Hi, can someone help me to solve this problem based on the information below
Assuming Tottenham Hotspur, plc. continues in their current stadium following their current player strategy.
a. Perform a discounted cash flow (DCF) analysis using the cash flow projections given in the case. Based on this DCF analysis, what is the value of Tottenham Hotspur, plc.?
b. At its current stock price of 13.80, is Tottenham fairly valued?
- assume that WACC is 10.25%
- Maintenance capital expenditure and depreciation of maintenance Capital expenditure growing at 4% per year
- the net working capital is increased by only 1% and the terminal growth after 2019 is assumed to be 4%
| Exhibit 4 2007 Tottenham Balance Sheet (millions of pounds) |
| Assets | |
| Current assets: | |
| Cash and equivalents | 26.29 |
| Investments, available for sale | 0.63 |
| Inventory - Merchandise | 1.17 |
| Accounts Receivable | 19.99 |
| Total current assets | 48.07 |
| Property and equipment, net | 55.78 |
| Intangible assets, net | 49.35 |
| Total assets | 153.20 |
| Liabilities and Stockholder Equity | |
| Current liabilities: | |
| Accounts payable | 64.40 |
| Total current liabilities | 64.40 |
| Long-term debt and deferred interest, net of current portion | 43.08 |
| Total liabilities | 107.48 |
| Total stockholders (deficit) equity | 45.73 |
| Total liabilities and stockholders equity | 153.20 |
| Shares Outstanding (millions of shares) | 9.29 |
| Market Capitalization | 128.20 |
Exhibit 1 Basic Information 1 20-Year Risk Free Rate 4.57% Tottenham Equity Beta 1.29 Company Tax Rate 35% Source: Bloomberg, accessed September 2008. Exhibit 2 Team Valuations, Revenues, and Records (December 31, 2007) Team Enterprise Value (EV)a Net Debt/EV Revenue Operating Incor Arg. Points (1998-2007) Avg. Net Goals (1998-2007) Manchester United 934 0.84 169 50 82 42.7 Arsenal 588 0.53 134 11 77 38.1 Chelsea 345 0.28 154 -20 74 33.9 Liverpool 291 0.18 123 20 67 24.6 Newcastle United 167 0.46 87 6 53 2.3 Tottenham Hotspur 156 0.12 75 5 51 -1.9 Everton 106 0.32 58 -8 49 -4.9 Aston Villa 90 0.16 50 -11 51 0 Enterprise Value - Equity + Debt - Excess Cash. Source: Compiled from Forbes.com, "Soccer Team Valuations," http://www.forbes.com/lists/2007/34 biz_07soccer_Soccer-Team-Valuations_Rank.html, accessed August 2008 2008 2016 10 Other A B D E F G H I J K L M N 0 1 209-059 -12- 2 Exhibit 5 Tottenham Pro Forma Income Statement (millions of pounds) 3 Current Forecast 4 0 1 2 3 4 5 6 7 8 9 10 11 12 13 5 Revenue 2007 2009 2010 2011 2012 2013 2014 2015 2017 2018 2019 2020 6 Attendance 17.40 18.97 20.67 22.53 24.56 26.77 29.18 31.81 34.67 37.79 41.19 44.90 48.94 50.90 7 Sponsorship 15.70 17.11 18.65 20.33 22.16 24.16 26.33 28.70 31.28 34.10 37.17 40.51 44.16 45.93 8 Broadcast 28.70 31.28 34.10 37.17 40.51 44.16 48.13 52.46 57.19 62.33 67.94 74.06 80.72 83.95 9 Merchandise 5.20 5.67 6.18 6.73 7.34 8.00 8.72 9.51 10.36 11.29 12.31 13.42 14.63 15.21 7.10 7.74 8.44 9.19 10.02 10.92 11.91 12.98 14.15 15.42 16.81 18.32 19.97 20.77 Total 74.10 80.77 11 88.04 95.96 104.60 114.01 124.27 135.46 147.65 160.94 175.42 191.21 208.42 216.76 Operating Costs 12 13 Payroll 50.92 56.01 61.62 67.78 74.56 82.01 90.21 99.23 109.16 120.07 132.08 145.29 159.82 166.21 14 Stadium Operating Expenses 16.38 17.04 17.72 18.43 19.16 19.93 20.73 21.55 22.42 23.31 24.25 25.22 26.22 27.27 15 Other 1.80 1.87 1.95 2.02 2.11 2.19 2.28 2.37 2.46 2.56 2.66 2.77 2.88 3.00 Total 69.10 74.92 81.28 88.23 95.82 104.13 16 113.22 123.16 134.04 145.95 158.99 173.28 188.92 196.48 EBITDA 5.00 5.85 6.76 17 7.73 8.77 9.88 11.06 12.30 13.61 14.99 16.43 17.93 19.49 20.27 18 Depreciation 2.20 2.29 2.38 2.47 2.57 2.68 2.78 2.90 3.01 3.13 3.26 3.39 3.52 3.66 2.80 3.56 4.38 5.26 6.20 7.21 8.27 9.41 10.60 11.86 13.17 14.55 15.97 16.61 20 Interest 2.26 2.46 2.69 2.93 3.19 3.48 3.79 4.13 4.50 4.91 5.35 5.83 6.36 6.61 21 Taxes 0.19 0.38 0.59 0.82 1.05 1.30 1.57 1.85 2.13 2.43 2.74 3.05 3.37 3.50 22 Net Income 0.35 0.71 1.10 1.52 1.96 2.42 2.91 3.43 4.52 5.09 5.66 6.25 6.50 Source: Compiled from company annual report 2007, http://admin.tottenhamhotspur.com/uploads/assets/docstore/old/tottenham_ar07.pdf, accessed August 2008, as well as internal company 23 reports. 19 EBIT 3.96 Exhibit 1 Basic Information 1 20-Year Risk Free Rate 4.57% Tottenham Equity Beta 1.29 Company Tax Rate 35% Source: Bloomberg, accessed September 2008. Exhibit 2 Team Valuations, Revenues, and Records (December 31, 2007) Team Enterprise Value (EV)a Net Debt/EV Revenue Operating Incor Arg. Points (1998-2007) Avg. Net Goals (1998-2007) Manchester United 934 0.84 169 50 82 42.7 Arsenal 588 0.53 134 11 77 38.1 Chelsea 345 0.28 154 -20 74 33.9 Liverpool 291 0.18 123 20 67 24.6 Newcastle United 167 0.46 87 6 53 2.3 Tottenham Hotspur 156 0.12 75 5 51 -1.9 Everton 106 0.32 58 -8 49 -4.9 Aston Villa 90 0.16 50 -11 51 0 Enterprise Value - Equity + Debt - Excess Cash. Source: Compiled from Forbes.com, "Soccer Team Valuations," http://www.forbes.com/lists/2007/34 biz_07soccer_Soccer-Team-Valuations_Rank.html, accessed August 2008 2008 2016 10 Other A B D E F G H I J K L M N 0 1 209-059 -12- 2 Exhibit 5 Tottenham Pro Forma Income Statement (millions of pounds) 3 Current Forecast 4 0 1 2 3 4 5 6 7 8 9 10 11 12 13 5 Revenue 2007 2009 2010 2011 2012 2013 2014 2015 2017 2018 2019 2020 6 Attendance 17.40 18.97 20.67 22.53 24.56 26.77 29.18 31.81 34.67 37.79 41.19 44.90 48.94 50.90 7 Sponsorship 15.70 17.11 18.65 20.33 22.16 24.16 26.33 28.70 31.28 34.10 37.17 40.51 44.16 45.93 8 Broadcast 28.70 31.28 34.10 37.17 40.51 44.16 48.13 52.46 57.19 62.33 67.94 74.06 80.72 83.95 9 Merchandise 5.20 5.67 6.18 6.73 7.34 8.00 8.72 9.51 10.36 11.29 12.31 13.42 14.63 15.21 7.10 7.74 8.44 9.19 10.02 10.92 11.91 12.98 14.15 15.42 16.81 18.32 19.97 20.77 Total 74.10 80.77 11 88.04 95.96 104.60 114.01 124.27 135.46 147.65 160.94 175.42 191.21 208.42 216.76 Operating Costs 12 13 Payroll 50.92 56.01 61.62 67.78 74.56 82.01 90.21 99.23 109.16 120.07 132.08 145.29 159.82 166.21 14 Stadium Operating Expenses 16.38 17.04 17.72 18.43 19.16 19.93 20.73 21.55 22.42 23.31 24.25 25.22 26.22 27.27 15 Other 1.80 1.87 1.95 2.02 2.11 2.19 2.28 2.37 2.46 2.56 2.66 2.77 2.88 3.00 Total 69.10 74.92 81.28 88.23 95.82 104.13 16 113.22 123.16 134.04 145.95 158.99 173.28 188.92 196.48 EBITDA 5.00 5.85 6.76 17 7.73 8.77 9.88 11.06 12.30 13.61 14.99 16.43 17.93 19.49 20.27 18 Depreciation 2.20 2.29 2.38 2.47 2.57 2.68 2.78 2.90 3.01 3.13 3.26 3.39 3.52 3.66 2.80 3.56 4.38 5.26 6.20 7.21 8.27 9.41 10.60 11.86 13.17 14.55 15.97 16.61 20 Interest 2.26 2.46 2.69 2.93 3.19 3.48 3.79 4.13 4.50 4.91 5.35 5.83 6.36 6.61 21 Taxes 0.19 0.38 0.59 0.82 1.05 1.30 1.57 1.85 2.13 2.43 2.74 3.05 3.37 3.50 22 Net Income 0.35 0.71 1.10 1.52 1.96 2.42 2.91 3.43 4.52 5.09 5.66 6.25 6.50 Source: Compiled from company annual report 2007, http://admin.tottenhamhotspur.com/uploads/assets/docstore/old/tottenham_ar07.pdf, accessed August 2008, as well as internal company 23 reports. 19 EBIT 3.96
