Valuation of Natural Gas Company
Valtech’s valuation team has recently completed a business valuation of PRC natural gas company.
The subject company is a PRC-based company with a long operating history in the natural gas and energy sector. The subject valuation is for annual impairment testing purposes. According to HKAS 36, our valuation adopted the discounted cash flow analysis to calculate the value in use of the cash-generating unit of the Company. We had an in-depth discussion with the management team of the Company to ensure the result both matches the management team’s opinion and won’t deviate from the current situation of the industry. With our dedicated support to the Management on reviewing the reasonableness of the financial forecast, the valuation is successfully completed without further comments from the auditor.
For these types of impairment testing assessment, it is important to justify some important underlying assumptions behind the scenes to handle potential challenges from regulators. One important role of a valuer in these types of valuations is to provide professional market research to support the underlying assumptions.
If the cash-generating unit is still expected to generate minimal cash flows which leads to significant impairment, don’t forget HKAS 36 also requires the company to also consider the fair value less cost of disposal (FVLCD). In some cases, minimal cash flows may simply be a result from bad management or lack of synergy from the company. The market may have an optimistic view on similar assets and shows good valuation multiples. Using the market approach to calculate the FVLCD may result in a higher recoverable value, even after considering transaction costs. Having a valuer in these types of tough situations may help the company to prevent excessive impairment expenses, if the market indeed shows objective evidence. Valtech Valuation is experienced in handling these valuations.
About Valtech Valuation
Valtech Valuation is a professional valuation firm accredited with ISO-9001 in valuation advisory services. The firm is renowned for its expertise in advanced valuation techniques, customized valuation models, data-driven insights, and adherence to compliance and reporting standards. The firm has a solid track record in valuation advisory for listed companies, private equity, fund managers, and financial institutions. Valtech’s qualified team comprises members with PhDs, CPA (HKICPA), CFA, Chartered Valuation Surveyors of the Royal Institution of Chartered Surveyors, and valuers accredited with Business Valuation (ABV) by AICPA and CVA qualifications in Singapore. Valtech continues to expand into more markets by leveraging its valuation platform and recruiting local experts.