Hello,
am looking at an example where a company has a number of JVs and associates and goal is to calculate the value of the stub.
A company owns 80% of JVs worth 100m due to a recent deal with an investor, has 10m in net cash, the JVs are valued at 5m on the balance sheet, the current market cap is 150m, total EBIT is 5m and the pre-tax income from JVs is 1m. There is also PP&E worth 10m.
So I calculated the following:
-> Equity value = 0.8*100 for JVs + net cash 10m + 0 for JVs on balance sheet as recently valued in a transaction = 90m
-> Stub value = market cap 150m - equity value 90m = 60m
-> Implied EV/EBIT = (stub 60m - net cash 10m) / (EBIT 5m - profit from JVs 1m) = 12.5x
Is that the right way to look at it?
If at all, how should the net PP&E be accounted for? Would argue not accounting for it as company going concern and not being liquidated.
thanks
Anyone have a view on this?
bump
If your company's ownership is 80% isn't it consolidating the JV partner's financials and netting out minority interest?
yes, that was done as there are several JVs. not the point though, more about the stub valuation.
bump
Bump
Sorry but still not following why you are performing an independent valuation of a stub that the company has just valued at $5m in its audited financials. Also can't tell if this is one JV or several. Also I've never heard of the term "associates" used interchangeably with JVs.
The JVs are on the BS, but recently an investor bought a stake in one of the JVs. It is several JVs. In Europe, many companies report JVs and associates as single line item.
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