Words: 4336
|BUSINESS ANALYSIS AND VALUATION | | | |DAVID JONES LTD | | | | | |BY SENIOR FINANCIAL ANALYSTS | |FROM | | | |[pic] | | | | | | | |[pic] | | | | | TABLE OF CONTENT EXECUTIVE SUMMARY3 DAVID JONES AND THE RETAIL INDUSTRY5 RETAIL INDUSTRY5 PROSPECT OF THE INDUSTRY6 DAVID JONES7 CORPORATE STRATEGY ANALYSIS7 PROSPECT OF THE COMPANY8 ACCOUNTING ANALYSIS9 EARNINGS MANIPULATION9 EVIDENCE OF EARNINGS MANAGEMENT9 FINANCIAL ANALYSIS10 TIME SERIES ANALYSIS11 Evaluating Operating Management14
Evaluating Investment Management15 Evaluating Financial Management16 CROSS SECTIONAL ANALYSIS18 Probability18 Investment Managment19 Financial Management20 FORECASTS AND VALUATIONS21 FORECAST21 SALES GROWTH22 NOPAT MARGIN23 WORKING CAPITAL TO SALES23 NET LONGTERM ASSETS TO SALES24 CAPITAL STRUCTURE25 VALUATION26 COST OF EQUITY27 COST OF DEBT27 SENSITIVITY ANALYSIS29 RECOMMENDATION30 REFERENCE LIST31 APPENDIXES33 EXECUTIVE SUMMARY David Jones is one of the leading department chain-stores in Australia, consisting of more than 30 stores nationwide. Moreover, David Jones is the oldest department store in the world that is still trading under its original name.
Throughout our efforts, we would like to find out whether the company can operate well and be prosperous in this new century, confronting with current and emerging challenges and difficulties. David Jones takes differentiation competitive strategy by selling many exclusive brands and products to customers with high purchasing power. The company has recently launched a new David Jones Master Card with the expectation of high earnings growth. Besides, four-year store expansion and store refurbishment plan indicates that David Jones confidence in its business outlook. However, David Jones has to face weak sales due to economic recession, while its major competitor Myer is taking greater market share by targeting the lower income customers.
Based on accounting analysis and financial analysis have been performed in the report, we found no distinct evidence about earnings manipulation despite some areas of suspicion. David Jones has been outperforming the retail industry over years. Sales kept increasing while cost of doing business kept declining over time. The company has been efficient in keeping most of the turnover ratios high. The only concern would be the increasing debt level that may affect company’s capital structure. High debt level may affect its credit rating and raise doubts about the company’s ability to repay debt as well. Over the years, David Jones has been outperforming its close competitor, Myer. The company still achieves a better ROA and ROE compared to Myer despite a similar gross profit margin.
Myer has relatively higher debt, indicated by all high debt-related ratios while David Jones has a tight policy on working capital. A negative sales growth is foreseeable for David Jones based on the recent report released by the company and the globe economic crisis. But NOPAT margin will not drop as much as sales due to cost management and inventory restructure, approximately 4% in 08/09. After 2009, it is expected that the sales growth to recover and even achieve the highest of 8% due to the company’s strategic plan, with the expansion of new stores and refurbishment of old stores. NOPAT margin is approaching 9% after the recession, due to the success of the four year expansion plan.
Despite the concern in their debt status, it is believed that strong cash flow position and improving earnings would decrease debt level to optimum level of 30% in the future. With the expected WACC of 8. 9%, the company is valued at 3. 18 dollar per share, ranging from $2. 89 to $ 3. 58 per share depending on the situation. We would recommend a current HOLD position for all potential and existing shareholders . Despite the strong business model of the company and the efficiency in working capital management, the current sluggish economic condition coupled with lack of earnings visibility indicates uncertainty about the future share price. DAVID JONES AND THE RETAIL INDUSTRY RETAIL INDUSTRY The main products in Retail industry are consisting of three categories: Graph 1-1 [pic] MAIN PLAYERS IN THE INDUSTRY [pic] |?? | | |Major Player | | |Market Share Range | | | | | |[pic] | | |Wesfarmers Limited | | |13. % (2009) | | | | | |[pic] | | |Woolworths Ltd | | |12. 0% (2009) | | | | | |[pic] | | |Harvey Norman Holdings Limited | | |1. % (2009) | | | | | |[pic] | | |NB Flinders Pty Ltd | | |0. 9% (2009) | | | | | |[pic] | | |David Jones Limited | | |0. % (2009) | | | | | |[pic] | | |Other | | |72. 0% (2009) | | | | Graph 1-2 Wesfarmers Ltd dominates the retailing market share after acquiring Coles Ltd in 2007. NB Flinders Pty Ltd owned Myer Ltd which sells a wide range of the national and private brands products, includes apparel, furniture, consumer electronics, cosmetics, toys and homeware amongst others.
David Jones Ltd is exclusively involved in retail trade via its department stores throughout Australia. These stores offer a wide range of products focused on middle Australian in upmarket. PROSPECT OF THE INDUSTRY Prospect in next year Due to the economic recession of 2008-2009, sales have been affected by an overall expansion in the cost of living. The household disposable income might not fluctuate a lot despite the unemployment rate keeps increasing but the interest rate has dropped. In addition, government’s stimulus package will mainly focused on low income earners. Therefore, the growth rate of retail industry might slowdown. Prospect in five years
The expected growth rate for 2008-2009 and 2009-2010 is 0. 8% and 0. 2% respectively. In 2010-2011, the whole retail industry might recover from recession with a growth rate of 1. 7%[1]. Prospect In the Long run In the long run, the retail industry will continue with a slow but steady growth rate. With the economic recovery, the household disposable income will increase but major increase will be on housing loans. Therefore, the share for retail industry to raise the revenue is limited. DAVID JONES David Jones Limited was founded in 1838 by David Jones and is the oldest department store in Australia. CORPORATE STRATEGY ANALYSIS SWOT Analysis Strength:
David Jones (DJs) retail stores targets on the premium end of the market in terms of the brands and products. Thus, David Jones has established a significant bargaining power by implementing differentiation competitive strategy. They offer exclusive brands and designs such as Veronica Maine . In July 2008,David Jones enhanced this competitive advantage by signing deals with 50 more new brands including Jets and Speedo swimwear, Hot Bondi Swim and Gorman. [2] DJs also emphasizes on product quality, customer service, its history, the quality brands it stocks, fashion parades and personalities. [3] It has strong financial ability with lower debt level compared to its competitor, Myer.
The size of the firm is large, but it has sufficient physical and human resources to implement their corporate strategy. Weaknesses: David Jones large debt issue has been a concern to shareholders. Opportunities: By signing deals with 50 more new brands, implementing store expansion and refurbishment plans, David Jones has enhanced their competitive advantages. In addition, the introduction of David Jones American Express Credit Card delivers significant earnings growth and value to shareholders. Threats: Recent financial crisis may decrease consumers’ purchasing power. Its competitor, Myer has changed their marketing strategy to lower income consumers since the market crash last December.
As one of David Jones’ main competitors, Myer is taking greater market share. MAIN PROSPECT OF THE COMPANY Prospect in next year The upmarket department stores like David Jones have been hit hardest, since cash bonus was targeted to lower income families, David Jones did not receive much from it. [4] As the economy problem spreads broader, it is sensible enough to forecast a further fall of revenue in the following yeProspect In five years Together with the recovery from the market crash and by the end of recession, the revenue will grow up to before. Sales would improve as there is an increase in purchasing power of customers. Furthermore, David Jones is already planning the open new stores in five years.
That signals the company’s resilience despite poor economic condition. Prospect In the long run It is believed that David Jones will keep up their revenue and profitability as desired, as DJ has strong marketing strategies in both differentiation and positioning. ACCOUNTING ANALYSIS EARNINGS MANIPULATION Managers of David Jones have incentive to manipulate earnings because their compensation plans depends on net profit after tax and the executive directors would receive a cash payment equal to dividends payable with the rights converted to shares upon each vesting. Thus compensation plans may motivate managers to manage earnings in order to achieve stable and predictable results.
Also, the managers have incentive to establish reputation to improve credit rating as well, as to maintain market pressure. EVIDENCE OF EARNINGS MANAGEMENT After a prolonged period of investigation, no evidence of earnings management was found. There was a decrease in net profit margin from 2007 to 2008 so managers tended to get a slightly lower compensation. Specific investigation into items and disclosed notes in financial statements but we couldn’t find anything evident in terms of accruals and valuation . However, there are some areas that we found suspicious Inventory- The inventory methods in terms of measurement of inventories and the departments mark up ratio adopted were unknown and undisclosed
Depreciation- The reasons for adjustment of the residual value and the useful life of all the depreciable assets are undisclosed. There is a decrease in assets from 2007 ($1,634,643) to 2008 ($1,529,645) and increase in expense ($709237 to$ 727574). Should the managers manipulate earnings, they would capitalize some of the economic benefit as assets instead of expensing them. There were time series and cross sectional analysis on David Jones and Myer, the main competitor . NO evidence of earnings management were found as no significant changes to the ratios of David Jones. Additional information is required to examine the possibility of earnings management. FINANCIAL ANALYSIS Graph 2-1-SUMMARY FINANCIAL STRENGTHS | INHERENT RISK | |A)outperform the retail industry |A)high debt level | |B)better ROE and ROA than competitors | | |C)efficiency in working capital management | | |D)less debt and strong ability for interest payment and debt | | |repayment | | |E) high net profit | | TIME SERIES ANALYSIS
In 2008, David Jones celebrated 170 years of trading and the company is the only department store in the world that has been trading for such a long history. Last year, the company reported a record high net profit after tax (NPAT) result and a record high dividend to shareholders under the unfavorable economic condition of global financial crisis. MARKET, INDUSTRY AND COMPANY PERFORMANCE -SALES Graph 2-2 [pic]The correlation coefficient (Appendix Table 3-2) is high, indicating that the economic condition and industry condition have the significant effects on the company’s performance. This can be proved by the company’s equity beta of 1. 08.
From the above Graph 2-3, the company experienced a stronger growth rate than that of whole economic and consumer discretionary industry in the period between year 2006 and 2007, but a deeper downward tendency in the year2008 SHARE PRICE Graph 2-3 . [pic] As expected the share price is volatile during recession period and it hit the bottom of about $2. 1 in March 2009[5]. But the share price started increasing after that and stays around $3. 50-$ 4. 0. Graph 2-4 Graph 2-5 [pic] [pic]Graph 2-7 From the above graphs, the key highlights of the past 12 months[6] include: Delivering an increasing in Department Store Sales of more than $276 million since FY06, to $2,098. 00 million in FY08(Graph 2-4); Delivering a 68. 5% increasing in fully franked dividend to ordinary shareholders from 16 cents per share(cps) in FY06 to 27cps in FY08(Graph2-5); Improving the sales per square meter more than 13 percents to $5,240/m2 in FY08 since FY06(Graph2-6); Decreasing its Cost of Doing Business(CODB) by 290 basis points from 34. 1% in FY06 to 31. 2% in FY08(Graph 2-7)[7]; and Maintaining a tight control on Capital Expenditure leading to significant reinvestment in the company’s core business whilst simultaneously increasing the free cash flow; Thus, the company has established a strong track record over the past three years, in terms of financial performance, shareholder return and cost of doing business, despite of the economy instability. Evaluating Operating Management Graph 2-8 [pic]
From the Table 3-3 and Graph 2-8, while the net profit margin after tax fluctuated a bit in the past three years, the change of ROE indicates the sound operating condition for the company, with the increase from 18. 11% (2006) to 42. 29% (2008). This had been due to the enhancement of company’s operating performance, with negative net financial leverage and remarkable improvement of spread from 2006 to 2007. Secondly, in recent two years, the remained comfortable level of ROE (42. 29%) in 2008 largely originated from the financial leverage gain because of company’s drawing on the financial leverage gain, increasing from -14. 11% to 17. 16%, to offset the downward company’s operating performance, the decrease of operating ROA from 57. 96% to 25. 13%.
Besides, those two points are consistent with the change trend of recurring NOPAT which eliminates the non-operating factors. Evaluating Investment Management Graph 2-9 [pic] The asset turnover is the second driver of a company’s return on equity. Therefore, we’ve exerted more effort on the analysis of asset turnovers (Graph 2-9). WORKING CAPITAL MANAGEMENT Overall, David Jones has shown greater efficiency in working capital management, with all improvement in most of the turnover ratios. Coupled with shorter days of cycle, improvement inventory, payables and property, plant and equipment turnovers remain stable. The only exception, accounts receivable turnover surprisingly dropped due to large amount of receivables recently.
This issue would be solved shortly with the deal with Amex American Express, which will transfer $374 million of debt-funded receivables off the David Jones balance sheet. [8] Evaluating Financial Management Graph 2-10 [pic] LIQUIDITY POSITION The firm experienced lower current ratio of 1. 2 in 2008 but improvement in quick ratio over 3 years . This indicates less significance of the inventory in total assets or improved efficiency of inventory turnover over the years, indicated by Graph 2-10. SOLVENCY POSITION Negative net-debt-to-equity in the first 2 years suggests that the company had more free cash flow to make debt payment. However, this situation changed when there is significant high positive debt-equity ratio and the sudden drop in cash flow.
The firm became less solvent; David Jones $350 million long-term debt issue exposed the company to the bankruptcy risk and thus increase the cost of equity. This problem would not persist too long as there would be an issue of equity to finance the four year expansion plan. In addition, the company improved its ability to make interest payment with interest coverage ratio of 6. 09 in 2008. Cross-sectional Analysis David Jones has outperformed Myer since 2003 PROFITABILITY Graph 3-1 [pic] David Jones has both higher ROE and ROA than its close competitor, Myer. Myer has a relatively larger amount of liabilities of$1465. 995 million (David Jones $1121. 47 million) ,and with a lower proportion of equity in the capital structure ROA doesn’t say much about how well a company performed regardless of the form of financing . Overall, David Jones performed better than Myer based on the reasonable level of liabilities, both strong ROE and ROA ratios and produced similar gross profit margin . While Myer carries a lot of debt, its high ROE can give investors a false interpretation about the company’s fortune. . INVESTMENT? MANAGEMENT Graph 3-2 [pic] Refer to Graph3-2, David Jones and Myer are showing similar pictures under investment management. However, Myer has an outstanding Accounts receivable turnover of 117. 55 times in 2008. While both companies have a similar amount of sales revenue, Myer’s accounts receivables amount is much smaller than David Jones’.
This implies either Myer operates highly on a cash basis or they have efficient and tight credit policies. FINANCIAL MANAGEMENT Graph 3-3 [pic] According to the comparison of Myer and David Jones’ financial management in Graph3-3, Both Myer and David Jones represent reasonable current ratios which are greater than 1. In this case, for every dollar of short term liability, David Jones has 1. 17 dollar current assets, or ,David Jones’ short term liability is covered by 1. 17 times. Myer has more than twice of the liability than David Jones and therefore has higher debt-related ratios despite of similar size of the equity for both the companies.
By contrast, David Jones’s ability to pay interest and in strong financial position helps David Jones to FORECASTS AND VALUATIONS Internal Even the sales will inevitably drop, but cut cost will ease the impact to some extent. David Jones implanting its cost reduction program in 2009, such as cut 150 job from office, halved expense on fashion activities. It is effectively decrease the cost of doing business about 70bp. Secondly, David Jones restructured its inventory level about 12. 9% in 1H09 to reduce the cost of goods sold, while the risk of discount selling unseasoned products also declined. The aged goods will be maintained below 5% of company’s benchmark.
It seems that company still keeps such trends until the economic recovery. Meanwhile, David Jones is renegotiating trading term with 2700 suppliers with the intention to introduce a plenty of top-class brands in store, and will attractive more customer to purchasing those “High price High margin “commodities. With David Jones’ New four-year Strategy, investment of 400million in 4-8 new store and refurbishment of high-value stores will boost the profit. External Australia economy will experience recession at least until 2011, unemployment will keep around 4. 3% and household will tighten spending. Discount stores will obtain larger share of Government’s Stimulus Package.
Since the department store will be the first influenced and recovered from economic crisis, David Jones may achieve better result from 2H2010 accompanied with the recovery of Australia economy. FORECAST SALES GROWTH Graph 4-1 [pic] Due to the recession and less demand for high quality products, David Jones’ sales will decrease more than expected in 2009. Therefore, the sales growth tends to drop below the mean reverting range of 3% to 5%. It is expected that sales growth will reach zero or negative during the recession. However, the new store plan will prevent the sales growth from falling too dramatically. Though the government had attempted to help by issuing stimulate packages to families, it may not affect David Jones’s sales growth, since people may not spend this limited money on luxury goods.
From 2011, it is expected that economy would start recovering[9]. There will be a large demand for disposable goods from the abnormally low point of 0. 5 to 6. 8%. After that sales growth tends to stay at around 6. 9% -8% and then 5% thereafter. NOPAT MARGIN Graph 4-2 [pic] Combining corporate capacity and macroeconomic impact, NOPAT Margin will decrease to around 4% in 2009, and will recover to around 6% in 2010, then gradually increase to about 6%-9% from 2011 to mean-level. The improvement of NOPAT is due to the success of the four year expansion plan. WORKING CAPITAL TO SALES Graph 4-3 [pic] The large increase in beginning net working capital from 2007 was due to the growth in account receivable.
With comparatively small growth in sales at the same time, the ratio grew significantly. Effective from 1 August 2008, all the debt-funded receivables would be taken off of the David Jones balance sheet and therefore we expect a fall in working capital. NET LONGTERM ASSETS TO SALES Graph 4-4 [pic] Net Long-term assets to sales will be greatly affected by expending projects and debt level. Higher debt level and the number of new stores plus comparably shrinking sale will make the keep the figure to around 25% in 2009 and have a decrease of 2% in 2010 to 23 %. With upward trend of sales, the number will eventually remain at 17. 1% in the long run. CAPITAL STRUCTURE Graph 4-5 pic] David Jones $350 million long term debt would be repaid in at least five years due to the current market conditions. Since they are launching the new store plans, they have decided to raise capital mainly by equity according to the CEO’s recent presentation. Thus the increase in equity will be higher than the increase in the net debt. The shareholders equity to market value of net capital is expected to be greater than the market value of debt due to low liquidity in debt market and fixed contracts. VALUATION COST OF EQUITY For the risk free rate, we use the most recent cash rate announced by the federal bank, which is 3%. Graph 5-1 [pic]
We use 5 year market and corporate returns as part of our valuation and thus obtain equity beta and cost of equity of 1. 087 and 12. 5% in 2009 using CAPM model. COST OF DEBT In order to reflect the true reality of the debt position of the company . we use average cost of debt of 8. 143%, after taking into consideration of weight age of each class of debt including bank overdraft, unsecured bank loan and receivable purchase, and also their interest cost. The cost of debt, adjusted after tax, would be 5. 7% (Graph 5-2) Graph 5-2 |?? |% |Total | |bank overdraft |11. 6 |29,600 | |Receivables purchase |7. 92 |250,000 | |Unsecured bank loan |8. 1 |350,000 | |?? | |?? | |total debt | |629,600 | |?? | |?? | |cost of debt | |8. 143043 | |after tax |?? |5. 70013 | We assume the low debt beta of 0. 59, due to the fixed debt repayment and interest payment, which would not produce additional risk to the creditors. After obtaining WACC of 8. 9%, we estimate the equity valuation of the company at about $ 1. 5billion; the amount is consistent among all the method used.
With the outstanding shares of 483,452,861, it is expected that David Jones to be valued at about $3. 18 per share. (Graph 5-3) Graph 5-3 |($000’s) |Equity Value |Equity Value | |?? |?? |per share | |Discounted Cash Flows |$1,535,587. 7 |$3. 18 | |Abnormal Earnings |$1,535,587. 7 |$3. 18 | |Abnormal Returns |$1,535,587. 7 |$3. 18 | SENSITIVITY ANALYSIS We assumed 3 scenarios a) the worst case b) most likely case c) the best case The worst case
We assumed that the economy takes a longer time to recover, so we assume the first five years to be worst off 50% than our original forecast. The expected case This is what we forecast and we expect the situation would be the same as forecasted The best case We assumed that the economy recovers earlier and even performs better than expected. The entire sales growth rate would be increased by 20% except for the first year sales growth because we expect the growth rate to be negative in the first year. RESULTS Graph 5-4 [pic] Graph 5-5 [pic] From the scenario analysis, the valuation of the company is ranging from 1. 3 billion to 1. 7billion. The share price per share is valued from $2. 89 to $3. 57 RECOMMENDATION
From the detailed analysis we performed, comparison with the historical share prices and review of analysts recommendations, we would recommend on “HOLD “strategy on David Jones shares, which means you hold the shares if you already own the shares while not to buy shares if you do not have any . Despite the great economic uncertainty in the near future, high debt level and lack of earnings visibility which will continue to limit relative out performance and sales growth, we believe that the business model is strong and the management of inventory, gross profit and cost of doing business is efficient. With the current price valued at $3. 18, we believe that the sales revenue to bounce back and the share price to be more attractive in the future if not in the near future. But at the moment, we would recommend a hold position. -Complete- WORD COUNT: 3468 Analysed and Reviewed by King Han Choon |3271368 | |Vicky Weiwei Wang |3175671 | |Jason Min Feng Su |3237070 | |Ambrosia Ting Pang |3246165 | |Kelly Mu Shan |3115794 | REFERENCE 1. DAVID JONES ANNUAL REPORT 2005 2. DAVID JONES ANNUAL REPORT 2006 3. DAVID JONES ANNUAL REPORT 2007 4. DAVID JONES ANNUAL REPORT 2008 5. Myer Annual Report 2006 6. Myer Annual Report 2007 7. Myer Annual Report 2008 8. IBIS World Industry Report: Retail Trade in Australia: G 9. Simon Canning, 2009, ‘Crisis brings David Jones back to the retail pack’, The Australian, 25th March. 10. ‘David Jones expects economy to worsen’, Retrieved on 26 May, 2008. 11.
David Jones ASX and Media Release, ‘3Q09 Sales better than expected, FY09 profit guidance reaffirmed’. 12. David Jones Presentation: Macquarie Conference, 8th May, 2009. 13. Steve Burnham, January, 2009, ‘Economy 2009: 10 key forecasts’, Retrieved on 26th May, 2008. 14. Patrick Stafford, March 2009, ‘Australia slides towards recession, shares rise again, David Jones profit up: Economy roundup’, retrieved on 26 May, 2008. 15. Bob Cunneen, December 2008, ‘Fiscal stimulus to encourage consumer spending’, retrieved on 26 May, 2008. 16. Retrieved on 26 May, 2008 from 17. ‘Economic data’, Economist Intelligence Unit Country Data, retrieved on 26th May, 2008. < http://www. economist. com/Countries/australia> 18. Forecast’, Economist Intelligence Unit Country Data, retrieved on 26th May, 2008. APPENDIXES Table 3-1 | |2006 |2007 |2008 | |Department Store Sales($M) |1,821. 60 |1,983. 20 |2,098. 00 | |Sales per Square Meter($Th) |4. 63 |5. 04 |5. 24 | |Financial Services EBIT($M) |34. 10 |36. 10 |38. 40 | |EPS |18. 7 |24. 6 |28. | |Dividend(cps) |16 |22 |27 | |Cost of Doing Business (Percentage of Sales) |34. 10 |32. 30 |31. 20 | Table 3-2 |27/07/05-21/7/08 |Correlation Coefficient(ASX300, Firm) |0. 455 | |27/07/05-21/7/08 |Correlation Coefficient(Industry, Firm) |0. 541 | Table 3-3 |? |2006 |2007 |2008 | |Net Profit Margin(After tax) |4. 45% |10. 52% |7. 2% | |ROA |8. 66% |8. 43% |10. 84% | |Operating ROA |17. 26% |57. 96% |25. 13% | |Spread |-3. 95% |45. 61% |30. 86% | |Net Financial Leverage |-0. 21 |-0. 31 |0. 56 | |Financial Leverage Gain |0. 85% |-14. 11% |17. 6% | |ROE |18. 11% |43. 84% |42. 29% | |Recurring NOPAT |4. 38% |11. 27% |7. 47% | Table 3-4 |Working Capital Management: |2006 |2007 |2008 | |Inventory Turnover |3. 6 |4. 2 |4. 6 | |Accounts Payable Turnover |4. 4 |5. 0 |5. 4 | |Accounts receivables Turnover |37. 4 |37. 1 |5. 23 | |Days’ Receivables |9. 8 |9. 7 |69. 7 | |Days’ Inventory |100. 2 |87. 7 |78. 8 | |Days’ Payables |83. 7 |73. 7 |68. 1 | |? |? |? |? | |Long-Term Asset Management: |? |? |? | |PP&E Turnover |7. 9 |8. 5 |9. 2 | Table 3-5 Short-Term Liquidity: |2006 |2007 |2008 | |Current Ratio |1. 64 |1. 79 |1. 17 | |Quick Ratio |0. 5 |0. 72 |0. 79 | |Debt and Long-Term Solvency: |? |? |? | |Debt-to-Equity |0 |1. 12 |1. 4 | |Net-Debt-to-Equity |-0. 1 |-0. 31 |0. 56 | |Interest Coverage Ratio: |? |? |? | |Interest Coverage |5. 94 |6. 12 |6. 09 | Table 4-1 |Yr 2008 | |DJs |Myer | |Profitability |ROE |42. 289% |32. 60% | | |ROA |10. 84% |5. 0% | | |Gross Profit Margin |39. 60% |40. 50% | Table 4-2 |Yr 2008 | |DJs |Myer | |Investment mgmt |AC Receivable turnover |5. 234 |117. 55 | | |Inventory turnover |4. 6 |5. 1 | | |Net LT asset turnover |9. 57 |2. 6 | | |PP&E turnover |9. 22 |11. 34 | Table 4-3 |Yr 2008 |Financial Leverage |DJs |Myer | |Short term |Current Ratio |1. 17 |1. 27 | | |Quick Ratio |0. 79 |0. 51 | | |Cash ratio |0. 26 |0. 6 | |Long term |Liabilities to equity |2. 25 |4. 61 | | |Net Debt to equity |1. 12 |2. 29 | | |Net debt to net Capital |0. 56 |0. 7 | VALUATION Equity beta (based on 5 year return projection) Table 5-1 |Cov(rm,re) |0. 001072909 | |Var(rm) |0. 000986933 | |? |1. 087114094 | Calculation of equity return and asset beta.
Table 5-2 |? e/? a=(E+D/E) |?? | |? e |1. 087114 | |Ba |0. 440483 | |E+D |1,529,645 | |E |619,790 | Table 5-3 |?? |Equity value($000) |Price per share | |The worst case |1,397,313. 12 |2. 89 | |Most likely case |1,535,587. 1 |3. 18 | |The best case |1,729,896. 70 |3. 58 | ———————– [1] Executive summary Retailing in Australia, http://www. euromonitor. com/Retailing_in_Australia [2]http://www. smartcompany. com. au/Free-Articles/The-Briefing/20080725-David-Jones-signs-exclusive-deals-with-50-new-brands. html) [3] http://www. strategicfactors. com/resources/zCompanyDirectorCompetitiveAdv. pdf y pg17. [4] http://business. smh. com. au/business/retailers-pray-for-a-reprieve–more-money-from-heaven-20090401-9jqj. tml [5] http://au. finance. yahoo. com/ [6] David Jones annual report 2008, Page 3 [7] David Jones annual report 2008, Page 8 [8] David Jones annual report 2008, Page 8 [9] http://www. smartcompany. com. au/finance/economy-2009-10-key-forecasts. html ———————– [pic] [pic] DavidjonesDavidjonesDavidjonesDavidJonesDavidjonesDavidjones DavidjonesDavidjonesDavidjonesDavidjonesDavidjonesDavidjones DavidjonesDavidjonesDavidjonesDavidjonesDavidjonesDavidjones DavidjonesDavidjonesDavidjonesDavidjonesDavidjonesDavidjones DavidjonesDavidjonesDavidjonesDavidjonesDavidjonesDavidjones DavidjonesDavidjonesDavidjonesDavidjonesDavidjonesDavidjones
DavidjonesDavidjonesDavidjonesDavidjonesDavidjonesDavidjones DavidjonesDavidjonesDavidjonesDavidjonesDavidjonesDavidjones DavidjonesDavidjonesDavidjonesDavidjonesDavidjonesDavidjones Davidjonesqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvb nmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwerty uiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdf ghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxc vbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwer tyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopas dfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklz xcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmrt uiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasd fghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzx cvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwe rtyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopa sdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjkl zxcvbnmqwertyuiopasdfghjklzxcvbnmrtyuiopasdfghjklzxcvbnmqwer tyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopas dfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklz xcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqw ertyuiopasdfghjklzxcv[pic][10]$%&6789]^abue? O???? ???~k_W_A+hZ8nhZ8nCJOJ[11]QJ[12]^J[13]aJnHo([pic]tHjh#? U[pic]hZ8nhZ8nnHo([pic]tH$h#? h#? CJOJQJaJnHtHh#? Ho([pic]tHhZ8nnHo([pic]tH(h|eNhZ8nB*CJHOJQJaJHo([pic]phO?? 3h|eNhZ8n5? B*CJHOJQJaJHnHo([pic]phO?? tH hZ8nhZ8nhZ8nCJ(bnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwert yuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmrtyuiopasdfgh jklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvb nmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwerty uiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdf ghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxc vbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwer tyuiopasdfghjklzxcvbnmrtyuiopasdfghjklzxcvbnmqwertyuiopasdfg hjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcv nmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwert yuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasd fghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzx cvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmrty uiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdf ghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxc vbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwer tyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopas dfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklz xcvbnmqwertyuiopasdfghjklzxcvbnmrtyuiopasdfghjklzxcvbnmqwert yuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasd ghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzx cvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwe rtyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopa sdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjkl zxcvbnmrtyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwer tyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopas dfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklz xcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqw ertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiop asdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwwertyuiopasdfghj klzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbn mqwertyuiopasdfghjklzxcvbnm Graph 2-6