Table 3. Applicability test,... | Emerald Publishing

Table 3.

Applicability test, income-based valuation methods for port concessions

Applicability test	Income-based approach valuation
Applicability test	Price-earnings valuation with the application of Gordon’s growth model
Applicable to concession valuation?	Not applicable
Rationale	• P/E ratio is benchmarked with a similar listed entity which may not be fully comparable on account to differing port institutional arrangements • The value is based on historic market information • Earnings can be subject to manipulation based on accounting treatment, certain financial non-disclosures, etc • Assumes constant dividend which may not apply in a concession • Assumes consistent dividend in perpetuity from year 1 • Concession has a limited lifespan and dividend is only payable once when there is cash available for dividends • Assumes stable growth per annum

Applicability test	Income-based approach valuation
Applicability test	Price-earnings valuation with the application of Gordon’s growth model
Applicable to concession valuation?	Not applicable
Rationale	• P/E ratio is benchmarked with a similar listed entity which may not be fully comparable on account to differing port institutional arrangements• The value is based on historic market information• Earnings can be subject to manipulation based on accounting treatment, certain financial non-disclosures, etc• Assumes constant dividend which may not apply in a concession• Assumes consistent dividend in perpetuity from year 1• Concession has a limited lifespan and dividend is only payable once when there is cash available for dividends• Assumes stable growth per annum