I have given you my opinion of the Kathmandu IPO on a number of occasions, based on my knowledge of the company from media circles and from the downturn in economy as a whole as it affects retailing.
It is however good to get other views from people with different opinions and ValueCruncher.com has done an analysis based on 3 different scenarios that is very interesting:
Valuecruncher has completed a base case valuation and three separate scenarios for Kathmandu. The first scenario (EBIT 8%) assumes EBIT margins of 8% against 10% in the base case. The second (Growth 5%) assumes 5% growth not the 10% of the base case. The third (CAPEX $40m) assumes CAPEX of NZ$40m compared to NZ$30m in the base case.
This base case and three scenarios give an enterprise value range of NZ$354 million to NZ$460 million (8.9 to 11.5x estimated 2009 EBIT). Valuecruncher gave a 25% weighting to each scenario which gives a NZ$411 million valuation (10.3x estimated 2009 EBIT). This NZ$411 million is our mid-point valuation of Kathmandu. See Valuecruncher for more
Valuecruncher have given this alot of thought but in my opinion their models, while giving 3 possibilities of value for the company, seem too positive given the global economic outlook.
Indications have been that sales at the company have been down, so a prospective investor needs to assume the worst in the current economic climate and that means no growth at all or indeed going backwards.
Debt levels are also largely discounted in the VC model, and as many have commented, debt levels were high over a year ago at more than $NZ180 million and the majority of IPO money is going to the former owners, not to be used within Kathmandu itself.
In addition more capital will be needed to fund the aggressive growth plans that management have.
To be fair Valuecruncher's estimates, as they point out, are based only on publicly known information, excluding the prospectus, so their estimate of value, like mine, is a bit of an educated punt.
We will look at the Kathmandu IPO prospectus - Requires free registration at Share Investor Forum to download
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Download the detailed Kathmandu Value Cruncher Report - Requires free registration Share Investor Forum to download
Download Kathmandu IPO Prospectus
Discuss Kathmandu at Share Investor Forum
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valuecruncher is a nice site and I have found some use in the site for my longer term investments.
ReplyDeleteSeems that Darren has become a lot more pessimistic about the overall economy. Rightfully so.
The growth rates do not even take in to account Jan Cameron's "threat" to launch her own outdoor sports label.
I have always found their pricing strange, in that I really have no desire to buy their products at full price when I just wait a few weeks and buy them at 50%. So Jan has a point with her proposed pricing and ability to compete.
I like VC too but while they are expert at their financial analysis their model largely ignores the things you point out above.
ReplyDeleteI tend to focus on those and they don't look good for Kathmndu as a whole or for some of the weaker retail players.