A Fundamental Valuation of B2Holding ASA

Thomas Rotvold Ingebrigtsen & Anders Mendoza Sveinhaug

Student thesis: Master thesis

Abstract

This thesis attempts to map the debt purchasing and collection industry in Europe, and value one of its largest incumbents B2Holding by applying relevant valuation theory. In Europe, the total stock of non-performing loans grew to 7 percent after the 2008 Financial Crisis, prompting regulatory powers to raise their attention to banks and financial institutions assets. Regulations encouraged an increase in the sale of non-performing loans and B2Holding managed to become a sizeable European debt purchaser and collector by employing a capital-intensive expansion strategy that utilised the extended supply and low-cost financing. By the end of 2019 they had acquired operational platforms in 23 countries with NOK 23.8 billion in remaining collections.
In 2019 the growth slowed in the industry because of tightening bond markets, increased competitive rivalry and eroding profit margins. B2Holding had to change its strategy to focus on joint ventures and fewer markets, consequently reducing their overall risk profile. Evidence suggested that competitors would adopt similar strategies and reduce internal competition to stabilise profits.
The fundamental share price of B2Holding was ascertained within the NOK 8.06 to 13.34 range, with the median price of 12.94. Compared to the 28.02.2020 share price of NOK 6.18, the median estimate corresponded to a substantial undervaluation of 52.24 percent. We added reliability to our valuation by running a robustness test using a Monte Carlo simulation on the DCF-enterprise valuation. It showed a 95.08 percent probability of observing a share price above NOK 6.18.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2020
Number of pages130