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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 bond’s 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
- Company’s 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 bond’s 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 - Company’s 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)