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Khakis’ R UsTeam 5
Kenry Qi| Mable Chow | Zack Xu
23/5/3
Agenda
Industry Overview1
Company Overview2
Valuation Analysis3
Alternative4
Recommendation5
Q/A6
23/5/3
Industry Analysis: Apparel and Footwear
Industry overview:
• Highly Competitive• Rely on Import• Bounce Back• Globalization
Sub-industry: Men’s Apparel Analysis
• Potential Opportunity
• Developmental Stage
• Growing potential in SP (i.e.: Men’s Wearhouse
Acquisition)
Chart Source: Conductor
Trends AnalysisOpportunities: •Online Store and Outlet Trends•Move to Overseas
Risks:•Competitive Edge•Growth Edge
Chart source: eMarketer
Khakis’ R Us Valuation Analysis – Overview of Selected Valuation Methodologies• Analysis of Selected Publicly Traded Company
Estimates current public market value of firm based on trading multiples of selected comparable companies
• Analysis of Selected Company Acquisitions Transactions Estimates value of firm in a change of control transaction based on multiples and premiums implied by
prior acquisitions of selected transactions
• Discounted Cash Flow Analysis Estimates enterprise value based on its projected future free cash flows discounted at a rate reflecting
risks inherent in its business and capital structure
Assumption• KRU price used in the most recent time manner: $12/ share• Reliable forward multiple (Projected sales, EBITDA, EBIT, etc.)• Capital structure will maintain the current in the future• No option and share repurchase program• Data and metrics were 2013 if without indication• Other assumptions
Analysis of Publicly Traded Company
Consideration:•D/E Ratio•LTM EBITDA Margin•EPS•Capital Size
Analysis of Publicly Traded Company
Analysis of Selected AcquisitionsConsideration:•Operations•Financial•Size of Transaction Value•Market condition
Analysis of Selected Acquisitions
Discounted Cash Flow Operating Assumptions
• Company sales growth will match the forecast
• Company stay constant growth after the fifth year
• Value as a stand alone company
Analysis of Discounted Cash Flow
Analysis of Discounted Cash Flow Selected Companies’ Unlevered Beta are based on the following factors:
•Capital structure•Capital Size•Rate of return on debt and equity
Levered Unlevered BetaBl=Bu*(1+(1-Tc)*(D/E))
Analysis of Discounted Cash Flow Assumptions:
•Cost of Debt is higher than the average of comparable companies
•Risk Free Rate will be taken the median rate
•Market Risk Premium match with other Comparable Companies
Analysis of Discounted Cash Flow
Analysis of Discounted Cash Flow
Khakis’ R Us Valuation Analysis - Summary
Price Per Share: $23