IFRS 16 adjustment in CIQ

Hello all,

I've looked at IFRS16 threads but none answer my question because it looks like they're all from around 2019/2020 when this topic was quite new.

Long story short for those who do not have time: how do you adjust for IFRS16 in your EBITDA multiples using CIQ?

Long story below:

1) I do not use the precomputed CIQ multiples because I do not agree with some of their hypothesis (CIQ computes it based on trading currency and I'd rather do it based on reported currency as an example. Also, it allows me to use average market cap with spot bridge elements because the CIQAVG functions would average the whole enterprise value and not only the mktcap).

2) Since I have to recompute the multiples myself, in order to compute multiples, I do as follows : (MktCap + CIQ bridge elements) / EBITDA (LTM, LFY or Fwd+1 to Fwd+3). CIQ bridge elements are the following: Total Debt, incl. all leases (operating and financing leases), Total Cash & ST Investments, Long Term Marketable Securities, Total Pref. Equity, Total Minority Interest. This is a "vanilla" CIQ bridge, i.e. when you look at the components of any bridge computed by CIQ, should the company report under US GAAP or IFRS, it would have those elements (which could be adjusted by this other element or that extra element but for the sake of simplicity let's stick to those vanilla elements). Hence, the enterprise value computed here is an IFRS16 adjusted enterprise value because all leases are considered in debt.

3) CIQ has two functions for EBITDA : IQ_EBITDA (which is a pre-IFRS 16 EBITDA) and IQ_EBITDA_LEASE_ADJUSTED (which is an IFRS 16 EBITDA, i.e. the latter is greater than IQ_EBITDA because less OPEX basically and such a formula works for both types of companies, should they report in US GAAP or IFRS). For LFY & LTM multiples, because the enterprise value I compute is an IFRS 16 enterprise value (the total debt item includes all types of leases), I should use the IQ_EBITDA_LEASE_ADJUSTED formula and that is perfectly ok with me. Indeed, I work in France with lots of french customers and IFRS is recommanded for huge groups in France.

4) Nonetheless, the problem comes when I have to deal with forward multiples. I have one formula for estimates and that is IQ_EBITDA_EST. No distinction between IFRS or US GAAP EBITDA for estimates then. It nonetheless looks like US GAAP reporting companies would have their estimates in US GAAP and IFRS reporting companies would have their estimates in IFRS. In order to have comparable EBITDA multiples, I had the idea of "adjusting" the estimate EBITDA for US GAAP companies that way : if the estimated EBITDA is of $1,000m, the historical adjustments over FY-2 to FY-0 represents on average 5% of the sales (available by substracting IQ_EBITDA_LEASE_ADJUSTED vs IQ_EBITDA and comparing the result to the sales) and the forward sales is of $5,000m, then my adjusted EBITDA would be of 1,000+5%x5,000 = $1,250m. But no adjustment needed for IFRS companies.

I could stay on US GAAP multiples (I guess you guys come mostly from the US :D) but I would have the same problem the other way around: how could I adjust the total debt incl. leases in the bridge? Because of IFRS16, IFRS reporting companies do not make the distinction anymore between operating and financing leases so I'd need to deduct for IFRS reporting companies the portion of leases related to operating leases, which is not communicated anymore in financial communications. So I'd much rather adjust a forward P&L agregate rather than a spot balance sheet agregate.

What do you think of my approach? Do you see any flaws in it? Also, how do you guys deal with such a topic?

Thanks a lot for your help :)