Transcript venus.unive.it

Master in Economics and Finance
Case study
The market value of a car company:
“Auto sport”
Venezia, January 2009
1
Suppose:
1. Today is December 31st 2001;
2. A famous car company (XX) has to manage a financial
distress. That’s why it would like to list a controlled
company, in order to sell 35% of its shares;
3. Company (XX) shows you, a well known financial analyst,
the business plan of the controlled company, asking for a
valuation.
2
“Auto-Sport” – past and future evolution
Sales
(Euro Bn.)
EBITDA/EBIT/FCFO
(EuroBn.)
Expected
1.500
Fatturato Netto
EBITDA
1.000
300
250
200
EBIT
500
FCFO
IMA
(02-05)
5,2%
6,8%
150
100
8,2%
50
0
0
-50
-500
2000
2001
2002E
2003E
2004E
-100
2005E
Growing sales and profit;
Positive FCFO from 2004
3
Sales volume
“Auto-Sport”
20.000
Brand 1
Brand 2
15.503
16.624
15.000
11.765
10.000
8.027
6.158
6.042
5.000
4.289
4.072
1.970
0
2000
11.214
12.335
7.476
4.2893.7384.289
4.289
4.289
1.869
2001
Average price per unit sold (‘000 Euro)
• Brand 1
155,9
• Brand 2
62,1
2002E
2003E
2004E
2005E
186,6
65,4
Strong volume increase for brand 2
4
Pay attention!!!
- There is a big difference between the average price per
unit sold of the two brands
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Total sales
(Euro Mln.)
Brand 2
Brand 1
100%
80
1.177 1.471 1.745 1.958
54%
60
40
46%
20
0
2002E 2004E 2006E 2008E
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Expected operating cash flows (FCFO)
DCF - asset side
Orizzonte di previsione del piano
2002
2003
2004
2005
Perpetuity
Vendite
F
4.289
4.289
4.289
4.289
4.289
M
3.738
7.476
11.214
12.335
13.460
TOTALE
8.027
11.765
15.503
16.624
17.749
F
156
165
175
186
196
M
62
63
65
66
67
F
668.655
708.774
751.301
796.379
840.180
M
232.130
473.545
724.524
812.889
904.768
TOTALE
900.785
1.182.319
1.475.824
1.609.268
1.744.948
9.008
65.028
101.832
110.235
102.952
Prezzo unitario (x1000)
Fatturato (x1000)
Cash Flow Operativi (x1000)
FCFO
-
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Summary of Cars Segmentation
and exposure to cyclicality
Wealth
Ultra-HNWI
....
Influenced by equity
markets
High Incomes to
cover monthly
payments
....
3.000
Mature industry closely
related to business
High Income/
cycle
Wealth
HNWI
% Change
% Change
40,0%
4.418
4.000
2.969 2.814 3.014 3.119 3.054
2.000
2.095
3.178
Number o
HNWI
3,0M
1.582
1.679
2,0
1997 1998 1999 2000
0,0
HNWI
-20,0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
-40,0
PIL
High Income
High Consumer
Confidence
364
60
319
40
20
100
0
1997 1998 1999 2000 2001 2002
0
1,0
0,0
2.144
298 291
80K
435
UHNWI
1.716 1.701
1.000
0
20,0
0
256
Number o
U HNWI
200
1.000
5.000
3.000
300
2.149
1.380
WW
Shipmentsd
400
2.000
...
WW Shipments
WW
Shipments
500
HNWI
Cars seen as
investment/enjoyment
Relies on accumulated
wealth
Portfolio diversified
resistant to market
swings
Cars are well within
purchasing capability
U-HNWI
Cyclicality/ Volatility
Low
Shipments
Driver
Cyclicality decreases with increases in car value
8
In order to use a DCF approach:
- how do you calculate the “fair” cost of capital?
And then:
- which is the fair value of the company?
9