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Sojaprotein AD Bečej – Relative Valuation

Relative Valuation – Sojaprotein AD Becej

Two alternative approaches are generally used in estimating equity value: fundamental valuation and relative valuation. Fundamental valuation involves discounting expected values of fundamentals such as free cash flow, dividends or residual income while relative valuation specifeies the value of the firm as function of selected fundamentals and their average pricing for peer companies.

Relative valuation is typically implemented with price multiples, that is, by multiplying a firm’s fundamental by the average price-to-fundamental ratio for a group of similar companies (same industry, size, leverage, etc). The average multiple is calculated using location measures such as the mean, median or harmonic mean, and often reflects discretionary adjustments made to account for differences in relevant value drivers (e.g., growth, risk, payout, earnings quality) across the companies. Another relative valuation approach which is less common is to use conditional price multiples (hereafter conditional valuation). This approach explicitly adjusts observed multiples (e.g., the price-to-book ratio) for difference in relevant value drivers (e.g., return on equity or ROE). In effect conditional valuation is the multivariate counterpart of price multiple valuation – it is based on the same rational as price multiples but uses severel fundamentals simultaneously.

P/B ratio (conditional and median)

Comparable firm ROE – X P/B ratio – Y
KRBL LTD KRB:IN 0,1203 0,78
Kaveria Seed Company Limited KSCL:IN 0,2407 4,08
Halwani Bros Co HB:AB 0,1497 1,89
AgroGeneration SA ALAGR:FP 0,1014 2,57
Imlek a.d., Beograd, IMLK 0,1907 2,05
Guangdong Jialong Food Co., LTD 002495:CH 0,0551 1,77
BrasilAgro AGRO3:BZ 0,0552 0,85
Ros Agro PLC AGRO:LI 0,0872 0,18
Origin Enterprises plc OIZ:GR 0,2103 2,22
b0 0,232375473 Median- 1,89
b1 11,81614508  
y=b0+bixi 1,338687229  
Correlation 0,694376451  
Coefficient of determination 0,482158656  
Indicative value of equity  in RSD 17,406,755,926 24,590,197,088
Indicative share price in  RSD 1,169,00 1,651,00
Current share price in RSD 490,00 490,00
Current ROE 0,09 0,09
Current P/B ratio 0,56 0,56
Estimated P/B ratio 1,34 1,89

Note: The data used in the analysis of comparables firms are taken from www.bloomberg.com. Date for the company analyzed were taken from  www.belex.rs

Share price on day 1/6/2012

In January 2011 in emerging markets for a sample of 266 companies from the agricultural sector average P/B ratio stood at  1,57 and ROE 18,67%, at the time in Europe for a sample of 32 companies  P/B ratio was 1,11 and ROE 15,13%. Source: Cap IQ & Bloomberg.

P/S ratio (conditional and median)

Comparable firm Net margin – X P/S ratio – Y
KRBL LTD KRB:IN 0,0448 0,29
Kaveria Seed Company Limited KSCL:IN 0,1560 2,64
Halwani Bros Co HB:AB 0,0990 1,25
AgroGeneration SA ALAGR:FP 0,1007 2,55
Imlek a.d., Beograd, IMLK 0,0769 0,83
Guangdong Jialong Food Co., LTD 002495:CH 0,2060 6,63
BrasilAgro AGRO3:BZ 0,2676 4,14
Ros Agro PLC AGRO:LI 0,0554 0,10
Origin Enterprises plc OIZ:GR 0,0364 0,38
b0 -0,659956641 Median – 1,25
b1 23,74184064  
y=b0+bixi 1,299016167  
Correlation 0,86280938  
Coefficient of determination 0,744440026  
Indicative value of equity  in RSD 19,166,418,466 18,443,967,879
Indicative share price in  RSD 1,286,00 1,238,00
Current share price in RSD 490,00 490,00
Current net margin 0,08 0,08
Current P/S  ratio 0,49 0,49
Estimated P/S ratio 1,30 1,25

Note: The data used in the analysis of comparables firms are taken from www.bloomberg.com. Date for the company analyzed were taken from  www.belex.rs

Share price on day 1/6/2012

In January 2011 in emerging markets for a sample of 266 companies from the agricultural sector average P/S ratio stood at  0,93 and net margin 8,59%, at the time in Europe for a sample of 32 companies  P/S ratio was 1,11 and net margin 6,27%. Source: Cap IQ & Bloomberg.

P/E ratio (conditional and median)

Comparable firm Debt to equity – x1 Expected Growth Rate  -x2 P/E ratio – Y
KRBL LTD KRB:IN 2,023 0,11 6,49
Kaveria Seed Company Limited KSCL:IN 1,438 0,22 16,94
Halwani Bros Co HB:AB 0,281 0,07 12,63
AgroGeneration SA ALAGR:FP 1,287 0,10 25,34
Imlek a.d., Beograd, IMLK 0,943 0,12 10,76
Guangdong Jialong Food Co., LTD 002495:CH 0,033 0,04 32,17
BrasilAgro AGRO3:BZ 0,537 0,06 15,48
Ros Agro PLC AGRO:LI 1,304 0,09 1,97
Origin Enterprises plc OIZ:GR 2,577 0,16 10,54
b0 8,038827086   Medijana -  12.63
b1 1,134969567    
b2 50,71921623    
y=b0+b1x1+b2x2 13,36    
Indicative value of equity in RSD 16,262,549,683   15,377,895,462
Indicative share price in  RSD 1,091,00   1,032,00
Current share price in RSD 490,00   490,00
Current P/E  ratio 6,00   6,00
Estimated P/B ratio 13,36   12,63

Note: The data used in the analysis of comparables firms are taken from www.bloomberg.com. Date for the company analyzed were taken from  www.belex.rs

Share price on day 1/6/2012

In January 2011 in emerging markets for a sample of 266 companies from the agricultural sector average P/E ratio stood at  33,96, at the time in Europe for a sample of 32 companies  P/E ratio was 20,67. Source: Cap IQ & Bloomberg.

Expected Growth rate = (1 – payout ratio) x ROE

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