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Ba ltic Valuation Conference 2013. MARKET ASSESSMENT ASSETS OF EMERGING MARKET - FEATURES OF THEIR INFORMATION SECURITY. Violeta Kasarova PhD (Bulgaria ), Rumi Chuknyisky , PhD, Peter Chuknyisky , PhD, Dari Dobrovidel (USA ) 2013.
VioletaKasarova PhD (Bulgaria),
Rumi Chuknyisky, PhD, Peter Chuknyisky, PhD, Dari Dobrovidel (USA)
Purpose of this reportis to demonstrate the specifics at usage of the comparative approach for market assessment of assets at various types of markets and the necessary for the purpose information.
The focus falls on :
All of the examples which are stated in the report are taken from the practice of the authors.
The economies in the world, in general are divided into:
Respectively the markets are also divided into developed and emerging.
According to the World Bank, an economy is considered as emerging economy, whenever its wealth creation level, measured by the gross domestic product per capita, is below that of the developed economies. Following this criterion, the World Bank classified in 2007, the economies of 209 countries as follows - 65 as developed and 144 as emerging.
These data are presented in the following table.
World Development Indicators Database, July 2008.World Bank
Many analysts consider the emerging markets as a whole, without formation of a subgroup of the frontier markets. We have adopted the same approach.
The assessors of the emerging markets have to do more complex and responsible job, because they are:
According to a study of Bulgarian analysts, in the assessments of the Bulgarian experts:
Every of the three above stated apprоaches, as per Damodaran (2002), has its advantages and disadvantagesand its application is related with many limitations and difficulties, which influence the final results of the assessment.
The comparative approach is very suitable for assessment of emerging markets, but there are some problems for its usage.
The restricted usage of the comparative approach in evaluation of enterprises (business) is hidden in the problems, related with the access to relevant market data. In the meantime this approach is largely used for evaluation of estates in Bulgaria, precisely because of the availability of information for sufficient number of market analogues, with prices that are result of accomplished deals.
The comparative approach is based on:
The main advantage is that encounters the circumstances of the market and the real priorities of the investors, while its application requires a presence of active market and accessible financial information for evaluated asset and its analogues. However, these two prerequisites, make in principle the comparative approach to be fast and easy for application, but hard for usage under conditions of emerging market, such as Bulgaria due to the low volumes of sales and transactions (mergers and acquisitions of companies), which limits the opportunities for choice of analogues. The solution of this situation is to use foreign analogues, which requires however, a series of additional adjustments to be done in order to achieve unified measures of the information.
Good results after using the comparative approach in the market assessments of the emerging markets can be achieved if:
OBJECT OF THE ASSESSMENT – Bulgarian- American Credit Bank AD (ВАСВ) , owner of 12 624 725 tradable shares
DATE OF THE ASSESSMENT - 30.09.2011
BANKS ANALOGUES: Used in the assessment market multiple Р/В and
Fair market value per single share is =
(2.102 + 0.681)/2 = 1.392 leva
Information sources for the assessment – Bulgarian stock exchange (http://www.bse-sofia.bg/), Bulgarian national Bulgarian National Bank (http://www.bnb.bg/), sites of the banks analogues - http://www.corpbank.bg/investor_relations.html; http://www.ccbank.bg/bg/about-us/annual-reports/; http://www.fibank.bg/bg/za-nas/page/698
OBJECT OF THE ASSESSMENT – Bulgarian enterprise
DATE OF THE EVALUATION – 31.12.2011.
ANALGOUES– two enterprises from USA
Information sources for the assessment:
Bloomberg - URL: http://www.bloomberg.com/
Yahoo! Finance - URL: http://finance.yahoo.com/
Moody’s - URL: https://www.moodys.com/
Value Line - URL: http://www.valueline.com/
Bulgarian Stock Exchange–URL: http://www.bse-sofia.bg/
Index of Economic Freedom - http://www.heritage.org/index/pdf/2011/index2011_highlights.pdf
Example 3. Market value using the comparative approach for assessment of estates on a developed market (following the example of the market of the USA)
Examples of Search Engines in Business Evaluation of Commercial and Residential Real Estate Properties in the USA Developed Market