Case 6, Sun Coast Savings Bank

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Case 6
Going Public
Sun Coast Savings Bank

Question 3

a) Calculating the Net worth-to-Asset ratios for the peer-group

Figure 3.1: Net worth-to-Asset ratios
|  |Net Worth |Assets |NW/A | |Virginia Federal |950 |14000 |0.068 | |Southland Financial |2020 |35000 |0.058 | |Texas Federal |1130 |24000 |0.047 | |Great Southern Financial |1400 |27000 |0.052 |

b) Calculating the compound growth rates in earnings per share for the peer-group

Figure 3.2: Compound growth rates
|  |EPS 1987 |EPS 1992 |Compound Growth | |Virginia Federal |2.5 |5.25 |15.99% | |Southland Financial |0.83 |2 |19.23% | |Texas Federal |1.59 |5.4 |27.70% | |Great Southern Financial |3.94 |6.25 |9.67% |

c) Calculating the Price-to-Earnings ratios for the peer-group

Figure 3.3: PE ratios
|  |Price |EPS 1992 |PE ratio | |Virginia Federal |32 |5.25 |6.1 | |Southland Financial |17 |2 |8.5 | |Texas Federal |25 |5.4 |4.63 | |Great Southern Financial |28 |6.25 |4.48 |

d) Calculating the Market-to-Book values for the peer-group

Figure 3.4: Market-to-Book ratios
|  |Price |Book Value per Share |MV/BV | |Virginia Federal |32 |30.3 |1.056 | |Southland Financial |17 |16.15 |1.053 | |Texas Federal |25 |38.95 |0.642 | |Great Southern Fin. |28 |56.5 |0.451 |

Question 4

In order to develop a reasonable range of values for market / book ratios (MV/BV) for Sun Coast, the MV/BV ratios of the other financial institutions can be used as a benchmark. The other institutions’ MV/BV ratios lie between 0.64 and 1.06, so this might be a reasonable range for Sun Coast’s MV/BV ratio. As Sun Coast’s NW/A ratio and Compound Growth in Earnings per share ratio are very similar to those of Southland Financial and Virginia Federal, Sun Coast’s MV/BV ratio might go more into the direction of 1.06 than 0.64.

Figure 4.1: The peer-group’s market-to-book ratios
|  |NW/A |Compound Growth |MV/BV | |Texas Federal |0.047 |27.70% |0.642 | |Great Southern Fin. |0.052 |9.67% |0.451 | |Southland Financial |0.058 |19.23% |1.053 | |Sun Coast |0.061...
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