case4 1december2010 - Corporate finance 4.2 Case#4...

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Corporate finance 4.2 Case#4: Oceanteam ASA TIME #1, GROUP #20: Yu-Chun Chen (2120828) Cheekin Poon (2133083) Zilvinas Sirutavicius (2118785) OCEANTEAM ASA VALUATION USING ASSET-BASED APPROACH Having a given dataset, we think that the best possible approach for evaluation of Oceanteam ASA is the asset-based approach. This method is usually for the valuation of the start-up companies, companies that cannot generate positive cash flow and its forecast becomes complicated and also companies that are close to liquidation. By using this method we try to determine the fair value of company’s assets. We analyze three scenarios. For conservative one we use the value of total assets and liabilities to calculate the value of the company. For neutral scenario we assume that tangible assets on balance sheet are conservative estimate of market value, so we add 20 per cent to the value to calculate them. Optimistic scenario is the one, we provide most of attention. We remain the values of all tangible assets except for the vessels the same as in the neutral scenario, as for the vessels we determine their value by given assumptions. We assume the rental income from one vessel EUR 50 thousand a day, costs of EUR 15 thousand a day if it rented as a long term charter and EUR 100 thousand and EUR 30 thousand a day respectively if it is a spot deal. We also assume economic life of 40 years, the ratio between long term charters and spot deals of 2:1 and utilization for spot deals of 33 per cent. We also assume that income from the vessels will not be the same throughout the whole period of 40 years, which is assumed to be an economic life of the vessel. We make an assumption, that after ten years, the income of a vessel will start to decrease by 2 per cent annually because of its age and decreased value.
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