I can't see how this qualifies as a going concern valuation as required by ASIC... i expect the large shareholders alternative report will destroy KPMGs major assumptions and findings.
As i noted yesterday KPMG have deducted from their going concern Enterprise Value, all the unsecured US programming contract liabilities upfront, ie treating them as PRESENT liabilities.
KPMG say they did this because Ten "was unable to discharge its liabilities in the normal course of business".... no further detail ... when exactly did Ten not pay a creditor? In late June Korda told everyone
"Ten is cash-flow positive at the present time". "Ratings are good, collected all our debts, so it's pretty much business as usual as far as advertisers, employees and programs are [concerned]." "What we have is a bit of a balance sheet problem that needs to be fixed via a recapitalisation process." KPMG themselves note Ten was cash flow positive in first half Fy17 and over the twelve months to end Feb17.
Either way, it appears the forecast expenses used in the model to estimate Enterprise Value already factor in payment of programming costs (p.102 CBS and Fox listed under 'costs' in 'cash flow assumptions' section) ie looks like double counting! Valuation 101 says enterprise value is pre debt payments, so if you're going to treat US programming as debt you can't also deduct the associated annual programming costs from the EV cash flows. Seems pretty fundamental... unfortunately KPMG don't show their annual cash flow forecast lines, not even at a summary level, so it's hard to be sure exactly what they've done here and what is underpinning their valuation numbers.
And they call it a valuation as at 31 Aug 2017, but the cash flow model used by KPMG is out of date because it includes actuals only till May'17. Have they not had full information and access from Korda/ management? Would've thought the last four months financials are pretty important in the circumstances
TEN Price at posting:
16.0¢ Sentiment: None Disclosure: Held
