Valuation of Selected Company

Yunfen Hou

Master's thesis

Abstract:

The main objective of the thesis is to evaluate the value of selected company, based on data from 2008 to 2012. The value will be evaluated by two stage DCF method according to the forecasted balance sheet and income statement, under the base forecasted date at December 31, 2012. This thesis focuses on Tencent Holdings Limited. Tencent operates in Internet software and services industry and it is the leader in this industry in China. Tencent provides mass media, entertainment, Internet and mobile phone value-added services, and operate online advertising services in China. It is the fourth-largest Internet Company in the world after Google, Amazon, and EBay, as of August 2012. There are five chapters in this thesis. The first chapter is introduction and next three parts—chapter 2 chapter 3 and chapter 4 are the most important parts. The second chapter is theoretical part, in this part the enterprises value and propose of valuation will be described. At the same time, the strategic analysis and financial analysis especially in financial ratios will be described. Finally, some valuation approaches have been introduced, especially in income approach. In third chapter, some details of Tencent will be described for example history. Then concentrate on the products of Tencent, including products description and analysis of product. Finally, the industry information will be analyzed, including Internet industry and instant messaging industry. And then SWOT analysis will be used to analyze internal and external environment of Tencent. In chapter 4, financial analysis will be used to evaluate the performance of Tencent, especially some important ratios will be calculated. Next two stage DCF model will be used to estimate the value of Tencent, which use CAPM model to estimate WACC of the company. Finally sensitivity analysis will be used to analyze the sensitivity of some important items in balance sheet and income statement to the value of Tencent. The last chapter is conclusion. Based on the analysis presented in chapter 3 and chapter 4, main conclusions and recommendations will be presented in this chapter. By above analysis we are able to assess the performance of the company and get the value of the company and sensitive variable to value of the company. Finally, a better plan could be made to improve the performance and value of the company.

Abstract:

The main objective of the thesis is to evaluate the value of selected company, based on data from 2008 to 2012. The value will be evaluated by two stage DCF method according to the forecasted balance sheet and income statement, under the base forecasted date at December 31, 2012. This thesis focuses on Tencent Holdings Limited. Tencent operates in Internet software and services industry and it is the leader in this industry in China. Tencent provides mass media, entertainment, Internet and mobile phone value-added services, and operate online advertising services in China. It is the fourth-largest Internet Company in the world after Google, Amazon, and EBay, as of August 2012. There are five chapters in this thesis. The first chapter is introduction and next three parts—chapter 2 chapter 3 and chapter 4 are the most important parts. The second chapter is theoretical part, in this part the enterprises value and propose of valuation will be described. At the same time, the strategic analysis and financial analysis especially in financial ratios will be described. Finally, some valuation approaches have been introduced, especially in income approach. In third chapter, some details of Tencent will be described for example history. Then concentrate on the products of Tencent, including products description and analysis of product. Finally, the industry information will be analyzed, including Internet industry and instant messaging industry. And then SWOT analysis will be used to analyze internal and external environment of Tencent. In chapter 4, financial analysis will be used to evaluate the performance of Tencent, especially some important ratios will be calculated. Next two stage DCF model will be used to estimate the value of Tencent, which use CAPM model to estimate WACC of the company. Finally sensitivity analysis will be used to analyze the sensitivity of some important items in balance sheet and income statement to the value of Tencent. The last chapter is conclusion. Based on the analysis presented in chapter 3 and chapter 4, main conclusions and recommendations will be presented in this chapter. By above analysis we are able to assess the performance of the company and get the value of the company and sensitive variable to value of the company. Finally, a better plan could be made to improve the performance and value of the company.

Keywords

Valuation， Tencent, DCF model, Internet, Value, Financial analysis, Sensitivity analysis

Keywords

Valuation， Tencent, DCF model, Internet, Value, Financial analysis, Sensitivity analysis

Language used: English

Date on which the thesis was submitted / produced: 25. 4. 2014

Thesis defence

• Date of defence: 28. 5. 2014
• Supervisor: Miroslav Čulík
• Reader: Petr Gurný

VŠB - Technical University of Ostrava

Ekonomická fakulta

Master programme / field:
Hospodářská politika a správa / Finance