NIBC Valuation Memo

Analysis of valuation methodologies

Comparable company analysis compares trading and operating performance of the Wynn Resort to its peers. We used this valuation method to determine how the market has valued the earnings and cash flows of similar companies and allow us to analyze other parameters such as book value, leverage and margins. The main benefit of this valuation methodology is that market efficiency ensures that the trading multiples are similar for companies in a related industry, geography, and have similar market cap and growth rates, thus the company in question can be valued based on its close trading comparables. Disadvantages include an inability to find exact comparables, as no two companies are the same; thinly traded stocks may not fully reflect the fundamental value of the company, or extreme market volatility may cause deviation from intrinsic value, and an entire industry could be undervalued or overvalued as a result.

Precedent transaction analysis determines the values offered in past acquisitions of similar companies and determines the pricing associated with past deals as compared to the target’s financial performance and current market value. The pro is that comparable transactions reflect reality as it has occurred in the past. This method gives you an accurate sense of how past transactions were successfully completed at certain premiums, which indicates a range of plausible premiums. Trends such as consolidating acquisitions, foreign purchasers or financial purchases become clearer. The cons are that past transactions are rarely comparable, precedent transactions include a purchase premium, and public data on past transactions can be misleading or non-existent.

Leverage acquisition (LBO), or recapitalization analysis was used to model Wynn’s financial performance under an initially high leveraged capital