Dorel Industries Ord Shs Class A T.DII.B

Primary Symbol: T.DII.A Alternate Symbol(s): DIIBF

Dorel Industries Inc is a Canadian company that sells juvenile products and furniture. Its segments include Dorel Home and Dorel Juvenile. Dorel Home segment is engaged in the design, sourcing, manufacturing, and distribution of ready-to-assemble furniture and home furnishings which include metal folding furniture, futons, children's furniture, step stools, hand trucks, ladders, outdoor furniture, and other imported furniture items. Dorel Juvenile segment is engaged in the design, sourcing, manufacturing, distribution, and retail of children's accessories which include infant car seats, strollers, high chairs, and infant health and safety aids. Its geographical segments include Canada, the United States, Europe, Latin America, Asia, and Other countries.

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Dorel Industries Ord Shs Class A > How to Value Dorel Currently

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Post by nozzpackon Oct 16, 2021 2:12pm

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Post# 34013633

How to Value Dorel Currently

OR

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