Determining the value of a company is a complex procedure which cannot be automated by any algorithm. This report investigated the intrinsic value and the relative value of Kathmandu Holdings Ltd., a New Zealand based company operating in the retail speciality industry. The valuation was based on the discounted cash flow model (DCF model) and a market multiple analysis. In this light, this report used assumptions such as future growth rate, EBIT growth, working capital, PPE and intangible asset turnover, all of which were largely affected by micro- and macroeconomic factors. Based on our calculation of a value per share of $2.72 using the DCF model, Kathmandu has been slightly over-priced in 2018 (+13 per cent).
This result was supported by the current share price of Kathmandu of $2.50 as of 1 March 2019. The selection of the company used for the market multiple analysis was based on the industry, comparable size, leverage, profitability and growth potential. Due to the size of the New Zealand economy and the nature of the Kathmandu business, the options to choose from were limited. We compared Kathmandu to The Super Retail Group, a retailer of automotive, outdoor equipment and clothing, operating in Australia, New Zealand and China. The NOA multiple of $2.74 suggested that Kathmandu was slightly over-priced, which was in line with our findings from the DCF model.
Kathmandu Holdings Ltd. is a New Zealand based company operating in the retail specialty industry. It offers a range of apparel as well as travel and camping equipment and is a leading retailer in Australasia. As at 31 July 2018, Kathmandu operates 167 retail stores across New Zealand, Australia, and the UK. In addition, the premium outdoor brand is operating through online channels, currently predominantly targeting the US. The main competitors of Kathmandu within the specialty retail industry include outdoor stores for fishing and camping, and big retailers, such as Macpac, Icebreaker or Torpedo 7, which are all vying for similar segments in the market. Due to the low start-up costs, the industry is also facing fierce competitions from online-only stores, where customers can shop around the clock from the comfort of their homes.
Table of Contents
- 1. Introduction
- 2. Background
- 2.1 Company profile
- 2.2 Attempted Takeover by Briscoe
- 3. Historical Financial Performance
- 4. Company valuation
- 4.1 Forecast Future Performance and Valuation
- 4.2 Industry Benchmarking
- 5. Conclusion
Objectives and Key Themes
This report aims to determine the intrinsic and relative value of Kathmandu Holdings Ltd., a New Zealand-based specialty retailer, using the discounted cash flow (DCF) model and a market multiple analysis. The valuation considers various assumptions, including future growth rates and macroeconomic factors. The report also benchmarks Kathmandu against industry competitors to assess its relative valuation.
- Company Valuation using DCF and Multiple Analysis
- Impact of Macroeconomic Factors on Valuation
- Industry Benchmarking and Competitor Analysis
- Kathmandu's Financial Performance and Growth Prospects
- Analysis of a Previous Takeover Attempt
Chapter Summaries
1. Introduction: This introductory chapter sets the stage for the report by emphasizing the complexity of business valuation and highlighting the report's focus on determining Kathmandu Holdings Ltd.'s net worth. It briefly outlines the structure of the report, which includes a company profile, background information on a previous takeover attempt, an overview of historical financial performance, and a company valuation based on the DCF model and a market multiple analysis. The chapter underscores the influence of micro- and macroeconomic factors on the valuation assumptions and the importance of industry benchmarking.
2. Background: This section provides crucial background information on Kathmandu Holdings Ltd. 2.1, the company profile, describes Kathmandu as a leading Australasian retailer of apparel and outdoor equipment with a significant online presence. It also notes the competitive nature of the specialty retail industry and the challenges posed by online-only stores. 2.2 details the attempted takeover by Briscoe Group in 2015, highlighting Kathmandu's unsatisfactory performance at the time and the subsequent rejection of the offer by shareholders, emphasizing shareholder confidence in Kathmandu's future prospects.
3. Historical Financial Performance: This chapter would delve into a detailed analysis of Kathmandu's past financial performance. It would likely cover key financial metrics over several years, providing context for the valuation models used in later chapters. This analysis would likely include key performance indicators (KPIs) such as revenue growth, profitability (EBIT, net income), and efficiency ratios. An examination of trends and anomalies in the historical data would set the stage for future projections.
4. Company valuation: This chapter presents the core valuation of Kathmandu Holdings Ltd. 4.1, focusing on forecasting future performance, would utilize the DCF model, detailing the assumptions made regarding future growth rates, EBIT growth, working capital, and asset turnover. The impact of macroeconomic factors on these assumptions would be explicitly addressed. 4.2, industry benchmarking, would compare Kathmandu's valuation to similar companies, using multiples like price-to-book (PB) and price-to-earnings (PE) ratios to assess Kathmandu's relative valuation. The selection criteria for comparable companies and the rationale for choosing specific multiples would be clearly explained.
Keywords
Kathmandu Holdings Ltd., company valuation, discounted cash flow (DCF) model, market multiple analysis, industry benchmarking, financial statement analysis, macroeconomic factors, takeover attempt, retail industry, specialty retail, New Zealand economy, relative valuation, intrinsic value.
Kathmandu Holdings Ltd. Valuation Report: Frequently Asked Questions
What is this report about?
This report provides a comprehensive analysis of Kathmandu Holdings Ltd., a New Zealand-based specialty retailer. Its primary goal is to determine the company's intrinsic and relative value using the discounted cash flow (DCF) model and a market multiple analysis. The report also examines the impact of macroeconomic factors and benchmarks Kathmandu against its industry competitors.
What are the key themes explored in the report?
The report explores several key themes, including: company valuation using DCF and multiple analysis; the impact of macroeconomic factors on valuation; industry benchmarking and competitor analysis; Kathmandu's financial performance and growth prospects; and analysis of a previous takeover attempt.
What methodologies are used to value Kathmandu Holdings Ltd.?
The report utilizes two primary valuation methodologies: the discounted cash flow (DCF) model and a market multiple analysis. The DCF model forecasts future cash flows and discounts them to their present value, while the market multiple analysis compares Kathmandu's valuation ratios (like P/E and P/B) to those of comparable companies.
What aspects of Kathmandu's history are considered in the valuation?
The report includes a detailed background on Kathmandu Holdings Ltd., including a company profile, and a critical examination of a past takeover attempt by Briscoe Group in 2015. This historical context helps to inform the valuation by providing insight into past performance and market sentiment.
How does the report account for macroeconomic factors?
The report explicitly addresses the influence of macroeconomic factors on the valuation assumptions used in both the DCF model and the market multiple analysis. This acknowledges that economic conditions significantly impact a company's future performance and valuation.
What is the role of industry benchmarking in this report?
Industry benchmarking plays a crucial role in assessing Kathmandu's relative valuation. The report compares Kathmandu's valuation metrics (e.g., P/E, P/B ratios) to those of similar companies in the specialty retail industry. This comparison helps to determine if Kathmandu is overvalued, undervalued, or fairly valued relative to its peers.
What information is included in the chapter summaries?
The chapter summaries provide concise overviews of each section of the report. They cover the introduction, background information on Kathmandu (including the company profile and the Briscoe takeover attempt), historical financial performance, and the core company valuation (including DCF and multiple analysis).
What are the key financial metrics analyzed in the report?
The report analyzes key financial metrics, including revenue growth, profitability (EBIT, net income), efficiency ratios, and other key performance indicators (KPIs) to assess Kathmandu's past performance and inform future projections within the DCF model.
What are the key assumptions used in the DCF model?
The DCF model relies on assumptions about future growth rates (revenue, EBIT), working capital requirements, asset turnover, and the discount rate. The report details these assumptions and discusses their potential impact on the valuation.
What keywords best describe this report?
Key words associated with this report include: Kathmandu Holdings Ltd., company valuation, discounted cash flow (DCF) model, market multiple analysis, industry benchmarking, financial statement analysis, macroeconomic factors, takeover attempt, retail industry, specialty retail, New Zealand economy, relative valuation, and intrinsic value.
- Quote paper
- Ariane Holz (Author), 2018, What is the value of Kathmandu Holdings Ltd.?, Munich, GRIN Verlag, https://www.grin.com/document/483032
