Valuation Case Study on Asiasons Capital Limited 1
Disclaimer and Declaration The objective of the presentation is for educational purposes. The full content of the presentation is for illustration purposes only and should not be used as investment recommendations . AB Maximus and its presenters are not responsible for all investment activities conducted by the participants and cannot be held liable for any investment loss. The company and presenters may have personal interest in the particular shares presented.
Agenda 1 Company Background Industry Overview 2 3 Valuation Risk 4
Company Background Asiasons Capital Limited is a private equity firm listed on SGX Mainboard since 2010 focusing on alternative investment opportunities in Emerging East Asia. Source: Company reports
Company Background • Setting up private equity vehicles focusing on the consumer and resources sector. • Latest fund is called Dragonrider Opportunity Investment Fund II L.P. (“DOFII”) focusing on Management acquisitions in the television, entertainment, Division and food & beverage (F&B) sectors. • F&B franchises include T.G.I. Friday’s, Applebees restaurants, etc. Source: Company’s Annual Report 2012
Company Background • Focus on providing M&A advisory, and Financial Advisory investment banking services. • Underwriting IPOs. Division Source: Company’s Annual Report 2013
Company Background Revenue growth (FY 2012 vs. FY 2011) Revenue ($'000s) 6,400 6,300 6,200 6,100 6,000 Revenue ($'000s) 5,900 5,800 5,700 5,600 FY 2011 FY 2012 Source: Company’s Annual Report 2012
Company Background Net profit growth (FY 2012 vs. FY 2011) Net profit ($'000) 35,000 30,000 25,000 20,000 Net profit ($'000) 15,000 10,000 5,000 0 FY 2011 FY 2012 Source: Company’s Annual Report 2012
Industry Overview Asean 4 (Indonesia, Malaysia, Thailand, and Philippines_ expected consumption growth rates of 5.0 – 6.5% over next 5 to 10 years. Increasingly young and urban population in these countries who have varied interests towards entertainment and fashion. Growth in disposable income and corresponding discretionary spending. Source: Company Annual Report 2012
Industry Overview Investors, retail and institution, are able to invest in a public-listed private equity firm without facing the high investment barriers, ie. the 2.0% management fee/ 20.0% performance fee (2/20) associated with many PE firms. Year-to-date (YTD) track record of achieving approx. 38.0% Internal rate of return (IRR). Source: Company Annual Report 2012
Valuation Methodology Discounted cash flow (DCF) for private equity industry using WACC (%) of 7.0%; 5-year time horizon; growth of 5.0% in first year and second year, 6.0% in third year, 2.0% terminal growth rate (Year T+1). Beta obtained from Reuters.com was 0.12, compared to average industry beta of 0.96. Growth drivers include potential acquisitions of entertainment and F&B assets, savvy youth market, growing private equity interest in South-East Asia.
Valuation Risk Free Rate 3.1% Market Required Return 10.0% Beta 0.12 Cost of Equity (CAPM) 4.0% Cost of Debt 7.6% WACC + small company bias 7.0% Equity Market Risk Premium 7.5% Source: Reuters.com and Company Reports
Valuation Investment Management Division • Continued expansion into regional markets in South East Asia seeking profitable private-equity opportunities. • Focus on growth opportunities in the entertainment and F&B sector. • Tap into the growing affluence of Asian consumers who are constantly keeping up with new trends.
Valuation Financial Advisory Division Acquisition of 32.6% indirect interest in the issued share capital of Asiasons WFG Capital Pte. Ltd. allows the Group to tap into the corporate advisory services market. (Transaction completed on Jan 04, 2013) Expectations of an increment in IPOs in the Asian region, and underwriting services are likely to be in demand.
Valuation 2013F 2014F 2015F 2016F 2017F FCFF ($’000) $33,962 $33,318 $32,997 $32,063 $30,856 Terminal Value $1,550,236 (FCFF2018/r) FCFF $33,962 $33,318 $32,997 $32,063 $1,581,092 NPV ($’000) $1,713,433 Minus Debt $7,874 Add Cash $12,245 FCFF due to $1,717,803 share holders no. of shares 997,760 (‘000) Fair Value per SGD 1.75 Share
Trading Data 52 Weeks Trading Range $0.52 - $0.99 Avg Volume (3 mths) 9.7 mil Market Cap $930.8 mil Source: Reuters.com
Main Risks Valuation assumes that the pace of investment growth remains stable, and less volatile financial markets in the next year or so. Entertainment and F&B assets do not display any material impairments going forward. Movie Media/Entertainment industry. F&B expansion through its SGX-listed subsidiary Chaswood Resources.
Main Risks Default Risk – Low (As of end FY 2012) Current ratio = 5.2x Interest coverage = 29.6 x D/E ratio = 0.0 Revolving credit facilities utilized as of 1Q13 = $7.4 mil Cash as of end 1Q13 = $11.3 mil Source: Company reports
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