RE:RE:This is a good deal!Just to clarify things a little. Although the Discounted Cash Flow approach is an important indicator of value, a professional business valuator will also look at other ways to establish and support the valuation number ....replacement cost, comparative values...
I've looked at the site from Google maps and though it is hard to know exactly where their property line begins and ends....there is a large parking lot....and it is a very large site ...it is in an absolutely stellar location location location
IMO while the DCF is a valid valuation method, it is subject to its assumptions and mathematical inputs, meaning changes in discount rate, assumed cash flows etc will generally have a significant effect on the final number
So I would also like to know what similar properties sell for around that area and what the cost might be to replace that facility.
WRT to DCF and capital allocation decisions that I learned in finance courses at university, I never saw them used "in the wild", though admittedly I dealt mostly with entrepreneurs and business owners. They all used simple payback calculations and rough rules of thumb....generally 3 years for assets, 4 to 5 times earnings for a service business.....where it was all about the sooner the better.and "expected outcomes in numbers and qualitative parameters"
Looking at our financials, I see the carrying value of the minority interest is about 6.5 million on the latest Balance Sheet ..... so they paid about 2 times book ......and their 2021 allocated interest in the profit was $500k out of $6.1MM so about 8.2%..(2020 400k out of 5.7mm= 7% ) from which we can infer Deerfoot takes in most of the profits as the minority interest share of the firm wide profit climbs towards 9%
So they paid 2 times book to capture an additional 9% of their most profitable property
Turning to price paid and market cap, 13.6 MM is about .075% of 180mm...the current market cap.
So to me, there are no red flags in this deal...though I would like to know what both the replacement and comparative value approaches say