Værdiansættelse af BoConcept Holding A/S: Fra truet møbelproducent til global franchise

Klaus Kaae Hermansen

Student thesis: Master thesis


The main purpose of the present thesis is to validate whether BoConcept Holding A/S (BC) is an attractive investment. BC is a Danish company listed on the Copenhagen Stock Exchange engaged within global sale of furniture. To reveal whether BC is an attractive investment, I have conducted a valuation to estimate fair value. The valuation is based on public available information 31st of October 2008. To support the valuation, I have performed a strategic and a financial analysis. The strategic analysis revealed that BC has improved its strategic position by establishing the franchise chain under the name ‘BoConcept’. The strategic analysis did furthermore show that BC has a substantial future market potential if the possibility of continuing the expansion of the franchise concept remains. Historical growth rates have been high in important key markets and market shares are still low, which supports the possibilities of further expansion. Analysis of the underlying development in BC show that the company has undergone a considerable development that has changed the company from being production orientated to now primarily focusing on sales through the franchise. Historical sale through the franchise chain has grown from a minor area to now representing all future sales. Sales growth in this particular area has been remarkably high compared to the rest of the business. The financial analysis did also show evidence of how BC’s business model benefits from economies of scale. This combined with the positive growth forecast outlines good perspectives for the future. Negative forecasts for the overall economic conditions, combined with competitive pressure, however, will be a great challenge and will unquestionably influence sales and income negatively. Based on my forecasts, I estimated the fair value of BC to 160.2 DKK a share. This price represents a 4,7% premium compared to listed price on the day of valuation. The price difference is too insignificant to define whether BC is an attractive investment or not, given the uncertainty in the process of estimating value. I would define BC, at the time of valuation, as an investment that approximately reflects the given income potential and the associated risk. The estimated value is highly dependent on sales growth and future gross margin. The estimated price is based on a scenario that predicts diminishing abnormal returns on invested capital due to increased competition. This is simulated as a decline in gross margin. If this assumption is proven wrong and it is possible to sustain the historic level of gross margin, there is considerable upside in fair value.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2008
Number of pages128