"I have done a rough calculation using similar methodology as...

"I have done a rough calculation using similar methodology as used back then. I get a valuation per share of $3.59 using 2008 and 2009 half year eanings (EBITDA), debt as at 31/12/08 and the earnings multiples used to value the business back in 2003."

My rough calculations are as follows:

VRL – Valuation Summary (A$ millions)
.....................................Low
Operating businesses
Austereo (52%).......................241
Exhibition...........................186
Production...........................140
Theme Parks..........................220
Distribution.........................292
Corporate Overheads/other...........(400)
Enterprise Value.....................679
Other liabilities................... (7)
Net cash at 31 October 2003...........77
Value of net assets..................749

Total shares on issue
(ordinary and preference) (millions).224.6

Value per Share $3.35

I have used debt levels as at 31/12/08 (slide 3 of VRL's 26/02/09 Presentation: Total Net Debt A$1,395.9M;

Multiples have been taken from the 2003 report which may well be out of date. However, it is an interesting exercise anyway.

A. Austereo (%).........................241

AEO is projected to have an EBITDA in 2009 of $80.9M. As at 31/12/08 it has $231M debt. The shares have been valued as per Research Report at $1.33 per share. With 344M shares outstanding that valuation gives a MC of $458M and an enterprise valuation of $689M. $689M/$80.9M gives a EV/EBITDA of 8.5 which is lower than the comparable transaction ratios used in the 2003 report.

VRL had 181.1M shares in AEO (ie. 52%). They last traded yesterday at $1.45 but were $1.33 on Thursday. Using the valuation of $1.33 x 181.1 = $241M


B. Exhibition...........................186

In the 6 months to 31/12/08 Exhibition made an EBITDA of $19.1M. In the 12 months to 30/06/08 it made an EBITDA of $43.2M. The valuation used in the 2003 Expert Report gave EV/EBITDA multiples ranging from 3.9 to 6.2. Taking the $43M as the annual base and using a low multiple of just 4 you get a valuation of $172M. However, it has just sold the Greece business for $80M which should they said should not effect the EBITDA of the business. It had $66.5M debt.
Therefore value of business = $172 + $80 - $66 = $186M


C. Production...........................140

I find it hard to determine an objective valuation for this business. They have 41% of the combined Film and music business. In 2003 they had 100% of the film business which was valued at $280 to $330. I feel the film business could be a real sleeper and worth a lot but would like to look at the individual annual returns from each film etc. However, without any details will just assume that:

Value of 41% of Film and Music Business = Value of 50% of Film Business alone = 50% of 2003 valuation = 50% of $280 = $140M


D. Theme Parks..........................220

The Theme Parks made EBITDA of $84.9M in 2008 and $49.0M in the six months to 31/12/08. In the 2003 Expert Report they valued the Theme Park businesses with EV/EBITDA multiples ranging from 5.8 to 7.8. I will take the earnings to dec 08 as been the most realistic as VRL have made some purchases since July 2007 which would make the 2008 earnings figure out of date. Say a full year EBITDA earnings exoectation of $100M and a low multiple of 6 gives the theme park business a valuation of $600M. The theme Parks have $380M of debt attached to them. Therefore valuation of $600M less $380 Debt gives a net Valuation of $220M.


E. Distribution.........................292

Film Distribution earned EBITDA of $55.7M in 2008 and $38.9M in the six months to Dec 08. In the 2003 Expert Report he valued the business using multiple ranging from 5.7 to 7.2. Taking what I think is a conservative ongoing estimate for full year EBITDA of $60M and applying a multiple of 7 I get the Distribution business to be valued at $420M. There is $128M of debt associated with the distribution gives a net valuation of $292M.


F. Corporate Overheads/other...........(400)

There is $163M debt associated with "Corporate/Other". In addition there was negative $38.7M EBITDA in 2008 and a negative $19.1M EBITDA in the six months to dec 2008 associated with "Other". In the 2003 Expert Report Grant samuel placed a negative valuation of $200M to $225M associated with these cost which include some component of shared costs belong to the other business units (i.e. other business units slightly overvalued above because they don't include all their costs. Will arbitary value this debt and negative EBITDA at a round negative $400M. This represents a negative $163 for debt and a negative $237M for the annualised negative $38.7M EBITDA. This equates to a EV/EBITDA multiple of 6.12 ((400-163)/38.7) = 6.1 which compares with the multiples of 4, 6 and 7 used above in the Exhibition, Theme Parks and Distribution Sections.n


...Enterprise Value.....................679

G. Other liabilities................... (7)

Value as at 31/12/09 as per VRL's 26/02/09 Presentation.

H. Net cash at 31 October 2003...........77

Value as at 31/12/09 as per VRL's 26/02/09 Presentation.

...Value of net assets..................749

Total shares on issue
(ordinary and preference) (millions)...224.6

Value per Share = $3.33 per Share using the above methodology. (Should note the Grant Samuel indicated in 2003 that shareholders would be unlikely to achieve the above amount for their shares. I have posted their comments a few posts above. This exercise has been done to get an updated valuation using more current earnings figures, debt levels and shares outstanding which have all cahnge considerably since 2003.


I would welcome any comments on the above, particular on any more up to date multiples that I should be using or on a more appropraite value for the Production unit.

Regards

SP