Illustrative DCF analysis for Happy Hour Co

Summary financials and cash flow

Management estimates J.P. Morgan outside-in extrapolation
DCF Forecast Year 0 1 2 3 4 5 6 7 8 9 10 TV
Mar YE
($m) 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
Revenue 1,149 1,256 1,354 1,147 1,443 1,472 1,487 1,501 1,516 1,532 1,547
% growth 9.3% 7.8% (15.3%) 25.8% 2.0% 1.0% 1.0% 1.0% 1.0% 1.0%
EBITDA 94 93 112 124 128 131 132 134 135 136 139
% margin
8.2% 7.4% 8.3% 10.8% 8.8% 8.9% 8.9% 8.9% 8.9% 8.9% 9.0%
% growth
D&A (1.6%) 20.7% 11.3% 2.6% 2.7% 1.0% 1.0% 1.0% 1.0% 2.1%
% of (36) (40) (47) (52) (55) (54) (51) (50) (49) (48) (48)
revenue
3.1% 3.2% 3.5% 4.5% 3.8% 3.6% 3.4% 3.3% 3.2% 3.1% 3.1%
% of
capex 79.2% 94.6% 103.8% 109.8% 107.0% 102.0% 99.0% 97.0% 95.0% 95.0%
EBIT
58 52 64 72 73 77 81 84 86 89 92
% margin
5.1% 4.2% 4.8% 6.3% 5.0% 5.3% 5.5% 5.6% 5.7% 5.8% 5.9%
Tax on
EBIT (9) (11) (12) (12) (13) (14) (14) (15) (15) (16)
% tax rate
17.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0%
Capex
% of (51) (50) (50) (50) (50) (50) (50) (50) (50) (50)
revenue 4.1% 3.7% 4.4% 3.5% 3.4% 3.4% 3.3% 3.3% 3.3% 3.2%
Change in NWC 16 15 11 4 0 0 0 0 0 0
Other Cashflows 0 (5) (5) (5) (5) (5) (5) (5) (5) (5)
% of
revenue 0.0% 0.4% 0.4% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3%

Exceptional items (18) (7) 25 (5) 0 0 0 0 0 0

% of 1.4% 0.5% (2.2%) 0.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
revenue
Unlevered free cash flow 31 54 93 59 63 63 64 65 66 69 862

Cashflow Timing (Years to 1 2 3 4 5 6 7 8 9 10

Discount)
0.92 0.85 0.78 0.72 0.67 0.61 0.56 0.52 0.48 0.44
Discount Factor
Discounted DCF cashflows 28 46 73 43 42 39 36 34 32 30 381

Net present value based on perpetuity growth method

Amount % of
Value Based on 8.5% WACC & 0.5% TGR Sensitising firm value ($m) and implied offer price to WACC and TGR
($m) NPV Perpetuity Growth Rate (%)
Present Value of Cashflows 403 51.4% 0.00% 0.25% 0.50% 0.75% 1.00%
PV of Terminal Value 381 48.6%
7.5% 898 / 409c 915 / 417c 934 / 427c 953 / 437c 975 / 447c
Implied Firm NPV 785 100.0%
WACC (%)

8.0% 838 / 379c 853 / 386c 868 / 394c 885 / 402c 903 / 411c
Net debt & adjustments (85)
8.5% 786 / 352c 798 / 359c 811 / 365c 825 / 372c 840 / 380c
Implied equity value 700
9.0% 739 / 329c 750 / 334c 761 / 340c 773 / 346c 786 / 352c
Implied share price ($c) 352
% premium to current 113.2% 9.5% 698 / 308c 707 / 313c 717 / 318c 727 / 323c 737 / 328c
Source: Company Business Plan (January 2020); Equity research; J.P. Morgan analysis
WORLDWIDE BREWING 1