(452 words counting)

Company valuation

David Jones Limited, ASX code: DSJ

Company position

David Jones limited is one of well-known department stores company, and it has high

competitive level in this industry in Australia. (IBIS world, 2014) David Jones limited

over 5 years David through, David Jones's revenue is forecast to contract by an

annualized 2.0% to $ 1.8 billion and it has a weak performance overall industry. David

Jones Limited had only held 9.6% of market share in industry.

Net profit Growth analysis

1.00%

3.00%

5.00%

7.00%

9.00%

11.00%

Net profit margin growth for DJS and MYR in year 2010-2014

Net

pro

fit m

argi

n %

Figure 1: Morningstar AatAnalysis premium, 2014

From graph, David Jones limited has high net profit margin than Myer during past 5

years, and David had been managing good company to maximize turning their revenue

into their profit in last 3 years. During past 2 years, however, the revenue and profit of

companies had significantly dropped down respectively. However, David Jones has

increased their profit from 2012 to 2013 although both company dropped largely profit

compare to last 3 years. David Jones Limited is still having stable position in its industry.

Valuation

(a) Price Earnings Ratio

2.50%

7.50%

12.50%

17.50%

22.50%

27.50%

32.50%

37.50%

42.50%

P/E ratio for DJS and MYR in year 2010-2014

P/E

ratio

%

Figure 2: Morningstar AatAnalysis premium, 2014

From P/E ratio graph, it shows that David Jones Limited earning share price growth is

higher than the Myer holding limited from over 5 years. As the result, it can be concluded

that David Jones limited has better performance than Myer Holding Limited It means

that David Jones Limited has higher expected growth in future than the Myer holding

limited in same industry.

(b) Price to Book value ratio

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Myer Holding lim-ited

0.0214 0.0236 0.0141 0.0159 0.0158

David Jones Limited 0.0331 0.0310000000000001

0.0168 0.0161 0.0191

0.25%0.75%1.25%1.75%2.25%2.75%3.25%

P/B value ratio for DJS and MYR in year 2010-2014

P/B

ratio

%

Figure 3: Morningstar AatAnalysis premium, 2014

The comparison between these two countries, David Jones limited definitely was having

higher P/B ratio, and investor could expect that David Jones would get high price gain

compare to Myer. However, P/B ratio is not enough for making investment decision.

From 2009 and 2013, David Jones had over 3% of P/B ratio, but share price had dropped

after one year later. Therefore, it resulted David Jones limited had good performance than

Myer although it holding only 9.6% marker share in its industry.

(c) EV/EBITDA ratio

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Myer Holding limited

0.0591 0.0705 0.0541 0.0599000000000001

0.0676

David Jones Limited

0.0734 0.0694000000000001

0.0477 0.0516 0.0596

1.00%

3.00%

5.00%

7.00%

EV/EBITDA ratio for DJS and MYR in year 2010-2014

EV/E

BITD

A r

atio

%

Figure 4: Morningstar AatAnalysis premium, 2014

EV/EBITDA ratio is one of useful tool for estimating value of company in it industry.

David Jones Limited and Myer holdings limited are well-known company in it

department store industry, according data David Jones limited was undervalue compare

to the Myer indicated by enterprise multiple.

Strengths Weaknesses (SWOT) analysis

Strengths Weaknesses

Store portfolio

Service portfolio

Broad Product and Brand

Portfolio

Weak profitability Indicators

Opportunities Threats

Business Transformation

Growth prospects: E-Retail

Brand Expansion

Business Expansion

Competitive Environment

Changing consumer preferences

Counterfeit good market

Table 1: SWOT analysis (OneSource, 2014)

Recommendation

David Jones Limited is considerable choice to invest, because it expected to increase to in

next 12 months in performance and sales. (IBIS World, 2014) David Jones Limited and

others competitors had invested heavily in technology to boost their performance better

than previously. David Jones did well in third quarter of 2014 than Myers, and it Price

earnings ratio, EV/EBITA ratio and Net Profit will be increased 20.4%, 9.9% and 104

million(AUD) in next 12 months respectively. (Deutsche Bank, 2014, para. 1)

Reference

1.) IBIS World. (2014). Major Companies: David Jones Limited. Retrieved from

http://clients1.ibisworld.com.au.ezp01.library.qut.edu.au/reports/au/industry/

majorcompanies.aspx?entid=405#MP5767

2.) OneSource. (2014). David Jones Limited : Strengths/Weaknesses(SWOT). Retrieved

from http://globalbb.onesource.com.ezp01.library.qut.edu.au/web/Reports/

ReportMain.aspx?

KeyID=517305&Process=CP&CIK=&Report=STRENGTHWEAKNESS

3.) Deutsche Bank. (2014). 3Q14 sales: Going out on a high note. Retrieved from

http://globalbb.onesource.com.ezp01.library.qut.edu.au/Web/NewsAndReports/

FetchAR_TR.aspx?Process=CP&DocID=66567288&file=file.pdf

Appendices

David Jones Limited financial ratio

Myer holdings limited financial ratio

David Jones limited SWOT table