ANALYSIS OF COMPANY VALUATION USING DCF METHOD AND RELATIVE VALUATION FOR PT. BITA ENARCON ENGINEERING

• Main Author: Bangundityo, Aryo
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/50800
• Institution: Institut Teknologi Bandung

PT. BITA Enarcon Engineering (PT.BEE) is an architecture engineering design consultant firm that has been operating for almost 40 years. Currently the company has been experiencing revenue and growth decline from 2015-2017. Internally the operating cost also has been high. PT.BEE is already in the mature stage of corporate life cycle and having a mature stable growth. But looking at their f inancial statements from the last 2 years shows decline in revenue and growth, the company is considered entering the decline stage of a corporate life cycle. The company has a plan to increase productivity and revenue to increase its growth, the company needs to do company valuation in order to obtain information regarding the enterprise value and share price should the management decides to sell through M&A or share issuance. PT.BEE will be valuated using two methods: discounted cash flow (DCF) method and relative valuation using multiples. Since the company is having negative growth, valuation using DCF only will not represent the intrinsic value of the company. Another valuation method is needed and the value will be averaged. Relative valuation for enterprise value will be using EV/EBITDA multiples, and for company share price will be using P/E ratio multiples based on data for construction and engineering industry in emerging markets. The obtained valuation results are Rp.28,556,870,548 for enterprise value and Rp.35.74 for company share price with 442,183,775 outstanding shares. Based on comparison between intrinsic and relative valuation, both enterprise value and share price are undervalued. The negative growth and lower valuation might send a warning to shareholders and future investors as the company enters the decline phase, they will have options whether to retain their ownership or selling it with lower valuation in current situation. But if the company management comes up with a strategy to increase back their growth, investors will invest in a company with lower price. The management should think as the firm shrinks, will it be able to divest assets and collect cash. If the company can get more for divesting assets than continuing investments, liquidating them will increase company’s terminal value. Four major strategies for mature company entering decline phase are: management changes, financial restructuring, internal strategies, and external strategies.