Multiple refers to Economic Value divided by the sum of (Investment @ cost plus Goodwill).
ML states "With the Kingston sale, the imminent sale of Ziff Davis and the generally more bullish outlook towards the Internet in Japan, the company (9984) should be able to command a higher multiple for its investment portfolio - a 10-15x multiple gives a price range of Y40k-60k".
Elsewhere in the report ...
"... And Asset Multiple is the only Valuation Metric
Softbank's investment period in late stage companies (through SBCP) is around one year, and in early stage companies (through Softbank Technology Ventures) is around two years. If we assume that the lifetime of the funds is around five years, and the annualized return is about 50-75%, the multiple at which the fund should be valued is roughly 5-10x (using an 8% discount rate). As this valuation is based on the assumption that the funds under management do not grow, we believe a "premium" can be applied to these valuations. In the case of CMGI ...
and then a chart ...
Name Invest. Goodwill Debt Mkt Cap. Economic Value
to (Invest.+
Goodwill)
CMGI 944 148 20 7,952 7
ICGE 102 7 1 11,624 107
9984 1,047 3,267 2,300 39,055 10
ML contends that 9984, given its more insightful management and better portfolio (more upside), deserves a higher multiple as more of its babies will make good. 9984 multiple can be expanded by increasing its economic value (market cap, pay down debt) or starting up cheaper but better companies (investment + goodwill). |
