How to Value Dorel CurrentlyOR
How did TD arrive at $46 per share CAD. The Table below ( all Values in USD ) shows the details, based on 2021 H1 financial statistics as of exit Q2/21, adjusted prorata ( 2 X ) for the full year.
It also shows the $37 million in operating earnings that will be gained by extinguishment of all bank debt ( $425 million ) less current cash of $60 million= $365 million in net debt.
Cash left over from the sale of the Sports ( S ) division will be $810 m less $365 m = $445 m USD.
Trading Valuation Subsequent to Sport Sales I assume that the remaining two segments ( whose operating profit is near identical to that of Sports which was sold for 7.6 times operating profit ) if not sold will be based 7.6 times operating profit whuich is $800 m.
So, after the sale of Sports and extinguishment of all bank debt, the remaining two divisions will have about
$560 million CAD in cash ( about $17 per share ) and a
trading valuation @7.6 times sales of $800 million USD = $1 billion CAD = $30 CAD per share Combined cash and trading valuation = $560 m cad + $1000 m cad = $47 CAD per share
This is near identical to the TD target of $46 CAD per share.
Valuation if Home and Juvenile is sold as well
At minimum, as the operating profit is about the same as Sports, H + J will be sold for $800 million USD .
However, annual sales is much higher than that of Sports and that should elevate the takeout price, as the suitors can claim a much larger addition to revenue growth.
I arbitrarally chose $200 million CAD = $250 m CAD which will boost the full takeover gains from sale of all divisions to over $50 per share.
Note that restructuring this year will reduce operating expenses of the Juvenile Division and elevate gross margins. This makes the above calculations somewhat conservative
There you have it... | | | | | | | |
| | Home ( H ) | Juvenile ( J ) | | ( H + J ) | Sport ( S) | |
| | | | | | | |
| H1 Sales X 2 | $930 m | $850 m | | $1.81 B | $1.17 B | |
| Gross Profit | 13.5% | 25.9% | | 19.4% | 23.8% | |
| H1 Op Pro | $29.2m | $5.0m | | $34.2 m | $53.5 m | |
| H1 Op Pro X 2 | $58.4 m | $10.0 m | | $68.4 m | $107 m | |
| | | | | | | |
| Interest Gains | | | | $37 m | $0.0m | |
| | | | | | | |
| Adj OP Profit | | | | $105.4 m | $107 m | |
| Acquired P/E | | | | | 7.6 | |
| Acquired Price | | | | ( $800 M ) | $810 m | |
| Acquired P/S | | | | | 0.692 | |
| Acquired Price | | | | ( $1.25 B ) | | |
| | | | | | | |
| Trading P/E | | | | ( $800 m ) | 7.6 | |
| | | | | | | |