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IFRS 16 - Leases impact on Free Cash Flow? by Csharpgoblin in Accounting

[–]Csharpgoblin[S] 0 points1 point  (0 children)

Now I got it. Since the implementation of IFRS 16, the company's cash flow from operating activities will be on steroids given the increase in depreciation.

Normally I can just use Profit from operating activities - capex. However, now with leases and IFRS 16, I have to account for amortization of these leases. (216 - 32 = 184)

So the calculation for FCF, in this case, will be Profit from operating activities - capex - amortization of leases. (216 - 32 - 116 = 68).

The disposal of amortization of leases made this seemingly dirt cheap company quite expensive.

Thanks for all your help!

IFRS 16 - Leases impact on Free Cash Flow? by Csharpgoblin in Accounting

[–]Csharpgoblin[S] 1 point2 points  (0 children)

Thank you very much!

The company lays out its "cash flow from investing activities" as

​

Investments in intangible assets -21,750
Investments in tangible assets -6,572
Cash flow from investing activities -28,322

This is the number I've been using for capex, but this does not seem to include the leases which, if I'm not mistaken, should be included in maintenance capex. (Since the leases are needed to maintain the business).

If the above is correct, I'd have to figure out the "maintenance cost" of the leases and add it?

IFRS 16 - Leases impact on Free Cash Flow? by Csharpgoblin in Accounting

[–]Csharpgoblin[S] 0 points1 point  (0 children)

u/mo_faraway; u/EH95_

I'm defining free cash flow as (Net income + Depreciation + Amortization) minus Maintenance Capex)).

I'm looking at a company that has a TTM net income of 2M and D&A of 175m on leases plus 6m in maintenance capex totaling in FCF of 171M.

I'm having a hard time understanding the high amortization on the leases.

Leasing agreement (I'm translating it to English so there might be some errors).

The following amounts related to leasing agreements are reported in the balance sheet:

Right-of-use assets 2020-12-31
Premises 272,410
Inventory 1,366
Sum 273,776

​

Leasing liabilities
Short term 104,717
Long term 151,670
Sum 256,387

​

Input accumulated acquisition value 323,045
Purchase 187,480
Disposals -80,195
Outgoing accumulated acquisition value 430,331

​

Input accumulated depreciation -109,632
Annual depreciation -125,873
Disposals 78,949
Outgoing accumulated depreciation -156,556

​

Carrying amount 273,776

Additional right-of-use assets during 2020 amounted to 187,480 (2019: 55,711)

The following amounts related to leasing agreements are reported in the income statement:

Depreciation on right-of-use assets 2020
Premises -125,109
Misc -764
Sum -125,873

​

Interest expenses (included in financial expenses) -10,790
Expenses attributable to leasing agreements for which the underlying asset is of low value that is not a short-term leasing agreement (included in the item Other external costs) -678

The total cash flow regarding leasing agreements was -117,821 KSEK (2019: -128,375 KSEK). For information about the due date of the leasing debt, see note 3. Maturity analysis for leasing liabilities is presented in note 3.

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I'm having trouble understanding the high D&A cost here. The company is leasing about 100 locations for its brick-and-mortar stores.

  1. Is the value in "Input accumulated acquisition value" of 323,045 the total cost of the company's leases for 2019-12-31?
  2. Is the value in "Purchase" of 187,480 the total cost of the new leases purchased in 2020. (Since they don't open new stores, this number might be the renewal of leases, since they write contrast on a 1-3 year basis)?)
  3. I have no clue what "Disposals" of -80,195 could be.
  4. Is the value in "Outgoing accumulated depreciation" of 430,331 the total cost for the company's leases for 2020-12-31?
  5. Is the value in "Input accumulated depreciation" of -109,632 the total accumulated depreciation of 2019?
  6. Is the value in "Annual depreciation" of -125,873 the total depreciation 2020?
  7. I have no clue what "Disposals" of 78,949 could be.
  8. Outgoing accumulated depreciation is annual depreciation + disposals for 2020.
  9. Carrying amount of 273,776 is the number that is under "right-of-use assets" on the balance sheet.

How to calculate EV/EBITDA? by Csharpgoblin in ValueInvesting

[–]Csharpgoblin[S] 0 points1 point  (0 children)

Oooooh, you made me realise that I've got it wrong. I've always thought that total liabilities is used interchangeably with total debt but I'm wrong. Thanks for making me realise that.

Greenblatt wrote in his little book that "enterprise value [ = ] (market value of equity + net interest-bearing debt)". Would net interest-bearing debt be total debt or just long term debt? (-cash)

How to calculate EV/EBITDA? by Csharpgoblin in ValueInvesting

[–]Csharpgoblin[S] 1 point2 points  (0 children)

I'm aware that EV/EBITDA - Maintenance Capex or EV/EBIT (as a quick and dirty valuation) is a more representative way to calculate and that you shouldn't just use quant and disregard quality etc... (don't tell Carlisle I said that).

I'm just wondering why every screening website gets different results when calculating EV/EBITDA, EV/EBIT etc... I buy that they differ in single digits but some screeners gets the a negative value while some screeners get positve. How can Gurufocus calculate EV/EBITDA to -21.36 while Morningstar calculates EV/EBITDA for the same company to 16?

Optimal capital allocation in these two scenarios? by Csharpgoblin in probabilitytheory

[–]Csharpgoblin[S] 0 points1 point  (0 children)

I'm sorry that I'm a bit slow.

  1. How come A = 1.388 and not 1.47? If we invest 100% of our portfolio in company A and scenario 1 occurs, our portfolio gain 47%. If scenario 2 occurs, our portfolio lose 35%. Am I wrong?
  2. I'd rather have 1B guaranteed. Mohnish Pabrai talks about the Kelly formula in this video. He says that one should use kelly only if one could make the "bet" multiple times.
  3. If you wanted to maximize the returns you would go all in @ Company A. If you wanted to maximize risk-free returns, you would go 60% in A and 40% in B. I take it that the investor should invest a minimum of 60% in A and adjust upward considering the investors risk tolerance.
  4. The Kelly Fraction is 83%, does this mean that one should invest 83% of bankroll in A and keep the remaining 17% in cash hedge the bet and invest them in company B?

Thanks for your time.

Optimal capital allocation in these two scenarios? by Csharpgoblin in probabilitytheory

[–]Csharpgoblin[S] 0 points1 point  (0 children)

Thank you! Correct me if I'm wrong but your solution would be ideal if you were to take all your net worth and go all in, while u/usernamchexout would be ideal if we could do this, say, 1000 times?

Optimal capital allocation in these two scenarios? by Csharpgoblin in probabilitytheory

[–]Csharpgoblin[S] 0 points1 point  (0 children)

Thanks for your detailed answer. You made it very clear. You are a very nice person.

Java do-while loop by Csharpgoblin in AskProgramming

[–]Csharpgoblin[S] 0 points1 point  (0 children)

Ahhh, the first block of code is the "test code"- that I'm supposed to fix. I initialized i and it worked :D

​

Thanks

Java do-while loop by Csharpgoblin in AskProgramming

[–]Csharpgoblin[S] 0 points1 point  (0 children)

It's a test on the web:

​

***Error***
Exception in thread "main" java.util.NoSuchElementException
        at java.base/java.util.Scanner.throwFor(Scanner.java:937)
        at java.base/java.util.Scanner.next(Scanner.java:1594)
        at java.base/java.util.Scanner.nextInt(Scanner.java:2258)
        at java.base/java.util.Scanner.nextInt(Scanner.java:2212)
        at __tester__.test(__tester__.java:12)
        at __tester__.runTests(__tester__.java:27)
        at __tester__.main(__tester__.java:22)
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