bluebook company valuation presentation
DESCRIPTION
BlueBook's presentation to Queen Mary Trading and InveTRANSCRIPT
HOW TO VALUE COMPANIES
www.bbk.io/qm
Why value companies? • To acquire a business – Investment Banker
• Raising Money for Your Own Business - Entrepreneur • Evaluate New Projects – Management Consultant
• Make Stock Recommendations – Investor/Trader
• Other reasons: Taxation / Bankruptcy / Litigation – Lawyer/Accountant
Further uses of valuation
Pension Planning
Your Mortgage
Buying or Leasing a Car
Deciding on an MBA
Saving for your kids’ educa=on
Relevant graduate skills 1. Market research
2. Data analysis
3. Presentation skills
4. Self-Marketing
5. Commercial acumen
HOW TO BUILD A FINANCIAL STORY
To tell a great financial story…
• Analyse nine aspects of a company
• Question EVERY number, percentage or ratio to understand WHY
• The goal is to paint a rich picture of the company’s future using the numbers
Company Profile
Financial Strategy Every decision that a business makes which involves money has one goal: to increase value for the shareholders of the company
• These decisions either take the form of an Investment, Financing or Dividend decision
• The business may consider Investments such as opening a new branch, expanding its product lines to new coffees or buying a competitor’s business
• In order to make these investments, the company has to raise finance, either a loan from the bank, equity from shareholders or a combination of both
• If there are no investment opportunity, the cash must be returned to shareholders as dividends in order to maximize shareholder value
Financial Performance
Information Sources • Company Annual Report and Website
• FCA, SEC Regulatory Filings
• Industry Reports
• Press – Financial Times, Economist, WSJ
CLEMENT’S GOPRO STORY
VIEW ONLINE: WWW.BBK.IO/CLEMENTB
GoPro Story Outline • Recent Capital Markets Activity
• Online Camera Market Overview
• Company Considerations – Share price performance – Recent Corporate Actions (eg. M&A, news announcements) – Operating Performance – Valuation
Question
What is the size of the action camera market?
Camera Market Overview
• GoPro is gaining market share in both the camera and camcorder markets, with 27% and 5% share respectively
• The overall digital capture market has fallen by 44% - GoPro however has grown by 240%
• Revenue growth in APAC has been slow. US and EMEA have been strong
• Camera market is trending towards the “selfie” culture
Camera & Camcorder Market Units shipped Comparison
GoPro Share of Camera & Camcorder market
0
50
100
150
200
0
1000
2000
3000
4000
5000
2011 2012 2013
Tota
l (10
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GoP
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GoPro total
0.00%
2.00%
4.00%
6.00%
0.00%
10.00%
20.00%
30.00%
2011 2012 2013
Camera market
Camcorder m
arket
camcorder market camera Market
Share Price Performance vs Competitors (Last 12 Months)
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200
Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug
Pric
e in
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-bas
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Garmin Sony Apple Netgear Nike Tesla UnderArmour
GPRO IPO – 26/6/2014 Current date – 12/09/2014
IPO Price - $24 High – $70.9
Peer group growth- 8.4% GPRO growth – 184.5%
Summary • GoPro, the manufacturer of high definition personal capture devices, is rapidly
gaining market share in the digital capture market
• Current and future revenues will come from the “Virtuous Cycle”
• As a media platform it could have the ability to curate the best content and gain advertising/royalties
• The market seems very optimistic about GoPro’s media platform opportunity
which is at least 2-3 years from materialising
It is far too early for long-term investors to be able to tell whether GoPro will have staying power or will be surpassed by larger counterparts like Sony, Google, or Apple.
Media Platform as Potential Catalyst
• Media Platform could prove lucrative if online viewership continues its growth • The two main revenue sources we forecast for this business model is advertising
and licensing
• GoPro’s demographic is 18-34 YO which is the most sought after from advertisers
• Based on a forecast 4 billion video views at $10 and 40,000 videos sold at $500, incremental $60 million annual revenues can be achieved from the media opportunity.
Revenues from advertising ($millions) Net revenue per 1000 views (CPM $ ) Avg
$6.00 $7.60 $8.00 $10.00 $12.00 $14.00 $16.00 1 $6.00 $7.60 $8.00 $10.00 $12.00 $14.00 $16.00 2 $12.00 $15.20 $16.00 $20.00 $24.00 $28.00 $32.00
Number of views 3 $18.00 $22.80 $24.00 $30.00 $36.00 $42.00 $48.00 Billions 4 $24.00 $30.40 $32.00 $40.00 $48.00 $56.00 $64.00
5 $30.00 $38.00 $40.00 $50.00 $60.00 $70.00 $80.00 6 $36.00 $45.60 $48.00 $60.00 $72.00 $84.00 $96.00 7 $42.00 $53.20 $56.00 $70.00 $84.00 $98.00 $112.00
Income Statement GoPro Hist. Hist. Hist Proj. Proj. Proj. Proj. Proj.
Income Statement 31-Dec-11 31-Dec-12 31-Dec-13 31-Dec-14 31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18 Net Sales 234,238.0 526,016.0 985,737.0 1,335,981.1 1,696,251.4 2,008,230.2 2,349,086.0 2,750,465.8 COGS 111,683 298,530 623,953 868,387.7 1,051,675.9 1,204,938.1 1,362,469.9 1,567,765.5 SG&A 83,776 173,869 263,081 366,143.5 443,424.3 508,045.2 574,466.3 661,026.3 EBIT 38,779.0 53,617.0 98,703.0 101,449.9 201,151.2 295,246.9 412,149.9 521,674.0
Depreciation 600.0 2,800.0 10,900.0 12,844.4 23,738.4 54,953.1 89,202.3 128,692.1 Amortization EBITDA 56,417.0 109,603.0 114,294.3 224,889.6 350,200.0 501,352.2 650,366.2
Non-recurring items 0.0 0.0 7,374.0 0.0 0.0 0.0 0.0 0.0 Interest Income 44 46 2 507.1 0.0 172.2 1,143.7 2,944.1 Interest Expense -32 -392 -6020 7,398.7 2,781.2 1,127.3 0.0 0.0 Profit before taxes 38,855.0 54,055.0 97,351.0 94,558.3 198,370.0 294,291.8 413,293.5 524,618.2
Taxes 14,179 20,948 30,751 29,868.8 59,511.0 88,287.5 123,988.1 157,385.5 Profit after tax 24,676.0 33,107.0 66,600.0 64,689.4 138,859.0 206,004.3 289,305.5 367,232.7 Discountinued Operations (Profit) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net income 24,676.0 33,107.0 66,600.0 64,689.4 138,859.0 206,004.3 289,305.5 367,232.7
Shareholder information Diluted weighted average shares outstanding 125,745.0 125,745.0 125,745.0 125,745.0 125,745.0 125,745.0
Diluted earnings per share $0.73 $0.51 $1.10 $1.64 $2.30 $2.92
Dividends per share $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Gross Margin 52.3% 43.2% 36.7% 35.0% 38.0% 40.0% 42.0% 43.0% EBIT Growth 38.3% 84.1% 2.8% 98.3% 46.8% 39.6% 26.6%
Balance sheet Balance Sheet Hist. Hist. Hist. Proj. Proj. Proj. Proj. Proj. 31-Dec-11 31-Dec-12 31-Dec-13 31-Dec-14 31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18 Cash and cash equivalents 36,485 101,410 0.0 0.0 34,439.8 194,290.4 394,539.0 Accounts receivable 80,197 122,669 173,677.5 220,512.7 261,069.9 305,381.2 357,560.6 Inventories 60,412 111,994 156,309.8 199,818.4 240,987.6 286,118.7 344,908.4 Prepaids 21,724 21,967 33,399.5 50,887.5 64,263.4 79,868.9 99,016.8 Total current assets 198,818.0 358,040.0 363,386.9 471,218.6 600,760.7 865,659.2 1,196,024.8
Net PP&E 22,440 32,111 59,346.0 137,382.7 223,005.7 321,730.3 440,580.1 Goodwill & Intangibles 8,449 17,365 17,365.0 17,365.0 17,365.0 17,365.0 17,365.0 Other intangibles 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other assets 16,958 32,155 44,087.4 55,976.3 66,271.6 77,519.8 90,765.4 Total assets 246,665.0 439,671.0 484,185.3 681,942.6 907,403.1 1,282,274.3 1,744,735.3
Short term debt 15,782 60,297 16,052.4 56,364.9 0.0 0.0 0.0 Accounts payable and accruals 109,840.0 220,595.0 240,476.6 288,362.7 341,399.1 399,344.6 467,579.2 Accrued income taxes 3,578 19,702 19,116.1 38,087.0 56,504.0 79,352.4 100,726.7 Total current liabilities 129,200.0 300,594.0 275,645.1 382,814.7 397,903.2 478,697.0 568,305.9
Total long-term debt 113,613 53,315 53,315.0 0.0 0.0 0.0 0.0 Other long-term liabilities 6,455 13,930 18,703.7 23,747.5 28,115.2 32,887.2 38,506.5 Total liabilities 249,268.0 367,839.0 347,663.8 406,562.2 426,018.4 511,584.2 606,812.4
Common stock 77,617.0 91,716.0 91,716.0 91,716.0 91,716.0 91,716.0 91,716.0 Retained earnings (80,220.0) (19,884.0) 44,805.4 183,664.4 389,668.7 678,974.1 1,046,206.9 Treasury stock 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total equity (2,603.0) 71,832.0 136,521.4 275,380.4 481,384.7 770,690.1 1,137,922.9 Total Liab.& Equity 246,665.0 439,671.0 484,185.3 681,942.6 907,403.1 1,282,274.3 1,744,735.3
Balance? OK OK OK OK OK OK OK
Cash Flow Statement GoPro Hist. Hist. Hist. Proj. Proj. Proj. Proj. Proj.
Cash Flow Statement 31-Dec-11 31-Dec-12 31-Dec-13 31-Dec-14 31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18
Net Income 24676 33107 66600 64689 138859 206004 289305 367233
Depreciation 2800 10900 12844 23738 54953 89202 128692
Amortisation 0 0 0 0 0 0 0
Change in OWC -48915 32582 -87461 -40975 -23649 -24254 -40508
Change in other assets -16958 -15197 -11932 -11889 -10295 -11248 -13246
Change in other liabilities 6455 7475 4774 5044 4368 4772 5619
Cash from Operating Activities -23511 102360 -17086 114778 231381 347777 447791
Capex 0 18326 40079 101775 140576 187927 247542
Cash from Investing Activities 0 -18326 -40079 -101775 -140576 -187927 -247542
Change in Common Stock 77617 14099 0 0 0 0 0
Change in Treasury Stock 0 0 0 0 0 0 0
Dividends 0 0 0 0 0 0 0
Long Term Debt Repayment 113613 -60298 0 -53315 0 0 0
Cash from Financing Activities 191230 -46199 0 -53315 0 0 0
Net Cash Flow 167719 37835 -57165 -40312 90805 159851 200249
Beginning Cash 41113 -16052 -56365 34440 194290
Ending Cash 41,113 -16052 -56365 34440 194290 394539
Discounted Cash Flow Analysis
Years 0 1 2 3 4 5 5 Financial Year (Dec. Year end) 2013 2014 2015 2016 2017 2018 Terminal Period
Total Turnover 985,737 1,335,981 1,696,251 2,008,230 2,349,086 2,750,466 growth (%) 35.5% 27.0% 18.4% 17.0% 17.1% EBIT 98,703 101,450 201,151 295,247 412,150 521,674 margin (%) 10.0% 7.6% 11.9% 14.7% 17.5% 19.0% Depreciation & Amortisation 10,900.0 12,844.4 23,738.4 54,953.1 89,202.3 128,692.1 Tax @ 30.0% (29610.9) (30435.0) (60345.4) (88574.1) (123645.0) (156502.2) Capital Expenditure 18325.6 40079.4 101775.1 140576.1 187926.9 247541.9 Capex/Sales (%) -1.9% -3.0% -6.0% -7.0% -8.0% -9.0% Working Capital 32582.0 (87461.2) (40974.7) (23648.9) (24254.0) (40508.1) Working Capital / Sales (%) -3.3% 6.5% 2.4% 1.2% 1.0% 1.5% Free Cash Flow 94248.5 -43681.3 21794.5 97400.9 165526.3 205814.0 205814.0 Discount Factor 0.8939 0.7990 0.7142 0.6384 0.5707 0.5707 Terminal Value 4,520,624 Present Value -39045.96 17414.39 69567.25 105679.21 117456.78 2,579,892 Enterprise Value (m) 2,851 Net Debt as at 172.5 Market Capitalisation (m) 2,678 No. Shares (m) 126 Share Price ($) 21.30
Based on above forecasts, we calculate a per share valuation of $21.30. GoPro currently trades at $68.2 on Nasdaq Stock Exchange – >3.2x our valuation
Relative Valuation - Trading
Competitor Market Cap Enterprise Value ($m) EV/Sales P/E 2014 2015 2016 2014 2015 2016
iRobot Corp 1076 880.44 1.6x 1.4x 1.2x 33.0x 25.8x 21.5x Garmin Ltd 11026 8154 2.9x 2.8x 2.8x 19.1x 17.6x 16.5 Lululemon athletica 5644 4946 3.1x 2.8x 2.4x 19.9x 22.2x 18.6 Chipotle Mexican Grill 18414 18090 4.7x 4.1x 3.7x 47.9x 37.3x 31.9 Michael Kors Holdings 16589 15643 4.7x 3.7x 3.0x 25.2x 20.5x 17.3
Hain Celestial Group 4303 4927 2.3x 2.0x 1.9x 27.2x 23.2x 21.5 Annies inc 537 520 2.2x 1.9x 1.6x 35.0x 27.9x 27.8
Mean 3.1x 2.7x 2.4x 29.6x 24.9x 22.2x Median 3.0x 2.8x 2.4x 27.2x 23.2x 21.5x
Gopro Implied Market Cap Mean 3,931 4,359 4,590 1,916 3,462 4,564 Median 3,835 4,577 4,647 1,760 3,222 4,429
Current Market Cap 7400 Min 1,760 Max 4,647
Market Premium (%) 88% 70% 61% 286% 114% 62% 93% 62% 59% 321% 130% 67%
# of shares 126 Share price $31.26 $34.66 $36.50 $15.24 $27.53 $36.30
Looking at a trading multiples valuation we see that GoPro has a 286% market premium on its 2014 P/E multiple and an 88% premium on its EV/Sales
THEORY VS PRACTICAL
OUR VALUATION
$21
MARKET VALUATION
$74
Conclusion
The market seems very optimistic about GoPro. It is not trading on fundamentals
Question
What reasons would explain the difference in valuation?
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