DIGBY

s e n s o r s
Current Business Model
Executive Team
CEO CFO COO CMOs
Zaarin Bushra
Luc Petre Daniel Mazzone Parth Patel Abhishek Gogna

Niche Player
High-End High Shareholder
Low Overall
High Profitability Segment Market Returns (Dividend and
Market Share
Leader Stock Growth)
 HOW WE GOT HERE?
TRADITIONAL EXIT

strategy Focus Traditional

Niche Excellent Design exit
Differentiation High Awareness Round
Accessibility 3
New Products

WHy? To use funds to finance development in other

segments eg. High
PROblems encountered
and solutions

Marketing

Low-segment positioning
LOW marketing Investment

Problem Solution
Lowest marketing (SG&A/ Quick Increase to2 nd

Sales) expenditure in highest in Round 3 and

th
Round 1 and 4 in Round 2 the highest in Round 4
 Excessive spending
Round 5 awareness and accessibility
Low High Perform. Size
100 & 100
97 & 100 100 & 100 97 & 100
97 & 100

Problem
Continued Large Marketing Spend in Round 6 and 7
Highest SG&A/Sales % in Market
Marketing diminish Returns
Once product reaches 100% awareness
promotion $ can be reduced to $1.4 million

Once 100% accessibility is reached in a

segment, combined sale $ can be reduced to
$3.5 million

Round 6/7: Maintained Promotion budgets > $2M

and Sales > $4M in High-End Segment

Solution: Round 8 Spend decreased to tie

nd
for 2 place. Reduced spend to around
the limit.
Low-end segment r&d
R&D Investment was too small in round 3 which lead to
early revision date

Early revision date led to much smaller age and poor

position

Had to be revised again to bring in circle leading to a

compounding of the problem

Solution: Low prices resulted in reasonable market

share ranging from market leader in round 4 to
lowest in Round 7 and small recovery in Round 8.
MAJOR LEARNING EXPERIENCES

Don’t be too
Do analyze
conservative Don’t
competitor actions
(Low Debt significantly
and benchmark best
Issuance) or too underprice
practices
Aggressive competition
(Marketing
(Highest (Low-End in
Expenditures and
Marketing Round 5)
Financing Strategy)
Expenditure)
 Overall Performance
Swot
Strengths
Awareness and
High End Segment Ability to create High Returns Accessibility across all
segments

Weaknesses
Low Overall Contribution Margin
Market Share (Niche Products)
 The Future
threats
Short Term: Competition in High-End Segment

Long Term: Larger Companies Investing in

High End

Opportunities
High End is the third fastest growing
market (16.2%)

Market Consolidation (For Digby: Getting Acquired ie. )

Why should ferris buy digby?
WE ARE UNDERVALUED AND OFFER GREAT POTENTIAL

EFFICIENCY + FINANCIAL HEALTH +

PROFITABILITY

STRATEGIC ASSETS IN GROWING

MARKET

SYNERGIES
LOWEST P/E RATIO BUT HIGHEST IN CLASS
PERFORMANCE
LOWEST P/E RATIO (OF POSSIBLE TARGETS)

HIGHEST PROFIT MARGIN (OF POSSIBLE

TARGETS)

LOWEST DEBT/EQUITY IN MARKET

HIGHEST ASSET TURNOVER

 P/E RATIOS
DIGBY: 7.6

ANDREWS BALDWIN CHESTER ERIE FERRIS

7.8 9.7 8 8 7.5

COMPETITOR AVERAGE: 8.2

TARGET AVERAGE: 8.375
HIGHEST PROFIT MARGIN
DIGBY: 20%

ANDREWS BALDWIN CHESTER ERIE

17.4% 18.7% 19% 15.5%
 LOWEST DEBT TO EQUITY
DIGBY: 62.1%

ANDREWS BALDWIN CHESTER ERIE FERRIS

68.2% 84.9% 76.8% 74.8% 76.8%
 HIGHEST ASSET TURNOVER
DIGBY: 1.83

ANDREWS BALDWIN CHESTER ERIE FERRIS

1.17 1.1 1.39 1.57 1.42
GROWING HIGH-END SEGMENT
HIGHER PRICES AND HIGHER QUALITY
0 1 2 3 4 5 6 7 8
17 15 17 19 26 32 36 34 32
projected market share
9 10 11 12 13
35 39 44 49 54

CLOSEST COMPETITOR PEAKED IN ROUND 3

At 30%
 DCF: THE ASSUMPTIONS
EBIT Growth: Slows from 24.8% to 6%.
Based on: CAGR of 35.84% (6-8) which declined at rate of 29.77% (6-8)

Tax: 35% consistent with past

Working Capital: Average % of EBIT (Round 7/8: 66.4%) and growth

with EBIT

CAPEX: 9.2M (~200 Capacity) and 15% Growth

Depreciation: 1:1 Ratio with CAPEX

Terminal Value Growth: 2.3% (GDP Growth)

WACC: 25.58% (RF: 2.344%; Market Return 19.3%; Beta 1.5; Cost of Debt:
8.3%
 DCF: True values

Enterprise Value: $344,282,248.98

Equity Value: $314,923,248.98

True Share Value: $152.69 (6% Premium)

True P/E: 8.088 (closer to market average)

Market Share Price: $144.07

FERRIS &
D I G BY

“THE WHOLE IS GREATER THAN THE SUM OF ITS

PARTS”
-ARISTOTLE
 Synergies

Segment management
Domination talent
 segments
2 products in each

Traditional: Ferris
Low: Ferris + Digby
High: Digby
Performance: Ferris + Digby
Size: Ferris
management expertise

strategic strategic
mgmt/rise mgmt
Abhishek Luc
+ +
Zaarin Mahnoor
+
Myra
the Closing pitch
LARGE DISCOUNT ON SHARES

BEST IN CLASS RATIOS

STRATEGIC ENTRY INTO HIGH-END

SIGNIFICANT SYNERGY POTENTIAL

THANK YOU
Q U E S T I O N S ?
APPENDIX: HISTORICAL FINANCIALs
APPENDIX: DCF
APPENDIX: WACC
APPENDIX: ENTERPRISE AND EQUITY
VALUE
APPENDIX: WHAT CAN FERRIS DO IN
OTHER SEGMENTS?

Low + Performance will be useful (2

products in each segment)

Size capacity can be sold to finance

expansion in Ferris ‘Size’ segment
APPENDIX: FINANCIAL ANALYSIS
APPENDIX: FINANCIAL ANALYSIS
APPENDIX: FINANCIAL ANALYSIS
APPENDIX: FINANCIAL ANALYSIS
APPENDIX: FINANCIAL ANALYSIS
APPENDIX: FINANCIAL ANALYSIS
ROS
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8
-5.00%
-10.00%
-15.00%

Digby Andrews Baldwin Chester Erie Ferris

APPENDIX: FINANCIAL ANALYSIS
ROA
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
-5.00% Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8
-10.00%
-15.00%

Digby Andrews Baldwin Chester Erie Ferris

APPENDIX: FINANCIAL ANALYSIS
High-End Market Share
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8

Digby Andrews Baldwin Chester Erie Ferris

APPENDIX: FINANCIAL ANALYSIS
APPENDIX: FINANCIAL ANALYSIS