Provide an investment recommendation

Email to management

Good morning Anna, I have updated the valuation of Brewing Co., with the expected
financial impact of facility fire in FY21. With
that, the supply chain can be assumed to be interrupted for a whole year as the
facility is long to rebuild, with that assumption our
implied equity value goes down from 718 $m to 654$m. minus 20% from our margin of
safety , and now the margin is 99,1%. As
from the report of another bidding, they valued the Brewing Co., to be 650$m , as
expected with our calculation. This is still a
bargain and a good M&A transaction if looking from the MOS.

Net present value based on perpetuity growth method

Preliminary valuation
Revised valuation (post-fire)

Amount % of
Value Based on 8.5% WACC & 0.5% TGR Amount ($m)
% of NPV Value Based on 09% WACC & 01%
Present Value of Cash flows 409
50.9% TGR ($m) NPV
PV of Terminal Value 394
49.1%

Present Value of Cashflows 345 46,7%

Implied Firm NPV 803
100.0%

PV of Terminal Value 394 53,3%

Net debt as of Mar-20E (85)

Implied Firm NPV 738 100,0%

Implied equity value 718
Net debt & adjustments (85)
Implied offer share price (c) 361
Implied equity value 654
% premium to current 118.8%
Implied share price ($c) 329

% premium to current 99,1%

Source: Company Business Plan (January 2020); Equity research; J.P. Morgan analysis

WORLDWIDE BREWING
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