Valuation

Comprehensive Valuation Report – SaaS Firm

Ruskin Felix Consulting LLC partnered with a SaaS (Software as a service) company to prepare a comprehensive valuation report. The report highlights the financial viability of the project by laying emphasis on the valuation basics, valuation of the company – pre-operations, valuation of the company – post-operations, and re-evaluation of the company. To understand how financially viable the project is, we have highlighted the difference between VC and Angel valuation and the best practices to be followed for application of funds. 

Information about the company:

  • Type of Company – SaaS (Software as a service) 
  • Business of Company: Providing a Full-service Website builder (Semi-automated)
  • Avg Charge per user per month: $20 per month
  • No. of Shares: 10,000,000
  • Value of 1 share: $0.00001
  • Total Value of Company (Nominal Value) = $100

The Company being into the Technology industry will be valued separately for tax purposes and valuation of startup purposes. For accounting purposes, as per IAS 3, the company software will be valued as per the cost involved to build the asset and amortized/depreciated over the course of the usable life of the asset, after reducing any salvage value.

The software must be valued as per the term value of the asset. This will be the Net Present Value of all the Discounted Cash Flows that the company will generate over the course of its life. This term value is the present value of all future cash flows that will be generated from the company. Thus, for a startup, it will be very necessary that the management makes assumptions about the value generated from the sale of its services periodically and then discounts it with the internal cost of capital of the business. Even with no clients but a ready product, the company needs to be valued at the NPV (Net Present Value) of all future cash flows expected to arise from the Asset, considering a weighted risk factor to discount the asset further.

Normally allocation of Funds is done based on an ongoing understanding of expenses and operating costs. It is therefore an assessment that must be made by the company on a continuous basis. At an early stage the investment allocation are as follows: 40%-50% for research and development, 10%-20% for salaries, 0%-5% for bonuses, 10%-15% for HR expenses, 10%-15% for other software expense, 15%-20% for advertising and marketing expense, and 0%-5% for other expenses. 

At a later stage the investment allocation are as follows: 15%-25% for research and development, 15%-25% for salaries, 5%-10% for bonuses, 10%-15% for HR expenses, 0%-5% for other software expense, 30%-40% for advertising and marketing expense, and 10%-15% for other expenses. 

This Valuation has been taken by way of making Common Size Balance Sheets of similar business and thus are in a range of percentage instead of an overall percentage. Proper Consultation must be taken for assessment of the same. Valuation services can also be provided to you for you to gain a better understanding of which investors and type of investments to look for. 

Comprehensive Valuation Report – Shareef Corner

Ruskin Felix Consulting LLC partnered with Shareef Corner to prepare a comprehensive valuation report. The report highlights the financial viability of the project by laying emphasis on the business risk, credit risk, competition risk while also analyzing the projections. The infrastructure outlay forms a significant part of the report. To understand how financially viable the project is, we have highlighted the projected turnover and projected expenses. The financial metrics further helps to understand the NPV and IRR, payback period and the capital that is required to be raised.

Some of the key risks associated with this type of business are as follows:

  • Scalability and cost of acquisition
  • Revenue maximization practices
  • Distribution Network – Selection and Operation
  • High reliance on specific distribution KDRs

There will be a credit risk that the company will be exposed to as well if some parts of the operations are funded through debt. In such a case the assumed WACC of 10% may also change. Even with higher demand and opportunity in the market. Businesses that have focus on food products run the risk of depreciation or obsoletion of output produced in case of long-term storage. This increases the cost of warehousing as well as the need for assured demand for the output. With various players in the field, the sudden increase in competition might affect the long-term view of the business as product differentiation and distribution will be key to the operational success.

The overall valuation of the company is based on 3 valuation methods and is computed based on the weighted average of the valuation methods. The overall valuation of the company (Post Money) is SAR 2.167 billion on a 5 Year forward basis. The methods used to compute the value of the company are:

  • PE multiple of FCFF cash flows
  • Overall Project NPV Valuation – DCF Valuation
  • Terminal Value Method

The range of valuation for the business is computed at: SAR 1.95 billion to SAR 2.38 billion.

It is to be noted that this value is based on the projections and assumptions made for the valuation and may significantly differ during real operations due to the overall business and industry risk. The Pre-money Valuation of the business is SAR 452 million based on 2021 Earnings Multiple basis at a 42X PE Ratio.

For an investment of SAR 30 million, the investor should get 6.64% of the overall company at the above-mentioned valuation range – Pre money and should look to gain an IRR of 225% on investment.

The company is a viable investment due to its assured structured cash flows and growth potential at a valuation of SAR 2.167 billion with a healthy business and asset flow with existing distribution contracts. 

Comprehensive Valuation Report – Black Orchard Farming

Ruskin Felix Consulting LLC partnered with Black Orchard Farming to prepare a comprehensive valuation report. The report highlights the financial viability of the project by laying emphasis on the business risk, credit risk, competition risk while also analyzing the projections. The infrastructure outlay forms a significant part of the report. To understand how financially viable the project is, we have highlighted the revenue segmentation, projected revenue, operational expenses and revenue expenses. The financial metrics further helps to understand the NPV and IRR, payback period and the capital that is required to be raised. 

Some of the key risks associated with this type of business are as follows:

  • Scalability of farms and cost of acquisition
  • Yield maximization practices
  • Distribution Network – Self or franchise Model

There will be a credit risk that the company will be exposed to as well if some parts of the operations are funded through debt. In such a case the assumed WACC of 10% may also change.

Even with higher demand and opportunity in the market. Businesses that have focus on food products run the risk of depreciation or obsoletion of output produced in case of long-term storage. This increases the cost of warehousing as well as the need for assured demand for the output. With various players in the field, the sudden increase in competition might affect the long-term view of the business as product differentiation and distribution will be key to the operational success.

The overall valuation of the company is based on 3 valuation methods and is computed based on the

weighted average of the valuation methods. The overall valuation of the company is $16.67 Million on a 5 Year forwards basis. The methods used to compute the value of the company are:

  • PE multiple of FCFF cash flows
  • Overall Project NPV Valuation – DCF Valuation
  • Terminal Value Method

The range of valuation for the business is computed at: $14.1 Million to $19.2 Million

It is to be noted that this value is based on the projections and assumptions made for the valuation and may significantly differ during real operations due to the overall business and industry risk.

For an investment of $800,000, the investor should get 4.17% – 5.6% of the overall company at the above-mentioned valuation range.

The company is a viable investment due to its assured structured cash flows and growth potential at a valuation of $16.67 Million and the investor should invest $800,000 at a Share value of 4-6% Equity in the company.

M&A Due Diligence & Valuation Entertainer X Advantage Plus

Ruskin Felix Consulting LLC prepared a business strategy report while shedding light on the strategic alliance assessment of Entertainer and Advantage Plus. The Client Al-Zarooni Investments owns the Entertainer and was looking to partner with Advantage Plus for its foray into Group Club memberships. The report highlights the merger and the market analysis for Entertainer and Advantage plus. Through this report, RF Consulting has tried to highlight the advantages and key strengths of the merger. The financial viability of the project has also been assessed by understanding the cost analysis, comprehensive sensitivity analysis, and probability analysis. The report emphasizes on the inhouse development of the merger and lays down specific future opportunities. Through the recommendations, we have tried to provide an expert opinion and assessed the financial viability of the M&A and executed due diligence. The deal was executed completely in 2021 and was successfully implemented.

The Entertainer company has high brand value which can be utilized for expanding business as it’s a market leader in its main industry of providing group discounts coupons with network of hotels, F&B and leisure services. The company has about 75,000 active members and have existing database of 100,000 clients which it can be utilize for furthering the alliance product in the market. The overall strength in the GCC and UAE market is high, and the company can utilize existing strength levels to create awareness of the new product in the market it operates in. The company has surplus capabilities and will be able to put in the cost of marketing and sales that would be assessed for the new proposed product. With the company operating in its present space for many years, it has substantial links, network and value that can be vital to creating a new product and brand.

The overall economy of UAE and GCC has been growing however it has been relatively stagnant in the recent years and has lesser growth rate in its tourism traffic. However, the economy has grown steadily and looks to create events like the EXPO Dubai 2020 to boost its influence in Travel and tourism. 

Based on the understanding on the business strategy, there are a few recommendations that are there for Entertainer and Advantage Plus. The potential for inhouse development is there for the Entertainer, but as per the predicted demand and initial market stance, we would advise Not to focus on the inhouse development as it runs a high risk and has only a 10-20% margin overall while in operation. The company should make an alliance with the Advantage plus, use synergies, market strength, existing clientele to gain market share. Using expertise and created algorithm and network of partners of Advantage Plus.

Analyzing the financial viability of the merger, there are a few assessments that we have made, based on the financial projections. We expect substantial value to be generated from operating jointly. However, even with that increased value, Advantage plus will clearly gain further value with time as it will be able to reduce its operating margin and increase the services based on the number of partners and average memberships. There is thus a great opportunity for the Entertainer to eve and acquire the company advantage plus. RFC also performed a deep assessment of competitors in the field like Privelee in UAE and Saudi Arabia

The alliance will be profitable for both companies The Entertainer and Advantage Plus as per our assessment of the overall market opportunity and cost projections.

Tiny Astro

Ruskin Felix Consulting LLC partnered with Tiny Astro to prepare a comprehensive strategy report and a smart contract review. Tiny Astro’s team requested that Ruskin Felix Consulting LLC design a detailed renting and leasing mechanism for the platform as well as the review and audit of the Smart Contract. The report also highlights the financial viability of the of the project by laying emphasis on the cost variables, revenue computation, projected valuation of the crypto, NFT revenue projection, and cash flow analysis. The report also shed light on the coin distribution plan and the value based on the circulation of the coin.

Given the opportunity to review Tiny Astro Project’s smart contract source code, we in the report outline our systematic approach to evaluate potential security issues in the smart contract implementation, expose possible semantic inconsistencies between smart contract code and design document, and provide additional suggestions or recommendations for improvement. Our results show that the given version of smart contracts is ready to launch after resolving the mentioned issues, there are no critical or high issues found related to business logic, security or performance.

During the first phase of our audit, we studied the smart contract source code and ran our in-house static code analyzer through the Specific tool. The purpose here is to statically identify known coding bugs, and then manually verify (reject or confirm) issues reported by tool. We further manually review business logics, examine system operations, and place DeFi-related aspects under scrutiny to uncover possible pitfalls and/or bugs. We have so far identified that there are potential issues with severity of 0 Critical, 0 High, 0 Medium, and 2 Low. Overall, these smart contracts are well- designed and engineered.

In this audit, we thoroughly analyzed Tiny Astro Smart Contract. The current code base is well organized but there are promptly some low-level issues found in the first phase of Smart Contract Audit. Meanwhile, we need to emphasize that smart contracts are still in an early, but exciting stage of development.

Tiny Astro NFT based SaaS platform should thus be marketed as a community of enthusiastic NFT holders who need automated services for NFT collections. There should be tiers for difference value additions. The company should also look at raising the funds based on the overall valuations and cash flow projections. A key aspect of the project is the supply management, and the company should use the logic to create an automated BOT to manage the prices of the token. Tiny Astro smart contracts were also successfully reviewed, and the various errors diagnosed and highlighted should be corrected by the development team. The firm’s overall value is expected to be $197 Million by 2027, inclusive of the underlying Coin. The business does have the risk of imitation and replication by other already active platforms. Thus, market share needs to be increased faster through marketing and brand integration strategies. The business has a substantially high IRR (312%), but similar projects on the Cryptocurrency Universe are in line due to the initial capital raised through NFT based asset sale.

 

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