Asset Valuation Techniques

🛑 The Biggest Silent Killer of Mining Projects: Overconfidence in the Orebody 🛑 Every mine plan looks good... on paper. Production targets are met. Budgets approved. Equipment ordered. Everyone feels good until the mine starts underperforming. Month after month. Quarter after quarter. And the excuses pile up:   “Unexpected dilution” “Poor ground conditions” “Operational delays”   But here’s the truth nobody wants to say out loud:   The real failure happened years earlier, when we trusted the orebody model more than we should have. Mining is the only industry I know that builds billion-dollar businesses on statistical guesses... and then gets surprised when reality doesn't cooperate. Geological uncertainty is not a rounding error. It’s not a minor risk. It's shown to be the major contributor to project failures. It’s the foundation your entire operation stands on, or collapses on. And yet, companies build LOM plans assuming the estimated block model is the ground truth. Why? Because it's easier to assume certainty than to quantify uncertainty and plan for it. Because spreadsheets are cleaner when you don’t have multiple scenarios. Because no one wants to explain to the board that the “high-confidence” resource might still let them down. But pretending the orebody is perfect doesn't protect you. It just delays the realization.   🔍 Here’s what actually happens: Resource models, even “measured” ones, have built-in errors, including grade, volume, and continuity errors. Estimation methods like Kriging smooth out the grades, where high-grades (where we make money!) are underestimated, and low-grades are overestimated. Mine plans are optimized assuming every block behaves exactly as estimated. Operations find out the hard way that Mother Nature didn’t read the single 3D model.   🔴 And the cost? Missed production targets. Inability to control contaminants at the plant. Cash flow shortfalls. Poor reconciliation. Erosion of investor trust. Bad CAPEX decisions. Inability to fulfill contracts.   All because we decided to ignore the geological uncertainty!   ✅ What actually works? Quantify uncertainty, early and often. Simulate multiple orebody realizations that reproduce the local variability under the ground instead of relying on a single “best guess.” Optimize the strategic mine plan looking at all simulations. This will ensure you have integrated risk-management, prioritizing less risky, yet rich, areas early on till more information is available for later project stages. Report the production schedules probabilistically.   Mining doesn’t fail because it’s inefficient. It fails because it assumes the earth will behave the way a model says it should. And when that assumption breaks, everything else does too. Maybe it’s time we stop treating geological uncertainty as a technical inconvenience. It’s the core business risk, and facing it in advance is the only way we’ll stop falling short. #Uncertainty #Risk #ResourceModel #MinePlanning #Stochastic

The externalities era is over. The internalisation era has begun. A powerful new whitepaper from the Value Balancing Alliance demonstrates what many of us in sustainable finance have long suspected: externalities don't stay external. They usually, and to a significant degree, move from narrative into numbers and get internalised as a core driver of asset pricing, cash flows, enterprise valuation, Value at Risk and cost of capital for boards, asset owners, investors and regulators. If unaddressed, they are an impediment to economic productivity. Key findings that should change how we allocate capital: 1. Markets are already pricing externalities: Research shows ~20% of corporate externalities are already capitalised in market valuations. Firms in the top carbon burden decile face +1.7% higher cost of capital. The question isn't whether externalities matter financially- it's whether your models reflect this reality. 2. The risk is material and asymmetric: Climate Value at Risk (CVaR) and Nature Value-at-Risk (NVaR) estimates range from 6-50% of global equity value depending on transition pathways. These aren't tail risks - they're central to valuation, especially in transition-critical sectors. Nowadays, central banks and supervisors, including the Network for Greening the Financial System (NGFS) scenarios map policy and climate pathways to sectoral earnings and default/loss rates, providing input curves for "Value at Risk" and "Expected Shortfall" stress paths. The tooling up to extend climate to nature-related financial risk quantification is underway. 3. The implementation gap is closing fast: Standard setters (ISSB, CSRD, ESRS, ISO14008/14054, ICMA, OECD et al) now anchor decision-useful sustainability information into core reporting regimes, valuation principles, transition finance guidance, and investment stewardship expectations: the infrastructure for decision-grade impact valuation is becoming operational. 4. For Transition Finance, this is the breakthrough moment: Externalities accounting provides the analytical spine that converts transition commitment narratives into quantified cash-flow drivers, risk factors, and investable guardrails. It's the bridge from narrative to numbers. If your company's externalities are 50% of its market value, are you running a business or managing a liability that hasn't been billed yet? #SustainableFinance #TransitionFinance #NaturalCapital #ImpactValuation #ESG #ClimateRisk #NatureRisk

Appraising a business isn't just about applying an EBITDA multiple and calling it a day. Each piece of the puzzle can materially affect the valuation. If you're doing FP&A advisory work, or serving as a Fractional CFO, clients will often benefit from a valuation model. The model doesn't need to be perfect, but it serves a couple of purposes: 𝟭) 𝗗𝘆𝗻𝗮𝗺𝗶𝗰 𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻 𝗕𝗮𝘀𝗲𝗱 𝗼𝗻 𝗥𝗲𝗮𝗹 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗣𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲 Instead of relying on a static, one-off valuation, an integrated 3-statement model allows you to automatically refresh the appraisal as actual financial results (income statement, balance sheet, and cash flow) evolve. The model will recalculate the company's value in real time as revenue, margins, working capital, or capex change. 𝟮) 𝗦𝗰𝗲𝗻𝗮𝗿𝗶𝗼 𝗣𝗹𝗮𝗻𝗻𝗶𝗻𝗴 𝗮𝗻𝗱 𝗪𝗵𝗮𝘁 𝗜𝗳𝘀 When the valuation is tied to full financial statement forecasts, you can easily run "what if" scenarios: How does a price increase or cost savings initiative affect the valuation? What happens if growth slows? By integrating assumptions into the model, you can help a business owner understand how these decisions impact value. 𝗪𝗵𝗮𝘁'𝘀 𝗵𝗮𝗽𝗽𝗲𝗻𝗶𝗻𝗴 𝗶𝗻 𝘁𝗵𝗶𝘀 𝗲𝘅𝗮𝗺𝗽𝗹𝗲? In this analysis, loosely based upon a real company (I’ve changed the figures and assumptions), I use both an NTM Revenue Multiple and an NTM EBITDA Multiple. NTM stands for next twelve months. That's why it's vital to have a 3-statement forecast model behind this analysis. For illustrative purposes, I weighted the two different approaches 50/50 to reduce reliance on a single method. However, it may be concerning that the gap between the indicated value of equity before adjustments ($31.5 million and $84.9 million) is so wide between the revenue and EBITDA multiples. This is why selecting the right market multiples and the right basis for the multiple matters so much. Rely on a questionable multiple or basis and you’ll end up be with a questionable valuation. The value may need to be adjusted for a control premium, recognizing that buyers often pay a premium to gain strategic decision-making power. The result: A marketable, controlling value of $83.2 million. 𝗪𝗵𝗲𝗻 𝘆𝗼𝘂'𝗿𝗲 𝗯𝘂𝗶𝗹𝗱𝗶𝗻𝗴 𝗱𝘆𝗻𝗮𝗺𝗶𝗰 𝗺𝗼𝗱𝗲𝗹𝘀 𝗮𝗻𝗱 𝘃𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻𝘀 𝗳𝗼𝗿 𝗰𝗹𝗶𝗲𝗻𝘁𝘀, 𝗮𝗹𝘄𝗮𝘆𝘀 𝗿𝗲𝗺𝗲𝗺𝗯𝗲𝗿: (1) Different methodologies can lead to very different results. (2) Adjustments for control can move the needle dramatically. (3) A valuation isn't just a number. It’s a combination of judgement and assumptions. You can have two different Fractional CFOs who arrive at two different outcomes. That's why it's helpful to make integrated financial models flexible, so they can update and be adjusted with relative ease. These models help give business owners a reasonable basis for the worth of their companies. They deserve that.

Ever wonder why one $2M business sells for 3x and another for 6x? Same revenue. Same size. But wildly different valuations. Here’s the truth: multiples aren’t magic—they’re math + perception. And if you're buying (or selling) a business, you'd better know what drives them. 👇 I broke it down: ✅ 15 traits that justify a higher multiple ⚠️ 15 traits that kill your valuation Use it as a checklist. Or a warning. ✅ Higher Multiple (Premium Valuation) Attributes Recurring Revenue Model – Subscription-based, contracts, or ongoing services. Strong Free Cash Flow – Consistent, growing, and high-margin. Diverse Customer Base – No single customer represents more than 10–15% of revenue. Established Management Team – Business can run without the owner. Proprietary Product or IP – Something hard to copy. Growing Industry – Tailwinds instead of headwinds. Low CapEx Requirements – Doesn’t require constant reinvestment to grow. Brand Strength / Market Position – Recognized leader or top provider. High Employee Retention – Skilled, loyal team in place. Owner Not Critical to Operations – Transferable relationships and workflows. Automated or Documented Systems – SOPs, CRMs, project tools. Audited or Clean Financials – Clear books, accrual basis, CPA-reviewed. Strong Supplier Relationships – Favorable terms, diversified vendors. Regulatory Advantage – Licenses, permits, or approvals that are hard to get. High Customer Satisfaction – Strong reviews, referrals, and retention. ⚠️ Lower Multiple (Discounted Valuation) Attributes Customer Concentration – One or two customers = big risk. Declining Revenue or Profit – Flat or shrinking trendline. High Owner Dependency – No business without the owner. Weak Margins – Low profitability after cost of goods and overhead. Outdated Tech or Processes – Manual, inefficient, or legacy systems. Unreliable Financials – Commingled, cash basis, missing records. High Employee Turnover – Constant rehiring and retraining. Limited Market Size – Small niche, no room to scale. High CapEx Needs – Constant investment in equipment or infrastructure. Litigation or Legal Issues – Pending suits or compliance red flags. Aging Customer Base – Declining usage or market shift. Poor Online Presence – Weak digital marketing or outdated website. No Growth Strategy – No plan, no roadmap, no momentum. Short-Term Wins Only – Recent spike, no sustainable edge. Messy Inventory or AR/AP – Bloated balance sheet with hidden problems.

💡 How Do You Value a Business? It Depends on What You're Really Trying to See. As a CFO, I get asked this question all the time: “What’s this business worth?” My answer? It depends on the method, the assumptions, and the purpose. Because business valuation isn’t just a technical exercise. It’s a lens. And each lens gives you a different angle. In my latest guide, I’ve broken down the five most widely used valuation methods and when each one matters most: 🧮 1. Discounted Cash Flow (DCF) This method gives you the intrinsic value based on future free cash flows. It’s powerful but also sensitive to assumptions. Miss the WACC or terminal growth rate, and the whole model skews. ✅ Best for: Long-term investors who believe in the fundamentals ⚠️ Watch out for: Overconfidence in your forecast 📊 2. Comparable Company Analysis (CCA) This one is about market mood. You look at peers, ratios like EV/EBITDA or P/E, and ask: What are similar businesses worth today? ✅ Best for: Fast benchmarking and market-aligned estimates ⚠️ Watch out for: Differences in business models or risk profiles 🤝 3. Precedent Transaction Analysis (PTA) Here, we look at recent M&A deals to benchmark value. Think of it as a real-world yardstick. ✅ Best for: Negotiating in M&A scenarios ⚠️ Watch out for: Unique deal terms or outdated data 🏗️ 4. Asset-Based Valuation Strip away the forecasts and trends. This approach values the net assets, which are what you own minus what you owe. ✅ Best for: Asset-heavy businesses or liquidation scenarios ⚠️ Watch out for: Undervalued intangibles and obsolete assets 🧠 5. Real Options Valuation This is the most advanced and strategic approach. It values flexibility in your decisions based on how the future plays out. ✅ Best for: High-risk, high-reward projects with optionality ⚠️ Watch out for: Overengineering a model based on hypotheticals ✅ The best valuation method? It depends on the question you’re trying to answer. Are you selling? Investing? Raising capital? Planning for growth? Each scenario deserves a tailored lens. 📥 Download the full guide to see a practical breakdown of each method, including pros, cons, and where I’ve seen them applied effectively. 💬 What valuation method do you rely on most, and why? #CFOInsights #BusinessValuation #DCF #ComparableCompanies #MergersAndAcquisitions #StrategicFinance #ExecutiveLeadership #CorporateValuation

✨ Valuation is never “one-size-fits-all.” As a valuation freak, I’ve learned that every industry has its own way of measuring value. What works for banks won’t work for airlines, and what works for IT services won’t work for cement. For example: Banks → Price-to-Book & ROE (capital strength matters most) IT Services → EV/EBITDA (earnings growth is key in an asset-light model) Pharmaceuticals → P/E & EV/EBITDA (earnings powered by R&D and global reach) Airlines → EV/EBITDA & EV/ASKM (traffic and cost efficiency drive value) The real insight? 📊 Valuation ratios aren’t just numbers — they reflect what truly drives a business: growth, efficiency, scalability, or assets. 👉 For anyone working with businesses or investments, the question to ask is: What really drives value in this sector? Curious to hear — which industries do you think are the hardest to value?

If you’re a financial modeller, analyst, investor, or simply curious about valuation in emerging markets, this one is worth your time. After weeks of deep work, I’m excited to share my full DCF valuation model for Nestlé Nigeria PLC, built with a clean structure, transparent assumptions, and robust scenario analysis. This model covers: - 📊 Historical performance review (FY20 to FY24) - 🔍 Forecast drivers and assumptions (FY25 to FY29) - 🧮 Detailed schedules: revenue, margins, working capital, capex, FCFF - 💰 WACC computation & terminal value - 📈 Valuation output: EV, equity value, and implied share price - ✔️ Comprehensive model checks to ensure integrity A few highlights from the model: - The model's base assumptions result in an enterprise value ("EV") of N1,599bn (Market EV of N1,325bn) with an equity value of N1,000bn (Market CAP of N694bn) and a model-implied share price of N1,262 (Market share price of N875).  - Compared to the market share price of N875, the model suggests that the stock is undervalued by c.30.6% supporting a BUY recommendation. -The recommendation is supported by strong cash flow, margin resilience despite costs, inflation, and fx pressure, conservative discount rate, deleveraging and strengthening returns Please watch the walkthrough on YouTube: https://lnkd.in/embN-zxQ Let me know your thoughts; I always enjoy discussing modelling approaches and valuation perspectives. #corporatefinance #businessvaluation #DCFvaluation #Microsoftexcel #Nestle #learning #MVP

📡 MTN buying back infrastructure it once sold is one of the most interesting corporate finance moves in Africa right now. For years, telecom companies across the world sold tower assets to unlock cash, reduce debt and create “asset-light” businesses. Now the trend is slowly reversing. 🔄 MTN’s proposed $6.2 billion acquisition of IHS Towers signals something much bigger than a telecom transaction. It highlights where the long-term value in the industry may actually sit. Infrastructure ownership is becoming strategic again. 🏗️ Whoever controls the towers increasingly controls: • network quality • data growth • 5G expansion • fintech ecosystems • future digital infrastructure This deal also says something important about capital allocation. Many corporates spent the last decade monetising infrastructure to improve short-term balance sheets. But in sectors where connectivity, data and scale drive competitive advantage, owning the underlying infrastructure may ultimately create far greater long-term value. We are starting to see a shift from: “sell infrastructure to improve returns” to: “own infrastructure to control the ecosystem.” And in Africa’s rapidly growing digital economy, that could become a major competitive advantage. 🌍 #MTN #IHSTowers #Telecommunications #CorporateFinance #MergersAndAcquisitions #Infrastructure #Africa #CapitalAllocation #PrivateEquity #Finance #Strategy #5G

WHEN DO YOU STOP THE PIT AND GO UNDERGROUND? (Part 2) In the previous post, we explored one of the toughest questions in mine planning: “When do we stop the pit and start going underground?” That post lit up with ideas, stories, and great debate — and one question kept coming up: 👉🏽 What really dictates the switch? Let’s go deeper — into the logic, the curves, and the math that reveal when value changes hands. Before we look into the governing equations, let's remind ourselves of the mine economics! ⚒️ Open Pit Economics — The Law of Diminishing Depth At shallow depths, the pit is king. Big equipment, bulk movement, quick tonnes. But as you go deeper, the walls open up, waste explodes, and the strip ratio skyrockets. The value of an open pit mine at any depth d is governed by this equation; V_{pit}(d) = R(d) - [C_{mining}(d) + C_{waste}(d) + C_{process}] At some point, every extra tonne of ore comes with mountains of waste — and your profits start slipping away. 🏗️ Underground Economics — The Slow Starter That Wins Deep Underground begins where open-pit struggles. Yes, it’s expensive at first — declines, ventilation, power, access — but once inside, you mine only the valuable material. V_{UG}(d) = R(d) - [C_{dev}(d) + C_{stoping}(d) + C_{UGGA} + C_{backfill}] At first, UG is costly. Then steady. While the pit curve falls, the underground curve rises — until they finally meet. 💡 The Crossover — Where Value Changes Hands This is the magic point planners search for: V_{pit}(d_t) = V_{UG}(d_t) At that depth dₜ, both methods deliver the same NPV. Above it, open pit wins. Below it, underground takes over. It’s the “handshake” between two worlds — where the pit bows out, and underground takes the crown. 🧭 The Planner’s Secret Never stack up totals—they hide ugly benches. Judge the next bench only: if pushing the pit one level deeper won’t pay for its extra waste, haul, dilution, and delay, while the first underground stopes do pay, you’ve hit the transition. That’s the moment smart planners stop digging and start tunnelling. ⚙️ How World-Class Planners Make the Call 1️⃣ Run Whittle or Pseudoflow with a UG shadow (exclude access & crown pillar). 2️⃣ Compare incremental shells — not just “ultimate pit.” 3️⃣ Integrate pit + UG schedules to protect mill feed. 4️⃣ Test sensitivities (±20%) on slopes, prices, and delays. 5️⃣ Plot both curves — where they cross, the numbers speak for themselves. 💬 In Short The pit says, “I can still go deeper.” The underground replies: “But I can do it smarter.” Your job as a planner is to determine where value outweighs volume. 🧮 I’ve built a Transition Calculator (Excel) that visualises this crossover — just enter your pit & UG costs, NSR, and slope, and it shows where the switch happens. Join our toolkit and download the template here! 👇🏽https://lnkd.in/dv8Ney28 Or share this post to your network to get the template for free. Let me hear your thoughts! #MinePlanningClarityToolkit