Page 208 - ACCESS BANK ANNUAL REPORTS_eBook

ment in each of the unquoted equity securities at the end of the financial year using the Market approach.

The Adjusted fair value comparison approach of EV/EBITDA, P/E ratios and P/Bv ratios was adopted in valuing each of
these equity investments taken into cognizance the suitability of the model to each equity investment and the availability
of financial information while minimizing the use of unobservable data.

Description of Valuation Methodology and inputs:
The fair value of the other unquoted equity securities were derived using the Adjusted fair value comparison technique.
Adjusted fair value comparison approach of EV/EBITDA, P/E ratios and P/B ratios are used as input data .

The steps involved in estimating the fair value of the Group’s investment in each of the investees (i.e. unquoted equity
securities) are as follows:
Step 1: Identify quoted companies with similar line of business ,structure and size
Step 2: Obtain the EV/EBITDA or the P/B or P/E ratios of these quoted companies identified from
Bloomberg,Reuters or Nigeria Stock Exchange
Step 3: Derive the average or median of EV/EBITDA or the P/B or P/E ratios of these identified quoted com-
panies
Step 4: Apply the lower of average (mean) or median of the identified quoted companies ratios on the EV/
EBITDA or Book Value or Earnings of the investment company to get the value of the investment
company
Step 5: Discount the derived value of the investment company by Illiquidity discount and EPS Haircut Adjust-
ment to obtian the Adjusted Equity Value
Step 6: Multipy the Adjusted Equity value by the present exchange rate for foreign currency investment
Step 7: Compare theAdjusted Equity value with the carrying value of the investment company to arrive at a
net gain or loss

a. Enterprise Value (EV):
Enterprise value measures the value of the ongoing operations of a company.It is calculated as the
market capitalization plus debt, minority interest and preferred shares, minus total cash and cash
equivalents of the company .

b. Earnings Before Interest ,Tax Depreciation and Tax (EBITDA ):
EBITDA is earnings before interest, taxes, depreciation and amortization. EBITDA is one of the
indicator’s of a company’s financial performance and is used as a proxy for the earning potential of a
business.

EBITDA = Operating Profit + Depreciation Expense + Amortization Expense

c. Price to Book (P/B ratio):
The price-to-book ratio (P/B Ratio) is used to compare a stock’s market value to its book value. It is
calculated by dividing the current closing price of the stock by the latest company book value per share
or by dividing the company’s market capitalization by the company’s total book value from its balance
sheet.

d. Price to Earning (P/E Ratio):
The price-earnings ratio (P/E Ratio) values a company using the current share price relative to its per-
share earnings.

The sources of the observable inputs used for comparable technique were gotten from Reuters,
Bloomberg and the Nigeria Stock Exchnage

Basis of valuation:
The assets is being valued on a fair open market value approach. This implies that the value is based on the conservative
estimates of the reasonable price that can be obtained if and when the subject asset is offered for sale under the present
market conditions.

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Annual Report & Accounts 2017