Page 7 - Valuation in Abnormally Uncertain Times

SECTION 2 :

GUIDANCE ON VALUATIONS IN ABNORMALLY UNCERTAIN TIMES

It is clear from the public equity markets that COVID-19 has had a devastating impact on the valuations and led to an increase in
the returns required by shareholders.

In this section, we provide guidance on how to carry out valuations in abnormally uncertain times such as the current one.

GUIDANCE ON THE INFORMATION TO CONSIDER/INCLUDE AS AT THE DATE OF
VALUATION

The key criteria for considering and including information as at the valuation date is whether the information was known or
knowable. Subsequent events are generally not known or knowable, but if they are reasonably foreseeable they can be taken
into account.

A valuation conducted as at 31 December 2019 will differ significantly from a valuation conducted on 31 March 2020, where
COVID-19, being a subsequent event, should have no impact on the valuation analysis as at 31 December 2019.

For valuations as at 31 March 2020 and going forward, the uncertainties brought about by COVID-19 needs to be carefully
considered and incorporated into the valuation assumptions.

GUIDANCE ON FREE CASH
FLOW PROJECTIONS

To value an asset or business using the
Discounted Cash Flow (“DCF”) approach,
projections for future free cash flows are
typically constructed over a 5-year to 10-year
period and should be extended to a future
point in time where the subject of valuation
has reached a steady growth state.

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