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Case-oldtown berhad

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Reference no: EM132460058

Case: OldTown Berhad

After reading the case and doing the three-part analysis requested below, be able to explain why would or would not recommend accepting RM 3.18 per share.

1. Approach 1: Projecting Expected Future Net Cash Flows.

a. What growth rates, discount rate and terminal values are appropriate here if the Capital Asset Pricing Model is used? Growth rate of what? What information is available? Is this estimate for a shorter planning period? Or, for a terminal value estimation?

b. What value should be put on each share? Are there any difficulties of estimation?

2. Approach 2: Projecting Future Expected Dividends.

a. Estimate the cost of equity and the share value using the Gordon Growth Model of discounting future dividends.

b. How do the estimates of future growth rates of dividends affect the share valuation estimates?

3. Approach 3: Implied Growth Rates for Earnings, EBITDA or Dividends

a. Look at the multiples shown in Exhibit 6. What are the implied growth rates for target companies' EBITDA? Earnings? Revenues?

b. What can be learnt from this data?

c. Would this change the valuation placed on each share?

4. If there are valuation differences in the answers above, how to reconcile what has been found? How best to deal with the fact that both "the growth rate" and "the discount rate" are estimates? How best to structure a credible valuation model?

5. Does the offered acquisition premium affect the answer?

6. Should accepting RM 3.18 per share be recommended or not?

Reference no: EM132460058

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