West Teleservice IPO
memorandum to: from: subject: West TELESERVICE IPO date: May 15, 2014
After a careful analysis of the teleservice industry and the players in the space, we chose the following companies as comparable to West Teleservice: SITEL Corporation, APAC Teleservices and Precision Response Corporation.
West Teleservice is an integrated teleservice provider whose business model is based on recurring large volume application with focus on state of art technology, quality of service, long term corporate relationships and a management with high level of expertise. We also looked at other dimensions such as size of revenue and revenue projection, operational margins and net margins as indicators of comparable companies in the industry. A detailed analysis of this is captured in Appendix 1.
West Teleservice is looking to issue 5.7 M shares, which is equivalent to 13% of total shares outstanding (the co-founders want to retain 87% of the company). The first approach we took in valuing West Teleservice was taking the multiples approach. We then calculated the average of three multiples for the comparables in the industry:
Price / Sales
5.9
Price / Operating Profit
45
Price / Earnings
82
Using the three multiples above, we came up with valuations of $44/share, $49/share and $53/share for West Teleservice. Compared to the S&P recommendation of $21.5/share, this seemed to be much higher evaluation. Based on this analysis however, Ms. Little would likely recommend a valuation of $44/share.
We then proceeded to value West Teleservice using the DCF method. In using the method, there were a few fundamentals about the teleservice industry that came into play. One being that scalability was provided by technology investments or human resource investment, given that workstations, staff and ports need to be added for both personal and automated services. We kept the sales projection based on 2 years of historical data. However, we also retained the same net
After a careful analysis of the teleservice industry and the players in the space, we chose the following companies as comparable to West Teleservice: SITEL Corporation, APAC Teleservices and Precision Response Corporation.
West Teleservice is an integrated teleservice provider whose business model is based on recurring large volume application with focus on state of art technology, quality of service, long term corporate relationships and a management with high level of expertise. We also looked at other dimensions such as size of revenue and revenue projection, operational margins and net margins as indicators of comparable companies in the industry. A detailed analysis of this is captured in Appendix 1.
West Teleservice is looking to issue 5.7 M shares, which is equivalent to 13% of total shares outstanding (the co-founders want to retain 87% of the company). The first approach we took in valuing West Teleservice was taking the multiples approach. We then calculated the average of three multiples for the comparables in the industry:
Price / Sales
5.9
Price / Operating Profit
45
Price / Earnings
82
Using the three multiples above, we came up with valuations of $44/share, $49/share and $53/share for West Teleservice. Compared to the S&P recommendation of $21.5/share, this seemed to be much higher evaluation. Based on this analysis however, Ms. Little would likely recommend a valuation of $44/share.
We then proceeded to value West Teleservice using the DCF method. In using the method, there were a few fundamentals about the teleservice industry that came into play. One being that scalability was provided by technology investments or human resource investment, given that workstations, staff and ports need to be added for both personal and automated services. We kept the sales projection based on 2 years of historical data. However, we also retained the same net