SILVER BULLETS - Espirito Santo Investment Bank incorporating ...

THIRD QUARTER 2010
H&M
Valuation Metrics 2008 2009 2010E 2011E 2012E
Recommendation: BUY Execution P/E 11.6 10.8 19.2 16.9 14.9
Fair Value: SEK 250 Reported P/E 11.6 10.8 19.2 16.9 14.9
EV / Sales 3.7 3.3 3.1 2.7 2.4
Share Price: SEK 213.7 EV / EBITDA 14.8 13.5 12.1 10.7 9.4
Upside / Downside 17.0% EV / EBIT 16.5 15.3 13.6 12.0 10.6
FCF Yield 3.7% 3.6% 4.5% 4.9% 5.5%
Previous Fair Value N/A Dividend yield 7.3% 7.5% 4.3% 5.0% 5.7%
% change to fair value N/A
Bloomberg: HMB SS Key ratios 2008 2009 2010E 2011E 2012E
T-One: HM'B.SK
EBITDA margin 25.2% 24.1% 25.3% 25.5% 25.7%
EBIT margin 22.7% 21.3% 22.5% 22.7% 22.9%
Capex / Revenue 5.3% 5.4% 5.3% 5.4% 5.5%
Shares In Issue (Less Treasury) 1,655 Capex / Depreciation 2.1 1.9 1.9 1.9 2.0
Market Cap 353,689 Net Debt / EBITDA (1.0) (0.8) (0.8) (0.7) (0.6)
Net (debt) / cash (22,113) EBITDA / Net Interest (21.2) (53.3) (60.7) (56.3) (54.7)
Adjustments For Associates & Minorities 0 ROE 41% 40% 42% 44% 47%
Enterprise Value 331,576
Net Pension Deficit
P&L Summary 2008 2009 2010E 2011E 2012E
Forthcoming Catalysts Revenue 88,532 101,393 108,228 121,920 136,836
% change 14.5% 14.5% 6.7% 12.7% 12.2%
Monthly sales figures 15th of each month EBITDA 22,340 24,474 27,424 31,125 35,198
9M results 29 September 2010 % change 19.3% 9.6% 12.1% 13.5% 13.1%
% margin 25.2% 24.1% 25.3% 25.5% 25.7%
Depreciation & Amortisation (2,202) (2,830) (3,022) (3,393) (3,799)
EBIT 20,138 21,644 24,402 27,733 31,399
% change 20.0% 7.5% 12.7% 13.6% 13.2%
% margin 22.7% 21.3% 22.5% 22.7% 22.9%
Associates 0 0 0 0 0
Execution Analysts Operating Profit 20,138 21,644 24,402 27,733 31,399
Caroline Gulliver +44 207 456 9173 Net Financials 1,052 459 452 553 644
Robert Evans +44 207 426 9210 Other Pre-tax Income 0 0 0 0 0
Richard Cathcart +44 207 456 9155 Pre Tax Profit 21,190 22,103 24,854 28,285 32,043
Income Tax Expense (5,896) (5,719) (6,462) (7,354) (8,331)
Minority Interests 0 0 0 0 0
Revenue Breakdown (2009) Net Income 15,294 16,384 18,392 20,931 23,712
Execution Net Income 15,294 16,384 18,392 20,931 23,712
Reported EPS 18.5 19.8 11.1 12.6 14.3
Execution EPS 18.5 19.8 11.1 12.6 14.3
DPS 15.50 16.00 9.20 10.58 12.17
Payout Ratio 83.9% 80.8% 82.8% 83.7% 84.9%
Shares In Issue (Less Treasury) 828 828 1,655 1,655 1,655
Cash Flow Summary 2008 2009 2010E 2011E 2012E
EBITDA 22,340 24,474 27,424 31,125 35,198
Taxes Paid (5,940) (6,468) (6,462) (7,354) (8,331)
Sales growth trends Interest Paid / Received 1,052 459 452 553 644
Sales growth
Profit margin trends
Gross profit margin
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
62.2%
62.0%
61.7%
61.5%
61.3%
61.1%
Rest of World
27%
12% 12%
5%
-1%
Nordic
16%
Euro ex-
Finland
57%
9%
-5%
10%
3%
9%
3%
2008 2009 2010E 2011E 2012E
New space sales growth LFL sales growth
2008 2009 2010E 2011E 2012E
Gross profit margin EBIT margin
24%
23%
22%
21%
20%
Operating profit margin
Change in Working Capital 442 (518) (370) (878) (957)
Associate & Minority Dividends 0 0 0 0 0
Other Operating Cash Flow 72 26 (17) (34) (37)
Operating cash flow 17,966 17,973 21,027 23,411 26,517
Capital Expenditure (4,724) (5,481) (5,712) (6,556) (7,472)
Free Cash Flow 13,242 12,492 15,315 16,856 19,044
Acquisitions & Disposals (820) (93) 0 0 0
Dividends Paid To Shareholders (11,584) (12,825) (15,227) (17,511) (20,137)
Equity Raised / Bought Back 0 0 0 0 0
Other Financing Cash Flow (446) (180) 0 0 0
Net Cash Flow 392 (606) 88 (655) (1,093)
Balance Sheet Summary 2008 2009 2010E 2011E 2012E
Cash & Equivalents 22,726 19,024 22,113 21,458 20,365
Tangible Fixed Assets 12,441 14,811 17,501 20,664 24,337
Goodwill & Intangibles 1,656 1,674 1,674 1,674 1,674
Associates & Financial Investments 1,775 1,797 1,797 1,797 1,797
Other Assets 12,645 17,057 14,632 16,001 17,492
Total Assets 51,243 54,363 57,717 61,594 65,665
Interest Bearing Debt 0 0 0 0 0
Other Liabilities (14,293) (13,750) (13,974) (14,498) (15,069)
Total Liabilities (14,293) (13,750) (13,974) (14,498) (15,069)
Shareholders' Equity 36,950 40,613 43,744 47,096 50,596
Minority Interests 0 0 0 0 0
Total Equity 36,950 40,613 43,744 47,096 50,596
Net debt / (cash) (22,726) (19,024) (22,113) (21,458) (20,365)
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