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Comparable Multiples

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Comparable Multiples Trading Multiples

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Multiples – trading comparables A benchmarking method to value a company Introduction  Value a company comparing its trading and operating performance to the one of its peers

 This methodology assumes efficient financial markets ― The value of a listed company is fully reflected in its

share price

How to run a trading comparables analysis 1. Create a pool of listed peers

 Carefully select peers  Key criteria: sector, size, geographies, growth profile etc.

2. Select the relevant multiples to be used

 Key multiples include: ― EV/ Revenue ― EV/ EBITDA

 Possible retreatment of EBITDA to EBITDAR (i.e.

EBITDA before rent), EBITDA vs. earnings multiples

3. Calculate last 12 months and forward looking multiples set

― P/E

Key comments  When using this valuation method, it is vital to keep consistency in the calculation of the multiples

― Numerator and denominator of the multiple have to be

consistent: if we adjust the EV for Investment in associates, the analyst needs to be sure that EBITDA reflects it

 Value drivers are: growth and margin evolution  The multiples do not take into account any control

 Calculate Enterprise Value for all peers  Be consistent in the different adjustments 4. Calculate averages and median

 Calculate relevant multiples average  Deduct a valuation range 5. Apply the multiple range to the valued company’s relevant aggregates

 Apply valuation range to relevant financial aggregates (Revenue, EBITDA, EBITDAR…)

premium

Multiples Enterprise value vs. equity value multiples ENTERPRISE VALUE

SALES EBITDAR EBITDA

RETURNS TO EQUITY AND DEBT

ENTERPRISE VALUE •EV / SALES •EV / EBITDAR •EV / EBITDA •EV/ EBIT

RETURNS TO EQUITY

EQUITY VALUE •P / E

EBIT

NET INCOME

Selecting the peer universe BROAD UNIVERSE

REFINED SET INDUSTRY



LOOK AT BROKER AND RESEARCH REPORTS CAPITAL IQ / FACTSET SCREENING

PRODUCTS SCALE GEOGRAPHY

ASK YOUR TEAM GROWTH PROFILE FINANCIAL STRUCTURE

Example of a trading multiples page A benchmarking method to value a company 3

6 LOCAL

COMPANY

CURRENCY

888 Holdings

GBP

Betfair Betsson 'B'

CLOSING

% of 52

PRICE

WEEK HIGH

MARKET ENTERPRISE NET DEBT/ CAP

VALUE

1.08

95.2%

379

GBP

7.41

81.9%

SEK

178.00

79.3%

bwin.party digital

GBP

1.17

66.0%

942

767

Codere

EUR

3.55

45.1%

195

1,277

(CASH)

LTM EBITDA CASH

NET DEBT/

MARGIN LTM EBITDA

P/E

EV / EBITDA

2012E

2013E

2014E

2012E

2013E

2014E

8.1x

7.6x

7.4x

334

(44)

18.6%

n.m.

15.2x

14.3x

14.0x

743

608

(135)

135

16.6%

n.m.

19.4x

16.2x

14.1x

6.9x

6.2x

5.9x

7,523

7,669

146

250

33.3%

0.2x

13.2x

10.3x

9.1x

10.9x

8.5x

7.7x

(173)

196

n.m.

0.9x

9.9x

10.7x

9.7x

6.0x

5.8x

4.9x

987

186

20.1%

3.2x

7.6x

4.9x

3.3x

4.0x

3.7x

3.5x

Intralot SA

EUR

1.33

71.5%

211

673

388

123

11.4%

2.6x

5.8x

10.5x

8.0x

3.9x

3.6x

Ladbrokes

GBP

1.90

99.2%

1,726

2,124

397

25.3%

1.5x

10.5x

11.2x

10.3x

8.1x

8.3x

7.9x

Lottomatica

EUR

17.09

93.1%

2,946

5,568

2,622

32.7%

2.6x

13.0x

11.8x

11.1x

5.6x

5.3x

OPAP S.A.

EUR

4.65

58.9%

1,483

1,465

(19)

306

52.3%

n.m.

3.2x

5.2x

4.6x

2.3x

3.4x

3.1x

Paddy Power

EUR

56.15

94.2%

2,714

2,564

(150)

150

27.4%

n.m.

22.6x

19.8x

17.9x

15.0x

13.4x

12.3x

Rank Group

GBP

1.50

96.8%

581

540

(42)

18.2%

n.m.

12.6x

12.0x

11.6x

5.1x

4.9x

4.8x

Sportingbet

GBP

0.52

92.4%

345

379

21.5%

0.8x

9.9x

11.2x

8.7x

8.9x

6.9x

5.2x

Unibet Group plc

SEK

197.50

98.8%

5,512

5,231

(281)

491

25.3%

n.m.

14.2x

11.7x

10.3x

9.0x

7.4x

6.8x

William Hill

GBP

3.32

92.5%

2,337

2,622

274

197

26.7%

0.9x

12.3x

11.5x

7.6x

7.3x

High

99.2%

52.3%

3.2x

22.6x

19.8x

17.9x

15.0x

13.4x

12.3x

Mean

83.2%

25.3%

1.6x

12.1x

11.6x

10.3x

7.2x

6.6x

6.1x

Median

92.4%

25.3%

1.2x

12.4x

11.5x

10.3x

7.3x

6.6x

5.6x

Low

45.1%

11.4%

0.2x

3.2x

4.9x

3.3x

2.3x

3.4x

3.1x

Example of a trading multiples page – cont’d A benchmarking method to value a company VALUATION

GROWTH

MARGIN

REVENUE GROWTH (2011 – 2013E) (%)

% OF 52 WEEK HIGH Median 74.0% 92.4%

EUR

92.3%

ASIA

74.0%

US-R

Median 6.8% 9.0%

70.5%

US-S

67.1%

US-M

EV/ 2013E EBITDA

EUR

7.3%

US-S

6.8%

US-M

6.8%

ASIA

US-M

6.6x

6.1x

6.0x

EUR

US-S

US-R

P/E 2013E

US-R

11.5%

ASIA

10.3%

US-M

9.1%

EUR

US-M

16.0x

ASIA

13.4x

US-S

11.5x

EUR

US-S

19.4%

ASIA

18.5%

EUR

15.9%

US-M

31.4% 8.0%

US-S

US-R

US-S

25.3%

24.7%

23.5%

EUR

US-M

ASIA

19.5%

US-R

NET INCOME MARGIN (%) Median 12.0% 18.4%

29.2% 18.5%

US-R

12.2%

Median 24.7%

Median 17.9%

9.0x

US-R

22.5%

EBITDA MARGIN (%)

EPS GROWTH (2011 – 2013E) (%) Median 13.4x

17.9x

US-R

Median 18.5%

Median 10.3% 13.0%

9.5x

ASIA

6.0%

EBITDA GROWTH (2011 – 2013E) (%) Median 6.6x

9.8x

EBIT MARGIN (%)

ASIA

17.9%

US-S

12.2% 11.2%

10.7%

EUR

US-M

12.0%

11.0% 6.2%

US-S

EUR

US-M

ASIA

US-R 8

Example of a trading multiples page – cont’d A benchmarking method to value a company PEER SET 1

PEER SET 2

% OF 52 WEEK HIGH Median 74.0% 53.5%

91.8%

42.0%

Nevada

Boyd

MTR

6.0x

5.4x

4.5x

P/E 2013E Median 13.4x 14.2x

13.4x

11.9x

n.a.

Boyd Gaming

Churchill Downs

Dover Downs

MTR Gaming

Nevada G&C

7.8x

Ameristar Casinos

8.5x

Isle of Capri

9.0x

Century Casinos

9.7x

Penn National

Pinnacle Entert.

MGM

Resorts

n.m.

Entert.

n.m. Ceasars

Sands

Vegas

Las

Wynn

13.3x

14.1x

16.8x

10.9x

Internation al Gaming

Median 9.0x

WMS

P/E 2013E Median 17.9x

21.6x

3.5x

n.a.

Nevada G&C

Century Casinos

MTR Gaming

Penn National

Isle of Capri

Churchill Downs

Pinnacle Entert.

Ameristar Casinos

Boyd Gaming

Las Vegas Sands

Ceasars Entert.

Wynn

MGM Resorts

n.a.

P/E 2013E

5.4x

3.2x

Scientific Games

6.0x

Median 6.1x

Internation al Gaming

6.4x

6.1x

53.7%

WMS

Capri

Isle of

Downs

Dover

r Casinos

Amerista

Casinos

Century

Penn

National

Downs

Churchill

6.7x

9.2x

8.8x

Bally Tech.

9.6x

6.9x

57.9%

EV/ 2013E EBITDA Median 6.0x

8.7x

70.5%

SHFL

10.1x

Entert.

EV/ 2013E EBITDA

Median 9.8x

10.3x

Pinnacle

EV/ 2013E EBITDA

Ceasars

MGM

Resorts

Sands

Vegas

Las

Wynn

28.2%

70.9%

WMS

58.8%

SHFL

72.5%

Internation al Gaming

73.1%

SHFL

74.9%

Bally Tech.

81.5%

Bally Tech.

83.0%

G& C

88.4%

Dover Downs

93.8%

65.5%

Gaming

68.8%

Gaming

79.0%

Median 70.5%

Scientific Games

% OF 52 WEEK HIGH Median 67.1%

Scientific Games

% OF 52 WEEK HIGH

PEER SET 3

Comparable Multiples Precedent Transactions

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Multiples – precedent transactions A benchmarking method to value a company and the premium for its control Introduction

How to run a precedent transactions analysis

 Compares the multiples implied by selecting M&A transactions involving companies with similar characteristics

1. Create a pool of listed peers

 Carefully select peers  Key criteria: sector, size, geographies, growth profile

 Multiples are “real” in the sense previous buyers agreed to pay the price

etc.

2. Select the relevant multiples to be used

 Possible retreatment of EBITDA to EBITDAR (i.e.

EBITDA before rent), EBITDA vs. earnings multiples

Key comments  While in theory the analyst should calculate forward looking multiples, the date is usually not available – historical multiples are generally retained Sources of information: Transaction announcement Investors presentation Latest financial report Dedicated database Broker notes issued at the time of the deal Press, mergermarket

Company sources Third party sources

 Drawback is that transactions happened in the past, in another environment (economic, social etc…)

 The multiples take into account a control premium –

transaction multiples are generally higher than trading multiples

3. Calculate multiples set

 Calculate Enterprise Value for all peers  Be consistent in the different adjustments  Ideally it would be great to have the forward looking multiples but, at the moment of the transaction, the buyer must have had private information about the target to draw its own forecasts

4. Calculate averages and median

 Calculate relevant multiples average  Deduct a valuation range 5. Apply the multiple range to the valued company’s relevant aggregates

 Apply valuation range to relevant financial aggregates (Revenue, EBITDA, EBITDAR…)

Sum of the Parts (“SOTP”)

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Sum-of-the-parts analysis (SOTP)  The SOTP methodology values a company by applying different valuation techniques to its separate units

 This methodology is used to value holding companies or conglomerates £m

Method.

Multiple

Reference

% held

Equity Value

Sub 1

Market value.

n.a.

1,500

75%

1,125

Sub 2

Market value.

n.a.

600

60%

360

Sub 3

EV/EBITDA – Net Debt

8.0x

100%

560

Sub 4

P/E

10.0x

100

80%

800

Listed Subs

Private Subs

Operating Units Corporate Overheads Net Debt

2,845 EV/EBITDA

6.0X

(30)

(180)

P / BV

1.0X

(300)

2,365 13

Sum-of-the-parts analysis (SOTP) â&#x20AC;&#x201C; Contâ&#x20AC;&#x2122;d 800

2,845

(180) (300)

2,365

560

360 1,125

Sub 1

Sub 2

Sub 3

Sub 4

Operating Units

Corporate Overheads

Net Debt

Total 14