Introduction
This analysis arrives at approximations of the value of SaskTel, a provincial Crown corporation owned by the government, and thus the citizens and taxpayers, of the province of Saskatchewan. The valuation ranges could be useful in determining the future ownership or use of this asset. Every organization needs to review what it could or should do to serve its clients and whether its present array of assets is appropriate for its strategy and its future operations.
Valuation
Market-based valuation of SaskTel
The best probable estimate of the total market capitalization, that is, the total value of the company traded on a public stock exchange, is $2.055-billion to $2.147-billion. The calculation used to arrive at this range of figures was performed using comparison companies, the closest peers being three Canadian regional telecommunications companies; however, large Canadian telecommunications services providers and several smaller, profitable regional U.S. companies were also used. In the end, the U.S. examples were retained for comparative purposes, but they were not used in the final calculations.
Intrinsic, Discounted Free Cash Flow (DCFC) valuation of SaskTel
Using several estimates and assumptions, the probable range of value for SaskTel is estimated to be $0.622-billion to $0.883-billion.
The lower figure is based on applying metrics derived from projected Adjusted Free Cash Flows that in turn are projected into the future at a growth rate of 2 per cent, discounted to Present Value at 10 per cent. The upper figure uses the same projected Adjusted Free Cash Flow average, also projected into the future at a growth rate of 4 per cent, discounted to Present Value at 8 per cent. Alternative methods and estimates, shown in Appendix A, arrived at figures that are far below the numbers given above.
Adjustments to cash flow were required, as there were a number of unusual trends or circumstances evident in the financial performance of the company in both recent and earlier years.
Final Caution: Neither of the valuation ranges above, neither the market value nor the intrinsic value, constitutes a Private Market Value that a corporate acquisitor may pay, such acquisitor having the benefit of being able to attempt to optimize the value of the taken-over company, with synergies, cost-cutting, asset disposal, optimization and perhaps the use of previous years’ tax-shielding losses.
Note: For details, please read the entire study that follows this section.
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