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What valuation models can I use to value holding companies
because the company I am researching
has 4 subsidiaries listed on the stock exchange, and 2 that are not listed in the stock exchange

Should I value each company one by one? or should I just value the holding company as a whole

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Comments (10)

  • overpaid_overworked's picture

    The answer partially depends on what you're trying to acheive with the valuation, but personally, I'd sum of the parts the holding company. It'll probably be a ton more work, but then you can have a serious talk about the A&D opportunities for each of the pieces, and you can analyze the stronger and weaker contributors to the overall company.

  • mrb87's picture

    Sum of the parts and/or run dcfs on each of the opcos if you have the info.

  • rubsjoaquin's picture

    @overpaid_overworked, thanks I'm trying to derive an intrinsic price for the holding company,
    If I am going to value each of the parts then I can handle the companies that are publicly listed,
    but what about the non-listed parts of the holding companies, one is a bank and the other is a mining company
    what valuation models can I use for the two?

  • BBnkr10's picture

    If you have no access to their financials or what you need to build the appropriate model, take a look at comparables and value it that way, or you can use different proxies. Someone please correct me, if I'm wrong. Maybe you just use proxies if company is not generating revenue (like a start-up tech).

  • GPMagnus's picture

    Assuming there are any synergies between the companies (whether public or private), be sure to monitor inter-company transactions and adjust the financials / see if the holding company is playing games with the financials ... otherwise you might be totally off-base with your valuation

  • rubsjoaquin's picture

    @ddp34, what proxies should I use?
    one subsidiary is a bank that is not public, I actually have no access to its financial statements but I only get to know they disclose namely net income and total assets, as well as ROE, but how can I assign a proxy for it? it is only a small private bank
    @gpmagnus, thanks, I will take that into account when forecasting the consolidated financial statement of the holding company

  • BBnkr10's picture

    Okay, not sure, but perhaps you can use , P/BV = (ROE -g)/(r-g), since you have ROE, and you need to look at P/BV multiple (since you're dealing with a bank). For the discount rate, use comps (safe discount rate in the market for small private banks). If you cannot get the growth rate at all, use comps again, but I would think you would want your estimates to be on the lower end, or conservative in nature, since a small private bank can only grow THAT much -- might be wrong though, but figure out a way to get a reasonable growth rate.

    Also, if you have total assets, that should be a huge metric since banks measure their value by total assets (loans). And BV is just TA- all intangible assets less liabilities. So, maybe another multiple may be a multiple of total assets?

    I'm sure there are many bank gurus on this site that can help. Let me know if any of that makes sense. You can PM me as well. Thanks.

  • rubsjoaquin's picture

    ^yes thanks I'm done with the bank but now my problem is the other private company is a petrochemical company,
    the only given info is their Sales and EBITDA
    that's it
    I'm thinking to find a similar public petrochem company domestic or foreign then get its Price-to-Sales ratio
    then multiply it to the private company's sales to estimate the private firm's value
    its like:
    P/S Ratio of Similar firm X Sales of private firm = Private firm's value
    Is this alright? or what valuation methods should I use with only the given data

  • BBnkr10's picture

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