We have choosen PT. Krakatau Steel as our thesis considering that the company is a well established state owned company operating in a very strategic industry within the middle of the growing infrastructure development climate in this country. At the same time, the company was having a plan to become a public listed company through an Initial Public Offering in Indonesian Stock Market )IDX).

We have conducted a research to find the fair market value of PT. Krakatau Steel taking into account its favourable position in the business, revitalization of its existing facilties, capacity expansion, construction of new facilties, and the expected growing production capacity in the future.

In analyzing the company's position within the industry, we use SWOT analysis to identify its strengths, weaknesses, opportunities and threats that the company are encountering and might be encounter in the future. In addition, we also analyse the company's position using Porter 5 forces to have more comprehensive insight and understanding on PT. Krakatau Steel's position within the steel industry in international market.

In conducting the valuation, we follow the common business valuation procedures and valuation methods which generally used by any company and security houses. The valuation approaches that we have used are market approach and income approach. The market approach is used to get the company's value with its performance at the current state. While income approach is used to see the company's value taking into account all of its future expansion programs and capturing its expected performance and income in the future.

With the market approach we use two different methods, EV/EBITDA multiple and P/E multiple. While with the income approach we use Discounted Cash flow (DCF) method. All of the methods are described in detail in this report.



Research Location : PT. Krakatau Steel Tbk.

Supervisor : Herdianto Budianto & Tulus Nababan



Confidential until 2015.