A Case Study On The Valuation Research Of GEM Hi-tech Enterprises Based On Real Options Approach

High-tech enterprise in Gem market has the characteristics of high price-earnings ratio,and investors can't judge the rationality of stock price based on the price-earnings ratio.And thus,company valuations has become an important means of judging whether companies‘ share price is reasonable.This paper attempts to build a more reliable valuation model for both theory and practice purpose to help investors make investment judgment.In order to achieve the research objectives,the article elaborates,analyzes and summarizes the characteristics and application of the existing valuation models as the theoretical support of the article.In the process of reading foreign documents,it was concluded that residual income has a stronger ability to interpret business value.Next,the article summarizes some of the operating characteristics of the GEM Hi-tech companies,and discriminates the relevant factors that influence the evaluation of the company's value: cash flow instability,attention to the role of intangible assets,difficulty in determining comparable companies,and flexibility in business operations.The establishment of the model lays the foundation for analysis.After analyzing and comparing the characteristics of each valuation model,the author believes that the managers of high-tech companies can make business decisions such as putting into production,postponing listing,or abandoning production based on the R&D achievements of the market changes.These characteristic are the same as that of real options.Considering the consistency of them,the author selected real option method to construct a corporate value valuation model for the Hi-tech high-tech enterprise.It is aiming to reduce the influence brought by outstanding growth,operational instability and large amount of R&D investment which reduce the free cash flow,etc,when doing the valuation.To verify the applicability of the construction model,the author chose Laimei as a case company to apply the real option model.And comparing the results obtained by the calculation of the real option method with the results of the mainstream free cash flow discount method,to further analyze the applicability of the real option valuation model.Laimei is a typical growth-oriented,high-tech enterprise that places more emphasis on innovation and R&D than its peers.Finally,the company's stock price under the real options approach is 9.88 yuan per share,which is closer to the actual stock price of 9.04 yuan than the 4.11 yuan obtained under the free cash discount model.The author deconstructs the difference between the results of the free cash flow discount model and the actual stock price,and finds that it is the high level of capital expenditure cause the lower result of free cash flow model.This also verifies that the real options approach is more applicable to the company's intrinsic value assessment for the GEM hi-tech companies with outstanding growth and significant R&D investment.