Fwd: Valuation project WD
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Craig Cartier
Feb 25, 2013, 5:52:23 PM2/25/13
to gua...@googlegroups.com
Sooo...maybe we can send tomorrow morning?
---------- Forwarded message ----------
From: <teresa....@alumni.esade.edu>
Date: Mon, Feb 25, 2013 at 11:51 PM
Subject: Re: Valuation project WD
To: ccar...@gmail.com
Dear Craig
I will review it asap and I will come back to you.
Best
Teresa
Enviado desde mi iPad
El 25/02/2013, a las 19:44, Craig Cartier <ccar...@gmail.com<mailto:ccar...@gmail.com>> escribió:
Hi Theresa, thank you for your feedback.
We have reviewed your feedback, and also included some additional calculations and have updated our forecasts on the attached spreadsheet.
We have addressed your former comments as is shown below, and included some additional questions. As you know, our initial bid is due today at midnight, so while it is not ideal that we are giving you this update so late, we would be all the more appreciative if it were possible to still give feedback today.
Thank you very much. Our responses to your former comments, as well as our additional questions are included below.
Craig
In response to your former comments:
a. Cash Flow projections: we are taking as starting point 2012 (as we have the annual report). So you should project 5 years i.e. 2017 and then a TV. 2 years is too short.
CC: We have done exactly this, projected out 5 years and then included a TV.
b. revenues increase = 5% why ???? remember you are buyers......
CC: We have reexamined this assumption, and for the mid-term feel this is accurate. Historical data shows this is a justifiable assumption.
c.Other income: in 2012 is expected 17.913 (actually is depreciation.....) I do not see the sense of this. Because of this estimation, EBIT / revenues goes from 19% in 2011 to 61% in 2012 ???? Does it make any sense ???????
CC: This was a mistake in our original spreadsheet - we have removed this mistake.
d. CAPEX. increase of 20% a year ????? is not too high ?????? explain your assumptions well.
CC: We have reevaluated this assumption and offered an explanation in line with Disney's recent investments in parks and resorts.
e.WC investment: 0?????? if you are increasing your revenues (so your activity) you will have higher WC needs. So 0 is conceptually not correct. Please review it!!!!!
CC: We have reviewed and amended this figure
f. WACC???? you have Beta calculation but I have not seen WACC calculation.
CC: We have included the WACC calculation
g. your estimate for g is 3%: is quite high --> remember you are buyers if I am not mistaken.
CC: We have also revised this estimate. Since for the short and medium term (our 5-year projection) we actually see slightly declining cash flows, we have revised g to 0 for the long term.
______________________________________________________
Additionally we would have the following questions for you:
1) We understand that, using the DCF method, adding the yearly DCFs along with the residual value will calculate an Enterprise Value (as shown in our "calculations" worksheet Cell B32). We then subtract the Net Debt to find the equity value, and the equity value is divided by the number of outstanding shares to obtain a per-share price.
* Are we thinking about this correctly conceptually?
* Additionally, when calculating net debt (to move from the enterprise value to the equity value), do we use Disney's total liabilities (and subtract the cash-on-hand from this)? Or do we use a different number, such as Total Debt? For reference, we found that Disney's total liabilities is about 33 billion, where the total debt is about 14 billion, so it makes a huge difference which number we use
2) Our per-share price looks to be 5.94 (cell B38). This is about 1/10th of the market value. While we think our assumptions lead us to this as the correct value, it seems staggeringly low compared to the market. Do you see any glaring problems with our calculations and assumptions?
Thank you very much again!
Craig
> Dear Teresa,
>
> Attached you can find our calculations for the required data for Walt Disney.
> We are still lacking some information, like the inventories forecast, however our main concern is that WD really does not have a clear competitor, even less competitors. Therefore we cannot really calculate the ßeta for the market, thus not being able to calculate the WACC so far. Should we take Comcast as competitor and just compare it with his beta? I hope you can help us there.
>
> Thank you.
>
> Kind regards,
>
> <Finance Calculations Team Guacala.xlsx>
>
> El 10/02/2013, a las 19:24, teresa corrales <teresa....@esade.edu<mailto:teresa....@esade.edu>> escribió:
>
>
>
<Finance Calculations Team Guacala_Craig.xlsx>
From: <teresa....@alumni.esade.edu>
Date: Mon, Feb 25, 2013 at 11:51 PM
Subject: Re: Valuation project WD
To: ccar...@gmail.com
Dear Craig
I will review it asap and I will come back to you.
Best
Teresa
Enviado desde mi iPad
El 25/02/2013, a las 19:44, Craig Cartier <ccar...@gmail.com<mailto:ccar...@gmail.com>> escribió:
Hi Theresa, thank you for your feedback.
We have reviewed your feedback, and also included some additional calculations and have updated our forecasts on the attached spreadsheet.
We have addressed your former comments as is shown below, and included some additional questions. As you know, our initial bid is due today at midnight, so while it is not ideal that we are giving you this update so late, we would be all the more appreciative if it were possible to still give feedback today.
Thank you very much. Our responses to your former comments, as well as our additional questions are included below.
Craig
In response to your former comments:
a. Cash Flow projections: we are taking as starting point 2012 (as we have the annual report). So you should project 5 years i.e. 2017 and then a TV. 2 years is too short.
CC: We have done exactly this, projected out 5 years and then included a TV.
b. revenues increase = 5% why ???? remember you are buyers......
CC: We have reexamined this assumption, and for the mid-term feel this is accurate. Historical data shows this is a justifiable assumption.
c.Other income: in 2012 is expected 17.913 (actually is depreciation.....) I do not see the sense of this. Because of this estimation, EBIT / revenues goes from 19% in 2011 to 61% in 2012 ???? Does it make any sense ???????
CC: This was a mistake in our original spreadsheet - we have removed this mistake.
d. CAPEX. increase of 20% a year ????? is not too high ?????? explain your assumptions well.
CC: We have reevaluated this assumption and offered an explanation in line with Disney's recent investments in parks and resorts.
e.WC investment: 0?????? if you are increasing your revenues (so your activity) you will have higher WC needs. So 0 is conceptually not correct. Please review it!!!!!
CC: We have reviewed and amended this figure
f. WACC???? you have Beta calculation but I have not seen WACC calculation.
CC: We have included the WACC calculation
g. your estimate for g is 3%: is quite high --> remember you are buyers if I am not mistaken.
CC: We have also revised this estimate. Since for the short and medium term (our 5-year projection) we actually see slightly declining cash flows, we have revised g to 0 for the long term.
______________________________________________________
Additionally we would have the following questions for you:
1) We understand that, using the DCF method, adding the yearly DCFs along with the residual value will calculate an Enterprise Value (as shown in our "calculations" worksheet Cell B32). We then subtract the Net Debt to find the equity value, and the equity value is divided by the number of outstanding shares to obtain a per-share price.
* Additionally, when calculating net debt (to move from the enterprise value to the equity value), do we use Disney's total liabilities (and subtract the cash-on-hand from this)? Or do we use a different number, such as Total Debt? For reference, we found that Disney's total liabilities is about 33 billion, where the total debt is about 14 billion, so it makes a huge difference which number we use
2) Our per-share price looks to be 5.94 (cell B38). This is about 1/10th of the market value. While we think our assumptions lead us to this as the correct value, it seems staggeringly low compared to the market. Do you see any glaring problems with our calculations and assumptions?
Thank you very much again!
Craig
On Wed, Feb 20, 2013 at 6:25 PM, teresa corrales <teresa....@esade.edu<mailto:teresa....@esade.edu>> wrote:
Dear all
regarding the valuation project, I have reviewed the draft you sent to me and I would like to comment the following:
a. Cash Flow projections: we are taking as starting point 2012 (as we have the annual report). So you should project 5 years i.e. 2017 and then a TV. 2 years is too short.
b. revenues increase = 5% why ???? remember you are buyers......
c.Other income: in 2012 is expected 17.913 (actually is depreciation.....) I do not see the sense of this. Because of this estimation, EBIT / revenues goes from 19% in 2011 to 61% in 2012 ???? Does it make any sense ???????
d. CAPEX. increase of 20% a year ????? is not too high ?????? explain your assumptions well.
e.WC investment: 0?????? if you are increasing your revenues (so your activity) you will have higher WC needs. So 0 is conceptually not correct. Please review it!!!!!
f. WACC???? you have Beta calculation but I have not seen WACC calculation.
g. your estimate for g is 3%: is quite high --> remember you are buyers if I am not mistaken.
I hope you have been working in the project and you have more work done. I would suggest to review the above comments and send to me a more complete version. I think we should schedule a meeting next week once you have reviewed all the above in order to review your final valuation. According to the schedule we do not have much time to finish it.
Please let me know any doubts you may have and we could meet on Wednesdey afternoon to review all toghether. Nevertheless please let me know any doubts you may have in the meantime.
Best regards
Teresa
2013/2/14 Teresa Corrales <tcorr...@gmail.com<mailto:tcorr...@gmail.com>>Dear all
regarding the valuation project, I have reviewed the draft you sent to me and I would like to comment the following:
a. Cash Flow projections: we are taking as starting point 2012 (as we have the annual report). So you should project 5 years i.e. 2017 and then a TV. 2 years is too short.
b. revenues increase = 5% why ???? remember you are buyers......
c.Other income: in 2012 is expected 17.913 (actually is depreciation.....) I do not see the sense of this. Because of this estimation, EBIT / revenues goes from 19% in 2011 to 61% in 2012 ???? Does it make any sense ???????
d. CAPEX. increase of 20% a year ????? is not too high ?????? explain your assumptions well.
e.WC investment: 0?????? if you are increasing your revenues (so your activity) you will have higher WC needs. So 0 is conceptually not correct. Please review it!!!!!
f. WACC???? you have Beta calculation but I have not seen WACC calculation.
g. your estimate for g is 3%: is quite high --> remember you are buyers if I am not mistaken.
I hope you have been working in the project and you have more work done. I would suggest to review the above comments and send to me a more complete version. I think we should schedule a meeting next week once you have reviewed all the above in order to review your final valuation. According to the schedule we do not have much time to finish it.
Please let me know any doubts you may have and we could meet on Wednesdey afternoon to review all toghether. Nevertheless please let me know any doubts you may have in the meantime.
Best regards
Teresa
Dear Albert
I will review your calculations and come back to you. Regarding your question about beta calculation, for the market you should take an index (dow jones) and the evolution in the past 10 years for example. I think you did an exercise like that with Luisa, calculating the beta of wv????
Any further information de not hesitate to contact me.
Best regards
Teresa
Enviado desde mi iPhone
El 14/02/2013, a las 11:47, Albert Morgenstern <morgenste...@gmail.com<mailto:morgenste...@gmail.com>> escribió:I will review your calculations and come back to you. Regarding your question about beta calculation, for the market you should take an index (dow jones) and the evolution in the past 10 years for example. I think you did an exercise like that with Luisa, calculating the beta of wv????
Any further information de not hesitate to contact me.
Best regards
Teresa
Enviado desde mi iPhone
> Dear Teresa,
>
> Attached you can find our calculations for the required data for Walt Disney.
> We are still lacking some information, like the inventories forecast, however our main concern is that WD really does not have a clear competitor, even less competitors. Therefore we cannot really calculate the ßeta for the market, thus not being able to calculate the WACC so far. Should we take Comcast as competitor and just compare it with his beta? I hope you can help us there.
>
> Thank you.
>
> Kind regards,
>
> <Finance Calculations Team Guacala.xlsx>
>
>
>> Dear all,
>>
>> I hope everything is going well!
>>
>> Here we are again with our project about WD!!!
>>
>> I have just received a mail with the schedule of the project and I would like to know how this is going. By February 14th we should have the preliminary valuation materials (beta equity, WACC an CF projection). Please let me know how is it going and send to me your draft material and doubts if any!!!!
>>
>> We can schedule a meeting to discuss how the valuation is going between next week and the following one depending on agenda and your needs.
>>
>> Please let me know how your project is going!
>>
>> Best regards
>>
>> Teresa
>
> _________________________
> Albert Morgenstern
> morgenste...@gmail.com<mailto:morgenste...@gmail.com>>> Dear all,
>>
>> I hope everything is going well!
>>
>> Here we are again with our project about WD!!!
>>
>> I have just received a mail with the schedule of the project and I would like to know how this is going. By February 14th we should have the preliminary valuation materials (beta equity, WACC an CF projection). Please let me know how is it going and send to me your draft material and doubts if any!!!!
>>
>> We can schedule a meeting to discuss how the valuation is going between next week and the following one depending on agenda and your needs.
>>
>> Please let me know how your project is going!
>>
>> Best regards
>>
>> Teresa
>
> _________________________
> Albert Morgenstern
>
>
>
<Finance Calculations Team Guacala_Craig.xlsx>
Craig Cartier
Feb 25, 2013, 5:53:17 PM2/25/13
to teresa....@alumni.esade.edu
Hi thank you Teresa,
In that case I will wait for your feedback. We will submit our bid tomorrow morning or midday so that hopefully we can include your feedback. Thank you very much.Craig
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