Provide an investment recommendation

Email to management
Dear Management Team,

Financial Impact of Supply Chain Interruption

• Minimal financial impact in the short-term given it has had minimal effect on the financial projections in the years following
FY21. Therefore, we do not see this as a strong reason to significantly lower your bid nor is it an indication of future financial
distress.

• Given the long-term nature of this investment and the intangible (synergy value) value of this investment, we do not see this
fire as a material issue either.

Bidding Dynamics

• The information regarding bidding on HappyHour Co. from the NY/HK Times to be credible. Due to several large strategic
firms searching for opportunities
to expand we can expect a highly competitive bidding environment.
• If WorldWide Brewing is expecting to extract higher vatue from synergies than some of the bidding competitors, this leaves
an opportunity to pay a higher
price.

Valuation Adjustments

• FY21
Net Revenue
present of $1, on
value based 100mm (downgrowth
perpetuity ~4-5%)method
• 50% gross margin
• Management expects to revert
Preliminary to originally forecasted sales in FY22 and thereafter Revised valuation (post-fire)
valuation
This has resulted in a revised NPV of $738mm from $803mm, an equity value
Value Basedofon$654mm
8.5% WACC &from $718mm and
0.5% TGR offer
Amount ($m)share price of
% of NPV
Value Based on 8.5% WACC & 0.5% TGR Amount ($m) % of NPV
329 cents from 361
Present Value of Cash flows cents. 409 50.9% Present Value of Cash flows 345 46.7%
PV of Terminal Value 394 49.1% PV of Terminal Value 394 53.3%
Implied Firm NPV 803 100.0% Implied Firm NPV 738 100.0%
Net debt as of Mar-20E (85) Net debt as of Mar-20E (85)
Implied equity value 718
Implied offer share price (c) 361 Implied equity value 654
% premium to current 118.8% Implied offer share price (c) 329

Source: Company Business Plan (January 2020); Equity research; J.P. Morgan analysis % premium to current 99.1%

WORLDWIDE BREWING 1