Step assisted the management team and shareholders of King Price Financial Services with independent valuation services
A valuation for the King Price Financial Services Group (“KPFS” or the “Group”) was required for the purposes of internal decision-making and a potential capital raise process. Step was approached as an independent valuation expert in order to execute and deliver a valuation report for KPFS.
Step scoped the various entities within KPFS in order to determine the most appropriate valuation methodology to apply to each asset. Following this, the materiality of each entity towards the overall Group value was evaluated to determine the extent of analysis to be performed on each entity.
The Step team worked closely with the management of KPFS to understand the business model for the material entities. Historical performance was assessed and analysed by the Step team with key value drivers of historic performance identified. Following a thorough review of overall financial performance and key value drivers, these were discussed with management in order to better understand normalised levels of performance over the historic period. Normalisations were performed in order to account for the impact on the book as a result of COVID-19 as well as adverse weather conditions experienced over the course of the historic period.
Through a combination of market research across the non-life insurance industry in South Africa and through discussions with management and key personnel across the business, the forecast financial performance was analysed and assessed in order to determine the basis for management’s forecasts.
The Step team independently calculated an appropriate discount rate using observable market inputs and company-specific risk factors.
Based on the analysis performed, the discussions held with management and the market research performed, the Step team developed a set of five additional economically plausible scenarios. These scenarios were valued using the income-based approach and were run through the valuation model in order to arrive at a reasonable valuation range for the material entities within the Group.
A market multiples-based approach was used in conjunction with the income-based approach. A universe of companies were identified within the non-life insurance space in order to arrive at an appropriate range of valuation multiples. The valuation output from the market multiple-based approach was then sense tested against the valuation output from the income-based approach in order to calibrate and triangulate value from both a relative and intrinsic valuation perspective.
The valuation of the Group was determined using a sum of the parts approach and applying the relevant discounts were applicable.
The Valuation report detailed the overall process followed, the financial analysis performed on historic and forecast performance including the detailed analysis performed on the key value drivers in the business, the valuation output for each of the entities that were valued by the Step team as well as market research performed on the non-life insurance industry in South Africa.