2007 2008 2009
Current Assets 403,864 455,744 418,315
Fixed Assets 1,072,093 1,079,226 1,053,755
Total Assets 1,475,957 1,...
CAGR
(25,471)
0.01172
Cash Flow=NI + Depreciation 114,542 163,292 86,592
2007 2008 2009
Revenue 675,407 1,110,831 699,833
COGS (excluding deprec...
0 0 -13.05%
CAGR
1.79%
-12.83%
-13.05%
-13.05%
- -
2007 2008 2009
Price/Earnings 9.2 10.3 20
Price/Book 1.2 1.1 0.76
Price/Sales 2.996 1.630 1.808 Earning per share
Price/Ca...
2007 2008 2009
Earning per share 0.27 0.23 0.08
Price/ share 3.65 2.84 1.89
675,407 1,110,831 699,833
Share capital 554,40...
The Corporate Value Model is a useful way of valuing companies that are privately owned because it
relies on the discounti...
Risk-fee rate (T-Bill rate)
Market Risk Premium
Beta (Average of 3 competitors' betas)
Required rate of return on equity
C...
t are privately owned because it
unt rate to measure the overall
a on price, beta, dividends per share, and earnings per s...
4.42%
8%
0.42
7.78%
2.25%
0.0225
- 0
1,404,514 1
1,404,514
7.78%
PV
135,346
148,880 2,062,507
1,913,627
$1,901,069
-
$1,90...
a.com/content/uae-interbank-lending-rate-drops-225
a.com/content/uae-interbank-lending-rate-drops-225
2007 2008 2009
Price/Earnings 9.2 10.3 20
Price/Book 1.2 1.1 0.76
Price/Sales 3.00 1.63 1.81
Price/Cash Flow 0.11 0.13 0.0...
Average Current Level
2 year
Compound
Growth
1-year ahead
Projected
Level
End of year
Estimated Value
13.2 86,592 Net Inco...
Estimated Value
Today
With 30
million
shares,
Price per
share
919,755 2.56
1,344,776 3.75
1,417,522 3.95
6,825 0.02
2.57 A...
Period
Growth
rate
Dividend
during non-
constant
growth
phase
Price at end
of non-
constant
growth
phase
2007 30% 1.95
200...
e approach with growth
o years, and a long-term
of $1.50 per share at the
Lisa's estimate 5.298409 based on Corporate Value Model
Dan's Estimate 2.57 based on Price ratio models
Joe's estimate $40...
sonable. This price is
hree competitors how much per share do you think that Citrus
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Awanna second project

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Awanna second project

  1. 1. 2007 2008 2009 Current Assets 403,864 455,744 418,315 Fixed Assets 1,072,093 1,079,226 1,053,755 Total Assets 1,475,957 1,534,970 1,472,070 Current Liabilities 89,728 116,877 54,567 Long-term Debt 0 0 0 Owners' Equity 1,372,153 1,403,102 1,404,514 Total Liabilities and Owners' Equity 1,461,881 1,519,979 1,459,081
  2. 2. CAGR (25,471) 0.01172
  3. 3. Cash Flow=NI + Depreciation 114,542 163,292 86,592 2007 2008 2009 Revenue 675,407 1,110,831 699,833 COGS (excluding depreciation) 521,893 898,891 567,570 Gross Profit 153,514 211,940 132,263 Depreciation 0 0 0 Operating Expenses 38,606 44,337 44,946 Earnings Before Interest & Taxes 114,908 167,603 87,317 Interest expense 366 4,311 725 Earnings Before Taxes 114,542 163,292 86,592 Income Taxes - - - Net Income 114,542.0 163,292.0 86,592.0 - - -
  4. 4. 0 0 -13.05% CAGR 1.79% -12.83% -13.05% -13.05% - -
  5. 5. 2007 2008 2009 Price/Earnings 9.2 10.3 20 Price/Book 1.2 1.1 0.76 Price/Sales 2.996 1.630 1.808 Earning per share Price/Cash Flow 0.11 0.13 0.0594 Price/ share Dividend Yield % 5.65 6.63 7 Sale Beta 0.42 0.42 0.42 Share capital Recent Price 3.65 2.84 1.89 Price per share Operating cash flow Total equity 0.0594 http://www.scribd.com/doc/11720559/prime-holding-report-on-uae-cement-jan-2009
  6. 6. 2007 2008 2009 Earning per share 0.27 0.23 0.08 Price/ share 3.65 2.84 1.89 675,407 1,110,831 699,833 Share capital 554,400 637,560 669,438 Price per share 1.21826659 1.742316017 1.045403757 Operating cash flow 146,600 178,000 83,444 Total equity 1,372,153 1,403,102 1404515 0.0000054 0.0000026 0.0000027 83,444 Operating cash flow 1404515 Equity 2009 4 Dividend yield #DIV/0! eport-on-uae-cement-jan-2009
  7. 7. The Corporate Value Model is a useful way of valuing companies that are privately owned because it relies on the discounting of future cash flows at an appropriate discount rate to measure the overall value of a firm. Most of the other methods require comparative data on price, beta, dividends per share, and of similar publicly traded firms for estimates of inputs to be used in applying the respective models. Calculation of Citrus Glow's stock price based on the Corporate Value Model 1) Find the market value (MV) of the firm. 2) Find PV of firm’s future FCFs 3) Subtract MV of firm’s debt and preferred stock to get MV of common stock. MV of stock = MV of Firm - MV of debt and preferred stock (if any) Divide MV of common stock by the number of shares outstanding to get intrinsic stock price (value). P0 = MV of common stock / # of shares Also called the free cash flow method. Suggests the value of the entire firm equals the present value of the fir Remember, free cash flow is the firm’s after-tax operating income less the net capital investment where net capital investment is equal to the change in net fixed assets FCF = NOPAT – Net capital investment EBIT Tax Rate NOPAT Change in Fixed assets Free Cash Flow (2009) Expected growth rate of free cash flows = year 1 year 2 Required rate of return on equity (based on CAPM Model) 2. Comment on Lisa’s preference of the Corporate Value Model. Based on her approach, what would Citrus Glow’s selling price per share be if they were to issue 5 million shares?
  8. 8. Risk-fee rate (T-Bill rate) Market Risk Premium Beta (Average of 3 competitors' betas) Required rate of return on equity Cost of Debt After-tax cost of debt Weights Debt Equity WACC FCF in 2010 FCF in 2011 FCF in 2012 Firm Value in 2009 Debt Equity Value Number of shares Price per share
  9. 9. t are privately owned because it unt rate to measure the overall a on price, beta, dividends per share, and earnings per share applying the respective models. get intrinsic stock price (value). ire firm equals the present value of the firm’s free cash flows. ss the net capital investment hange in net fixed assets 87,317 0% 87,317 (25,471) 112,788 20% 10% APM Model) http://english.alrroya.com/content/uae Value Model. e per share be
  10. 10. 4.42% 8% 0.42 7.78% 2.25% 0.0225 - 0 1,404,514 1 1,404,514 7.78% PV 135,346 148,880 2,062,507 1,913,627 $1,901,069 - $1,901,069 358,800 5.298409016 Long term debt is 0 http://english.alrroya.com/content/uae
  11. 11. a.com/content/uae-interbank-lending-rate-drops-225
  12. 12. a.com/content/uae-interbank-lending-rate-drops-225
  13. 13. 2007 2008 2009 Price/Earnings 9.2 10.3 20 Price/Book 1.2 1.1 0.76 Price/Sales 3.00 1.63 1.81 Price/Cash Flow 0.11 0.13 0.06 Beta 0.42 Risk-free rate 4% Market Risk Premium 8% Required Rate (CAPM)= 7.78% Number of shares to be issued 358,800 Estimated Price Per share 2.57 Total Value of Equity 922,219.17 Dan's estimate under the Price-ratio approach turns out to be between $31 and $63 with an average of $47 as compared w Under Dan's approach the firm's value is determined in relationship with the relative valuation ratios of the firm's top 3 competitors. So it would give a more realistic value. Also, only 1-year ahead growth estimates have to be made reducing forcasting error. However, beta and required return estimates are still required. 3. How does Lisa’s price estimate compare with Dan’s price price-ratio models? What are the pros and cons of Dan’s preferred
  14. 14. Average Current Level 2 year Compound Growth 1-year ahead Projected Level End of year Estimated Value 13.2 86,592 Net Income -13.05% 75,289 991,311 1.0 1,404,514 Book Value 1.17% 1,420,980 1,449,399 2.1 699,833 Sales 1.79% 712,375 1,527,805 0.1 86,592 Cash Flow -13.05% 75,289 7,356 average of $47 as compared with Lisa's estimate of $57.91 n ratios of the firm's top tes have to be made reducing e compare with Dan’s price estimate based on the and cons of Dan’s preferred approach?
  15. 15. Estimated Value Today With 30 million shares, Price per share 919,755 2.56 1,344,776 3.75 1,417,522 3.95 6,825 0.02 2.57 Average
  16. 16. Period Growth rate Dividend during non- constant growth phase Price at end of non- constant growth phase 2007 30% 1.95 2008 30% 2.54 2009 30% 3.30 3.30 3.30 42.36$ Dividend in Year 0 1.50$ Required Rate 7.78% Intrinsic Value $40.46 Joe's estimate of $207.12 is the lowest of the 3. However it is much closer to Lisa's estimate of $5.298 than Dan's estimate of $2.57 4. How far off would Joe’s price estimate if he were to use a 3-stage approach with growth assumptions of 30% for the first 3 years, followed by 20% for the next two years, and a long-term growth assumption of 6% thereafter. Assume that the firm pays a dividend of $1.50 per share at th end of the first year.
  17. 17. e approach with growth o years, and a long-term of $1.50 per share at the
  18. 18. Lisa's estimate 5.298409 based on Corporate Value Model Dan's Estimate 2.57 based on Price ratio models Joe's estimate $40.46 based on Dividend Discount Model Average 16.10809 Since the estimated values are based on fairly conservative expectations a simple average would be fine. So a offer price of around $50 per share would be reasonable. This price is similar to the competitors' current prices. 5. Based on all three estimates and on the valuation figures for the three competitors how much pe Glow is really worth? Explain your rationale.
  19. 19. sonable. This price is hree competitors how much per share do you think that Citrus

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