1. Dollarama Inc (TSE: DOL)
Jane Shui & Melody Zhang, Queen’s Commerce

2. Company Overview Company Overview Investment Thesis Macro Outlook
Company Description
Target Market
Based in Montreal Quebéc. Provide general merchandise for every day use.
Market capitalization: $6.5 billion
Canada’s biggest dollar store operator: 870 stores in 10 provinces by Feb. 28, 2014.
Market share: 60%
Those living close to the store
Value and convenience seeker looking to fulfill various level of basic needs.
One-stop shoppers to stock up household items
Impulse buyers
Company Management
Made up of Dollarama International Inc. (Canada) and Dollarama L.P. (Québec)
All Stores are corporate managed
Larry Rossy: founded Dollarama in Chair of the Board of directors CEO since 2004
Michael Ross: CFO
Neil Rossy: Chief Merchandising Officer
8.1% of stock ownership
Based in Montreal, Quebec, Dollarama Inc. is a 6.5 billion market capitalization dollar store operator that provides general merchandise for everyday use.
Financials
In , revenue was 1.85 B and EBITA is 356 M.
Dec 5th, 2013, 3rd quarter earning release for year reported an revenue of $522.9 M( 14.2% increase from last year) and EBITA of $99.8 M (19.4% increase).
Business Model
As of Feburay 3, 2013, 785 stores in 10 provinces. During , 86 net new stores opened.
Revenue Sources: retail and real estate lease
Operating Segment : Retails
Market Share: 60%.
Company Management
Larry Rossy, Chairman and CEO since 2004.
Stock Performance – 343% increase in 5 years See Appendix XX for full details
Company Overview
Investment Thesis
Macro Outlook
Industry Outlook
Risks/Catalysis
Valuation

3. Key Financials/Stock Performance
Company Overview
Business Strategy
Key Financials/Stock Performance
Compelling value proposition on a wide variety of everyday merchandise to a broad base of customers
Growth in sales, net earnings, and cash flows
Multi-price point strategy: $1, $1.25, $1.50, $2, and $3
Merchandise mix based on retail value
Metric Name
Fiscal Year 12-13
Revenue
Gross Profit
694.84
EBITD
315.89
Net Income
220.99
Gross margin
37.38%
EBITD margin
16.99%
Earnings per share
$3.36
P/E ratio
25.73
Return on average equity
24.2
Company Overview
Investment Thesis
Macro Outlook
Industry Outlook
Risks/Catalysis
Valuation

4. Investment Thesis Company Overview Investment Thesis Macro Outlook
Market Leader with High Growth Potential
Biggest dollar store operator in the Canadian market
Market development opportunities within ON and QC: predicted 34 new stores opening in 2014 in each region
Opportunity to expand into new geographic locations in Canada where Dollarama has no or limited presence such as PEI.
Careful site selection to minimize cannibalization of sales when adding new stores
Management plans to build, expand and upgrade warehouse system and distribution networks
These strategic moves allow Dollarama to maintain an edge against its competitors
Favorable Macro and Industry Prospects
Canadian economy, particularly the retail industry is recovering from 2008 economic meltdown
Dec. 2013: 3.4% YoY growth rate in Canadian retail industry; CPI inflation rate remains as low as 1.2%
Canadian Dollar stores offer unique “Treasure Hunt” shopping experience
The industry is highly differentiated compared to American dollar store chains
The retail industry will do well in 2013 because of improving economy and consumer confidence
Valuation
Stock price is undervalued: DCP analysis suggests an implied share price of $98.66, stock is currently trading at $86.35 as of February 28, 2014
High potential for growth and expansion in the future, explaining the fact the premium at which it is trading
High liquidity and healthy financial viability with low exposure to bankruptcy
Strong margins suggest efficient business operations
Company Overview
Investment Thesis
Macro Outlook
Industry Outlook
Risks/Catalysis
Valuation

5. Macro Outlook Company Overview Investment Thesis Macro Outlook
Industry Outlook
Risks/Catalysis
Valuation

6. Canadian Retail Industry
Industry Outlook
Canadian Retail Industry
Canadian Retail industry still vital for Canadian economy after the global recession
Total Sales: $457.4 B
Sales in Miscellaneous Stores: $10.7 B (2011)
Value Retail industry: an established growing niche market
Canadian consumers are value-oriented (PwC)
Dollar store industry has high growth potential compared to other players in the value retail industry (Appendix I).
Industry Trend
Dollarama
Growth
Steadily Recovering, increasing investment on geographical location, IT
Double Digit Growth rate, market penetration in ON and BC, expansion to AB & BC
Marketing expenditure
Increasing marketing initiatives and its online presence
Srong brand name, successful brand name and easy accessibility->no significant advertising expenditure
Competitors
Americanization-expansion of Walmart and Target
Conveninent Location, urban shoppers, "convenience store model"
Price
Low price, $1 Fixed Strategy to Multi pricing strategy
Value oriented, multi price points, industry leader
Product Sourcing
Indirect sourcing
Direct Sourcing (52% oversea and 48% North America)
Cost Control
Optimize supply chain to reduce SG&A costs
Improving distribution channel and warehouse expansion
Retail Owner Institute, KPMG 2013 Industry Outlook Survey and Dollarama Inc.
Company Overview
Investment Thesis
Macro Outlook
Industry Outlook
Risks/Catalysis
Valuation

7. Catalysts & Risks Company Overview Investment Thesis Macro Outlook
A) General Economic Improvement
Positive indicators for the consumers industry
Increasing wages and earnings
Decent aggregate growth
Low unemployment rates
Stable housing price
Fed’s tapering: a sign of the government’s confidence in the economy, and its recovery.
B) Strong Company Operating & Financial Performances
Comparable store sales increased by 6.5 in FY 2013
Sales growth by 19.9% to $561.9M
Normalized EBITDA grew by 20.7% to $120.9M
Normalized diluted net earnings per share increased by 26.5%
Management announced a 27% increase in quarterly dividend for its holders of common shares from $0.11 to $0.14 per share by the end of 2013.
C) Sustainable Organic Growth for Years to Come
DOL has experienced exponential growth over the years, expanding from 335 stores in 2004 to 789 in 2013.
Management has announced that it will open at least 85 new stores primarily in Ontario and Western Canada over this FY.
It plans to open 70 to 80 more stores in FY 2015.
A) High Household Debt
Average Canadian consumers personal debt excluding mortgage increased by 0.83% QoQ, and 2.19% YoY to a level of R$27,355
Total debt to disposable income stand at 163%, primary driven by mortgages
However, comparatively slower growth in debt level at 3.90% YoY, slowest pace since 1995, which is favorable for the consumers industry
B) Fluctuating Foreign Exchange Rate
Majority of supply sourced from foreign countries using USD, while sales are made in CAD
Appreciation of foreign currency against CAD will hurt the profit margin of DOL
Given that DOL is a value retailer, margin is extremely important for it
C) Distribution
High inventory turnover rate exposes DOL to the possibility of depleted inventory
Goods are transported from suppliers to 4 warehouses, distribution centers, and then to stores through various means of transportation, such as sea, train, truck, and etc.
Delay or interruption of services could negatively affect business and financial results
Company Overview
Investment Thesis
Macro Outlook
Industry Outlook
Risks/Catalysis
Valuation

8. Valuation I Comparables
Market Cap
Enterprise Value
EV/EBITDA
P/E
Consumers
(CAN$ in B)
2013
2014 E
2015 E
P/FCF
Dvd Yld
Big Lots Inc.
1,72
1,98
5,24 x
6,29 x
5,68 x
10,22 x
13,26 x
11,84 x
12,80 x
0,00%
Dollar General Corp.
19,14
21,90
10,71 x
10,50 x
9,46 x
18,70 x
18,61 x
16,13 x
30,54 x
Dollar Tree Inc.
11,37
11,88
10,34 x
9,12 x
8,12 x
19,97 x
17,22 x
15,01 x
25,00 x
Dollarama Inc.
5,98
6,27
15,71 x
15,80 x
13,40 x
25,20 x
24,78 x
19,98 x
29,96 x
0,63%
Family Dollar Stores
7,60
8,17
9,02 x
9,37 x
8,59 x
17,79 x
19,47 x
17,52 x
1,47%
Five Below
2,12
2,13
32,03 x
29,34 x
21,75 x
78,51 x
59,21 x
44,08 x
Pricesmart Inc.
2,98
17,11 x
17,32 x
15,93 x
34,39 x
31,21 x
27,54 x
107,09 x
6,10%
Median
9,93 x
9,23 x
19,10 x
16,90 x
25,88 x
Mean
34,75
41,19
12,67 x
12,20 x
10,62 x
25,76 x
23,14 x
19,63 x
34,85 x
1,97%
Commentary
DOL trades only slightly above average for EV/EBITDA and P/E. Trades at multiples that are still slightly below some of its comparables with lower market capitalization and enterprise value, such as “Five Below” and “Pricesmart Inc”.
The higher trading multiples indicate higher consumer confidence in the continuous growth of DOL, and the growth of the dollar industry in Canada.
The current dividend yield for DOL is at approximately 0.63%; a strong track record of stable and growing dividend yield will boost investor confidence, and provide extra value for them.
Dollarama has generally higher margins, revenue per store, and generally stronger credit status than elsewhere
Company Overview
Investment Thesis
Macro Outlook
Industry Outlook
Risks/Catalysis
Valuation

9. Ratio Analysis & Comparison
Financial Ratios
Operating Ratios
Operating Metrics CR
D/A
ROA
ROE
NPM GM
EBITDM
Big Lots Inc.
1,73
9,76%
10,44%
22,41%
3,28%
39,21%
7,50%
Dollar General Corp
1,54
26,74%
9,50%
19,72%
5,95%
31,74%
12,37%
Dollar Tree Inc
2,18
9,86%
24,38%
41,12%
8,38%
35,87%
14,82%
Dollarama Inc
3,04
18,07%
15,45%
24,20%
11,89%
37,38%
19,18%
Family Dollar Stores
1,72
13,92%
12,53%
30,63%
4,27%
34,26%
8,97%
Five Below
1,89
18,19%
12,35%
4,78%
35,78%
11,28%
Pricesmart Inc
1,37
8,84%
10,79%
18,33%
3,66%
16,10%
6,63%
Mean
1,92
15,05%
13,63%
26,07%
6,03%
32,91%
11,54%
Median
23,31%
Commentary
All of the margins for DOL are above the industry average, and are the highest among industry competitors, indicating real growth potential for DOL as well as above-average operating efficiency.
ROA and ROE are near average and slightly above industry median; an above-average industry performer in returns.
Current ratio is extremely strong, indicating financial liquidity, and that there is no immediate threat of bankruptcy.
Debt ratio is slightly higher than industry mean and median, as DOL started to become more leveraged for future expansions.
Company Overview
Investment Thesis
Macro Outlook
Industry Outlook
Risks/Catalysis
Valuation

10. Valuation II: Discounted Cash Flow
Share Price Calculation
Target Price
($Thousands)
Enterprise Value
$7 680,56
Less: Debt
$(522,20)
Add: Cash
$52,57
Equity Value
$7 210,93
Shares Outstanding
$73,09
Implied Share Price
$98,66
Current Price
$86,35
Dividend Yield
0,63%
Sensitivity Analysis
Growth Rate
EV/EBIDTA
20%
23%
25%
28%
30%
14,80 x
$78,37
$85,31
$92,67
$100,47
$108,75
15,30 x
$80,92
$88,07
$95,66
$103,72
$112,25
15,80 x
$83,46
$90,83
$98,67
$106,96
$115,75
16,30 x
$86,01
$93,60
$101,65
$110,20
$119,26
16,80 x
$88,55
$96,36
$104,65
$113,44
$122,76
Commentary
Analysts Price Target
Assumptions: yearly growth rate of 25%, and an EV/EBITDA ratio of 15.80x:
Target price of $98.67 (exit price)
In line with analysts’ estimates
Sensitivity Analysis:
Prices of DOL is more sensitive to changes in growth rate than changes in EV/EBITDA
Necessary to maintain its growth rate
Current price of DOL: $86.35 (entrance price)
Company is still intrinsically undervalued given the large future growth potential
Refer to Appendix 3 for details on DCF assumptions.
12-Month Price Target
Mean
$94.9
High
$100.0
Low
$85.0
Target vs. Current
99.9%
# of Analysts 14
Company Overview
Investment Thesis
Macro Outlook
Industry Outlook
Risks/Catalysis
Valuation

11. Investment Highlights
Revenue $1.8B, ROE 24.2% with solid management team and a strong dividend yield of 0.63%
Advantageous macro and micro outlook
Leader in a unique niche market with continuing prospects for solid growth (opening new stores and distribution expansion)
BUY
Target Price : $98.67 per share
Entrance Price: Current Market Price
Exit Price: $98.67
Company Overview
Investment Thesis
Macro Outlook
Industry Outlook
Risks/Catalysis
Valuation

12. Thank you! Questions?

13. Appendix I- Competitive Advantages of Dollar-Store Industry
Low fixed price point
Convenient location and store size
Broad offerings of everyday branded or unbranded merchandise
Small or individual size product quantity
No-frills, self-service environment

14. Appendix II: Stock Performance

15. Appendix III: DCF Assumptions
Cost of Equity
Beta
0,16
Risk Premium
8,27%
RFR
2,83%
4,15%
WACC Assumptions
($) %
Debt
$522,20
35,92%
Equity
$931,49
64,08%
Total Capital
$1 453,69
100,00%
Cost of Debt
7,5%
Tax Rate
30%
WACC
5,36%
Terminal Value
EBITDA Multiple
15,80 x
Growth Rate
25%
Thousands
2013
2014
2015
2016
2017
Multiple
NOPAT
220,99
276,23
345,29
431,61
539,51
8525,17
Add: D&A
209,51
261,88
327,35
409,19
511,49
Less: CapEx
52,96
66,20
82,75
103,43
129,29
Less: Change WK
272,41
340,51
425,63
532,04
665,05
Unlevered FCF
105,13
131,41
164,26
205,33
256,66
Discount Period
0,00
1,00
2,00
3,00
4,00
Discount Factor
94,92%
90,09%
85,51%
81,17%
Discounted FCF
124,73
147,99
175,58
208,32
6919,50
Add: Terminal Value
Total Discounted FCF

16. Appendix IV: Location Selection Criteria
The level of retail activity and traffic patterns
The presence or absence of competitors
The population and demographics of the area
Total rent and occupancy cost per square foot
The location of existing Dollarma stores
Note: Nearly all of the sotres are located in high-traffic areas such as strip malls and shipping centers. Dollarama open stores in various locations, including metropolitan areas, mid-sized cities and small towns.

17. Appendix V: Store Presence13 44 63 27 19
326
239 3 27 27

18. Appendix VI: New Store payback
Low capital investment to open stores
Rapid sales increases after opening
Consistent sales volumes and low ongoing operating costs
Initial Investment: $0.7 million ($0.5 million for capital expenditures and $0.2 million for invetory)
Sales: $2.5 million within the first two years of operation  average payback period two years.

19. Appendix VII: Top Ten Newest Store
Date Opened
Mall
Address
City
Prov.
01 March 2014
Place Rosemere
55 Blvd. Bouthillier
Rosemere QC
685 Danforth Ave
Toronto ON
25 February 2014
Valley Centre Mall
st Street
Whitecourt AB
24 February 2014
Centennial Plaza
th Street
St-Paul
18 February 2014
410 Main Street East
Kingsville
15 February 2014
County Fair Plaza
1020 Dawson Road
Thunder Bay
13 February 2014
Galeries Lac St-Jean
1055 Avenue du Pont
Alma
Transcanada Mall
nd Street NE
Calgary
11 February 2014
5999 Southridge Ave.
Prince George BC
1770 Main Street
Penticton