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Are you projecting the IS for the subsidiary? If so just apply the % not held by the company to the net income of the subsidiary. Else, you could project it as a % of sales or a % of net income. In the the BS it basically shows outside of shareholders equity but still as a component of equity and you just project it like retained earnings (add to the previous years non-controlling interests and deduct any dividends paid to non-controlling interests)
Non Controlling Interest in a Model (Originally Posted: 12/17/2015)
I'm modeling a company's financials. The company owns a 50% stake in a another (private) business. This private business accounts for about 50% of the company's net income, however it's only been around for a year and there's no information on it's revenue projections or margins or anything. It heavily impacts EPS. How would you account for this in your model?
At 50% ownership treat it as an equity stake. Your income from associates line will flow in below EBITDA and the actual dividend paid out by this private Co will flow into your cash flow statement.
In your cash flow of course you need to back out the share of net income before adding in the actual cash dividend received
You record the investment at cost in your assets and every year it increases by your share of the net income (the one flowing into your Income statement) and decreases by the dividend paid to you?
Capisce?
Thanks that's helpful. I more meant though, how would you model this number going forward, since there's very little information on it, and it's very relevant to EPS of the parent company
Depends on the industry in which this private firm operates. In the absence of any data a flat/declining figure would be a conservative estimate.
Depends completely on your view of the private company - since it is a swing factor (50%) you will have to think about the stance you want to take on it
Payments to non-controling interets in FCF (Originally Posted: 12/15/2015)
Hi,
Quick question. In the case of a company having >50% in other companies (therefore consolidated in FS), where do you put the "Payment to Minority Interests" in your FCF calculation ? I often see this line after FCF (i.e. excluded) but it seems like it should be deducted to FCF to reduce it and get a real view of company's free cash generation. What do you think ?
Thanks
I am not positive, but I think this is added at the end. So FCF gets you EV, but then you add/subtract minority interest to that. Anyone else have more thoughts?
Payments to minority interest holders are included in the FCF, hence we add minority interests to the EV so that we compare apples to apples.
What about free cash flow to equity though? Does that include minority interest?
non-controlling interests? (Originally Posted: 11/27/2010)
how do i model this? projected out to NI, but the historicals have a non-controlling interest in there....
Usually have seen it kept constant over time.
How to value Non Controlling Interest when it gets out of hand! (Originally Posted: 04/25/2014)
I am looking at a company that has an increasingly large amount of its EBITDA adjusted by NCI (non controlling interest). In other words over the years the portion of its income that has to be reduced to NCI is getting larger and larger because their main business is performing poorly while its 60% ownership in a sub is growing. The problem is that now the FCF used as an input for my DCF or EBITDA in my comps models don't really tell the whole story. How is this normally handled? Do I just use adjusted EBITDA or FCF after I take out NCI? Thanks for the help.
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