Financial Times: Strengthen asset evaluation to objectively reflect the value of listed companies

In recent years, asset appraisal has played an important role in the initial public offering (IPO) and mergers and acquisitions of listed companies in my country. Experts suggest that asset appraisers should participate in the issuance and pricing process of listed companies and implement regular asset appraisals for listed companies.

　　 Asset evaluation should participate in the IPO pricing of listed companies

The report provided by the China Assets Appraisal Association to reporters shows that, according to the announcement information of listed companies in my country, the Assets Appraisal Association has made statistics on the evaluation data of the initial public offering (IPO) company restructuring in 2012. In 2012, there were 26 initial listed companies on the main board market in my country. (The Securities Regulatory Commission has suspended the issuance of new shares since October 2012), of which 19 companies have undergone restructuring evaluation, accounting for 73.08% of the total number of IPO companies that year; the total market value of the evaluated companies is 134.286 billion yuan, accounting for the total market value of all IPO companies that year 53.82%. The total assets assessed are 28.43 billion yuan; the book value of net assets is 8.160 billion yuan, the appraised value is 15.413 billion yuan, the value-added value is 7.252 billion yuan, and the appreciation rate is 88.87%.

　　 Asset appraisal, with its professional functions of value discovery, value judgment, and value management, actively serves enterprise restructuring and listing, truly and objectively reflects the value of enterprise assets, and promotes the standardized and orderly progress of asset securitization.

　　 Asset appraisal experts suggest that in order to further improve the IPO pricing mechanism, asset appraisers should participate in the process of issuing pricing by listed companies. At present, the issuance pricing of listed companies is mainly determined by the inquiry method of securities firms, which is mainly based on the price-earnings ratio realized by the issuer in the past few years. Asset appraisers specialize in enterprise value evaluation. The valuation of the issuer is not only based on book and historical conditions, but also pays more attention to factors such as its market value and future profitability. The participation of asset appraisers in the issuance pricing process is conducive to more accurate judgments and valuations of the issuer’s capital structure and future profitability, better safeguarding the interests of investors and promoting the healthy and orderly development of the capital market.

　　Implement a regular asset appraisal system for listed companies

　　 For the majority of investors in the capital market, most of them have had the experience of investing in stocks with the concepts of mergers and acquisitions and asset restructuring. In fact, asset appraisal has played an important role in this.

According to the information announced by my country’s listed companies, the Asset Evaluation Association’s statistics on the asset evaluation data of mergers and acquisitions and restructuring completed in 2012 show that in 2012, my country’s main board listed companies completed 627 mergers and acquisitions and restructuring transactions, of which 528 have undergone asset evaluation. Accounted for 84.21%; the total market value of the company involved was 4,987.05 billion yuan, accounting for 25.87% of the market value of all main board listed companies. The total assets assessed are 1107.818 billion yuan; the book value of net assets is 314.758 billion yuan, the appraised value is 611.692 billion yuan, the value-added amount is 296.934 billion yuan, and the appreciation rate is 94.34%. Among the 961 mergers and acquisitions and restructuring asset evaluation reports, 780 report results were used as the basis and reference for the pricing of restructuring transactions, accounting for 81.17%.

　　 From the perspective of major asset restructuring, 78 listed companies completed major asset restructuring transactions in 2012, of which 75 were assessed, accounting for 96.2%. The total assets assessed are 249.993 billion yuan; the book value of net assets is 103.55 billion yuan, the appraised value is 189.710 billion yuan, the value-added amount is 86.155 billion yuan, and the value-added rate is 83.20%. Among the 164 major asset restructuring reports, except that the transaction target is a listed company directly pricing in the market, the remaining 155 report results are used as the basis for transaction pricing, accounting for 94.51%.

　　 It can be seen that asset appraisal provides a professional basis and reference for the pricing of listed companies' mergers and acquisitions, and promotes fair transactions and standardized operations of listed companies' mergers and acquisitions.

　　 Some asset appraisal experts suggested that in order to further improve the information disclosure of listed companies, a regular asset appraisal system for listed companies should be implemented. According to the current institutional arrangements, listed companies are required to conduct regular audits, but the regular audit reports only reflect the book value of the listed company, not the market value, and cannot fully and truly reflect the company's fair value and future profitability. The implementation of a regular evaluation system for listed companies and regular valuation of the overall assets of the company is more conducive to dynamically and accurately reflecting the true asset status of the company, further improving the information disclosure of listed companies, protecting the interests of investors, and promoting the standardized and healthy development of the capital market.

　　Source: China Assets Appraisal Association website