Corporate Valuation on Internet Portals : A Comparative Case Study on NHN And PCHOME
Date Issued
2008
Date
2008
Author(s)
Hong, Gyu-Young
Abstract
Abstract This paper is designed primarily to investigate Korea and Taiwan internet portals to provide insights into the manner in which accounting information, along with measures of internet usage, is employed in the valuation of internet firms and provide a comparative study on their valuation. In this paper, I claim that the old rules still apply. The way to test the reasonableness of new economy stock prices is to model the company''s ability to generate cash in the future. For the empirical study, I employ the DCF valuation model and select two internet portals, one Korean company – NHN – and one Taiwanese internet company – PCHOME –, both are listed on the respective stock exchange – KOSDAQ and Taiwan Stock Exchange. Perhaps more importantly, this paper offers insights into the practical implementation of the DCF model. An important challenge to implementing the original model is estimating the various parameters of the model. So for more accurate analysis, we separately analyze their business units, E-business, online game and the portal (display ad or keyword ad) in our sample. Therefore, we improve the valuation by forecasting market trend and companies’ future earnings, and by inferring the WACC from the observed the companies’ stocks. We illustrate these extensions in a valuation of the companies, NHN and PCHOME. Furthermore, many of the internet companies generate negative accounting income in spite of high stock price. Given these circumstances, the comparative approach for valuation with industry peers is conducted in a later part. Those analysis results show that the DCF model gives the reasonableness of their current stock prices and so indicates the high forecast capacity. As the last part, search service of NHN and PCHOME is analyzed to compare their current market performance and it suggests that search service could bring high value of internet portal.
Subjects
DCF
Valuation
PCHOME
Search Service
Type
thesis
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