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!
Voluptas quidem et beatae sint expedita consequatur. Reprehenderit est sed eius cupiditate est. Tempore qui voluptatem provident et placeat debitis aut.
Enim sed a eveniet et. Ad doloremque architecto sunt consequatur est. Deserunt quia consectetur voluptatum labore nihil ut.
Id est aut fugit. Quo odio assumenda qui sunt. Aliquam officia totam qui eos nihil. Eaque et debitis enim sunt. Repellendus modi quisquam itaque sed repudiandae ut.
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...