Tottenham Hotspur plc
Tottenham Hotspur plc
1.
First, calculate FCF. As written in the case, both depreciation and CAPEX grows 7% annually and I assumed change in NWC is consistently 0. Given discount rate is 10.25%. I put 1% perpetual growth on CF projection after 2020.
The NPV of CF is 79.13 (in M GBP) as below.
Since EV is 79.93 and net debt (total debt – cash and equivalents) is 16.79, therefore we can say that E is 63.14.
On the other hand, as its current stock price of £13.80, the market capitalization (E) is 128.2.
In sum, we claim that the share price of Tottenham is significantly overvalued. The stock price should be 6.80 GBP.
2.
EV/EBIT multiples of 8 temas are calculated as the table below:
As for 3 teams, EV/EBIT is not calculated because their EBIT were negative in 2007. The wide rage of EV/EBIT from 14.55 to 53.45 is observed.
Though Arsenal shows extremely high multiple (53.45), Tottenham’s seems also higher.
Based on my answer on Q1, the EV was 63.14, the multiple is calculated as 12.63. It is apparently the lowest number in the given 5 teams; however I believe the result, the low expectancy from investors, is reasonable because this CF projection assumes no investment on stadium even though the chairman worries about its small stadium in 2008.
There are some relative advantages and disadvantages of multiples versus DCF valuation methods.
The biggest advantage is the easiness of calculation. Additionally, it’s useful to compare with other companies. On the other hand, multiples cannot be calculated id the denominator is negative, and the consistency of the earnings is also a key. In this case, EBIT was used whereas ideally FCF should be used.
3.
a) Build the new stadium
EV decreased compared to the case without new construction due to high cost. However I believe that there is other positive effects on the team such as to attract good player. EV is 9.72.
b) Sign a new striker
Based on my research, premier league has 38
1.
First, calculate FCF. As written in the case, both depreciation and CAPEX grows 7% annually and I assumed change in NWC is consistently 0. Given discount rate is 10.25%. I put 1% perpetual growth on CF projection after 2020.
The NPV of CF is 79.13 (in M GBP) as below.
Since EV is 79.93 and net debt (total debt – cash and equivalents) is 16.79, therefore we can say that E is 63.14.
On the other hand, as its current stock price of £13.80, the market capitalization (E) is 128.2.
In sum, we claim that the share price of Tottenham is significantly overvalued. The stock price should be 6.80 GBP.
2.
EV/EBIT multiples of 8 temas are calculated as the table below:
As for 3 teams, EV/EBIT is not calculated because their EBIT were negative in 2007. The wide rage of EV/EBIT from 14.55 to 53.45 is observed.
Though Arsenal shows extremely high multiple (53.45), Tottenham’s seems also higher.
Based on my answer on Q1, the EV was 63.14, the multiple is calculated as 12.63. It is apparently the lowest number in the given 5 teams; however I believe the result, the low expectancy from investors, is reasonable because this CF projection assumes no investment on stadium even though the chairman worries about its small stadium in 2008.
There are some relative advantages and disadvantages of multiples versus DCF valuation methods.
The biggest advantage is the easiness of calculation. Additionally, it’s useful to compare with other companies. On the other hand, multiples cannot be calculated id the denominator is negative, and the consistency of the earnings is also a key. In this case, EBIT was used whereas ideally FCF should be used.
3.
a) Build the new stadium
EV decreased compared to the case without new construction due to high cost. However I believe that there is other positive effects on the team such as to attract good player. EV is 9.72.
b) Sign a new striker
Based on my research, premier league has 38