CCC Hopes Foreign Governments Will Be Squared Away

Crown Corporations, Ian Madsen, Valuation

Canadian Commercial Corporation (CCC) is a relatively minor player in the Canadian export financing and insurance market. It plays a complementary role to its sister Crown corporation, Export Development Canada (EDC), although it also appears to overlap in some ways. CCC occupies more of a role of facilitator or agent for smaller companies which have contracts for exports or investment or infrastructure with foreign governments, including defense industry and military ones. Using an intrinsic value method, and discounting to the present, CCC’s projected future free cash flows, the range of estimates is $28.8M to $201.7B, with a tighter range of a median (middle value) of $50.4B to a mean (simple average) of $64.9B. Making allowances of bad debt of as much as 5 percent of outstanding loans, that is, by $1.55B, does not lower the estimated value of the company appreciably. Discounting for a bad-but-not-Great Depression-level of bad debt experience of 1 percent of the total loan portfolio, the value of the corporation is wiped out and is heavily negative. In the second version, the range of estimates is $7.43B to $52.03B, with a tighter range of a median of $13.01 to a mean (simple average) of $16.74B. Making allowances of bad debt of as much as 5 percent of outstanding loans, that is, by $1.55B, does not lower the estimated value of the company appreciably. Discounting for a bad debt experience of 5 percent of total loans, the range becomes a median of $12.39B to a mean of $15.93B.

In the second version, the range of estimates is $136M to $952M, with a tighter range of a median of $238M to a mean of $306M. Making allowances of bad debt of 1 percent of outstanding loans, that is, by $56.3M, does not lower the estimated value of the company appreciably. Discounting for a bad debt experience of 5 percent of total loans, the range becomes a median of negative $43M to a mean of positive $24.9M.

View the entire valuation here: VS09_CCCvaluation_OC3018_F1