Valuation Of Real Estate Listed Companies Based On Residual Income Model

With the high speed of urbanization process in China, Chinese real estate industry has always maintained a good development trend in the past decade. Even during the 2008 financial crisis, it still maintained rapid development. The real estate industry is deeply affecting the Chinese economy. With the rapid development of real estate industry, the real estate investment industry for enterprise, financing, mergers and acquisitions and the purchase demand is also growing, and in this process, scientifically accurate predictive value of the business has become a critical issue. For the assessment of the value of the real estate business, the current appropri(?)te assessment model already exists, such as "Free Cash Flow for the Firm". This paper will present a new valuation model-residual income model based on the value creation perspective, and try to examine whether the residual income valuation model is applicable to real estate companies.This paper is divided into theoretical research and case analysis in two parts, first introduced in the theory part of the connotation of enterprise value, defined herein was designed to evaluate the real estate listed companies intrinsic value, then it introduced the current mainstream business valuation methods and put up the advantages and disadvantages of each method. Then this paper takes the traditional residual income model, combined with the results of previous studies and the characteristics of the real estate industry, improves the traditional residual income model through background research and formula derivation. The improved two-stage residual income model can be applicable to real estate valuation of listed companies.In the part of case analysis, this paper uses "Poly Real Estate" as an example, valuates Poly Real Estate’s evaluation by the improved residual income valuation model. At first we do some basic financial indicators forecast of Poly Real Estate. In the prediction process, this paper take the macroeconomic conditions, industry conditions and their own development status into consideration. Subsequently, we obtain an evaluation value of Poly Real Estate. Then I compare the final assessment of the value to market value to analyze the applicability of residual income valuation model for the valuation of real estate listed companies. Through theoretical research and case studies, paper concludes that residual income model can be applied to the valuation of real estate listed companies.