1. TSE: BCI
12/5/2013 Close: $15.70
New Look Eyewear (TSE: BCI)
Investment Report
Report Prepared by:
David Fortino
Dylan Mulrain
Jan-Cayo Fiebig
December 6th, 2013

2. TSE: BCI
12/5/2013 Close: $15.70
Capital Markets Summary
Company overview
Stock performance
BCI provides eye care products and services
in eastern Canada. It offers lens, eye glasses,
sunglasses, and contact lens, as well as eye
examination services.
Previous Close:
52-Week Price Range:
Dividend Yield:
Market Cap:
P/E:
Industry: Specialty retail, other
$15.70
$8.73 - $16.05
4.0 %
$159.53 M
21.79
BCI announced
acquisition of Vogue
Optical
Steady increase in EPS
Record Q3 earnings
Company Overview
Industry &
Competitors
Financial Analysis
Valuation
Risk Analysis

3. TSE: BCI
12/5/2013 Close: $15.70
Investment Thesis
Company
Structure
Financials
Industry &
Market
Financial outperformance & favorable market conditions build a strong investment thesis
7.7
Increase in Avg.
Age over the last
5 Years in CA
3rd
50%
Market position
in Canada
Of market owned
by independents
19%
4%
25%+
CAGR over the
last 8 years
Current
Dividend Yield
Recommendation
ROE over the last 5
years
2X
Industry Average
Sales/Store
HOL
D
BUY
1 Year PT
$17.91
50% $1.4M
# of Shares owned
by J. Bennett
(Chairman)
19.4%
Immediate cost
savings post VO*
acquistion
UPSIDE
*VO – Vogue Optical
Company Overview
Industry &
Competitors
Financial Analysis
Valuation
Risk Analysis

4. TSE: BCI
12/5/2013 Close: $15.70
Industry Overview
Fragmented industry and aging population provides potential for growth
CA Industry Size*
Annual Growth 08 – 13
$2.5 B
Annual Growth 13 – 18
2.1%
Lifecycle Stage
Revenue Volatility
MATURE
2.5%
LOW
DIFFICULT
Concentration Industry
MEDIUM
Market Segmentation in CA
Differentiation
Competition
MEDIUM
Average population in CA
40.6
3%
31.6
33.27
41%
56%
12.8%
Independants
Chains
Internet
13.4%
10-Years Ago 5-Years Ago
Pop. >
14.7% 60 Years
Today
* Calculation based on % of population needing glasses, average age, renewal rate & average price
Company Overview
Industry &
Competitors
Financial Analysis
Valuation
Risk Analysis

5. TSE: BCI
12/5/2013 Close: $15.70
Competitors
•
•
•
35 stores (26 in Wal-Mart)
Privately owned
Ontario
•
•
•
157 outlets
Public company
Across Canada
•
•
•
•
•
•
161 stores
Privately owned
Ontario, Nova Scotia, New
Brunswick and Manitoba
Company Overview
Industry &
Competitors
•
•
•
55 stores (26 in Wal-Mart)
Privately owned
Ontario
Financial Analysis
Valuation
62 stores (26 in Wal-Mart)
Privately owned
Maritimes Area
•
•
•
165 stores
Privately owned
Across Canada
74 stores (26 in Wal-Mart)
Public company
Quebec
•
•
•
•
•
•
•
•
•
52 stores (26 in Wal-Mart)
Privately owned
Quebec
77 stores (26 in Wal-Mart)
Privately owned
Quebec & Ontario
Risk Analysis

6. TSE: BCI
12/5/2013 Close: $15.70
Business Model within Industry
Key Drivers
•
Supply Industries
Consumer Confidence
Index
# of adults aged 40+
Demand from optometrists
Federal Funding for
Medicare
•
•
•
•
•
•
Glasses & Contact Lenses
manufacturing
Glasses & Contact Lenses
Wholesaling
Optometrists
Market is ready to consolidate
•
•
•
•
Eye Glasses
and Contact
Lenses Stores
Demand Industries
Consumers
Why BCI will be successful in the future
No dominant company
Luxottica & New Look only public players
Ideally suited to consolidate independents
or other chains
Over the five years to 2018, the number
of retailers is projected to fall an average
0.9% annually
•
•
•
•
In-house lab significantly reducing lens costs
Higher average ticket through favorable highend product mix
Good location and bigger store size generate
almost double the traffic per store
Effective marketing strategy with off-peak
marketing promotions
BCI will maintain competitive advantage resulting in an organic and inorganic growth
Company Overview
Industry &
Competitors
Financial Analysis
Valuation
Risk Analysis

7. TSE: BCI
12/5/2013 Close: $15.70
Vogue Optical Acquisition
Our research indicates that the Vogue Optical acquisition will be accretive.
Company & deal details
Purchase Price
# of stores
TTM EBITDA Multiple
$74M
65
8.6x
TTM EBITDA
$40M
$9M
1.20
Why acquire Vogue Optical
•
TTM Revenue
1.00
Highly complementary network with no
geographic overlap
0.80
Transfer of lens production to current lab
•
Better supply terms from increased scale
0.40
•
Upgrade product mix and gross margins
0.20
•
Increase marketing efforts
•
Generate higher traffic
EPS
•
Incremental EPS
0.60
BCI EPS
-
Synergies expected to reach $1.4M out-of-the-gate or 16% of EBITDA
Company Overview
Industry &
Competitors
Financial Analysis
Valuation
Risk Analysis

8. TSE: BCI
12/5/2013 Close: $15.70
Operating Performance
25.0%
20.0%
Operating Margins
Operating Margin (%)
15.0%
•
•
10.0%
5.0%
0.0%
-5.0%
2007
2008
2009
2010
2011
2012
Operating margins inline with industry
Efficiencies expected to increase as
utilization of lab facility capacity increases
2013e
-10.0%
-15.0%
New Look Eyewear
Luxottica Optical
Essilor
Contant Contact
70.0%
60.0%
50.0%
•
•
•
Consistently high ROE
Outperformance relative to peers
Deserves a to trade at a premium
Return on Equity
Return on Equity
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
Company Overview
Industry &
Competitors
Financial Analysis
2007
2008
Valuation
2009
2010
2011
Risk Analysis

9. TSE: BCI
12/5/2013 Close: $15.70
Capital Structure
New Look Eyewear will have a more optimal capital structure post acquisition
Pre-acquisition
Post-acquisition
8%
35%
Market Value of Debt
Market Value of Equity
65%
92%
Value of Debt:
Value of Equity*:
Debt to Equity Ratio
Post-Acquisition:
Value of Debt:
Value of Equity:
$ 9.81M
$ 120.81 M
54.2%
Earnings Before Interest
& Tax Post-Acquisition:
$21.1M
$ 84.81 M
$ 156.40 M
Interest Coverage Ratio
Post-Acquisition:
4.51
*Based on 10 day trading price prior to acquisition announcement
Company Overview
Industry &
Competitors
Financial Analysis
Valuation
Risk Analysis

10. TSE: BCI
12/5/2013 Close: $15.70
Valuation Summary
The EBITDA, Perpetuity and Forward P/E method all indicate a Buy on BCI
$23.00
$21.00
PT
Price Per Share
$19.00
19.4 %
$17.00
Upside
$15.00
CP
$13.00
1 Year PT
$11.00
$9.00
$17.91
$7.00
$5.00
52 Week Range
EBITDA Method
Perpetuity Method Forward PE Method
4 YR AVG EV/EBITDA
Perpetuity Growth
Comparable Ratios
Forward PE
Low
BCI
Industry Average
Assumed
Company Overview
Average
High
Low
Average
High
Low
Average
High
7.53x
9.84x
11.14x
9.84x
13.70x
11.63x
40.82x
14.39x
(2.50 %)
1.10 %
2.20 %
4.00 %
2.50 %
8.20 %
4.00 %
3.20 %
15.0x
17.20x
15.67x
-
21.74x
20.06x
Industry &
Competitors
Financial Analysis
Valuation
Risk Analysis

11. TSE: BCI
12/5/2013 Close: $15.70
Management Team
BCI has a strong management team being able to lead the company in the future
Management Team
Experience
Key Person
•
Chairman
•
VP of …
Antoine Amiel
•
Vice Chairman of New Look Eyewear Inc.
Richard Cherney
•
Secretary - Managing Partner of Davies Ward Phillipes
M. William Cleman
•
Management Consultant of Cleman Consultig Inc.
Paul Eschenberg
•
President and CEO of Schroders & Associates Canada INC.
William Ferguson
•
President of Eric T. Websters Foundation
Martial Gagne
•
President of New Look Eyewear Inc.
C. Emmett Pearson
•
Director New Look Eyewear Inc.
Bennet
Board of Directors
Diverse and experienced Board who is capable of maintaining competitive advantage
Company Overview
Industry &
Competitors
Financial Analysis
Valuation
Risk Analysis

12. TSE: BCI
12/5/2013 Close: $15.70
Risk analysis
While a successful integration of Vogue Optical is critical, no major risks are present
Risk
Prob
Impact Description
Industry Risk
LOW
•
•
internet continues to be minor player
licensing of dispense glasses will limit exp.
MED
•
•
laser peaked in 2005, and down 10% since
most patients still need glasses after surgery
MED
MED
•
•
•
private independents own 50% of market
do not have financial capacity
Favorable product mix with more high end-frames
Integration of Acquisition
MED
•
HIGH •
•
Due Diligence
LOW
HIGH • inability to generate higher traffic
Internet
LOW
Laser Surgery
LOW
Other Retail Chains
Vogue Optical Acquisition
Company Overview
Industry &
Competitors
•
first material acquisition in BCI history
no prior experience in large acquisitions
risk mitigation through management team
overvalued current company operations
Financial Analysis
Valuation
Risk Analysis

13. TSE: BCI
12/5/2013 Close: $15.70
Experienced Management Team
Two members of management make NewLook’s future more promising
Antoine Amiel
Vice Chairman
John Bennett
Chairman
• Charged with strategic development at NewLook Eyewear
• Prior to NewLook he was the Vice President of International
Subsidiaries of Nikon-Essilor Co. Ltd. (2005-2012).
• Experience with the operational responsibility for five distribution
subsidiaries and six factories in the United States.
• Also managing director of Nikon Optical UK, and CFO of Nikon’s
ophthalmic division
• Mr. John Bennett has significant capital markets experience (Senior
executive with Scotia McLeod (now Scotia Capital)
• Through his investment holding company, Benvest Capital, Mr.
Bennett owns approximately 4.6 million shares (46%) and is the
largest shareholder.

14. TSE: BCI
12/5/2013 Close: $15.70
Financial Model

15. TSE: BCI
12/5/2013 Close: $15.70
Income Statement: Post-acquisition of Vogue Optical
Actual
2010
2011
2012
2013e
2014e
Estimate
2015e
2016e
2017e
131.492
134.243
140.476
Revenue
70.778
80.190
82.296
89.593
Cost of Revenue
as % of revenue
20.934
29.6%
22.208
27.7%
23.214
28.2%
23.610
26.4%
36.05
27.4%
36.81
27.4%
37.65
27.4%
38.52
27.4%
Gross Profit
as % of revenue
49.844
70.4%
57.982
72.3%
59.082
71.8%
65.983
73.6%
95.439
72.6%
97.436
72.6%
99.666
72.6%
101.960
72.6%
Operating Expenses
as % of revenue
43.617
61.6%
49.059
61.2%
48.945
59.5%
51.610
57.6%
74.424
56.6%
75.981
56.6%
77.720
56.6%
79.509
56.6%
Operating Income
as % of revenue
6.227
8.8%
8.923
11.1%
10.137
12.3%
14.373
16.0%
21.015
16.0%
21.454
16.0%
21.945
16.0%
22.451
16.0%
Interest Expense
Net Non-Operating Losses (Gains)
0.407
0.851
0.376
(0.010)
0.432
-
0.440
-
4.665
-
4.665
-
4.665
-
4.665
-
Pretax Income
4.969
8.557
9.705
13.933
16.350
16.790
17.281
17.786
Income Tax Expense
Tax rate (%)
(6.524)
-
2.512
29.4%
3.209
33.1%
3.290
23.6%
Income Before XO Items
Extraordinary Loss Net of Tax
Minority Interests
11.493
0.005
6.045
0.021
6.496
0.018
10.643
0.030
11.249
-
11.551
-
11.889
-
12.237
-
Net Income
Profit Margin %
11.488
16.2%
6.024
7.5%
6.478
7.9%
10.613
11.8%
11.249
8.6%
11.551
8.6%
11.889
8.7%
12.237
8.7%
Available to Common Shareholders
11.488
6.024
6.478
7.290
11.249
11.551
11.889
12.237
1.15
1.14
0.60
0.59
-48%
0.64
0.63
6%
0.72
0.72
15%
0.92
0.92
27%
0.94
0.94
2.69%
0.97
0.97
2.92%
1.00
1.00
2.92%
10.02
10.06
10.07
10.13
10.20
10.32
10.10
10.10
12.26
12.26
12.26
12.26
12.26
12.26
12.26
12.26
-
-
-
2.16
-
-
-
-
Earnings per share (EPS)
Basic
Diluted
EPS Growth
Average of shares outstanding
Basic
Diluted
Shares Issued (bought)
5.10
31.2%
5.24
31.2%
137.315
5.39
31.2%
5.55
31.2%

16. TSE: BCI
12/5/2013 Close: $15.70
Revenue Forecast: Post-acquisition of Vogue Optical
2009
Current Store Revenue
Stores, period end
Average stores
Current Revenue per Store
Same store sales growth
2010
68.958
63
62
1.112
70.778
Actual
2011
80.190
2012
2013e
82.296
90.532
91.890
2017e
93.268
94.667
69
66.5
71
70
76
73.5
76
76
76
76
76
76
76
76
1.115
0.2%
1.206
8.2%
1.176
-2.5%
1.174
-0.2%
1.191
1.5%
1.209
1.5%
1.227
1.5%
1.246
1.5%
3.33
40.96
42.35
44.05
45.81
40.000
Stores, period end
Average stores
65
5.4
70.78
64
80.19
67
82.30
70
Average Revenue Growth %
1.112
1.115
1.206
1.176
65
65
65
65
65
65
0.63
2.4%
0.65
3.4%
0.68
4.0%
0.70
4.0%
89.59
79
131.49
141
134.24
141
137.31
141
140.48
141
-0.1%
68.96
62
65
65
0.62
1.4%
Acquied Revenue per Store
Same store sales growth
Total Revenue per store
2014e
64
63.5
Acquired Store Revenue
Total Revenue
Total averge stores
86.260
Estimate
2015e
2016e
2.2%
2.7%
2.9%
2.9%
1.135
0.933
0.952
0.974
0.996

17. TSE: BCI
12/5/2013 Close: $15.70
Actual
EBITDA Calculation
2010
Net Income
2011
11.488
2012
2013e
Estimate
2015e
2016e
2014e
6.478
3.843
5.43%
4.036
5.03%
4.709
5.72%
4.81
5.37%
7.09
5.39%
7.23
5.39%
7.40
5.39%
7.57
5.39%
1.258
(6.524)
0.366
2.512
0.432
3.209
0.440
3.290
4.665
5.101
4.665
5.238
4.665
5.392
4.665
5.549
10.07
12.94
14.83
19.15
28.10
28.69
29.34
30.02
Add:
Depreciation
as % of revenue
Interest
Income Taxes
EBITDA
10.613
11.249
11.551
11.889
2017e
6.024
12.237
CAPEX: Post-acquisition of Vogue Optical
Actual
2010
Capital Expenditures
Normalization
Acquisition of Land
Acquisition of Building
Sustaining CAPEX
as % of revenue
2011
2012
(2.980)
(3.841)
(3.84)
4.67%
(4.49)
5.21%
2017e
1.462
2.834
(2.98)
3.72%
2014e
(8.789)
-
2013e
Estimate
2015e
2016e
(4.059)
4.53%
(5.958)
4.53%
(6.082)
4.53%
(6.221)
4.53%
(6.365)
4.53%

18. TSE: BCI
12/5/2013 Close: $15.70
Comparable Ratos: Average EV/TTM EBITDA
New Look Eyewear TTM
Luxottica Optical TTM
Essilor TTM
Constant Contact TTM
2010
9.04
13.56
13.32
75.35
2011
11.63
11.76
12.91
41.28
2012
7.53
13.19
16.46
20.15
Current
11.14
13.51
14.86
26.48
Median
Low Range
High Range
Average
9.84
13.01
14.39
40.82 *Constant Contact Excluded
13.70
11.14
14.39
Price to Earnings: Pre-acquisition of Vogue Optical
Actual
Net Income
Equity
ROE
ROE
WACC
Growth
2010
11.488
16.9931
67.60%
29%
7.9%
2.67%
Growth
2011
6.024
24.058
25.04%
2012
6.478
26.324
24.61%
2013e
7.280
28.465
25.58%
17.46
1.60%
2.10%
2.60%
3.10%
3.60%
4.10%
4.60%
26.0%
15.0
16.0
17.1
18.5
20.2
22.4
25.3
27.0%
15.0
16.0
17.2
18.6
20.3
22.6
25.5
2014e
7.423
32.037
Estimate
2015e
2016e
7.533
7.645
37.098
Return on Equity
28.0%
29.0%
15.1
15.1
16.1
16.1
17.2
17.3
18.7
18.8
20.5
20.6
22.7
22.8
25.6
25.8
30.0%
15.1
16.1
17.4
18.8
20.7
23.0
26.0
2017e
7.759

19. TSE: BCI
12/5/2013 Close: $15.70
DCF: Post-acquisition of Vogue Optical
Actual
2010
2011
2012
2013e
2014e
Estimate
2015e
2016e
2017e
EBITDA
19.153
28.100
28.688
29.344
30.020
Changes in Working Capital
Capital Expenditures
Taxes
0.001
(4.059)
(3.290)
(0.001)
(5.958)
(5.101)
(0.001)
(6.082)
(5.238)
(0.001)
(6.221)
(5.392)
(0.001)
(6.365)
(5.549)
Total Unleavered Free Cash Flow
11.81
17.04
17.37
17.73
18.10
Net Present Value Calculation
Period
Discounted Cash Flow
Total Net Present Value
1.0
11.15
66.18
2.0
14.93
3.0
14.10
4.0
13.35
5.0
12.64
7.9%
WACC Schedule
Cost of Equity
Risk-free rate
Equity risk premium
Beta
Cost of equity
3.15% CAD 30-year T
6.00%
1.15 Assumed higher
10.05%
Statutory tax rate
EBITDA Method
Exit Year EBITDA
Multiple
Terminal Value
Net Present Value
Low
28.100
11.1x
313.03
214.44
High
28.100
14.39
404.29
276.96
Perpetuity Method
Unlevered Free Cash Flow
Growth Rate
Terminal Value
Net Present Value
Low
18.10
2.2%
324.94
222.60
High
18.10
3.2%
398.05
272.68
Discounted Cash Flow Total Valuation
EBITDA Method
Low
Total of Present Value of Cash Flows
Present Value of Terminal Value
Total Enterprise Value
Net Debt
Equity Value
Share Count Pre-acquisition (millions)
Issuance of shares (millions)
Total share count
Estimated Equity Value per Share
$
66.18
214.44
280.62
83.28
197.34
10.46
2.16
12.62
15.64 $
Perpetuity Method
High
66.18
276.96
343.13
83.28
259.85
10.46
2.16
12.62
20.60 $
Low
66.18
222.60
288.78
83.28
205.50
10.46
2.16
12.62
16.29
$
High
66.18
272.68
338.86
83.28
255.58
10.46
2.16
12.62
20.26
31.2%
Cost of Debt
WACC Schedule
Risk-free rate
Credit rating
Credit spread
Cost of debt
3.2%
N/A
2.40% Assumed
5.55%
After Tax Cost of Debt
3.8%
Capital Structure
Long-term Debt
Senior secured debt facility
Junior unsecured debt facility
Notes Payable
Market Value of Debt
9.10
60.00 **should line of
15.00
0.71
84.81
Share Price at valuation date
Number of shares outstanding
Market Value of Equity
Debt/EV
Equity/EV
Debt/Equity
$
$
14.95
10,461,489
156
35%
65%
54%
WACC
7.9%
Growth Rate
2.7%
Forward Price to Earnings Valuation
Low
2014 Eanrings per Share
Forward PE Ratio
Estimated Equity Value per Share
High
0.92
17.2
$
15.77
0.92
20.6
$
18.88

20. TSE: BCI
12/5/2013 Close: $15.70
Appendix

21. TSE: BCI
12/5/2013 Close: $15.70
Market Size

22. TSE: BCI
12/5/2013 Close: $15.70
Age & Population Overview