Raw Deals: Book value or discounted cash flow?

IOI Properties privatisation by IOI Corp.

• Based on Bloomberg’s consensus estimates, the IOI Corp offer was 36% below IOI Prop’s book value of RM3.63 and valued the company 8.9 times its forecast earnings for the year ending June 30, 2009. ( source: Raw deal for IOI Prop’s minority shareholders )

Puncak Niaga on rejecting Selangor Government Offer. (News clip from Dow Jones)

• Puncak Niaga:Selangor Govt Offer For Water Assets Unacceptable
  
  KUALA LUMPUR (Dow Jones)--Puncak Niaga Holdings Bhd. (6807.KU) Monday said last week's revised offer from the Selangor state government to buy its units' water-related assets are not acceptable.
  
  The company said in a stock exchange filing the MYR1.9 billion offer to buy the assets of unit Puncak Niaga (M) Sdn. Bhd. was "unacceptable" due to the valuation method based on the one-time book value of the assets.
  
  "The discounted cash flow ("DCF") method is the more appropriate valuation method for concession companies which is commonly applied in corporate mergers and acquisitions," Puncak said.
  
  The board and shareholders of unit Syarikat Bekalan Air Sealngor Sdn. Bhd., or Syabas, meanwhile were "unable to arrive at a decision" on the state government's MYR3.36 billion offer for its assets because any disposal requires the consent of the federal government as the holder of a golden share in the company.
  
  "To date, Syabas has not received or been informed of any instruction or decision from the Federal Government in respect of the same," it said.

Above table for Business Times article here

Hmmm... interesting eh?

IOI Properties were taken private at 36% below it's book value.

Puncak Niaga is saying one times book value is unacceptable.

Yeah one could easily said that in the privatisation of a listed subsidiary, the holding company would ALWAYS offer the cheapest price possible. For if it wasn't cheap, why would the major shareholders waste their time and effort?

While on Puncak's case, it's a takeover. Hence they would want to seek the best price possible.

Two contrasting differences on how to value a company eh?

One was done on a deeply discounted book value while the other wants the discounted cash flow.

Would it be wrong to see most would want to use the valuation best fit one's needs?

ps: Postings on DCF (Discounted Cash Flow)

• DCF (Discounted Cash Flow) example
• Using the DCF