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X5_EV_presentation_Pentegov

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Vitaly Pentegov
Vitaly Pentegov

The document summarizes different valuation methods used to calculate the intrinsic value of X5 Retail Group, a Russian retail company. The valuation methods included: - Discounted cash flow analysis using free cash flows discounted by the weighted average cost of capital. - Comparable company analysis applying EV/EBITDA and EV/Sales multiples of listed comparable companies to X5 Retail metrics. - Precedent transaction method applying multiples from previous retail transactions to X5 Retail EBITDA. - Return on invested capital approach considering shares as bonds paying coupons. The document also provides sensitivity analysis details for the DCF and compares valuation multiples for relevant companies.

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X5 retail group valuation Made by Vitaly Pentegov 13.05.2016
Intrinsic value of the company was calculated as the sum of free cash flows generated by the existing and new retail stores discounted by weighted average cost of capital (WACC) - Value of the company was calculated by applying EV/EBITDA and EV/Sales ratios of listed comparable companies to X5 Retail metrics - Company value was calculated by applying EV/EBITDA ratios from previous transactions to X5 Retail EBITDA estimate - This valuation method can include premiums historically paid for control in the industry - Lack of comparable historic transactions for companies and assets with similar characteristics and geography of assets - Inadequate premiums paid - Useful only for approximate estimation - Lack of public companies and assets with similar characteristics, business model and geography of assets - Useful only for approximate estimation Valuation methods applied DCF Comparable Companies Precedent Transaction Description Consideration - Calculated applying EBITDA multiple and Gordon growth methods - Recent changes in company operations and financials are taken into account - Calculated with macroeconomic and operations forecasts 2 Higher School of Economics 2016 ROIC approach - Shares are considered as bonds paying coupons, therefore yield to maturity is calculated based on bonds current value. - Reflects return and cash flows that investor will get in perpetuity after buying the stock on market price - Based on fair assumptions of future company growth driver - Companys business risks are not taken into account
DCF sensitivity analysis Main Inputs ? WACC = 13.86% ? ROIC = 11% ? Terminal growth rate = 6.0% ? Market Cap= 343 214 mln. ? Effective tax rate = 21% 3 Higher School of Economics 2016 Comparable companies Precedent transactions ROIC based DCF EV/EBITDA 2016E EV/EBITDA 2017E EV/EBITDA 2018E EV/Sales EV/EBITDA EV/Sales IRR = 7% mln. rub. Comparable companies Multiples Multiples Date Acquirer Target EV / EBITDA EV / Sales 22/2/12 Billa AG ENKA TC LLC 8.6x 0.6x 6/20/11 DIXY Group Victoria Group 9.6x 0.8x 4/31/11 7th Continent Mosmart CJSC 15.4x 1.4x 6/9/14 Azbuka Vkusa Spar 6.5x 0.4x 12/15/10 X5 retail group Kopeyka 10.9x 0.9x 30/9/09 X5 retail group Paterson 9.8x 0.7x 3/12/12 Aushan Real 13.7x 0.4x 9/8/11 EBRD and Luna Lenta 11.3x 1.1x 9/5/13 VimpelCom Ltd Digital ION 3.4x 0.2x Precedent transactions Valuation result 364372 510957 395385 376684 446018 495175 215534 476348 348982 617810 633203 544403 550258 631911 735957 357151 623679 707163 150000 250000 350000 450000 550000 650000 ROIC approach 21 29 54 30 42 49 9 13 -5 OPCF = NI + D&A + NonMonEx + ?NWC CAPEX FCFF Selling Space, thnd sq. m. 2 223 2 572 3 333 new 6032 Terminal Period Assumptions IRR to all existing stores, real RUB 10% Reinvestment rate 100% Terminal growth 0% 62 62 60 5 years Growth scenario 5 years Growth scenario 2013 2014 TTM 2016-2019 p.a. New store IRR during grows stage 11% (proved by current X5 financials) IRR = 7% real terms (in 2015 prices) 9 365 Valuation results, mln. RUB (if not stated), data as of 13.05.2016 EV / EBITDA EV/ Sales 2016 2017 2018 Current Company x x x x Tier I: Relevant Companies Lenta Ltd. 8.0x 6.7x 6.1x 0.5x Metro Cash & Carry 5.4x 5.2x 5.1x 0.2x Magnit 14.6x 11.4x 8.9x 1.4x Mean 9.3x 7.8x 6.7x 0.7x Median 8.0x 6.7x 6.1x 0.5x Tier II: Others O'key 5.0x 4.3x 3.6x 0.4x Dixy group 4.2x 3.5x 3.1x 0.4x M.Video 5.6x 5.4x 4.9x 0.2x Mean 4.9x 4.4x 3.9x 0.3x Median 5.0x 4.3x 3.6x 0.4x DCF (Gordon growth) DCF (growth EBITDA)

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X5_EV_presentation_Pentegov

  • 1. X5 retail group valuation Made by Vitaly Pentegov 13.05.2016
  • 2. Intrinsic value of the company was calculated as the sum of free cash flows generated by the existing and new retail stores discounted by weighted average cost of capital (WACC) - Value of the company was calculated by applying EV/EBITDA and EV/Sales ratios of listed comparable companies to X5 Retail metrics - Company value was calculated by applying EV/EBITDA ratios from previous transactions to X5 Retail EBITDA estimate - This valuation method can include premiums historically paid for control in the industry - Lack of comparable historic transactions for companies and assets with similar characteristics and geography of assets - Inadequate premiums paid - Useful only for approximate estimation - Lack of public companies and assets with similar characteristics, business model and geography of assets - Useful only for approximate estimation Valuation methods applied DCF Comparable Companies Precedent Transaction Description Consideration - Calculated applying EBITDA multiple and Gordon growth methods - Recent changes in company operations and financials are taken into account - Calculated with macroeconomic and operations forecasts 2 Higher School of Economics 2016 ROIC approach - Shares are considered as bonds paying coupons, therefore yield to maturity is calculated based on bonds current value. - Reflects return and cash flows that investor will get in perpetuity after buying the stock on market price - Based on fair assumptions of future company growth driver - Companys business risks are not taken into account
  • 3. DCF sensitivity analysis Main Inputs ? WACC = 13.86% ? ROIC = 11% ? Terminal growth rate = 6.0% ? Market Cap= 343 214 mln. ? Effective tax rate = 21% 3 Higher School of Economics 2016 Comparable companies Precedent transactions ROIC based DCF EV/EBITDA 2016E EV/EBITDA 2017E EV/EBITDA 2018E EV/Sales EV/EBITDA EV/Sales IRR = 7% mln. rub. Comparable companies Multiples Multiples Date Acquirer Target EV / EBITDA EV / Sales 22/2/12 Billa AG ENKA TC LLC 8.6x 0.6x 6/20/11 DIXY Group Victoria Group 9.6x 0.8x 4/31/11 7th Continent Mosmart CJSC 15.4x 1.4x 6/9/14 Azbuka Vkusa Spar 6.5x 0.4x 12/15/10 X5 retail group Kopeyka 10.9x 0.9x 30/9/09 X5 retail group Paterson 9.8x 0.7x 3/12/12 Aushan Real 13.7x 0.4x 9/8/11 EBRD and Luna Lenta 11.3x 1.1x 9/5/13 VimpelCom Ltd Digital ION 3.4x 0.2x Precedent transactions Valuation result 364372 510957 395385 376684 446018 495175 215534 476348 348982 617810 633203 544403 550258 631911 735957 357151 623679 707163 150000 250000 350000 450000 550000 650000 ROIC approach 21 29 54 30 42 49 9 13 -5 OPCF = NI + D&A + NonMonEx + ?NWC CAPEX FCFF Selling Space, thnd sq. m. 2 223 2 572 3 333 new 6032 Terminal Period Assumptions IRR to all existing stores, real RUB 10% Reinvestment rate 100% Terminal growth 0% 62 62 60 5 years Growth scenario 5 years Growth scenario 2013 2014 TTM 2016-2019 p.a. New store IRR during grows stage 11% (proved by current X5 financials) IRR = 7% real terms (in 2015 prices) 9 365 Valuation results, mln. RUB (if not stated), data as of 13.05.2016 EV / EBITDA EV/ Sales 2016 2017 2018 Current Company x x x x Tier I: Relevant Companies Lenta Ltd. 8.0x 6.7x 6.1x 0.5x Metro Cash & Carry 5.4x 5.2x 5.1x 0.2x Magnit 14.6x 11.4x 8.9x 1.4x Mean 9.3x 7.8x 6.7x 0.7x Median 8.0x 6.7x 6.1x 0.5x Tier II: Others O'key 5.0x 4.3x 3.6x 0.4x Dixy group 4.2x 3.5x 3.1x 0.4x M.Video 5.6x 5.4x 4.9x 0.2x Mean 4.9x 4.4x 3.9x 0.3x Median 5.0x 4.3x 3.6x 0.4x DCF (Gordon growth) DCF (growth EBITDA)