The Valuation Of TG Company Based On Residual Operating Income Model

The TG company is preparing for stock listing，the board and management require tojudge the value of TG company properly for stock pricing.So it is necessary to assess theequity value of TG company scientifically.First，after comparing the valuation model combined with the characteristics of TGcompany，it is determined that the residual operating income model is the best for TGcompany；then，after the approaches to the valuation of TG company is summarized accordingto the theory analysis of ROIM，it is time to follow the steps to evaluate the equity value ofTG company.The first step，test whether TG company meets the premise of application；Second，adjust TG company’s balance sheet and income statement separately to meet theclean surplus relation，and distinguish between business activities and financial activities forthe analysis and forecast of parameter estimation；The third step is business analysis providingsupport for parameter prediction，through analyzing both inside and outside environmentdeeply to find out the factors which impact on the TG company’s future sales，cost etc.Thefourth step based on the first two step，analyze and predict each evaluation parameterscombined with the historical financial data、development trend and business plan of TGcompany，and use BAPM model to calculate discount rate of business activities；Fifth，assessthe equity value of TG company by ROIM on the fourth step basis；The sixth step issensitivity analysis based on the result of equity valuation.Finally，the result of the valuation shows that the whole value of TG company is133,961.30million yuan on31th December2013，then after subtracting the net financialliability of26,652.28million yuan at the same time，it is got that the value of equity is107,309.01million yuan on31th December2013..In addition，it is found that PM、ATO and Kis the key factor which affect the equity valuation of TG company through the single factorsensitivity analysis.Besides，a conclusion is obtained that the equity valuation of TG companyvaries within the range between65,279.79million yuan and399,018.04million yuan throughthe multi factor sensitivity analysis.The domestic securities institutions generally assess the equity value by P/E.The result ismore lower than the calculation by ROIM which shows the necessity of the application ofROIM indirectly.This study is benefit for making a correct evaluation on the equity valuation of TGcompany and providing the reference for stock pricing.Moreover，the research also providereference and guidance for equity valuation of other enterprises.