Ruskin Felix Consulting LLC partnered with Globalfy 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 and the past financials of the company. The financial metrics further helps to understand the NPV analysis, and the FCFF computation.
Some of the key risks associated with this type of business are as follows:
- Consistency of order pipeline.
- Low Profitability Margins
- Various Intrinsic KPI factors for business
- Relatively high competition
A higher level of risk is associated with the entertainment, production and media industry where the overall value of firms is harder to predict. Also Hit and miss projects are higher as number of clients to be attained is dependent on high cost of acquisition with low churn rate. The industry has an extremely focused and high competition-based operation metrics and one or a series of failed/unsuccessful projects can heavily jeopardize future operations and production pipeline. Thus, the overall industry and target Equity Cost of Capital used for discounting FCFFs is taken as 10%. The company also runs the risk of defaults, delays and issues arising from contracted and planned revenues in cases where the business operations will not pan out as planned and projected. The delay and non-payment of revenues by clients is also to be accommodated in the overall business risk of the company. This may adversely affect the cash flows of the leading to cutbacks, execution delays and layoffs.
The overall valuation of the company is based on 4 valuation methods and is computed based on the weighted average of the valuation methods. The overall valuation of the company is $983.5K on a 5 Year forward basis. The methods used to compute the value of the company are:
- PE multiple of Net Profit (CY)
- Revenue Multiple on CY Revenue
- Overall Project NPV Valuation (DCF)
- Terminal Value Method
Due to the significance of overall net cash flows in present value from investor’s perspective, we have used the ratio of 30% valuation for it, thereby providing the investor a higher assured returns during the period of the investment.
The range of valuation for the business is computed at: $885k to $1.08 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.
The company is a viable investment due to its assured structured cash flows and growth potential at a valuation of $983k.