| Can we discuss non-standard valuation methods? Sometimes used on non-standard assets? Posted: 01 Jul 2020 01:34 PM PDT I am very interested in valuations of different asset classes. We were all taught the basic valuation methods: - Discounted Cash Flow model - Really only useful for a mature, stable company like a utility or a JNJ.
- Relative Valuation/Current Multiples - P/E, EV/EBITA, P/FCF, etc.
- Precedent Transactions - The cost companies have paid in the past for comparable companies
- M&A Premiums Analysis – Analyzing M&A deals and figuring out the premium that each buyer paid, and using this to establish what your company is worth
- LBO Analysis – Determining how much a PE firm could pay for a company to hit a target IRR
Then things start to get wonky. Here are some little less used methods: - Dividend Discount Model - stock is worth the sum of all of its future dividend payments, discounted back to their present value
- Residual Earnings Model - Useful if the company doesn't have predictable dividends (or none at all
- Future Share Price Analysis – Projecting a company's share price based on the P/E multiples of the public company comparables, then discounting it back to its present value
- Real Options on assets such as "drug patents and mining or oil/natural gas rights"
For Energy Only: - Multiples- P/MCFE, P/MCFE/D (where MCFE = 1 Million Cubic Foot Equivalent, MCFE/D=MCFE per Day), P/NAV
For Retail & Airlines Only: Distressed firms: - Liquidation Model
- Sometimes you look at valuations on both an assets-only basis and a current liabilities-assumed basis. This distinction exists because you need to make big adjustments to liabilities with distressed companies.
- Valuing Equity as Options
For REITs only: - Public REIT Multiples: P/FFO and P/AFFO
- Net Asset Value (NAV) Model - Forward NOI/ Cap Rate and add in all their other Assets, subtract their Liabilities, and divide by the share count to get NAV/share
- DCF with Levered FCF (not as common)
- Dividend Discount Model (not as common)
Real Estate (property level): - Replacement Cost method – you estimate how much it would cost to re-construct the property
- Multiples - NOI/Cap Rate (commercial), $/Sqft (residential)
- Comparables or Comps for residential properties: properties in the same area that have the same sqft, same bed & bath, etc
Ship/Tanker Assets: - Market approach (FMV)
- Replacement cost
- Income approach
- Hamburg rules
- PFandbrief Act
Pre-Revenue /Early Stage Companies: - Venture Capital Method
- The Dave Berkus Valuation Model
- Bill Payne's Model
- Risk Factor Summation Method
- Replacement Method or "All-In" Method
- Rule of Thirds
- Current Value Method - Only used when (a) no material progress has been made on the enterprise's business plan, (b) no significant common equity value has been created in the business above the liquidation preference on the preferred shares, and (c) no reasonable basis exists for estimating the amount and timing of any such common equity value above the liquidation preference that might be created in the future
- First Chicago Method
Private Equity Securities (that have several share classes): - Current Value Method (focuses on the current value. Only useful when acquisition/dissolution is imminent)
- Probability-Weighted Expected Return Method (PWERM)
- Option Pricing Model (OPM)
These could all be used in a: - Sum-of-the-parts valuation - Using a combination of the methods above, you break the company into its different P&Ls and value each of them individually. Sometimes in combination with the "conglomerate discount"
Now... can we discuss maybe some even LESS known valuation methods or valuation methods for assets that are not common? How or what is done to value them? For example, I saw a company that pays out people a guarantee for litigation that hasn't happened yet but then they keep all the proceeds if they win. Essentially by pooling a lot of cases together, they can get a confidence interval of the rate of success and value of settlements/awards and then take an arbitrage on that. That is one hella of an alternative asset play imo. What do you guys got? Any good stories? Any different or weird valuation methods I didn't cover? edit: edited to include options Edit 4: Keep adding things submitted by /u/GoldenPresidio [link] [comments] |
| Short Zoom ($ZM) Posted: 01 Jul 2020 09:53 AM PDT |
| Jeffrey Gundlach on coronavirus recession: A V-shaped recovery is 'highly optimistic' [Full] Posted: 01 Jul 2020 08:22 PM PDT |
No comments:
Post a Comment