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Abstract:
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The purpose of this thesis is to estimate the value of the company DSV, which is listed on the
stock exchange in Copenhagen. This purpose leads to the main question:
“Is DSV’s share over-or undervalued relative to its strategic and economic potential?”
The Danish transport- and logistic company DSV has grown significantly since the company
was founded in 1976. With a strategy of organic growth and acquisitions DSV has succeeded
in strengthen the business substantially and has created shareholder value.
In order to answer the main question of the thesis, a strategic analysis was performed, from an
external and internal point of view. The external analysis showed that the general transport
market is very low due to the financial crisis. Since DSV is very sensitive to the situation on
the transport market, the financial crises has caused a significant decrease in the revenues.
However, the internal analysis showed that DSV is a company that is able to adjust to the
circumstances of the market. The analysis also showed that DSV is very aware of keeping
their fixed costs low. DSV’s primary parameter of competition is the price, and that is why
cost control is extremely important. This also means that economies of scale are important in
order to keep the unit costs as low as possible. Economies of scale have been a vital part of
the strategy of growth.
Besides the strategic analysis, the financial history of DSV was analysed.
The qualities of the earnings were evaluated sound, and there were no indications of red flags.
DSV has changed their accounting principles once in the last five years. This change has
made it necessary to adjust prior years for the purpose of the analysis.
The financial analysis showed an increasing tendency in higher ratios, which indicates that
DSV has performed well. The ROIC ratios are high compared to the estimated WACC. In
2008 ROIC was 12.90 % compared to a WACC of 6.86 %. The ROE ratio was in 2008 33.77
% compared to the owners required rate of return, which was estimated 8.89 %. The ratio analysis has shown a positive development in the historical analysis period. DSV has
generated a positive cash flow during the analysis period until 2008. The growth in sales and
turnover made it necessary for DSV to finance the growth by obtaining loans. A risk analysis
consisting of an operation and financial analysis was evaluated to be a little above the average
level.
Through the information gained from the analysis of financial and non-financial valuedrivers,
a budget has been made. It is made as a realistic forecast on future turnovers and revenues and
the budget is the main component in the valuation of DSV.
The valuation of DSV was performed with the DCF-model and the RI-model. These models
are based on pro forma accounts, and if done correctly, they will give the same result. The
total cash flows and the residual income, in the excess return period, and the terminal period
are discounted to present values with a discounting factor, which is the WACC. WACC was
calculated to 6.86 %.
Through the two valuation methods, a price of 23,918 million DKK has been calculated. A
total of 209.15 million outstanding shares give an average price of 114 DKK per share. A
sensitivity analysis reveals that the valuation is very sensitive to changes in WACC, the asset
turnover rate and the profit margin from sales.
Through comparison with the price multiples it has been clarified that the valuation of DSV is
low compared to other transportation companies in Europe.
The share was traded on the Copenhagen Stock Exchange, Friday 16th of April 2010 at a price
of 104 DKK. Through the valuation methods the share has been valued at 114 DKK. For this
reason it has been determined, that there is a potential for growth in the share price, since the
price of the shares of DSV are undervalued. |
