Hi, Thanks for the detailed comments and reading through this lengthy report. I appreciate it. So on the leases, my EBITDA and my terminal value is adjusted for rent (IFRS 16 adjustment). That is I don't add back the entire D&A in EBITDA - but just the D&A on PP&E leaving in the right to use asset depreciation. So I've considered leases …
Hi, Thanks for the detailed comments and reading through this lengthy report. I appreciate it. So on the leases, my EBITDA and my terminal value is adjusted for rent (IFRS 16 adjustment). That is I don't add back the entire D&A in EBITDA - but just the D&A on PP&E leaving in the right to use asset depreciation. So I've considered leases already. The other way to do it is what you pointed out. Add back entire D&A (including ROU assets) and then takes leases as debt. Either way is fine. I like my method because it gives me a better since of ongoing cash flow. Like you mentioned, discount rate and terminal multiple depend on each investor and analyst and their comfort levels. I take 10% discount rate throughout all my DCFs, because it helps be do an apples to apples comparison between opportunity available to me (and the margin of safety). To the extent possible I adjusted cash flows for any perceived risks. Not that CAPM is a bad methodology. It is just my choice. Terminal multiple is also very subjective. I think 5 years from now Aritzia will have a growth avenue in Europe and China (and broader Asia / Australia). So still think 13X multiple is reasonable. Also, I should the sensitivity precisely for that reason. It depends on what the investor is comfortable assuming. Thanks again for reading.
Hi, Thanks for the detailed comments and reading through this lengthy report. I appreciate it. So on the leases, my EBITDA and my terminal value is adjusted for rent (IFRS 16 adjustment). That is I don't add back the entire D&A in EBITDA - but just the D&A on PP&E leaving in the right to use asset depreciation. So I've considered leases already. The other way to do it is what you pointed out. Add back entire D&A (including ROU assets) and then takes leases as debt. Either way is fine. I like my method because it gives me a better since of ongoing cash flow. Like you mentioned, discount rate and terminal multiple depend on each investor and analyst and their comfort levels. I take 10% discount rate throughout all my DCFs, because it helps be do an apples to apples comparison between opportunity available to me (and the margin of safety). To the extent possible I adjusted cash flows for any perceived risks. Not that CAPM is a bad methodology. It is just my choice. Terminal multiple is also very subjective. I think 5 years from now Aritzia will have a growth avenue in Europe and China (and broader Asia / Australia). So still think 13X multiple is reasonable. Also, I should the sensitivity precisely for that reason. It depends on what the investor is comfortable assuming. Thanks again for reading.