A member of the Daiwa Group. Authorised and regulated by the Financial Conduct Authority. Registered office as stated. Registered in England No Valuations – What on Earth is Going On? Richard Pulford, Managing Director MUTIS – 13 November 2014

We’re all doomed …

… but nobody’s noticed S&P at record high NASDAQ just short of record high FTSE100 just short of record high

The market can stay irrational longer than you can stay solvent John Maynard Keynes

But who’s being irrational? …

Supply creates its own demand Say’s Law

It’s all perfectly rational, but …

Leverage multiples are up … … but protections for lenders are down It’s all perfectly rational, but …

UK M&A volumes up 50% from 2010

AO World Y/e Mar (£m)FY13AFY14AFY15CYFY16FFY17F Turnover – growth (%)n.a40%33%38%28% EBITDA – margin (%)4%3%2%4%5% EV761.8 EV/EBITDA 71.2x29.0x16.5x For the bulls out there who believe that the online penetration rate will continue to rise and AO will continue to gain market share, consider the following: if the online penetration rate reached 100% and AO sold every single major domestic appliance in the UK, the stock would still trade on a PE multiple of 22 times in our analysis. Shore Capital, 2014 Product protection plans: Whilst AO may well be profitable without selling protection plans it certainly would not be as profitable – commission earned from selling product protection plans forms a material proportion of earnings (around 50% of adjusted EBITDA in 2014) and in our view their contribution to earnings was the difference between a profit and a loss in Shore Capital, 2014 It’s all perfectly rational, but …

So what? Sometimes, the best investments are the ones you don’t make Donald Trump