Valuation for Holding Companies?
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
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.
Sum of the parts and/or run dcfs on each of the opcos if you have the info.
@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?
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).
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
@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
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.
^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
If you use comps, and use P/S (given the sales are somewhat similar) and multiply that to the Sales of the firm, that will give you the "Price" or equity value, not enterprise value; which I assume is what you want, correct? The firm's value = enterprise value. For EV, you would want a EV/EBITDA comp. I may be able to help more, if I had more info, PM me.
^thank you for the help, I'm pretty much done with the valuation just one last quick Q though, In a justified P/B = (RoE - g)/(k - g) I am just wondering if the RoE here is the current RoE, forecasted RoE for next year, or the long-run RoE?
How to value the holding company with one operating investment (Originally Posted: 08/12/2015)
I need to valuate the holding company which has a ~30% share in an energy company. This is their only investment. How would I go about valuing the IPO of the holding company?
Do your research on the investment company and build that DCF (or use your other valuation metrics) and assign 30% of the valuation to the holding company. What is the parent doing with the cash they raise? You'd need to then do a similar approach to the holding company for the cash they raise. Sum the values. Take into account IPO fees, etc.
Holding Companies (Originally Posted: 02/19/2010)
This maybe a silly question, but are holding companies a type of private equity? If not, what is the difference?
I think private equity companies usually have the intention of flipping a company within 2 or 3 years and will usually try and delist it if it's public.
Holding companies generally have a longer term outlook.
OK. Thanks.
Valuing Holding Companies with Intercompany Transactions (Originally Posted: 03/20/2018)
I am currently struggling with how to value a construction company, any help will be much appreciated! Details are as follows:
There is a construction company, which has a ~41% stake in a renewable energy subsidiary. The construction company derives half of their construction revenue from constructing power plants for their renewable energy subsidiary, with the other 50% coming from other construction projects unrelated to their subsidiary. They also generate income when their subsidiary sells electricity through their 41% holding.
My question is how would you value this company? My current method is using SOTP, where I value its construction biz on a PE basis after removing 41% of the revenue derived from constructing the power plants and a DCF on its renewable energy subsidiary.
The part I'm struggling with is that the construction company fully consolidates their financials, which results in the 100% removal of all transactions related to the construction of power plants, meaning that all the profits generated from the construction of these power plants is not included in its P&L. Would my above SOTP method still be the correct way to value this company?
Thanks.
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