I have two questions, which I hope someone can kindly clarify for me.
1. I often see developers' relative valuations being expressed on a discount/premium-to-net asset value basis. NAVs are in turn based on independent appraisal of the developer's portfolio value.
Is that valuation metric more relevant for-type businesses (build/buy-and-let), rather than homebuilders (build-and-sell)? or can it be used across the board?
I am hesitant to use P/E (or other measures based on "recognized" figures) for build-and-sell type developers, due to the time lag between when pre-sales are made and when corresponding revenue is recognized (varies from 1-2 yrs). I feel this lag renders accounting figures incomparable between different companies. This is especially relevant for China and certain emerging market countries where developers are highly dependent on pre-sales (I do not know what industry practice is in US/WE).
can anyone enlighten me on what measure is more appropriate, as I can't find a consensus between different research reports I am reading right now.
2. Assuming independent appraiser arrives at portfolio value using, to arrive at NAV for the whole firm, I use the following calculation
= estimated portfolio market value minus net debt
That is, in arriving at NAV above, I should NOT subtract from portfolio value the balance of operating liabilities (shown on GAAP/IFRS statements), as they are already reflected in estimated portfolio value and I will be double counting if I do so.
My logic is thatvaluation of portfolio (essentially an NPV figure before financing) already reflects any operating liabilities associated with projects in portfolio, INCLUDING advance payments from customers, if any.
I really hope this does not sound confusing. As usual, I would be very grateful for any thoughtful input.