Apranga Equity Valuation Report by Group 10 Opposition by Group 20 General comments - It would be easier to follow and understand if there would be provided exchange rate LTL/EUR. - Would be nice if there was a conclusion part or something similar, because otherwise there is a feeling that report was cut. Presentation - Short and nice presentation about the company. Though, could be some interesting facts presented. Historical Financial Analysis - Asset structure. If stating some facts, then some proffs or examples should be provided. (“This is typical for a company in the retail industry.”) - Cost structure – well presented, the graph is very representable, helps to understand better, get better insight. - Profitability – good that compare with competitors, however, it would be more beneficial if there would be some information about competitors presented already before, where they are operating, their size, just to make sure, that they are really comparable to Apranga. - Financial position – it is stated that financial position is stable and presented as an advantage of the company. But is it so? As net income in 2009 was negative. - Operating risk – “It might be the case that the rapid growth has negatively affected the profitability of Apranga, as its stores compete among themselves and might “cannibalize” each other.” Are there any proofs for that? Any literature that states, that it’s a common case for large retail companies? - Liquidity – good comments about quick ratio, applied for the specific company, not just taking pure theory. Overall, good explanation about the ratios, thus, makes it easy to follow, however, could be more elaborated, what exactly ratios mean to specific company, interpretation. - Growth – quite often there are pure numbers, lucking explanation, why such big/small increase/decrease happened. Scenario and forecasting, Valuation model Positive - The excel sheet is very well made. - All assumptions are well explained and motivation behind is clear. - There is a lot of information about the sales, personnel expenses, interest rates, the same about the items in proportion of sales. Negative - It’s a minor detail, but in the income statement some accounts could have been regrouped, such as the advertising, the bank commission, labeling, logistic, business trip. It seems difficult to predict the future percentage of sales for each (even if it is computed with the average of the previous years). - However, how there can be decrease in proportion in assets and property, if previously was stated that Apranga wants to open new shops. (“Expect the proportion of intangible assets and property, plant and equipment to fall from their five-year average values of 28.7%”)
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Too much focusing on assumptions. 3 pages of assumptions and only 1 page of future performance analysis, equity valuation part 2 pages long.
Equity Valuation Positive - All numbers are well described, we understand where they come from, so it’s very good - Then we found that there is a good explanation of the price earning, market to book and permanent measurement bias ratio and the results. - Final we found that the sensitivity analysis table was very good to see all variations in market prices. Negative - However, adding the country risk to the ECB rate appears fine to have the risk free rate. But I think it’s more usual to use the safest ten year’s government bond, for instance the German bond is considerate in Europe as the safest one. Here for the 10 year period this table shows the long-term interest rate bond in European countries. In Lithuania it was around 5% in April. We can take this rate if we take the currency in question. We don’t know which rate is the best, but anyway both should be fine. - You said that the actual market value is two hundred and twelve million (212.320,000). But you don’t mention that it was one hundred and fifty two million in the beginning of the year. And your estimated price was made at the beginning of this year. - Which brings us to our final comment is that your estimated market share is two hundred and seven million (207,280,000). But this is the value in January, you should have the value in May to be able to compare it with the current share price of May. (Generally, we have this impression that you tried to have the same price as the market.)
