Equity valuation in growth and fundraising contexts

Business case

Equity valuation in growth and fundraising contexts

Sub-industry: Real estate development of residential and nursing homes

Context

In order to develop its activities, a French real estate developer was raising new funds. A valuation was required to fix the subscription price of the shares.

Key Takeaway

The most relevant method to assess the equity value of a real estate developer is the net assets value method, which consists in adding (i) the current value of the real estate projects portfolio and (ii) the (adjusted) net book value of assets. In order to assess this current value of the project portfolio, it is necessary to take into account the level of progress of the projects and the expected margin at completion. On this last point and if some projects are co-developed with other real estate developers, it is important to isolate the share of the future margin that should ultimately be captured by the valued entity.

Accuracy Role

During our four-week engagement, the equity value of the shares was estimated using four valuation methods: adjusted net assets value, discounted cash flow, stock market multiples and comparable transaction multiples.