Pumpkin Patch
Valuecruncher has placed a value on Pumpkin Patch of $3.89 per share with a range of $2.46 to $5.55, compared with the current share price of $4.25.
Revenue Growth
Because of Pumpkin Patch’s unstable revenues growth we have taken fairly conservative estimates of future growth. Revenues growth has been decreasing from 27.28% in the 04/05 period to 11.09% in the 05/06 period. The revenues growth for the 06/07, 07/08, and 08/09 periods has been estimated to be 10%, 9% and 8% respectively, converging closer to the comparator Hallenstein Glasson Group’s current revenues growth of 7.13%.
EBIT Margin
The EBIT margins for Pumpkin Patch have been increasing steadily from 6.40% (2003) to 14.47% (2006) and with its current expansion in all four of the markets it is present it (NZ, AUS, UK and US), it is likely that these EBIT margins will continue to grow. For this reason we have used an EBIT margins of 15%, 16%, and 17% for the next 3 periods.
Discount Rate (WACC)
The discount rate that has been applied in the analysis is 10.5%, in line with discount rate for Hallenstein Glasson Group, as given in the PwC Cost of Capital Report.
Terminal Growth
The terminal growth is assumed to be 3%.
Commentary
The higher EV/EBIT multiple can be explained by the larger number of growth opportunities from Pumpkin Patch. As they continually expand into the UK and US markets, whilst growing the number if stores they operate in Australia and New Zealand, we believe that Pumpkin Patch have more opportunities to grow when compared with New Zealand comparators Hallenstein Glasson or Postie Plus.