I need suggestions

[WeiChiLoh]

I still do not get how I got FCF multiple horribly wrong.

 

I need guidance.

Over the last 6 years, collectively, CAPEX is roughly inline with DA.

So I guess EBIT (1-t) would be appropriate.

 

EBIT(1-T)

$260(1-40%) = $160

EV $2B / EBIT $160 = 12.5X

 

Please help. I am dying to know the answer.

 

 

[yadayada]

depreciation period is much shorter then actual life of the machines. A decent amount of coinstar machines lastee more then twice as long, so far, without being replaced.

 

And there is pricing power, which I think will make a big difference this year, as they just upped prices. So barely any earnings last year, but a complete cash guzzler, unlike blockbuster.

 

Lot's of other differences, but you gotta figure that out yourself if you really care.

[WeiChiLoh]

depreciation period is much shorter then actual life of the machines. A decent amount of coinstar machines lastee more then twice as long, so far, without being replaced.

 

And there is pricing power, which I think will make a big difference this year, as they just upped prices. So barely any earnings last year, but a complete cash guzzler, unlike blockbuster.

 

Lot's of other differences, but you gotta figure that out yourself if you really care.

 

Yea. I kind of figured that out. (Before you told me, YAY)

I was initially puzzled how collectively 6-years CAPEX exceeded D&A by only 10%, even though Redbox had a 140% kiosks growth over the same period.

 

Yes, another possible driver is that 2014 was a relatively soft box office year, unlike 2015, probably a box office record year.

 

Thanks for the idea. It is indeed exciting. I will update you on my findings.

[Travis Wiedower]

Honestly, just go read through the OUTR thread on this forum (listed under its old ticker CSTR). It covers a lot of what you want to know. There are several write-ups on VIC as well that give a good background.

[WeiChiLoh]

depreciation period is much shorter then actual life of the machines. A decent amount of coinstar machines lastee more then twice as long, so far, without being replaced.

 

And there is pricing power, which I think will make a big difference this year, as they just upped prices. So barely any earnings last year, but a complete cash guzzler, unlike blockbuster.

 

Lot's of other differences, but you gotta figure that out yourself if you really care.

 

Stop me if I am wrong.

 

Since EBIT would be too low given aggressive depreciation, EBITDA - CAPEX seems more appropriate.

2014 EBITDA @ $450M. CAPEX @$100M.  Interest Expenses - $50M. Tax - 40%.

FCFE - $180M

 

This is probably CONSERVATIVE, believe it or not, as EBITDA includes ($30M) EBITDA loss in New Ventures, which from the looks of things, should turn positive soon...maybe 2016? It also includes growth CAPEX from New Ventures. So normalized EBITDA probably too low, CAPEX too high.

 

Using 2014 full year guidance.

 

Redbox

$390m EBITDA

$18M+$29M Maintenance CAPEX = $47M Maintenance Capex - Used upper end of guidance, allocate corporate CAPEX according to revenue, probably too aggressive as a good portion of corporate CAPEX is probably embed into New Ventures

Tax @ 40%

FCFF = ~$200M

 

Discount Rate = Unlevered beta of 2? - Guess it is hard to say whether Redbox will still be around in 10 years? That come up to be roughly 2.7 levered beta. 18% cost of equity. Cost of debt roughly 3% (after taxes). Cost of capital = 12.5%

 

Perpetual growth - 1%?

Value of Redbox = $1.7B

 

 

Coinstar

$120m EBITDA

$5M+$5M Maintenance CAPEX = $10M Maintenance Capex

Tax @ 40%

FCFF = ~$66M

 

Discount Rate = Unlevered beta of 1? - Stable business? That come up to be roughly 1.35 levered beta. 10% cost of equity. Cost of debt 3%. Cost of capital = 7.5%

 

Perpetual growth rate - (3%) - I stand by my belief that the shift to digital kills Coinstar business.

Value of Coinstar = $600m

 

Redbox + Coinstar = $2.3B = $82

 

+ Upside optionality from New Ventures

+ If price hikes are indeed successful. More optionality there too.

 

 

[rukawa]

Gazprom