Valuation Methodology

At MILES Valuation, we apply internationally recognised valuation methodologies in accordance with global financial reporting standards, including IFRS and HKFRS.

Our approach combines rigorous financial modelling, market benchmarking, and professional judgement to ensure that valuation conclusions are transparent, supportable, and audit-defensible.

Depending on the nature of the asset or business being valued, we generally apply three principal valuation approaches.

1. Income Approach

The Income Approach determines value based on the present value of future economic benefits expected to be generated by an asset or business.

This approach is commonly used for valuing operating businesses, intangible assets, and investment projects.

Common Methods

Discounted Cash Flow (DCF) Method

The DCF method estimates value by projecting future cash flows and discounting them to present value using an appropriate discount rate that reflects the risk of the investment.

Key inputs typically include:

Revenue growth projections
Operating margin assumptions
Capital expenditure and working capital requirements
Discount rate (WACC)
Terminal growth rate

DCF analysis is widely used for:

Business valuation
Goodwill impairment testing
Purchase price allocation (PPA)
Intangible asset valuation

Relief-from-Royalty Method

This method is typically used for valuing trademarks or brand-related intangible assets. The value is estimated based on the hypothetical royalty payments avoided by owning the asset.

Multi-Period Excess Earnings Method (MPEEM)

This method isolates the cash flows attributable specifically to an intangible asset after deducting returns required for other contributory assets.

It is commonly applied in:

Customer relationship valuation
Technology valuation
PPA engagements

2. Market Approach

The Market Approach estimates value by reference to pricing multiples observed from comparable companies or comparable transactions in the market.

This approach reflects current market pricing behaviour and is frequently used when reliable comparable information is available.

Common Methods

Guideline Public Company Method (GPCM)

This method derives valuation multiples from publicly listed companies with similar business operations.

Common valuation multiples include:

EV / Revenue
EV / EBITDA
P / E
EV / EBIT

Comparable companies are selected based on factors such as:

Industry classification
Business model similarity
Revenue sources
Geographic exposure
Company size and growth profile

Guideline Transaction Method

This method uses valuation multiples derived from completed mergers and acquisitions transactions involving comparable companies. It reflects the control premium typically paid in acquisition transactions.

3. Asset-Based Approach

The Asset-Based Approach determines value based on the fair value of a company's underlying assets and liabilities.

This approach is commonly used where a company's value is closely tied to the value of its net assets rather than its earnings potential.

Common Methods

Adjusted Net Asset Value Method

This method adjusts the book values of assets and liabilities to their fair values.

It is commonly used for:

Investment holding companies
Real estate companies
Asset-intensive businesses
Liquidation scenarios

Method Selection

The selection of valuation methodology depends on several factors, including:

Nature of the business or asset
Availability of reliable financial projections
Availability of comparable market data
Stage of development of the company
Purpose of the valuation

In many engagements, multiple approaches are considered to cross-check the reasonableness of valuation results.

Professional Standards

Our valuation engagements are performed with reference to internationally recognised standards, including:

International Financial Reporting Standards (IFRS)
Hong Kong Financial Reporting Standards (HKFRS)
International Valuation Standards (IVS)

These frameworks ensure that valuation conclusions are consistent with financial reporting requirements and audit expectations.

Why Methodology Matters

Robust valuation methodology is critical to ensuring that valuation conclusions are:

Technically defensible
Transparent to auditors and regulators
Consistent with market practice
Reliable for financial reporting and transaction decision-making

At MILES Valuation, we combine professional valuation judgement with data-driven analysis to deliver valuation opinions that clients and auditors can rely on.

If you require an independent valuation for financial reporting, transaction support, or regulatory compliance, please contact MILES Valuation to discuss your requirements.