In: Finance
A firm that operates in chemical sector decides to go public in Borsa İstanbul. Operating profit of this firm is 322 000 000 TL and depreciation and amortization is 16 000 000 TL.
Short term Financial Debt: 52 000 000 TL, Long Term Financial Debt: 16 000 000 TL
Short Term Payables: 10 000 000 TL, Long Term Payables: 0,
Cash and Cash Equivalents: 17 000 000 TL, Share capital : 140 000 000 TL.
If the average of EV/EBITDA multiple of comparable firms in chemical sector is 9, estimate the value per share for initial public offering according to the average EV/EBITDA.
that s the whole question given.
EV= Market Value of Common Stock + Market Value of preferred Stocks + Short Term Debt + Long Term Debt + Minority Interest - Cash and Cash Equivalents
Thus As per Data Given we have
EBIT | 322000000 |
D&A | 16000000 |
Short Term Debt | 52000000 |
Long Term Debt | 16000000 |
Short Terms Payables | 10000000 |
Cash and Cash Equivalents | 17000000 |
Share capital | 140000000 |
Thus EV= Share Capital ( Market Value of Common Stock) + Short Term Debt(Which also Includes Account Payable)+Long Term Debt - Cash and Cash Equivalents
=140000000+52000000+10000000+16000000-17000000=
201000000 |
(EV of the Firm)
EBITDA=EBIT(Operating Profit + D&A)=
322000000+16000000 |
=
338000000 |
USING COMPARABLE VALUATION METHOD
We have Average EV/EBITDA=9 (Industry)
To Calculate= The value per share for initial public offering
PS-Face Value of the Shares not Mentioned , No of Shares Not Mentioned
Thus Assuming Face Value of Shares to be 10
Comparing EV/EBITDA of Industry to that of company
Thus 9(INDUSTRY AVERAGE)=EV/EBITDA(COMPANY)
9*338000000=EV=3042000000
But we Know that EV=Share Capital ( Market Value of Common Stock) + Short Term Debt(Which also Includes Account Payable)+Long Term Debt - Cash and Cash Equivalents
3042000000= Share Capital (It will Increae because we are going for IPO) + 52000000+10000000+16000000-17000000
Share Capital Required=
2981000000 |
Initial Investment we have is 140 000 000 and we require
2841000000 |
Initially No. Of share Capital was 140 000 000 Considering Face Value of 10Rs No of Shares =140 000 000/10=140 000 00
Thus Diluting it to Furture more investment we require
2981000000/140 000 00 |
=
212.9285714 |
Would be the per share Price during IPO The Value Depends on the Face Value thus changing it would change IPO Value as well