CaseStudy3

Q1.ChoosingComparableCompanies
Ideallyyouuseexactlythesameassetwhenconductingcomparableanalysis,thismaybeeasywhenpricing
Pokmoncardsbutallcompaniesaredifferent.WhiletryingtofindcomparablecompaniesIhavebalanced
thestrictnessofmycriteriatoensurethecompaniestrulyrepresentDSHwithoutcreatingasmallsamplebias.
Choosingcompaniescorrectlywillensurethatmultiplescorrectlycomparethecompanies.Ihaveusedthe
companiesindicatedinthetablebasedonthecategoriesthatfollow.
ASX:JBH

ASX:MYR

ASX:HVN

NYSE:BBY

SEHK:493

LSE:DXNS

NYSE:RSH

NYSE:GME

TSE:9435

IndustrySelection
DSHisintheconsumerelectronicsindustrybutthebroadretailindustryrepresentcomparablecompaniesas
theyareexposuretoverysimilarrisks;thefreedomofentryandexitofnewfirmstotheindustryensuresthat
marginsstaylow.Theytrytodifferentiateonqualityofserviceandrelyheavilyontheproductmarketingof
theirsuppliers,exposingthemtofashionsthatareoutoftheircontrol.Traditionalbricksandmortarstores
haveallfelttheimpactofonlineretailersandmosthavenowdevelopedomnichannelretailstrategies.
Excludingonlineonlyretailerstheindustryisexposedtosimilaroperatingcostsstructureandprofitmargins
andthereforeDSHcanbecomparedwithretailerssuchasMYR.Aweaknessofcomparingthewholeindustry
comesfromlongtermcyclesthateffectcashflowsintheshorttermforoneretailsubcategorysuchasthe
releaseofanewgamingconsole.Asthishappenedin2013itistheforwardproxieshavebeenused.The
portionofHVNthatoperatesasaretailerisverysmall,beingafranchisethatownsalargepropertyportfolio
andisinvolvedinavarietyofnonretailbusinessesmakesitunfitforcomparableanalysis.
InternationalComparison
Globalisationhasintegratedfashionandretailtrendsacrosstheglobe,thisincreasesthecomparabilityof
internationalcompanieswithDSH.Australian'smaybeconsideredtohavehighincomesanddeveloping
marketsmiddleclassisgrowingbutretailisamostlyunregulatedindustrywithfreedomofentrytomarkets,
makingiteasyforinternationalcompaniestocompeteforthesecustomersandlevelinglongtermgrowth
opportunities.BestBuyisagoodexampleofthisasitoperatesintheUS,Canada,ChinaandMexicobutwith
thelatestrevenuefigures40xDSHitistheonlycompanythatistoobigtocompare.Taxandaccounting
standardsmayvaryfromcountrytocountry,thiscreatesanissueincomparisonacrossborders.Differencesin
standardsforrecordingD&A,differenttaxratesandfinancingcostschangethewayassetsperformancelooks
onpaperbutusingEV/EBITDAandEV/Revenuehelpstandardisethecompanies,moreonthisinmultiple
selection.
GrowthPotential
Retailisahighlycompetitiveindustry,thethreebiggestplayersintheAustralianelectronicsmarketare
estimatedtohaveonly54%ofAustralianmarketshare.Customersarerarelyloyalandifoneretailerstarts
providingbetterserviceorcheaperpricestheydon'tthinktoomuchaboutmakingtheswitchandall
companieshaveroomforgrowth.WiththeexceptingofBestBuygrowthpotentialisrelativelysimilarforthe
remainingretailcompaniesandgoodmanagementwillbeabletoexpandmarketshare.AsRadioShackhas
particularlybadmanagement,earningaloss,losingmarketshareandnotforecastedtoearnaprofitinthe
mediumterm,itisnotusefultocomparewithDSH.Theycanbeconsideredanoutlierandnotindustry
standard.Apotentialweaknessinthisisthatitassumesequallyambitiousandskilledmanagementbutthisis
notoftenthecase.
CapitalStructure
Thecapitalstructureofafirmwillchangetheriskprofileofacompany,asleveragingearningsmightappearto
begoodthevolatilenatureofearningsinretailcouldchangealeveragedcompaniespositionrapidly,
thereforeSmallerdebttoequityratiosaredesirable.Ratherthaneliminatecomparablesthechoiceof
multiplesisusedtovaluecompaniesofdifferentcapitalstructure,discussedfurtherinQ2.

Q2.IdentifyingAppropriateRatios
Theratio'schosenareimportantastheystandardisethepriceofafirm,the
Multiple
Weight
difficultyarisesbecauseoneratiomayidentifyyourstocktobeoverpricedand
EV/Revenue(FY+1)
20%
anothermaysuggestitisunderpriced.ToaddressthisissueIhavechosento
EV/EBITDA(FY+1)
40%
triangulate3ratios,moredepthontriangulationinquestion3,accordingto
P/E(FY+1)
40%
theirimportance.Theratiosandweightsused,showninthetable,arejustified
below.

Consistency
Iusedonlyconsistentratios,thenumeratoranddenominatormustbothbeequityvalueorenterprisevalue
andnotoneofeach,asthiswillavoidmajorpricingdifferencesthatarisefromcapitalstructure.Forexample
theprice/EBITDAratioislikelytomakeafirmwithalargeamountofdebtlookcheapcomparedtoonewith
littledebt.Asthenetprofitofafirmwillbeaffectedbytheinterestpaymentbuttheoperatingprofitwillnot
theratiowillnotaccuratelymeasuretheperformanceoftheassetsorthevaluetotheshareholder.Usingthis
ratiowouldunderestimatetheriskforequityholdersthatisassociatedwithhighlevelsofdebtandnot
provideagoodcomparisonprice.
ForwardEstimates
Ihaveusedthe1yearestimatedrevenue,EBITDAandEPSascashflowproxiesinmymultiplesasvalueis
determinedinacompany'sfuture,notit'srealised,cashflows.Whenusingconsensusestimatesthegrowth
andriskpotentialofacompanyisaccountedforbuttheassumptionthattheanalystshaveaccurateestimates
ismade.Althoughanalystsaccuracycanbequestionedthereismoreusefulinformationcapturedinthe
estimates.AlthoughitisraretouseforwardestimatedofrevenueandEBITDAinthiscaseitwasnecessaryas
thegamingconsolesreleasedin2013haveaffectedthecashflowsofeachretailerdifferentlydependingon
theirdependenceongamingrevenues.Tousefurtherforwardestimatessuchas2yearsaheadreduces
accuracyandthat'swhyIhavechosenthe1yearforecast.

EnterpriseValueMultiples

Theuseofforeigncompaniesmakesitnecessarytotryandmitigatetheeffectsofdifferentaccounting
standards.UsingtheEV/Revenuemultiplehelpsusachievethis,measuringafirm'sabilitytogeneratecash
flow.Howeverprofitabilityisnotmeasuredandusingonlythismultiplewouldassumeefficiencyisthesame
acrossallcompaniesbeingcompared.Asprofitabilitymeasuresvaluetoshareholdersmoreaccuratelythis
ratiogetsasmallerweighting,20%.TheEV/EBITDAmeasurescashflowefficiencyofthefirm'sassetsandisa
betterproxyforvaluetoallinvestors,thereforegainsalargerweightingof40%.Beingenterprisevalue
multiplestheyhavetheadvantageofdirectlycomparingtheperformanceofthecompany'sassetsregardless
ofcapitalstructure,standardisingthepricebeforetheleverageeffectsofdebt.ForthisreasonIhavegivena
combinedweightof60%totheenterprisevaluemultiples.

PricetoEarnings
Themostcommonlyusedvaluemetricisthepricetoearnings,althoughtherearedifferentrulesusedto
dictatewhatischeaporexpensive,ithasthebenefitofcomparingprofitdirectlyavailabletoshareholders.
Thisdoescomeatthedownfallofnotaccountingfortheeffectsofcapitalstructure,differencesinaccounting
methodsandtaxationbutisconsideredimportantasprofitavailabletotheshareholderisanimportant
measureofvalue.Thisratiothereforereceivesaweightingof40%.

UnusedRatios

ThePEGratiowasdisregardedinthisvaluationasgrowthhasbeenworkedintothemodelbyusingthe
forwardearningsestimates.Thepricetobookratiowasnotused,althoughthisratiomaybeusefulinvaluing
troubledcompaniesorsettingaminimumpriceitdoesnotmeasuretheabilityofthefirmtogeneratecash
flowsfromitsassetsandtostrengthenthecomparativeanalysisunprofitablefirmswerenotused.Itisalso
troublesomebecauseretailcompanysassetvaluesarenotregularlyupdatedandstorefixturesoroldstock
maynotaccuratelybemeasuredbythecompany'sbookvalue.EBITDAhasbeenusedasaproxyforFCFF

ratherthandirectlyduetothevolatilenaturecashflowsduetoabnormalexpensesandtemporarychangesin
CAPEXandworkingcapitalfromyeartoyear.EBITDAprovidesamorecomparablesteadymeasure.

Q3.ComparableValue
Ihavedeterminedavaluerangeof$1.56to$2.55bytriangulatingtheratioswiththeweightsstatedabove.
Thecurrentprice,$2.25,sitsjustabovethetriangulatedmedianprice,$2.19,andclosetotheofferpriceof
$2.20.MycomparativeanalysisshowsthatDSHwasvaluedfairlyatthetimeoftheinitialpublicoffering.

ThecompaniesIhavepickedfitastrictcriterionto
ensurecomparisonisaccurateandthemultiplesare
comparable.Visuallyyoucanseethedifferent
resultsachievedbyeachratio.Fromalowof$1.01
givenbytheEV/Revenueratiotoahighof$2.82
fromtheP/E.TheEV/Revenuealsogivesthelargest
range.Thetriangulationincorporatesinformation
fromeachratio.ThisEliminatestheneedtoholdtoa
strictsetofassumptionsthatislikelytobe
unrealistic,forexampleusingonlytheEV/Revenue
assumesfirmshavethesameefficiency.Asyoucan
seetheP/EratioalonewouldhavesuggestedthatthecompanywasundervaluedbutbothEVratiossuggestit
isovervalued.Provingtriangulationhasusedmoreinformationandproducedamoreaccuratevaluerangefor
DSH.TofurtherremovebiasnessIhaveusedthemedian,25thpercentileandthe75thpercentileforthe
average,lowandhighvalueestimatesrespectively,itremovesoutliersthatarelikelytobeundervaluedor
overvaluedthemselvesandcompaniesthatareeffectedbyspecialcircumstancesandhaveabnormalprices,
refertoquestion4formoreonstatisticalbias,strengthsandweaknessesofmymethods.

Q4.StrengthsandWeaknesses

Strengths

Manyofthestrengthshavebeenmentionedinthejustificationofvariousmethods,toavoidrepetitionthese
willnotberepeated.Someratio'shavecertainstatisticalpropertiesthathavebeenaccountedforbyusingthe
median,25thand75thpercentile's.Theinabilityofanyearningsmultipletobenegativeensuresapositively
skeweddistribution.Outliersarealsomorelikelytobeextremelypositivedueto0beingtheminimumvalue.
Irregularsituationssuchasarecallonaproductcanaffectearningsfor1year;thismayinflatethecurrent
pricetoearningsratiosubstantiallyandthereforeaffecttheaveragemeasure.Theretailenvironmentwas
temporarilydistorted,especiallyintheelectronicssubsector,withthereleaseofnewgamingconsolesin
2013.Adjustmenttoprovidemoreaccuratecomparisonhasbeenmadebyusingtheconsensusanalysts'
estimatesfor2014figures.Theuseoftheconsensusestimateseliminatesthebiasnessthatusingasingular
analystisexposedto,thisisoftenthetopicofdebateastowhetherthisisastrengthofweaknessof
comparativeanalysis.Oneoftheluxuriesofthestockmarketisrecentpricing,asthecomparablecompanies
usedallhavebetterliquiditythanDSH,amedianof0.45%dailyturnover,thisensurespricesarereliableand
uptodate.

Weaknesses
Asnotallcompaniesreportonthesamedatethemultiplesdonotcomparetheexactsameearningsperiods,
asfewmonthscansometimesmakealargedifferencetomultiplestheanalysisisexposedtoinaccuracy.This
canbeadjustedforbyusinginterimorquarterlyreportstoderiveamoreaccuratecrosssectionofthe
companiesbeingcompared.Oftenthedarksideofcomparativeanalysisisexposedwhenwholesectors
deviatefromanyrealisticvalue,ashappenedinthedotcombubble.Inasituationlikethisastockthatis
expensivemayappeartobecheapwhencomparedtopeers.Comparinglongrunaveragesofsectorormarket

multiplescanbeusedintheanalysistoavoidlargemarketdistortions.Thecompanymayhaveinformation
thatcausesittotradeatadiscounttomarketcomparablesoverthelongterm,ifnoquantitativeanalysisis
doneitmaybehardtopickthisinformationup.Onepossibilityistousethelongtermaveragemultipleand
compareittothelongtermaveragesectormultiple,ifalongtermpricingdiscountisexposedanissuethat
cannotbeseeninasimplecrosssectionalanalysisshouldbeconsidered.

Q5.Holisticvaluationandfairvalueinthelongterm
Asvaluationdiffersfrompersontopersonandfromsituationtosituationaholisticvaluationapproachisopen
tointerpretation.Relativevaluationisthemostcommonlyusedbutotherextremeexamplesinclude
Astrology.Discountedcashflowanalysisandvariationsofareconsidered,especiallyamongstacademics,to
capturethemostinformation.Theabilitytoforecastearningsintothelongerintothefutureprovidean
analystwithabetterunderstandingofintrinsicvalue.WhenaDCFwasperformedonDSHwiththeproforma
andWACCgiveninthecasestudyIcameupwithasharepriceof$5.79(assuming3%terminalgrowth).
Immediatelythisisopentocriticismastheassumptionsoftheprovideroftheproformaaretakenastrue
accurateestimates.Biasisawellknownattributeofvaluation,AswathDomodoranhasdoneanexperiment
wherehehasprovidedhisopiniononintrinsicvalueofacompanywhilegivinganassignmentouttooneclass
butnotanother,notsurprisinglytheclassprovidedwiththeopinionreturnedverysimilarvalueswhereasthe
otherclassdidn't.Theproformaprovidedalreadyhaserrorsincostmeasurementsassociatedwiththe
managementincentiveschemeandothernonrecurringitemsfor2014.Myjudgmentwouldbetodampen
profitabilitymeasuresasIthinktheanalystsestimatesareoptimistic.Ibelievethatwhensuppliersseethat
Dicksmithisproducingahealthyprofittheywillwanttoreturntheirownmarginstopreviousstandards.The
biasislikelytobepresentbecausetheprovideroftheproformahasanincentive,theIPO,tomakethe
companylookcheap.Thisthenexposestheprobleminherentinallvaluationtechniques,theassumptions
determinetheprice.Inrelativevaluationtheassumptionsaremadeindirectlythroughtheconsensusofthe
market,althoughthisgivesthebenefitofdiversifyingbiasnessitisdangerousasbecauseattimesthemarket
canmoveoffmomentumratherthanvalue.Variousstockmarketcrashesareproofofthisandatthesetimes
relativelycheapstocksmaystillbeoverpriced.Ithenbelievethatdiscountedcashflowvaluationisamore
accuratemeasureofintrinsicvalue;howevertheassumptionsshouldbeanalysedandajudgmentmadeasto
theaccuracyinamodelespeciallywitharapidturnaroundsuchasDSH.Manysituationsshouldbeanalysedto
determineavaluerangeratherthanholdingastrictsetofassumptionstodetermineasingleprice.For
purposeofexampleIhavedoneanothervaluationsimplyassumingthestatutoryproforma'sEBITestimateis
accurateandthenattachedgrowthtothegrowthinthenumberofstores,theresultis$2.27.Thisshowsthe
fragilityofvaluationtotheassumptionsmade.

Asthepurposeofvaluationisoftenfornegotiationsitisobviouswhytheinstituteofcharteredaccountants
definefairvaluetobe "Thepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinan
orderlytransactionbetweenmarketparticipantsatthemeasurementdate(anexitprice)."Inthiscaseitmakes
sensewhyrelativevaluationisusedmoreoftentoDCF,ifacompanywantstogopublictodaytheywantto
knowwhatisarealisticpricerangetheywillget.HoweverforthelongterminvestorWarrenBuffet'sdefinition
ismoreappropriate"priceiswhatyoupay,valueiswhatyouget".Thecontrastofthetwodefinitionsprovide
agoodanswertothequestion,asfairvaluedependsontheunderlyingassumptionsofthevaluationmodel
andthetimehorizonoftheinvestmentfairvaluewilldifferfrompersontoperson.Forthelongterminvestor
theprojectionsoftheDSFprovidesaholisticapproachtodeterminethefairvalueofanasset.

Dick Smith Holdings Limited: Financial Summary

A$ in millions, year end Jun

Profit And Loss

Revenue
COGS
Gross Profit
SG&A
EBITDA
Depreciation and Amort
EBIT
Interest Income
Interest Expense
Pre-tax Profits
Tax Expense
NPAT
No. Stores

FY11
1,281
946
335
299
36
13
24
0
1
23
7
16
320

FY12
1,370
1,030
340
307
33
13
20
0
1
19
6
13
325

FY13
1,280
(977)
304
(280)
24
(13)
11
0
(1)
10
(3)
7
323

FY14E
1,228
(920)
308
(236)
72
(13)
59
0
(2)
57
(17)
40
369

FY15E
1,303
(974)
329
(247)
83
(14)
69
2
(3)
68
(20)
47
382

FY16E
1,366
(1,017)
348
(257)
92
(15)
77
2
(3)
77
(23)
54
395

6.67
-11.03
-17.32
-17.98
24.83
2.38
1.47
1.6%

-6.73
-32.73
-60.28
-66.33
23.71
1.84
0.86
-0.6%

-4.18
111.97
167.62
177.69
25.11
5.86
4.79
14.2%

5.91
13.86
15.56
16.69
25.27
6.35
5.27
3.5%

4.70
10.33
11.54
12.27
25.51
6.72
5.65
3.4%

FY13
7
13
(50)
3
(27)

FY14E
40
13
(6)
15
62

FY15E
47
14
(3)
3
61

FY16E
54
15
(2)
3
69

Growth and Margins (%)

Sales growth
EBITDA growth
EBIT growth
NPAT growth
Gross margin
EBITDA margin
EBIT margin
Store Growth

26.17
2.84
1.87

Cash Flow StatemenFY11

FY12
Net Income
16
D&A (add)
13
Working Capital (Change)
Other Operating Cash Flow
Cash Flow from Operations
CAPEX
Acquisitions
Diverstitures
Others
Cash Flow from Inves
Dividends Paid
Debt (Change)
Common Stock Issuanc
Other Financing Cash F
Cash flow from Financ
Total Cash Flow

13
13

(53)
0
0
5
(48)

(24)
0
0
0
(24)

(5)
0
0
0
(5)

(20)
0
0
0
(20)

(18)
0
0
0
(18)

(21)
0
0
0
(21)

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0
(33)

0
0
0
0
0
42

(31)
0
0
0
(31)
12

(33)
0
0
0
(33)
15

Balance Sheet

FY11

FY12

Cash and Cash Equivalents

Accounts Receivable
Inventory
Other Current Assets
Total Current Assets
Net PP&E
Net Intangibles
Total Investments
Other Long Term Assets
Total Assets

FY13
13
10
169
16
208
60
0
0
39
307

FY14E FY15E
55
66
10
11
203
215
15
16
283
308
67
72
0
0
0
0
37
40
387
419

FY16E
81
11
225
17
334
78
0
0
42
454

Accounts Payable
Short-term Debt
Other Current Liabilities
Total Current Liabilities
Long-term Debt
Other long-term Liabilities
Total Liabilities

129
0
19
148
27
16
190

157
0
18
175
27
46
248

166
0
19
186
27
51
263

174
0
20
195
27
58
279

Preferred Shares
Total Common Equity

0
117

0
139

0
156

0
175

Total Liabilities and Equity

307

387

419

454

FY14E FY15E
41
48
13
14
(6)
(3)
(20) (18)
28
40
26.19 35.95

FY16E
54
15
(2)
(21)
46
38.35

Intrinsic Value Best Case

Free Cash Flows
FY11
EBIT*(1-Tax Rate)
D&A (add)
Working Capital (Chang
CAPEX
Free Cash Flows
Discounted
Terminal Growth Rate
WACC

FY12
17
(13)
0
(53)
(49)

14
(13)
0
(24)
(22)

3%
6%

Terminal Value
sum of PV
debt
Equity Value
no. shares
Share price

1316.53
65.68
13.50
1368.71
236.50
5.79

Intrinsic Value Worst Case

FY11
Free Cash Flows
EBIT*(1-Tax Rate)
D&A (add)
Working Capital (Chang
CAPEX
Free Cash Flows
Discounted
Terminal Growth Rate
WACC
Terminal Value
sum of PV
debt
Equity Value
no. shares
Share price

FY13
8
13
(50)
(5)
(35)
-34.80

FY12
17
(13)
0
(53)
(49)

14
(13)
0
(24)
(22)

FY13
8
13
(50)
(5)
(35)
-34.80

1568.00

FY14E FY15E
23
24
13
14
(6)
(3)
(20) (18)
10
17
9.48 14.75

FY16E
25
15
(2)
(21)
17
14.11

3%
6%
484.36
65.68
13.50
536.54
236.50
2.27

576.88

Comparative Analysis for Dick Smith Holdings Limited

Company Information

ASX:DSH

ASX:JBH

(AUD in millions, except per share data)

Dick Smith
Holdings
Limited

JB Hi-Fi
Limited

Latest Fiscal Year:

LTM as of:
52-Week High
52-Week High Date
52-Week Low
52-Week Low Date
Current Price (2/12/14)
% of 52-Week High
% of 52-Week Low
Daily Volume
% Turnover
Total Common Shares
Market Capitalization
Plus: Total Debt
Plus: Preferred Stock
Plus: Minority Interest
Less: Cash and Equivalents
Net Debt
Enterprise Value
Valuation
Total Revenue
Enterprise Value / Rev
EBITDA
Enterprise Value / EBITDA
eps
P/e
Revenue Growth
EBITDA Growth
EBITDA Margin

ASX:MYR SEHK:493 LSE:DXNS NYSE:GME TSE:9435

Myer
Holdings
Limited

30/06/2013 30/06/2013 27/07/2013

29/12/2013 31/12/2013 25/01/2014
$
2.41 $
23.13 $
3.26
10/01/2014
7/11/2013 29/04/2013
$
1.99 $
12.04 $
2.19
20/12/2013 18/02/2013 12/06/2013
$
2.25 $
18.50 $
2.58
93.4%
80.0%
79.1%
113.1%
153.7%
117.8%
0.2
0.6
2.1
0.09%
0.56%
0.36%
236.5
100.3
585.7
532.2
1,854.8
1,511.0
26.5
49.9
423.2
9.7
13.0
44.9
81.5
13.5
5.0
351.4
545 7
545.7
1 859 8
1,859.8
1 862 4
1,862.4

FY+1
FY+1
FY+1
FY+1
FY+1
FY+1
1 Year
5 Year
1 Year
5 Year
FY+1

Leverage/Coverage Ratios
Net Debt / Equity %
Net Debt / Capital %
EBITDA / Int. Expense

GOME
Dixons
Electrical
Retail plc
Appliances
Holding
Limited
31/12/2013 30/04/2013
31/12/2013 31/10/2013
$
0.22 $
0.97
25/11/2013 17/12/2013
$
0.09 $
0.47
25/06/2013 26/02/2013
$
0.19 $
0.87
87.5%
89.0%
214.5%
185.7%
47.1
11.8
0.28%
0.32%
16,875.1
3,656.1
3,205.9
3,168.9
396.6
577.9
(86.9)
1.0
1,470.4
650.7
(1,160.6)
(71.8)
2 045 3
2,045.3
3 097 1
3,097.1

GameStop
Corp.

25%Q

Median

1/02/2014 31/03/2013
1/02/2014 31/12/2013
$
63.97 $
98.11 $
1.69 $ 13.20 $ 43.55
14/11/2013 16/01/2014
$
25.88 $
42.89 $
1.23 $
7.12 $ 18.96
4/03/2013 13/02/2013
$
40.45 $
90.76 $
1.56 $ 10.54 $ 29.47
63.2%
92.5%
80%
84%
91%
156.3%
211.6%
136%
171%
199%
3.5
0.3
3.01%
0.54%
0.45%
115.8
47.7
4,684.3
4,333.7
1682.92
3187.39
3769.81
633.5
118.8
688.0
275.9
(688.0)
476.4
3 996 3
3,996.3
4 810 1
4,810.1
1861 12
1861.12
2571 18
2571.18
3546 67
3546.67

1,228.0
0.4x
72.0
7.6x
0.19
12.1x
(30.7%)
0.0%
(87.6%)
0.0%
6.1%

3,538.8
0.5x
227.4
8.2x
1.27
14.5x
5.8%
12.6%
9.7%
12.6%
6.4%

3,130.6
0.0x
289.8
0.0x
0.20
3.9x
0.4%
(1.7%)
(3.8%)
6.3%
9.3%

10,947.5
0.2x
330.2
6.2x
0.01
15.6x
10.4%
4.2%
NM
(8.0%)
3.0%

13,910.0
0.2x
608.1
5.1x
0.05
16.8x
3.0%
(0.1%)
(9.3%)
8.6%
4.4%

10,892.9
0.4x
940.4
4.2x
4.20
9.6x
1.7%
0.5%
(5.7%)
(1.4%)
8.6%

5,977.3
0.8x
387.5
12.4x
6.24
14.6x
0.2%
9.8%
28.4%
1.8%
6.5%

0.2x
258.6
4.7x
0.12
10.8x
0.3%
(0.1%)
(8.4%)
(0.7%)
5.2%

0.4x
330.2
6.2x
0.20
14.5x
1.7%
0.5%
(4.7%)
1.8%
6.4%

0.5x
497.8
7.9x
2.74
15.1x
4.4%
7.0%
6.4%
7.5%
7.6%

2.5%
2.5%
1.3x

0.3%
0.3%
24.9x

23.3%
18.9%
11.0x

0.0%
0.0%
25.0x

0.0%
0.0%
10.6x

0.0%
0.0%
137.8x

11.0%
9.9%
78.1x

0.0%
0.0%
10.8x

0.1%
0.1%
24.9x

6.8%
6.2%
51.5x

Comparative Value
EV/Revenue (Fwd)
EV
Debt - cash
Equity(EV
Equity(EV-Debt)
Debt)
Shares outstanding
Share Price

1st Qrt
251.42
13.50
237
237.92
92
236.51
$ 1.01

median
450.51
13.50
437
437.01
01
236.51
$
1.85

3rd Qrt
595.52
13.50
582
582.02
02
236.51
$
2.46

EV/EBITDA (Fwd)
EV
Debt - cash
Equity(EV-Debt)
Shares outstanding
Share Price

336.35
13.50
322.85
236.51
$ 1.37

445.92
13.50
432.42
236.51
1.83

567.23
13.50
553.73
236.51
2.34

P/E (Fwd)
Share Price

2.71

2.82

ComparativeValue
P/E(Fwd)
EV/EBITDA(Fwd)
EV/Rev(Fwd)
Triangulated

2.02

$0.90
Price Range
EV/Rev
EV/EBITDA
fwd P/E
Triangulated

Low
$1.01
$1.37
$2.02
$1.56

75%Q

Hikari
Tsushin,
Inc.

Mid
$1.85
$1.83
$2.71
$2.19

High
$2.46
$2.34
$2.82
$2.55

Weight
0.2
0.4
0.4

$1.40

$1.90

$2.40

$2.90

Dick Smith Holdings Limited: Financia

A$ in millions, year end Jun

Profit And Loss

FY15E

1281.1
945.9
=B4-B5
298.8
=B6-B7
12.5
23.9
0
1.4
=B10-B12
6.7
=B13-B14
320

1369.5
1029.5
=C4-C5
307.4
=C6-C7
12.5
20.1
0
1.4
=C10-C12
5.5
=C13-C14
325

1280.4
-976.8
=D4+D5
-280.1
=D6+D7
-12.5
=D8+D9
0
-1.4
=D10+D11+D12
-2.8
=D13+D14
323

1228
-919.6
=E4+E5
-236.4
=E6+E7
-13.2
=E8+E9
0.1
-1.5
=E10+E11+E12
-17.2
=E13+E14
369

1302.8
-973.6
=F4+F5
-246.5
=F6+F7
-14
=F8+F9
1.9
-2.7
=F10+F11+F12
-20.4
=F13+F14
382

FY16E
1365.5
-1017.1
=G4+G5
-256.7
=G6+G7
-14.6
=G8+G9
2.3
-2.7
=G10+G11+G12
-23
=G13+G14
395

Sales growth
EBITDA growth
EBIT growth
NPAT growth
Gross margin
EBITDA margin
EBIT margin
Store Growth

=(LN(C4/B4))*100
=(LN(C8/B8))*100
=(LN(C10/B10))*100
=(LN(C15/B15))*100
=(C6/C4)*100
=(C8/C4)*100
=(C10/C4)*100
=C16/B16-1

Cash Flow Statement

FY11
=B15
=B9

FY12
=C15
=C9

=(LN(D4/C4))*100
=(LN(D8/C8))*100
=(LN(D10/C10))*100
=(LN(D15/C15))*100
=(D6/D4)*100
=(D8/D4)*100
=(D10/D4)*100
=D16/C16-1
0
FY13
=D15
=-D9
-49.6
2.8
=SUM(D29:D32)

=(LN(E4/D4))*100
=(LN(E8/D8))*100
=(LN(E10/D10))*100
=(LN(E15/D15))*100
=(E6/E4)*100
=(E8/E4)*100
=(E10/E4)*100
=E16/D16-1
1
FY14E
=E15
=-E9
-6.3
15
=SUM(E29:E32)

=(LN(F4/E4))*100
=(LN(F8/E8))*100
=(LN(F10/E10))*100
=(LN(F15/E15))*100
=(F6/F4)*100
=(F8/F4)*100
=(F10/F4)*100
=F16/E16-1
2
FY15E
=F15
=-F9
-3.4
3.1
=SUM(F29:F32)

=(LN(G4/F4))*100
=(LN(G8/F8))*100
=(LN(G10/F10))*100
=(LN(G15/F15))*100
=(G6/G4)*100
=(G8/G4)*100
=(G10/G4)*100
=G16/F16-1
3
FY16E
=G15
=-G9
-2
2.6
=SUM(G29:G32)

CAPEX
Acquisitions
Diverstitures
Others
Cash Flow from Investments

-53
0
0
5.4
=SUM(B35:B38)

-24
0
0
0
=SUM(C35:C38)

-5.4
0
0
0
=SUM(D35:D38)

-20.3
0
0
0
=SUM(E35:E38)

-18.3
0
0
0
=SUM(F35:F38)

-20.9
0
0
0
=SUM(G35:G38)

Dividends Paid
Debt (Change)
Common Stock Issuance (Repurchase)
Other Financing Cash Flows
Cash flow from Financing
Total Cash Flow

0
0
0
0
=SUM(B41:B44)

0
0
0
0
=SUM(C41:C44)

0
0
0
0
=SUM(D41:D44)
=D33+D39+D45

0
0
0
0
=SUM(E41:E44)
=E33+E39+E45

-31.2
0
0
0
=SUM(F41:F44)
=F33+F39+F45

-32.9
0
0
0
=SUM(G41:G44)
=G33+G39+G45

Revenue
COGS
Gross Profit
SG&A
EBITDA
Depreciation and Amortisation
EBIT
Interest Income
Interest Expense
Pre-tax Profits
Tax Expense
NPAT
No. Stores

FY11

FY12

FY13

FY14E

Growth and Margins (%)

Net Income
D&A (add)
Working Capital (Change)
Other Operating Cash Flow
Cash Flow from Operations

=(B6/B4)*100
=(B8/B4)*100
=(B10/B4)*100

Balance Sheet
Cash and Cash Equivalents
Accounts Receivable
Inventory
Other Current Assets
Total Current Assets
Net PP&E
Net Intangibles
Total Investments
Other Long Term Assets
Total Assets

FY13
13
10.4
168.5
15.8
=SUM(L4:L7)
60.3
0
0
38.9
=SUM(L9:L12)+L8

Accounts Payable
Short-term Debt
Other Current Liabilities
Total Current Liabilities
Long-term Debt
Other long-term Liabilities
Total Liabilities

129.3
156.7
166.2
174.2
0
0
0
0
19
18.2
19.3
20.3
=SUM(L15:L17)
=SUM(M15:M17) =SUM(N15:N1=SUM(O15:O17)
26.5
26.5
26.5
26.5
15.6
46.3
51.2
57.6
=SUM(L19:L20)+L18=SUM(M19:M20)+=SUM(N19:N2=SUM(O19:O20)+O

Preferred Shares
Total Common Equity

0
116.5

0
139.4

0
156.1

0
174.8

Total Liabilities and Equity

=L13

=M13

=N13

=O13

Intrinsic Value Best Case

Free Cash Flows
EBIT*(1-Tax Rate)
D&A (add)
Working Capital (Change)
CAPEX
Free Cash Flows
Discounted
Terminal Growth Rate
WACC

FY11

FY12

FY11
=B$10*0.7
=-B$9
=B$31
=B$35
=SUM(J30:J33)

FY12
=C$10*0.7
=-C$9
=C$31
=C$35
=SUM(K30:K33)

EBIT*(1-Tax Rate)
D&A (add)
Working Capital (Change)
CAPEX
Free Cash Flows
Discounted
Terminal Growth Rate
WACC
Terminal Value
sum of PV
debt
Equity Value
no. shares
Share price

3
FY15E
FY16E
=D$10*0.7
=E$10*0.7
=F$10*0.7
=G$10*0.7
=-D$9
=-E$9
=-F$9
=-G$9
=D$31
=E$31
=F$31
=G$31
=D$35
=E$35
=F$35
=G$35
=SUM(L30:L33)
=SUM(M30:M33) =SUM(N30:N3=SUM(O30:O33)
=N34/(1+$L$3=O34/(1+$L$38)^O2
=L34/(1+$L$38)^L28 =M34/(1+$L$38)^M
FY13

FY14E

0.03
0.06

Terminal Value
sum of PV
debt
Equity Value
no. shares
Share price

Intrinsic Value Worst Case

Free Cash Flows

FY14E
FY15E
FY16E
54.7
66.4
80.8
10
10.6
11.1
202.6
215
225.3
15.2
16.1
16.8
=SUM(M4:M7)
=SUM(N4:N7)=SUM(O4:O7)
67.4
71.7
78
0
0
0
0
0
0
37.3
39.6
41.5
=SUM(M9:M12)+M=SUM(N9:N12=SUM(O9:O12)+O8

=$O$40/(1+L38)^O28
=SUM($L$35:$O$35)
=$L$19-$L$4
=L40+L41-L42
236.5
=L43/L44

FY11
=B$10*0.7
=-B$9
=B$31
=B$35
=SUM(J50:J53)

FY12
=C$10*0.7
=-C$9
=C$31
=C$35
=SUM(K50:K53)

=O34*(1+$J$37)/(L3

0
0

1
1

2
2

3
3

FY13
=D$10*0.7
=-D$9
=D$31
=D$35
=SUM(L50:L53)
=L54/(1+$L$38)^L48

FY14E
FY15E
FY16E
=33.5*0.7
=M50*(1+F26 =N50*(1+G26)
=-E$9
=-F$9
=-G$9
=E$31
=F$31
=G$31
=E$35
=F$35
=G$35
=SUM(M50:M53) =SUM(N50:N5=SUM(O50:O53)
=N54/(1+$L$3=O54/(1+$L$38)^O4
=M54/(1+$L$38)^M

0.03
0.06
=$O$60/(1+L58)^O48
=SUM($L$35:$O$35)
=$L$19-$L$4
=L60+L61-L62
236.5
=L63/L64

=O54*(1+$J$37)/(L5

ti

Company In

ASX:DSH

ASX:JBH

(AUD in millions

Dick Smith Holdings

Limited

JB Hi-Fi Limited

Latest Fiscal Year:

LTM as of:
52-Week High
52-Week High Date
52-Week Low
52-Week Low Date
Current Price (2/12/14)
% of 52
52-Week
Week High
% of 52-Week Low
Daily Volume
% Turnover
Total Common Shares
Market Capitalization
Plus: Total Debt
Plus: Preferred Stock
Plus: Minority Interest
Less: Cash and Equivalents
Net Debt
Enterprise Value
Valuation
Total Revenue
Enterprise Value / Rev
EBITDA
Enterprise Value / EBITDA
eps
P/e
Revenue Growth
EBITDA Growth
EBITDA Margin

41455
41637
2.41
41649
1.99
41628
2.25
0.933609958506224
1.13065326633166
0.20791
=D15/D17
236.51136
532.15056
26.5
0
0
13
=SUM(D19:D21)-D22
545.65056

FY+1
FY+1
FY+1
FY+1
FY+1
FY+1
1 Year
5 Year
1 Year
5 Year
FY+1

41455
41639
23.13
41585
12.04
41323
18.5
0.799827064418504
1.53654485049834
0.56043
=E15/E17
100.26168
1854.84108
49.946
0
0
44.945
=SUM(E19:E21)-E22
1859.84208

1228
3538.79575
=D$24/D27
=E$24/E27
='Exhibit
'E hibit 1 - Fi
Financial
i l St
Statem
t 227.42187
227 42187
=$D$24/D29
=E$24/E29
0.1865
1.27248
=D$12/D31
=E$12/E31
-0.306563
0.057741
0
0.125904
-0.875841
0.097414
0
0.125977
0.0608180443791013
0.0642653281133843

Leverage/Coverage Ratios
Net Debt / Equity %
Net Debt / Capital %
EBITDA / Int. Expense

=D23/D18
=D23/D24
1.32112

=E23/E18
=E23/E24
24.93276

Comparative
EV/Revenue (Fwd)
EV
Debt - cash
Equity(EV-Debt)
Shares outstanding
Share Price

=K28*D27
=$D$19-$D$22
=C48-C49
=$D$17
=C50/C51

1st Qrt

median
=L28*D27
=$D$19-$D$22
=D48-D49
=$D$17
=D50/D51

3rd Qrt
=M28*D27
=$D$19-$D$22
=E48-E49
=$D$17
=E50/E51

EV/EBITDA (Fwd)
EV
Debt - cash
Equity(EV-Debt)
Shares outstanding
Share Price

=K30*D29
=$D$19-$D$22
=C55-C56
=$D$17
=C57/C58
C57/C58

=L30*D29
=$D$19-$D$22
=D55-D56
=$D$17
=D57/D58
D57/D58

=M30*D29
=$D$19-$D$22
=E55-E56
=$D$17
=E57/E58
E57/E58

P/E (Fwd)
Share Price

=K32*D31

=L32*D31

=M32*D31

Price Range
EV/Rev
EV/EBITDA
fwd P/E
Triangulated

Low

Mid

=C52
=C59
=C62
=C65*$F$65+C66*$F$66+C67*$F$67

High
=D52
=E52
=D59
=E59
=D62
=E62
=D65*$F$65+D66*$F$66+D=E65*$F$65+E66*$F$66+E

Triangulated
EV/Rev (Fwd)
EV/EBITDA (Fwd)
P/E (Fwd)

=C68
=C65
=C66
=C67

=D68-C72
=D65-C73
=D66-C74
=D67 C75
=D67-C75

=E68-D68
=E65-(C73+D73)
=E66-(C74+D74)
=E67 (C75+D75)
=E67-(C75+D75)

ASX:MYR

SEHK:493

LSE:DXNS

NYSE:GME

TSE:9435

Myer Holdings Limited

GOME Electrical
Appliances Holding
Limited

Dixons Retail plc

GameStop Corp.

Hikari Tsushin, Inc.

41482
41664
3.26
41393
2.19
41437
2 58
2.58
0.791411042944785
1.17808219178082
2.13234
=F15/F17
585.65485
1510.989513
423.155
0
9.728
81.47
=SUM(F19:F21)-F22
1862.402513

41639
41639
0.21712
41603
0.08856
41450
0 18998
0.18998
0.875
2.14521228545619
47.0855
=G15/G17
16875.056
3205.92313888
396.64078
0
-86.89444
1470.39018
=SUM(G19:G21)-G22
2045.27929888

3130.61245
3130
61245
=F$25/F27
289.8461
=F$25/F29
0.20333
=F$13/F31
0.004232
-0.017239
-0.037877
0.063393
0.0925844717700525

10947 45022
10947.45022
=G$24/G27
330.2361
=G$24/G29
0.01215
=G$12/G31
0.103793
0.042113

=F23/F18
=F23/F24
10 99558
10.99558

41394
41578
0.97365
41625
0.46662
41331
0 86673
0.86673
0.890186411955015
1.85746431786036
11.81758
=H15/H17
3656.10453
3168.8554792869
577.87437
0
1.01798
650.66007
=SUM(H19:H21)-H22
3097.0877592869

41671
41671
63.96726
41592
25.87938
41337
40 4476
40.4476
0.632317219777743
1.5629277053778
3.48981
=I15/I17
115.81074
4684.266487224
0
0
0
688.01355
=SUM(I19:I21)-I22
3996.252937224

41364
41639
98.1058
41655
42.89427
41318
90 75867
90.75867
0.925110136199898
2.115869322406
0.2595
=J15/J17
47.74964
4333.6938193788
633.52261
0
118.78017
275.90603
=SUM(J19:J21)-J22
4810.0905693788

13909 98216
13909.98216
=H$24/H27
608.06909
=H$24/H29
0.05147
=H$12/H31
0.030037
-0.00115
NM -0.092575
-0.079799
0.085697
0.0301655721984183
0.043714584462127

10892 92228
10892.92228
=I$24/I27
940.37759
=I$24/I29
4.20058
=I$12/I31
0.017194
0.00525
-0.056969
-0.013608
0.0863292297354021

0
0
24.95367
24
95367

0
0
137 75
137.75

0
0
10 6039
10.6039

25%Q

Median

75%Q

=QUARTILE(D8:J8,1) =MEDIAN(E8:J8)

=QUARTILE(D8:J8,3)

=QUARTILE(D10:J10,1=MEDIAN(E10:J10)

=QUARTILE(D10:J10,3

=QUARTILE(D12:J12,1=MEDIAN(E12:J12)
=QUARTILE(D12:J12
1=MEDIAN(E12:J12)
=QUARTILE(D13:J13,1=MEDIAN(E13:J13)
=QUARTILE(D14:J14,1=MEDIAN(E14:J14)

=QUARTILE(D12:J12 3
=QUARTILE(D12:J12,3
=QUARTILE(D13:J13,3
=QUARTILE(D14:J14,3

=MEDIAN(E16:J16)
=QUARTILE(D18:J18,1=MEDIAN(E18:J18)

=QUARTILE(D18:J18,3

=QUARTILE(D24:J24,1=MEDIAN(E24:J24)

=QUARTILE(D24:J24,3

5977 25039
5977.25039
=J$24/J27
387.48908
=J$24/J29
6.23534
=J$12/J31
0.002016
0.097551
0.284216
0.018339
0.0648273126801369

=QUARTILE(D28:J28,1=MEDIAN(D28:J28)
=QUARTILE(D29:J29,1=MEDIAN(D29:J29)
=QUARTILE(D30:J30,1=MEDIAN(D30:J30)
=QUARTILE(D31:J31,1=MEDIAN(D31:J31)
=QUARTILE(D32:J32,1=MEDIAN(D32:J32)
=QUARTILE(D33:J33,1=MEDIAN(D33:J33)
=QUARTILE(D34:J34,1=MEDIAN(D34:J34)
=QUARTILE(D35:J35,1=MEDIAN(D35:J35)
=QUARTILE(D36:J36,1=MEDIAN(D36:J36)
=QUARTILE(D37:J37,1=MEDIAN(D37:J37)

=QUARTILE(D28:J28,3
=QUARTILE(D29:J29,3
=QUARTILE(D30:J30,3
=QUARTILE(D31:J31,3
=QUARTILE(D32:J32,3
=QUARTILE(D33:J33,3
=QUARTILE(D34:J34,3
=QUARTILE(D35:J35,3
=QUARTILE(D36:J36,3
=QUARTILE(D37:J37,3

=J23/J18
=J23/J24
78 07235
78.07235

=QUARTILE(D40:J40,1=MEDIAN(E40:J40)
=QUARTILE(D41:J41,1=MEDIAN(E41:J41)
=QUARTILE(D42:J42 1=MEDIAN(E42:J42)
=QUARTILE(D42:J42,1=MEDIAN(E42:J42)

=QUARTILE(D40:J40,3
=QUARTILE(D41:J41,3
=QUARTILE(D42:J42 3
=QUARTILE(D42:J42,3

ComparativeValue
P/E(Fwd)
EV/EBITDA(Fwd)
EV/Rev(Fwd)
Triangulated
$0.90
Weight
0.2
0.4
0.4

$1.40

$1.90

$2.40

$2.90