Valuation of Byggmax Group AB

Andreas Ekenberg

Student thesis: Master thesis


The purpose and main objective of this report was to estimate the intrinsic value per share of the Swedish DIY retailer Byggmax as of April 16, 2015 by using renowned models, market practice and applicable public information. Company valuation has become more complex in recent years due to political instability in multiples regions, uncertain economic prospects and unpleasantly low inflation together with low to negative interest rates. Although these factors add complexity to the valuation process, it creates an opportunity for new insights and reflections. The valuation was carried out by a structured approach, covering aspects from larger mac-roeconomic drivers to firm specific factors. The valuation process was initiated by an intro-duction of the DIY industry and key players in Sweden, Norway and Finland followed by a brief presentation of Byggmax. Afterwards, a strategic analysis was performed, addressing the macroeconomic environment, industry characteristics and company specific attributes using theoretically accepted frameworks such as PEST, Porter’s five forces and value chain analysis. The most important findings reviled a very competitive industry comprising of un-differentiated goods with a plethora of competing retailers, reducing industry wide profita-bility. However, the company specific analysis showed that Byggmax has a very efficient organisation and a unique position in the market, with its primary activities revolving around growing and improving the network of stores. The strategic analysis was followed by a financial analysis, scrutinizing Byggmax’s financial performance in relation to one of its main competitors, Hornbach. The analysis focused on profitability, sales growth and liquidity and concluded that Byggmax is a very profitable com-pany without a significant liquidity risk. The main findings from the strategic and financial analysis were summarized in a SWOT analysis, showing that Byggmax has a very successful discount strategy, enabling high prof-itability. The main concerns were found to be related to industry characteristics, creating a downward trend in profitability. The findings were collectively used to forecast future cash flows as a basis for a DCF valua-tion, resulting in an intrinsic value per share of SEK 53, corresponding to a 10 per cent discount to the observed share price of SEK 59.5. The estimated cost of capital was estimated to be 7.23 per cent, with a cost of equity of 8.88 per cent and a cost of debt/COL of 3.58 per cent.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2015
Number of pages103