Chapter 312 Valuation and Financing
Hiroshi Arai is the senior executive of Shirakawa Holdings, and his rank is second only to the president, Kaede Shirakawa.
His role in Shirakawa Holdings is to handle the daily affairs of all subsidiaries under the group on behalf of Shirakawa Feng.
In terms of position and work content, it is somewhat similar to Western professional managers.
At the same time, he is also the chairman and president of Hokuto Bank, a subsidiary of Shirakawa Holdings.
This can be considered as returning to his old business, and Baichuan Feng is the only person whom he can trust with the bank.
At this time, Shirakawa Kaede announced the start of the meeting, and Arai Yu immediately stood up.
"Everyone, this is a detailed analysis of Shirakawa Electric 's business performance over the past year, as well as the company's current industrial layout and development."
An assistant came forward and distributed the prepared materials to every guest in the conference room.
Since you have decided to go public, you must prepare these basic information.
The financial details of Shirakawa Electric, which had never been made public before, were now clearly laid out before everyone.
The shipment volume, sales volume, operating costs, and operating profits of portable players, handheld game consoles , headphones, and even antique vinyl record players are all listed clearly.
Even the patent fees generated by the headphone patents and portable player patents are listed in detail.
These are the details of Shirakawa Electric's operations, and information on fixed assets and real estate is also provided.
Details of the land in Kawasaki, the headquarters building under construction in Shibuya , and the factories in Akita and overseas factories are all explained.
Of course, there are assets and there are also debts owed to the bank.
The bulk of the money is the loan for the construction of Shirakawa Building, and the lender is sitting right here.
As for the company's size, employees, technology and other soft power assets, not to mention, the first page is it.
It can be said that at this moment, Baichuan Feng fully displayed Baichuan Electric in front of everyone.
Why do this? When it comes to valuation, of course you have to take out all the treasures in the bottom of the box.
The more good things and the greater the potential, the higher the valuation, and naturally the more money you will get.
This is not the time to hide one's shortcomings. Even things that don't exist should be boasted about in an effort to raise the value of one's company.
Otherwise, how can we get money out of the pockets of Dai-ichi Kangyo Bank and Nomura Securities, two wealthy companies with plenty of money.
When the representatives of Dai-ichi Kangyo Bank and Nomura Securities looked at the information of Shirakawa Electric, they became more and more shocked, but at the same time they couldn't help but feel overjoyed.
Excellent assets! Absolutely excellent assets! Excellent assets with bright prospects!
Not to mention the various factories, land and other real estate, the profit last year alone was as high as more than 85 billion, or 340 million US dollars!
This is the net profit after tax, not a fictitious number like turnover.
To be honest, they expected Shirakawa Electric to have a good profit, with internal estimates of around US$200 million.
But 340 million exceeded their estimate by more than half, which is a completely different scale.
What does it mean that a company that has only been established for three years has an annual profit of more than US$300 million?
This means that the profit will continue to grow rapidly next year.
A company that has just been established for 3 years is too young. According to normal rules, the growth period of a new company can be at least 5 to 10 years.
Over such a long period of time, its revenue has been growing continuously.
That is to say, according to this trend, Shirakawa Electric's profits will continue to grow for at least 5 years.
So $340 million in profit is really just the beginning.
Don’t think that Namco made a profit of more than 200 million US dollars in the first year by developing the game "Pac-Man".
But will there be so many in the second year? Will there be another hit like Pac-Man in the second year?
Game manufacturers are, after all, content distributors, and their profitability depends heavily on whether the company can produce a hit product that year.
But Shirakawa Electric is different. It has stable and continuous profits, and it will not plummet or soar sharply.
But with a profit of $340 million, emphasizing the word "stable" has a completely different meaning.
This also shows the great potential of Shirakawa Electric, which is why Dai-ichi Kangyo Bank and Nomura Securities are so excited.
I have found a treasure. I have definitely found a treasure.
However, although everyone was very happy in their hearts, they did not show it on their faces.
"Well, does Mr. Shirakawa have any plan for the overall valuation of Shirakawa Electric?" Ichiro Watanabe of Dai-ichi Bank spoke first.
Although they are acquaintances of each other, he and Arai Yu are even old colleagues.
But when it comes to spending real money, he won't be polite and his sword for bargaining is already ready.
This time, it was Hiroshi Arai who spoke on behalf of Shirakawa Electric, "I believe you all have a general understanding of the situation of Shirakawa Electric.
Not to mention various assets and technologies, the net profit alone was as much as 85 billion yen last year.
The price-to-earnings ratio is used as the valuation basis to calculate the company's inherent assets.
We believe that Shirakawa Electric's valuation of 8 times net profit, 680 billion yen, is reasonable."
“Too high~”
As soon as Arai Yu finished speaking, Watanabe Ichiro shook his head.
This valuation far exceeded the expectations within Dai-ichi Kangyo Bank, and the silent representative of Nomura Securities, Takashi Yanagidani, also shook his head.
"Arai-san, whether it is calculated by market-to-earnings ratio or by price-to-book ratio.
However, for traditional manufacturing industries, the valuation is generally around 5 times the net profit.
Therefore, Nomura believes that Shirakawa Electric's valuation should fluctuate around 425 billion yen."
Takashi Yanagiya is the head of the financial investment department of Nomura Securities and is also a graduate of Meiji Business School.
Nomura specially asked him to take action for this negotiation.
His plan was to ask Baichuan Feng to consider the fact that they were fellow students from the same school and to maintain harmony and discuss all business matters.
And now, Baichuan Feng's senior was ruthless in bargaining, and with one cut, the valuation shrunk by nearly 40%.
As soon as Yanagidani Takashi finished quoting the price, Watanabe Ichiro of Dai-ichi Kangyo Bank immediately nodded in approval.
Apparently, the two companies had just reached a consensus in private at a very fast pace.
Faced with their offer, Baichuan Feng knocked on the table to attract everyone's attention.
“Yanagi-san just said that this is the market value valuation of the traditional manufacturing industry.
But please understand that Shirakawa Electric is not a traditional manufacturing industry, but an emerging electronic product manufacturer.
The two major engines of the Japanese economy are the automobile industry and the electronics industry, and Shirakawa Electric belongs to the latter.
How can a company that contributes to boosting the Japanese economy be classified as a traditional manufacturing industry?"
Saying that electronic manufacturers are traditional manufacturing industries may not be a problem in future generations, and not many people would refute it.
After all, the Internet economy has attracted too much attention, and various new technological concepts have emerged in an endless stream.
In comparison, the electronics industry, which has been developing for many years, does seem a bit "outdated".
But it was only the 1980s, and the electronics industry was definitely a high-tech industry.
It is different from authentic traditional manufacturing industries such as steel, clothing manufacturing, and food processing. This is the consensus of every ordinary person in Japan.
How can we use them as a reference for the valuation of Shirakawa Electric?
Therefore, the valuation of 8 times the net profit is 5 times higher than that of traditional industries, which seems completely reasonable to Shirakawa Kaede.
"Shirakawa-san, if Sony were valued like this, there would be no problem at all, but not Shirakawa Electric."
Ichiro Watanabe spread out the documents in his hand and pointed to the product catalogue on it.
"Shirakawa Electric's product range is not rich enough, and more than 90% of its profits depend on the walkman and handheld game console business.
This highly concentrated operating profit also carries high risks.
If these two businesses encounter setbacks, Shirakawa Electric's profits will plummet.
Moreover, these two products do not have the characteristics of high threshold and high technical difficulty, and are highly substitutable, so the valuation of 680 billion yen is too high. "
Facing Watanabe Ichiro's rebuttal, Shirakawa Kaede smiled.
"From another perspective, Watanabe-san, doesn't this also prove that Shirakawa Electric has unlimited potential?
Shirakawa Electric can make such profits just by relying on two products.
First, it shows that Shirakawa Electric has taken its products to the extreme.
Even though the threshold is not high, it always occupies the mainstream of the market, which is a reflection of the strength of our products.
Secondly, we will also launch CD players and audio products this year.
There are also major initiatives in storage devices and participation in standard setting in the future, which will create countless profits for Shirakawa Electric.”
"But that's the future, and no one knows whether these products will be popular," Yanagiya Takashi retorted.
“Isn’t investing in the future the most important part of investing?”
Baichuan Feng turned his head and looked at his senior brother with a smile, and the other party was speechless.
“If there are ready-made benefits in front of you, is it still called investment? No, it’s called making money.
Besides, Sony is also developing new equipment like , doesn’t that prove its market value?”
Since you are optimistic about Sony, I will use Sony for comparison.
Look, we have the same things they are developing, and our progress is no slower than theirs.
After a round of verbal sparring, Watanabe Ichiro and Yanagiya Takashi both fell into a brief silence.
Mr. Shirakawa (my junior fellow student), it would be a waste of his talent if he didn't become an investor.
The two people from Dai-ichi Kangyo Bank and Nomura Securities muttered the same thing in their hearts.
After thinking for a few seconds, Watanabe Ichiro turned around and whispered a few words to Yanagiya Takashi , then turned around and looked at Shirakawa Kaede.
"How about this, let's all take a step back. How about a valuation of 6 times net profit?"
"7.5 times" Baichuan Feng immediately quoted another price.
"6.5 times" Ichiro Watanabe immediately followed up.
"7.3 times"
"Shirakawa-san," Ichiro Watanabe interrupted the boring bidding game, "6.9 times, this is the bottom line.
As we all know, Shirakawa Electric is still young. Compared with the old brand Sony, it still has a lot less foundation.
Not to mention the product variety, the technical patents alone are far behind.”
Sony's current market value is less than 2 trillion yen, and Shirakawa Electric's valuation of more than 580 billion yen is already a lot.
What's more, Sony has been in operation for more than 30 years to reach its current scale, while Shirakawa Electric has only been established for a few years.
This is the last price Ichiro Watanabe had in mind. Anything more would require re-authorization from the Dai-ichi Kangyo Bank headquarters.
Baichuan Feng thought about it for two seconds and immediately made the decision, "Deal!"
Thus, in the final round of financing before listing, Shirakawa Electric was valued at 586.5 billion yen!
Now that the valuation has been determined, it’s time to talk about money.
