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Published byIrene Lynch Modified over 8 years ago
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A member of the Daiwa Group. Authorised and regulated by the Financial Conduct Authority. Registered office as stated. Registered in England No. 3067616 Valuations – What on Earth is Going On? Richard Pulford, Managing Director MUTIS – 13 November 2014
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We’re all doomed …
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… but nobody’s noticed S&P at record high NASDAQ just short of record high FTSE100 just short of record high
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The market can stay irrational longer than you can stay solvent John Maynard Keynes
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But who’s being irrational? …
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Supply creates its own demand Say’s Law
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It’s all perfectly rational, but …
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Leverage multiples are up … … but protections for lenders are down It’s all perfectly rational, but …
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UK M&A volumes up 50% from 2010
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AO World Y/e Mar (£m)FY13AFY14AFY15CYFY16FFY17F Turnover275.0385.0512.0708.0907.0 – growth (%)n.a40%33%38%28% EBITDA10.111.210.726.346.1 – 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 2012. Shore Capital, 2014 It’s all perfectly rational, but …
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So what? Sometimes, the best investments are the ones you don’t make Donald Trump
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