BUSINESS VALUATION AND PERFORMANCE OF PT ELANG BIRU FACILITY (EBFI)

• Main Author: Shanizal Hasny, Muhammad
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/63886
• Institution: Institut Teknologi Bandung

The Maintenance, Repair and Overhaul market is expected to grow exponentially in the next three years. It is expected that fleet size and utilization will slowly get back to the pre-pandemic level. After this initial wave, the MRO industry is expected to grow moderately. In the long-term, however, the industry growth will be dampened because of the effect of COVID-19. Since the pandemic hits, the company has already implemented several business decisions. The firm entered several new markets in the military and defense industry. Many new customers have also already been acquired in the non-aviation sector to offset the weak performance of the commercial airline sector. EBFI as a leader of MRO company in Indonesia suffered from these setbacks. The company's fundamental performance is heavily impacted, which makes the firm experience net loss and negative equity. The result can be seen in the stock market, where the price of stocks gradually decreased over a long period of time. This is happening because of decreased public confidence in air travel, and the pandemic situation is not yet finished. This condition creates the need of a valuation process based on the company’s internal and external analysis, and historical performance. The methodology of valuation processes performed in this final project use Black-Scholes method because of negative equity nature of the company. Benchmarking with other similar companies in other countries is performed to know how the other companies can overcome the obstacle created that affects their own company by this pandemic situation. Lastly, the Focus Group Discussion is performed to know the expert’s view on these matters. After all of these processes, several turnaround strategies are proposed to accelerate the financial recovery process. The strategies include the financial aspect and non-financial aspect. From a financial aspect, the company can implement a debt restructuring scheme and operational cost efficiency to reduce the financial load of the company. From a non-financial aspect, the firm can focus the business on a more profitable business line other than commercial airline business, such as cargo line and military and defense business line. Other potential business strategies include private placement for a potential investor and debt to equity swap scheme. The first valuation shows that the current value of the company is overvalued. By implementing these turnaround strategies, the company is expected to have a better financial condition, thus increasing the value of the company. The second valuation process is conducted by assuming that the company will implement turnaround strategies in the near future to see how significant the company's value will increase. The result shows that the value of the company can be increased significantly if the right turnaround strategies is implemented. This in effect will influence the stock's better market price and gain the interest of many investors to invest again in the company.