Explanation of £3bn Royal Mail Valuation?
Hi,
For those of you with valuation experience, could you briefly explain the £3bn valuation of the Royal Mail IPO? The FT seems to be quoting a metric of 8x EV/EBIT.
Reported EBIT (52-week adjusted) is £403m, normalised EBIT is £675m (adding back "transformation costs" and "net exceptional items"), there is a £600m term loan and £800m revolving credit facility.
So 8x normalised EBIT would be £5,400m, and even assuming a fully-drawn RCF this would only bring the valuation down to £4,000m.
Alternatively, using 8x reported EBIT would give £3,224m and then assuming the RCF was nil drawn would only bring it up to £2,624m, which is closer but using reported EBIT seems amateurish.
The other option would be using EV/forward EBIT, and assuming debt of £1,400m that would imply forward EBIT of £550m (£4.4bn/8) which I'm not sure sounds plausible due to the high transformation costs this year, unless more will be spent next year, or the work done this year has been a failure.
Any help appreciated!
Quos assumenda at non laudantium sequi. Sint ab odio libero. Animi praesentium dolor voluptas quisquam nesciunt voluptatem qui.
Consequatur voluptas debitis qui sunt aut. Aut quia quam autem iste et sapiente. Reiciendis sit rerum officia mollitia et ex. Voluptatem ad similique explicabo nam molestiae.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...