XXX Services Limited - Valuation Report
1. APPRAISAL OF THE COMPANY
We have been engaged to estimate the fair market value of XXX Services Limited (also referred to as “XXX”) as of XXX for the internal understanding of company management
For a business appraisal, the fair market value is defined as the expected price at which the subject business would change hands between a willing buyer and a willing seller, neither being under a compulsion to conclude the transaction and both having full knowledge of all the relevant facts.
We have appraised a fully marketable, controlling ownership interest in the assets of the subject business. The appraisal was performed under the premise of value in continued use as a going concern business enterprise. In our opinion, this premise of value represents a fair and best use of the subject business assets
Based on the information contained in the report that follows, we estimate that the fair market value of XXX Services Limited at:
Equity Value: US$ 5.54 million.
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The Business Enterprise Value includes all tangible and intangible assets, including business goodwill It also includes accounts receivable, and all business liabilities Equity value is arrived at after reducing debt and adding cash The valuation is derived from the acquired information provided by the management of the Company
2. DESCRIPTION OF THE APPRAISAL ASSIGNMENT
2.1. Standard and Premise of Value
This report relies upon the use of fair market value as the standard of value For this report, the fair market value is defined as the expected price at which the subject business would change hands between a willing buyer and a willing seller, neither being under a compulsion to conclude the transaction and both having full knowledge of all the relevant facts
The appraisal/report was performed under the premise of value in continued use as a going concern business enterprise. In our opinion, this premise of value represents the fairest and best use of the subject business assets.
2.2. The scope of the Report /Information Sources
The following sources of information were used in preparing the appraisal:
We conducted interviews with the Company's senior management team and analyzed the Company. Global, national, regional, and local economic data were compiled and reviewed.
This included data compilation from the private and publicly-traded company databases. The transactional data is also included in this report.
XXX Services Limited - Valuation Report
3. INTRODUCTION
XXX Services Limited (“XXX”) is licensed in Hong Kong to carry on fund administration, trust service, and company service business in accordance with the AntiMoney Laundering and Counter-Terrorist Financing Ordinance. XXX Services strives to serve its clients with comprehensive fund management and investment solutions The company has strong experience in both onshore and offshore fund structures and support in corporate services, investment management and investor relationship.
XXX Services Limited has a strong track record of establishing and operating onshore and offshore funds, family offices and managed accounts with investment and compliance professionals. The company is the one-stop solution for multi-strategy asset management, wealth management, onshore and offshore investment framework and fund operation/administration The company has highly experienced executive members who provide expert leadership in fund design, investment management, risk management and compliance under financial licenses.
Year of Incorporation: 2019
3.1. Business Segments
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The services provided by XXX is classified into various Business Segments-
3.1.1. Fund Services
XXX has a strong experience in fund administrative service. The company customizes and establishes the funds, trusts and managed accounts framework for institutional clients, which have specific tax, legal and compliance requirements
The company provides one-stop and tailor-made solutions for fund management which include-
▪ Fund domicile selection,
▪ Government registration, ▪ Investment execution,
▪ Post-investment valuation,
▪ Custodian services,
▪ Asset valuation and
▪ On-going compliance.
The company works closely with the board of funds, auditor, investment manager, legal counsel and other related parties.
Registered address: Flat/ Room 1701A, Tower 1, China Hong Kong City, 33 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong.
XXX Services Limited - Valuation Report
3.1.2. Connect Deal Match
Under this business segment, XXX Services connects investors with the world’s top assets through a tailor-made feeder fund structure and digital client onboarding system. The company builds the connection between the different markets and reconciles the compliance requirements.
This business segment’s cliental base includes-
▪ Insurance brokerage/ agent,
▪ Funds,
▪ Trust,
▪ Wealth management,
▪ Investment manager,
▪ Private bank,
▪ Family office,
▪ High net worth individuals,
▪ Distribution channels/ platforms,
▪ Independent financial advisors
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This segment serves the following needs of the clients-
▪ Fund administration service
▪ Marketing and fund raising service
▪ Intermediary and investor relation
▪ Data management and analysis
▪ Compliance and regulation
▪ Flexible investment structure rich products (public/ private)
▪ Due diligence
▪ Master accounts and transparent reporting
XXX Services Limited - Valuation Report
3.1.3. Tech- System Solutions
The company has designed a white label system of a one-stop operation platform for fund managers. The company helps clients to automate the middle and back offices, connect various service institutions, integrate data and provide end-to-end investor services
The services undertaken by this segment are-
▪ Smart KYC- Intelligent customer KYC is realized by using artificial intelligence technology such as id identification, image comparison and identity authentication
▪ Data Query- Online database supports learning knowledge and inquiring about overseas fund information anytime and anywhere
▪ Smart Contracts- An electronic contract can be generated with one click if the reservation is approved Meanwhile, intelligent Chinese-English translation technology helps improve the efficiency of contract generating.
▪ Online Reservation- Complete online reservation through an automatic process covering online data collection, checking and file transferring.
▪ Perpetuation of evidence- Using the principle of cryptography asymmetric algorithm and other technical means, the platform can achieve the solidification of subscription evidence and prevent tampering and denial
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▪ Electronic signing- Digital certificate authentication, hand-drawn signature and face recognition comparison technology are used to realize electronic signing。
▪ Post-investment management- Confirmation of fund shares, information disclosure and distribution of net value report.
▪ Real-time follow-up- Follow up on subscription results, give real-time feedback on the subscription process, update status.
XXX Services Limited - Valuation Report
3.2. Value Proposition
Providing comprehensive fund management services
XXX provides its clients with one-stop and tailor-made solutions for fund management The company undertakes all the services from selecting the fund domicile, to the registration of funds, to compiling of the legal procedures and filling of all the legal documents, to managing the fund accounts and providing all the custodian-related services, to assets valuation and post-investment valuation.
Strong relations with parties related to the fund management process
The company’s management maintains strong relationships with the members of the board of funds, the auditor, the investment manager, the legal counsel and all the other related parties during the fund management process. This ensures the smooth functioning of the entire process of fund management.
Building connections with different markets
XXX Connect business segment helps to connect the investors with the world’s top assets through tailor-made feeder structure and a digital client onboarding system. It builds connections with different markets and fulfills the compliance requirements.
Providing digitalized investment solutions
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XXX Tech segment provides its customers with various digitalized investment solutions For instance the KYC of the customer is done through artificial intelligence technology, the inquiry regarding the overseas funds can be done at anytime and anywhere through online databases, the Chinese English translator technology helps to improve the efficiency of the contract generating, electronic signing of the contract is done through digital certificate authentication, hand-drawn signature and face comparisons
Experienced Management
The company’s management team has an experience of more than 15 years in the trust fund industry which helps them in providing expert leadership in fund designing, investment management, risk management and compliance under financial licenses
Growth in the trust industry in Hong-Kong
A number of recent and ongoing developments in Hong Kong – such as the launch of a licensing regime for Trust or Company Service Provider (TCSPs), initiatives to attract family offices to set up in Hong Kong, and the pending implementation of the eMPF platform has led to rise in the trust business in Hong Kong.
3.3. Target Customers
The company focuses on the following businesses as its target customers:
▪ Asset Management Company,
▪ Wealth Management Company,
▪ Financial Services Provider,
▪ Ultra High Net Wealth Clients and
▪ Family Office
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3.4. Management Summary
The company’s executive members bring over 15 years of industry experience on average, providing expert leadership in fund design, investment management, risk management and compliance under financial licenses.
XXX Services Limited -
4.1. Hong Kong’s Asset and Wealth Management Industry
▪ Amidst the fast-changing, challenging environment facing many markets, Hong Kong’s asset and wealth management business remained resilient, with a 2% year-on-year increase in AUM to HKD35,546 billion (US$4,558 billion).
▪ As at 31 December 2021, the AUM of the asset management and fund advisory business conducted by licensed corporations and registered institutions increased year-on-year by 8% to HK$25,888 billion (US$3,320 billion).
▪ As at 31 December 2021, the AUM of the private banking and private wealth management business recorded a year-on-year decrease of 6% to $10,583 billion2 (US$1,357 billion) Respondents reported that the decrease was mainly due to changes in the values of underlying investments held by clients
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bn
▪ Net fund inflows of $2,152 billion (US$277 billion) were recorded for the asset and wealth management business during 2021 (2020: $2,035 billion (US$262 billion)), representing a 6% year-on-year increase.
▪ Non-Hong Kong investors remained a major source of funding for the asset and wealth management business, accounting for 65% of the AUM
▪ Assets managed in Hong Kong made up 56% of the AUM of the asset management business, with 49% of these assets invested in equities as of 31 December 2021.
Items above refer to the assets under management (AUM) of the relevant businesses. Certain assets reported under items C and D were managed by licensed corporations or registered institutions and therefore were also reported under item B. Accordingly, item A is not the sum of items B, C and D.
XXX Services Limited - Valuation Report
AUM of asset and wealth management business 5% 8% 65% 12% 3% 2% 5% 500%
Mainland-related licensed corporations and registered institutions
4.2 Size of the Hong Kong Trust market
AUM of asset management and fund advisory business
Asset sourced from the non-Hongkong investor
Staff in asset and wealth management business
Licensed corporation-Type 8 Regulated Activity
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Size of Hongkong domiciled SFCauthorised funds
Registered openended fund companies
Amid a challenging environment brought about by Covid-19, and geopolitical and macroeconomic uncertainty, Hong Kong’s trust industry has remained resilient. Assets under management continue to increase, and there are a number of significant growth opportunities which, if capitalized on, will paint a bright picture for the future of the industry.
A number of recent and ongoing developments in Hong Kong – such as the launch of a licensing regime for Trust or Company Service Provider (TCSPs), initiatives to attract family offices to set up in Hong Kong, and the pending implementation of the eMPF (Mandatory Provident Funds) platform continue to change the landscape of the city’s trust industry.
The accelerating digitalization of the industry presents a significant opportunity for the trust industry to innovate and invest in technology not only to enhance regulatory reporting and compliance, but also to engage more effectively with clients and provide an improved customer experience. The growing awareness and importance of environmental, social and governance (ESG) issue further present an opportunity for the trust industry to play a more prominent role in exercising its fiduciary duty to enhance corporate governance and push clients to integrate ESG factors into their overall strategy.
Hong Kong’s trust industry is intricate and diverse, providing an array of services to local and international clients that range from retail products and wealth and estate planning, to fund and pension administration and sophisticated trust structures. The trust industry also encompasses a variety of market players and regulators from different segments of the financial services sector. In addition, Hong Kong stands as a renowned international centre for trust-related businesses such as legal, tax, accounting and professional services Users of trust services range from high-net-worth individuals (HNWIs) and wealthy families, to corporates, pension scheme providers and charities.
Source: https://assets.kpmg/content/dam/kpmg/cn/pdf/en/2021/06/hong-kong-trust-industry-spotlight-taking-centre-stage.pdf; https://assets.kpmg/content/dam/kpmg/cn/pdf/en/2021/06/hong-kong-trust-industry-spotlight-taking-centrestage.pdf ; Asset and Wealth Management Activities Survey 2021; Securities and Futures Commission
XXX Services Limited - Valuation Report
The trust industry in Hong Kong continues to grow. According to the Securities and Features Commission of Hong Kong (SFC’s) latest Asset and Wealth Management Activities Survey, assets held under trusts in Hong Kong amounted to HK$4.71 trillion (US$605 billion) as at the end of 2021, up 5% from a year earlier Of this total, 56% of the AUM of the asset management business was managed in Hong Kong
4.3. Key Industry Drivers
Mainland
China remains the key driver
Over the last few years, mainland China’s financial services sector and capital markets have rapidly opened up to international investors This includes the launch and growth of the Stock Connect schemes between Hong Kong and Shanghai and Shenzhen, the launch of the Bond Connect, and the lifting of quota restrictions on the Qualified Foreign Institutional Investor and RMB Qualified Foreign Institutional Investor schemes in late 2019 The scrapping of foreign shareholding caps in the financial services sector, including for fund management companies in April 2020, have attracted great interest from international institutions. In addition to the Stock Connect and Bond Connect Schemes, the Mutual Recognition of Funds (MRF) arrangements between Hong Kong and mainland China, France, Luxembourg, Switzerland, Thailand, the Netherlands and the UK provide more investment opportunities for retail investors At the same time, there have been notable developments to facilitate the flow of mainland Chinese capital overseas through foreign direct investment, the Qualified Domestic Institutional Investor program, the Stock Connect Schemes and the impending southbound Bond Connect arrangements These developments allow investors in mainland China to buy into funds, equities, fixed income, structured products and projects overseas, creating opportunities for global asset managers and service providers along the value chain.
Rise of Capital Wealth
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Hong Kong is well positioned to take advantage of the rapidly growing wealth in the region Wealthy customers from mainland China and other parts of Asia are increasingly looking for more comprehensive types of services such as wealth management, estate and succession planning activities, and family office services. This is where the wealth management industry in Hong Kong has a pivotal role to play
The Ongoing Development of Greater Bay Area (GBA)
A key strategic component of China’s national development blueprint is the GBA, which aims to create a world-class city cluster comprising Hong Kong, Macau and nine cities in Guangdong Province. The GBA is home to more than 71 million people, with a combined GDP of US$1.6 trillion. In 2019, 20% of all HNWIs in China lived in the GBA. The sizeable population and growing amount of wealth in the region presents opportunities not just for the asset management industry, but also for private trusts, family offices and private CIS. With the GBA a clear growth opportunity, devising a strategy for the region is key for the trust industry, with potential benefits for first movers
The imminent launch of the GBA Wealth Management Connect
The imminent launch of the GBA Wealth Management Connect scheme, will allow residents of the cities in the GBA to invest in eligible investment products distributed by banks in Hong Kong and Macao, and vice versa Compared to the Mainland-Hong Kong MRF scheme, the Wealth Management Connect offers better opportunities to the trust industry. While the scheme will start by offering low to medium risk products, with a quota of RMB 1 million per individual, it is expected to evolve and expand over time, enlarging the overall size of the funds market. The launch of the Wealth Management Connect is a welcome development that is expected to bring benefits to Hong Kong’s asset management and trust industries.
Source: https://assets.kpmg/content/dam/kpmg/cn/pdf/en/2021/06/hong-kong-trust-industry-spotlight-taking-centre-stage.pdf; https://assets.kpmg/content/dam/kpmg/cn/pdf/en/2021/06/hong-kong-trust-industry-spotlight-taking-centrestage.pdf
XXX Services Limited - Valuation Report
Attracting Family Offices
There have been a number of new developments and initiatives over the past year to create a more attractive environment for family offices in Hong Kong In September 2020, the SFC issued updated guidance on investment vehicles owned by family trusts or family offices. The updated guidance should allow more single family offices run by experienced professionals to qualify as Corporate Professional Investors It also makes them eligible for certain exemptions related to sales suitability, client agreements and disclosures. The Hong Kong Monetary Authority (HKMA) and InvestHK also launched a one-stop information site for family offices, while the government announced the creation of a dedicated unit within InvestHK to assist family offices with their set-up in Hong Kong.
Embracing technology and digitalization
The Covid-19 has acted as a catalyst for organizations to foster innovation and investment in technology to enhance regulatory reporting and compliance, streamline internal processes, increase connectivity with clients and upskill their workforce. The wealth management industry is placing an increasing focus and investment in a wide range of technologies, in many cases to improve data security or to better serve customers Emerging technologies such as blockchain, Application Programming Interfaces (APIs) and robotic process automation are in increasing demand and are being more widely applied to the wealth management industry While the proliferation of technology and digitalization continue to transform the business and operating models within the industry, the industry needs to consider and prepare for client requirements and expectations around technology to continue to increase.
Market interest in virtual assets such as cryptocurrency is also on the rise, and this is an area that the SFC has been closely monitoring and has taken steps to include virtual assets under its regulatory purview. As virtual assets continue to gain traction both globally and in Hong Kong, this will likely lead to increased demand for trusted virtual asset custodians.
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Source: https://assets.kpmg/content/dam/kpmg/cn/pdf/en/2021/06/hong-kong-trust-industry-spotlight-taking-centre-stage.pdf
XXX Services Limited - Valuation Report
5. BASIS FOR VALUATION
Small business valuation generally relies upon some measure of business cash flows as the earnings basis. Free Cash Flow to Firm is considered the proxy for cash flow generated in the business and hence utilized as a basis for the Discounted Cash Flow.
5.1. Sources of Company Financial Information
The management has provided the company's unaudited Profit and Loss statement for year ending 31st March 2020, 2021 and 2022. The company was incorporated in FY20 and therefore still undergoing significant changes in revenue and costs. Therefore, financial analysis and comparison of the historical performance have not been made. For arriving at future cash flows, we have taken the financial projections provided by the management.
6. BUSINESS VALUATION APPROACHES AND METHODS
There are two fundamental ways to measure the value of a business :
▪ Market approach.
▪ Income approach
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Under each approach, some methods are available which can be used to determine the value of a business enterprise. Each business valuation method uses a specific procedure to calculate business value. No one business valuation approach or methodology is definitive. Hence, utilizing some business valuation methods under each direction is standard practice The business value is then determined by reconciling the results obtained from the selected processes Typically, a weight is assigned to each business valuation method Finally, the sum of the weighted results is used to determine the value of the subject business. This process of concluding the business value is called business value synthesis.
6.1. Market Approach
Under the market approach to business valuation, one consults the marketplace for indications of business value. This approach uses the economic principle of competition which seeks to estimate the value of a business compared to similar companies whose value has been recently established by the market. The business valuation methods under the market approach are:
▪ Trading Multiples
▪ Comparative Transaction Multiples
In the trading multiples approach, publicly listed companies resembling the subject company business are selected. Industry-relevant multiples like EV/Sales, EV/EBITDA, P/E, or P/B are then used to determine the company's value.
In the case of comparative transaction multiples, recent market transactions involving companies of similar business are used to calculate industry-relevant multiples like EV/Revenue, EV/EBITDA, P/E, or P/B. These multiples are then used to arrive at the value of the company.
Each valuation multiple is a ratio statistically derived from companies' trading price, sales, and earnings in the same industry as the subject business.
XXX Services Limited - Valuation Report
Trading Multiples Approach for XXX Services Limited
For the trading multiples approach, the following criteria were used:
• Geography: Worldwide
• Industry: Since XXX provides different set of services, companies operating in the Trust Services, Accounting and Other Professional Services and Application Software for Investment and Capital Markets has been shortlisted.
EV/Revenue (or EV-to-Revenue): This multiple compares a company's Enterprise Value to the company’s Revenue. EV-to-Revenue gives investors a quantifiable metric of how much it costs to purchase the company’s Revenue.
Details of trading comparable are given below:
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Table 1: Trading Multiples
XXX Services Limited - Valuation Report
As shown in the table 1, the median trading EV/Revenue multiple for all comparable companies is 4 52x, and the median excluding the bottom quartile is 5 04x However, since XXX Services is too small compared to the comparable companies, a size discount of 10% is applied. Since these companies are publicly traded, and XXX Services is not, we use an illiquidity discount of 10%. After considering the discount for lack of liquidity and small size, adjusted EV/Revenue ranges from 3.62x to 4.03x.
Transaction Multiples Approach for XXX Services Limited
For the transaction multiples approach, the following criteria were used:
• Geography: Worldwide
• Industry: Since XXX provides different set of services, companies operating in the Trust Services, Accounting and Other Professional Services and Application
Software for Investment and Capital Markets has been shortlisted.
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EV/Revenue (or EV-to-Revenue): This multiple compares a company's Enterprise Value to the company’s Revenue. EV-to-Revenue gives investors a quantifiable metric of how much it costs to purchase the company’s Revenue.
Details of transaction comparable are given below:
Table 2: Transaction Multiples
XXX Services Limited - Valuation Report
As shown in the table 2, the median trading EV/Revenue multiple for all comparable companies is 4 68x, and the median excluding the bottom quartile is 4.90x. However, since XXX Services Limited is too small compared to the comparable companies, a size discount of 10% is applied. After considering the discount for lack of liquidity, adjusted EV/Revenue ranges from 4 21x to 4 41x
6.2. Income Approach
• The Income Approach to business valuation uses the economic principle of expectation to determine the value of a business. One estimates the future returns the business owners can expect to receive from the subject business. These returns are then matched against the risk associated with receiving them fully and on time.
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• The returns are estimated as either a single value or a stream of income expected to be received by the business owners in the future. The risk is then quantified using the so-called capitalization or discount rates.
• The methods which rely upon a single measure of business earnings are referred to as direct capitalization methods. Those methods that utilize a stream of income are known as the discounting methods. The discounting methods account for the time value of money directly and determine the value of the business enterprise as the present value of the projected income stream. The method used by the valuation team under the income approach is called as Discounted Cash Flow.
Discounted Cash Flow Method for XXX Services Limited
XXX Services Limited commenced business in 2019. In FY20, the company was not operational for full year. The company had full year of operations in FY21 and FY22. Since these are only the initial years of company’s performance, reliance has been placed on the projections provided by the management for arriving at the value of the company.
The Income Statement projections provided by the management are utilized to calculate the free cash flow. These net free cash flows to firm are discounted with the weighted average cost of capital (WACC), and then together with the terminal value, the net present value of free cash flows will give the Enterprise Value estimate of the company. Enterprise Value is adjusted for debt and cash to arrive at the Equity Value.
XXX Services Limited - Valuation Report
6.3. Cost Approach
The cost approach is a valuation technique that reflects the amount required to replace an asset’s service capacity (often referred to as the current replacement cost)
The following are the commonly used valuation methods under the cost approach:
(a) Replacement Cost Method; and (b) Reproduction Cost Method
Cost Approach for XXX Services Limited
The cost approach can be used for a company with substantial fixed assets, and where the business' operations depend on these fixed assets Since the company operates in the service sector with higher dependence on human capital and services provided, it would not be feasible to use cost approach for valuing XXX Services Limited
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XXX Services Limited - Valuation Report
7. VALUATION
7.1. Revenue and Profitability Analysis
XXX Services Limited earns revenue from two recurring segments – Fund Services and Secretarial and Professional Services. In FY21, the company earned revenue from fund services of US$ 461,546. Revenue from this segment increased by 32.17% to US$ 610,006 in FY22. The Secretarial and Professional Services segment’s revenue in FY21 was US$ 59,810. Revenue from this segment declined by 22.16% to US$ 46,557 in FY22. The company also earns revenue from non-recurring services like consulting and referrals. In FY21 and FY22, XXX Services Limited earned non recurring revenue of US$ 623,270 and US$ 115,796 respectively.
The company’s gross margins were 24.07% and 70.91% in FY21 and FY22 respectively. EBITDA Margins for XXX Services Limited were 2.70% and 6.93% respectively for FY21 and FY22
7.2.1.
Revenue and Profitability Projections
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In FY23, the management expects the revenue from fund services and professional services to grow by 40 86% and 64 17% respectively The management also expects to start providing fund formation services from FY23 The management expects to earn revenue of US$ 409,299 from the fund formation services segment In FY24, FY25 and FY26, revenue from Fund Services are projected to grow at 35%, stabilising to 25% in FY27 The revenue from professional services segment is projected to grow by 15% from FY24 to FY26 stabilizing at 10% in FY27 Revenue from the fund formation services is projected to grow at 10% from FY24 to FY27
Using a conservative approach, the management has not projected any revenue from the non recurring businesses like consulting and referrals.
The management has projected gross margin of 71.10% in FY23. The long term gross margins are projected in the range of 68% to 67%. The management has projected the operating margins to improve from 6.93% in FY22 to 24.62% in FY27.
7.2.2. Terminal Value
The terminal value refers to the present value of the business as a going concern beyond the explicit period of forecasts up to perpetuity. This value is estimated by considering the past growth rates of the product/service, the economic life cycle of the product/service, expected growth rates in the future, capital investments made in the business, and the estimated growth rate of the industry and economy. For calculating the terminal value of XXX Services Limited, we have used the perpetual growth method assuming stable growth range of 2% to 3%.
XXX Services Limited - Valuation Report
8.2.3.
Cost of Equity
Since the Company doesn’t have any debt on its balance sheet, adjusted Cost of Equity (“ke”) is used as the discount rate. Adjusted cost of equity is the shareholder's required rate of return on an equity investment Capital Asset Pricing model (CAPM) as shown below has been used to compute the cost of equity:
ke = rf + (Rm-Rf) where
ke = Cost of Equity
rf = Risk Free Return
= Beta, a measure of stock’s volatility
Rm=Return on Equity Markets
Base Cost of Equity (ke) has been estimated at 3 36% using the following factors:
• Risk Free Return (rf) – rf is considered at 2.63% (10 year government bond yield).
• Beta () – The beta considered for XXX Services (0.44) is the adjusted beta arrived at by using average unlevered beta of comparable trading companies.
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• Market Risk premium (Return on Equity Market (Rm) – Rf) is considered at 7.66%.
The base cost of equity for XXX Services Limited has been adjusted with an additional company specific risk premium of 7% due to the business and operational risks associated with business The Adjusted Cost of Equity (ACOE) has been estimated at 13 02%
8.2.4. Capex
No significant capex is expected in the forecast period..
8.2.5. Working Capital
The management estimates the receivables at 30 days and payables at 15 days
XXX Services Limited - Valuation Report
Table 3: Income Statement of XXX Services Ltd
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XXX Services Limited - Valuation Report
8.3. Transaction Multiples
XXX Services Limited Revenue for FY23 is estimated at US$ 1.34 million. Using the adjusted EV/Revenue multiple of 4.21x to 4.41x and Revenue of FY23, we have arrived at an Enterprise Value range of US$ 5.66 million to US$ 5.93 million. As per the information provided by the management, the company does not have any debt outstanding or excess cash as of 30th June 2022. Thus, the fair market value of the equity of XXX Services Limited using the transaction EV/Revenue multiple is estimated to be US$ 5.66 million to US$ 5.93 million.
4:
8.4. Trading Multiples
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XXX
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XXX Services Limited - Valuation Report
8.5. Income Approach
Following is the summary of the Discounted Cash Flow Method:
Table 6: Summary of Discounted Cash Flow for XXX Services Limited
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XXX
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XXX Services Limited - Valuation Report
DISCLAIMER
The information contained herein is for private circulation solely for the internal reference purpose of XXX Services Limited . All information and opinions contained herein are strictly for informational purpose and does not purport to be full or complete, and nor constitute investment advice. This report has been provided and drafted to XXX Services Limited on a strictly confidential basis for their internal reference only. The recipients of this report are hereby notified that no information or documents mentioned are herein contained has been independently verified, and all such information including future projections, has been provided by the management of XXX Services Limited. Further, no representation or warranty, expressed or implied, is made that such information remains unchanged in any respect as of any date after those stated herein with respect to any matter concerning any statement made in this report. Valueteam Pte Ltd and its directors, employees, agents, and consultants shall have no liability (including the liability to any person by reason of error, negligence, or negligent misstatement) whatsoever for any statements, opinions, information, or matters (express or implied) arising out of, contained in or derived from, or for any omissions from the report. All recipients of the report should make their independent evaluations and should conduct their investigation and analysis and should check the accuracy, reliability, and completeness of the information and opinions expressed in this report, and obtain independent and specific advice from appropriate professional advisors, as they deem necessary. Where this report summarizes the provisions of any other document, that summary should not be relied upon, and relevant documentation should be referred to for its full effect. It may be noted that past performance is not necessarily indicative of future performance.