Market

Risk

Premium

Risk

free

0.76% 0.978 13%

13.47%

Cost of Equity

WACC= ?

Tax

Rate

29%

Weighted

Average

Interest rate

4.98%

Cost of Debt

3.53%

Stage B.

Stage C.

WACC

Calculation

Stage A.

10%

Beta Market

Risk

Premium

Risk

free

0.76% 0.978 13%

13.47%

Cost of Equity

WACC= ?

Tax

Rate

29%

Weighted

Average

Interest rate

4.98%

Cost of Debt

3.53%

Stage B.

Stage C.

WACC

Calculation

Stage A.

10%

0.76%

Beta Market

Risk

Premium

Risk

free

0.76% 0.978 13%

13.47%

Cost of Equity

WACC= ?

Tax

Rate

29%

Weighted

Average

Interest rate

4.98%

Cost of Debt

3.53%

Stage B.

Stage C.

WACC

Calculation

Stage A.

10%

Beta Market

Risk

Premium

Risk

free

0.76% 0.978 13%

13.47%

Cost of Equity

WACC= ?

Tax

Rate

29%

Weighted

Average Interest

rate

4.98%

Cost of Debt

3.53%

Stage B.

Stage C.

WACC

Calculation

Stage A.

10%

12-month target price:

€6.96

MRP:

14%

ERP: 6.63%

GR Rating:

Caa2

12-month target price:

€7.43

MRP:

13%

ERP: 6.63%

GR Rating:

Β3

Rating Upgrade

-1

1

3

5

7

9

11

13

15S h a r e P r i c e

7.43

12.9

4

Bull Case Assumptions

• g=3.88%

• MRP=11%

• Sales growth rate=7%

Bear Case Assumptions

• g=2%

• MRP=14%

• Sales growth rate=4%

Scenario Analysis

Financial Analysis

Companies EBIT Margin Net Income

Margin

Gross Margin

Fourlis 5.70% 1.80% 42.51%

Praktiker 3% 2% 34%

Leroy Merlin -9% -12% 33%

Marmaridis 12% 4% 47%

Sato -17% -17% 35.23%

Average -3% 6% 38%

Key Points

➢ Better operating margins

➢ Profitability ratios going upwards

Key Ratios

Industry Overview

& Competitiveness

Company


Analysis

Business


2016a

2017e

2.65

2015a

0.16%

4.72%

8.88%

RoE

Year

2.56

7.92%

2.47

2.34

2018e

RoE Decomposition (DuPont)

➢ Leverage main RoE’s component

➢ Tremendous increase in 2016

➢ Net profit margin enhancement

➢ RoE increase overall

FCFFCurrent

Price

5.81 7.43

Buy 33.21%Hold 57.41%Sell 9.4%

Model’s inputs:

➢ Future sales per year

➢ Terminal growth rate

Monte Carlo Simulation

2.69 16.9

Investment

Risks

Business Risks

Other Risks

Market Risks

Most Important Risks

Foreign

Competitors/

E-commerce

Industry Overview

& Competitiveness

Company


Analysis

Business


1st Risk

Financing/Funding Risk

Foreign competitors/ E-commerce

Risk about the expansion of the physical network 1

2

New stores our crucial for our valuation since it is based on a L-F-L model

Management constantly achieves and surpasses its goals

Investment

RisksIndustry Overview

& Competitiveness

Company


Analysis

Business


Risk about the expansion of the physical network


1

2

Fourlis can lose market share from foreign competitors and/or E-commerce

The group must improve its e-commerce part

2nd Risk


Investment


& Competitiveness

Company


Analysis

Business


3rd Risk

Risk about the expansion of the physical network



1

2

Lack of sufficient funds can bring the group to its knees

However, management is very effective

Investment


& Competitiveness

Company


Analysis

Business


BUY

Profitability

Growth

Competitiveness

Conclusion

Q&A - Appendices

Why use Moving Average for Beta?

• Beta is not a constant number

• Beta Changes with market conditions & company’s status

Calculations

• Fourlis Closing Prices. Y variable

• FTSE ASE Large Cap Index Closing Prices. X variable

Multiple OLS

Regressions Moving Average

Model

Program’s Output

Why did we use only DFCFF model?

• There are not public direct competitors

• Discounting Free Cash Flows only with Cost of Equity can be problematic

-30000

-20000

-10000

0

10000

20000

30000

40000

50000

2017 E 2018 E 2019 E 2020 E 2021 E 2022 E

FREE CASH FLOW TO THE FIRM

Net Income Net NonCash charges (NCC) Int*(1-taxrate)

Inv in fixed capital Inv in working capital

Years 2017E 2018E 2019E 2020E 2021E 2022E

NET INCOME € 13,905 € 16,701 € 18,000 € 21,156 € 24,287 € 27,531

NET NON-CASH CHARGES € 12,167 € 13,281 € 13,413 € 13,564 € 13,731 € 13,915

INTEREST EXPENSE*(1-TAX RATE) € 8,011 € 7,582 € 8,727 € 8,139 € 7,656 € 5,670

INVESTMENT IN FIXED CAPITAL € (11,893) € (11,881) € (11,908) € (11,916) € (11,900) € (11,901)

INVESTMENT IN WORKING

CAPITAL

€ (13,457) € (13,629) € (13,672) € (13,728) € (14,053) € (14,854)

FREE CASH FLOW TO THE FIRM € 8,733 € 12,054 € 14,561 € 17,214 € 19,721 € 20,361

Sales Breakdown

Company

overview

Industry Overview

& Competitiveness

Year 2016 A 2017 E 2018 E 2019 E 2020 E 2021 E 2022 E

Intersport

Revenue136.489 € 151.371 € 169.013 € 186.870 € 205.414 € 225.597 € 246.569 €

IKEA Revenue 290.856 € 291.644 € 298.014 € 305.796 € 316.315 € 327.214 € 338.270 €

Total Revenue 427.345 € 443.015 € 467.027 € 492.667 € 521.730 € 552.811 € 584.839 €

0%

40%

80%

120%

2016 2017 2018 2019 2020 2021 2022

IKEA INTERSPORT

GROUP OF COMPANIES · Unemployment Rates 0 5 10 15 20 25 30 2010 2011 2012 2013 2014 2015 2016...

Documents

Transcript of GROUP OF COMPANIES · Unemployment Rates 0 5 10 15 20 25 30 2010 2011 2012 2013 2014 2015 2016...