Firm Valuation of Skanska AB

Claes Adamsson & Johan Pilman

Student thesis: Master thesis


The purpose of this thesis is to determine the fair value of Skanska AB share, as of the 7th of April 2014. Skanska has recently grown stronger and is considered an established construction firm in the United States, one of Skanska's most promising markets. Together with deep roots in the Nordic countries, Skanska is exposed to an interesting future. In order to execute a robust valuation of Skanska, the thesis has undertaken three well-documented strategic frameworks: PEST Analysis, Porter Five Forces Analysis and a SWOT analysis. The PEST analysis examines the macro-economic drivers that currently are in place. Narrowing down the analysis to the industry-level, Porter Five Forces identified the factors that define the construction industry. The SWOT analysis summarized the key findings that will shape Skanska's future. The findings gave an opportunistic outlook for Skanska, where an increased urbanization and a high expected GDP growth within Skanska's home markets are contributing factor. Skanska has also proved to be well prepared for future challenges, through adapting quickly to new technologies and with an environmental consciousness. Through a systematic approach, Skanska's financial health was evaluated through a thorough financial analysis of Skanska's historical and current development. The revenues have grown throughout the years analyzed, where Skanska have recovered well from the financial crisis. Essential ratios such as ROE and ROIC have been benchmarked against Skanska's main competitors, NCC and Hochtief, where Skanska outperformed its peers. A breakdown of Skanska's business segments and geographical presence revealed a shift in the company’s revenue streams, allocated to the most promising markets of Skanska, the Nordics and the Americas, within the important Construction segment. Based on the findings from the strategic and financial analysis, Skanska's future was forecasted, allocating the revenues to each business area to generate reliable growth estimations. This ensured that a robust foundation to accurately valuate Skanska was undertaken. Using the established Discounted Cash Flow and Economic Value Added valuation models, the value per share was set to SEK 192.30. The computed result was further tested through a sensitivity analysis and benchmarked through multiples comparison, to conclude that the valuation was well executed. The derived result implies that the share is undervalued and the thesis recommendation is set to buy.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2015
Number of pages146