Forest Valuation

Forest valuations are commonly carried out using one or more of the following three approaches: the sales comparison approach, the cost approach, and the income approach. Although in Finland, a method called summation value is commonly applied, the income approach is increasingly gaining popularity as the forest asset class gains ever more attention from institutional investors. Outside Finland, Simosol has conducted valuations in Sweden, Baltics, Brazil, Colombia and Kenya.

Benefits

  • Cost-effective calculation of discounted cash flows of any forest asset
  • Compatibility with IFRS and GAAP standards
  • Expertise in growth & yield modeling and timber markets
  • Capacity to scenario building, including price scenarios for timber and carbon

Target audiences

  • Companies with the need for forest valuation for accounting purposes
  • Forest owners who are looking to sell or buy forests
  • Investors acquiring or selling forest assets

Our approach to forest asset valuation

In principle, while forest asset valuations could be conducted with the sales approach, the heterogeneity of forests and even in plantations (species, yields, terrain), inhibit trustworthy comparisons even within relatively small geographical regions.

Following the industry’s best practices, we typically use the income approach to value forest assets. To achieve this, and thanks to our extensive experience in building the industry’s leading simulators and optimization systems, we use our own IPTIM Assets to project discounted cash flows to attain income approach based value. To meet the requirements of international clients, we have adapted our methods to be compatible with IFRS and GAAP. The required inputs used in the process include forest inventory data, management objectives and market data.

Semi-automated forest valuation

Our semi-automated forest valuations are aimed at entities, which own large forest areas, typically thousands of hectares. Simosol’s tools can efficiently process large forest areas, in the excess of hundreds of thousands of hectares, and produce their future harvest removal schedules and consequent cash flows.  

With Simosol’s tools and processes forest valuations can be automated to a large extent. Because of multiple factors such as location specific issues, information availability, or reporting requirements, the valuations of companies’ forest assets always require some tailoring as well as expert judgement. The depth of each valuation is always mutually agreed on a client basis. 

Simosol has also produced a service called Metsä ja Puut which offers fully automated forest valuation of any Finnish forest estate.

Metsä ja Puut service

In Finland, where all forest inventory data is openly available, Simosol has built a fully automated web portal for purchasing valuation reports of any forest estate in the country. Using real transaction data from our partners, we deliver forest values based on the market valuation, income valuation and summation valuation approaches.

The service can be accessed by anyone directly from the web portal and it is charged based on either specific usage or through a fixed subscription.

Visit the service: metsajapuut.fi


What software is used

Software

Strategic planning

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Software

Metsä ja Puut automated valuation

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How this solution was used

Reference

Annual valuation of forest assets

Valuation of forest investments in Finland and Ireland. The work has included income approach based annual valuations of the forest assets. In addition, Simosol has assisted AXA in their forest asset due diligence processes.

More references

Reference

Forest asset valuations and value performance reports

Valuation of forest investments in Finland, Estonia, Latvia and Lithuania. Valuation included wood flow and cash flow modelling of the forest assets. In addition, Simosol has assisted in the client's valuations of forest investment targets.

More references

Our People to Help You

Miika Malmström

Head of Forest Valuations

+358 503038066

Miika is heading Simosol’s forest valuation business including the implementation, development and sales of the related services and products. He has nine years of diverse project-work experience in the forest sector including assignments related to forestry, forest industry, forest policy and field experience from 16 different countries. His main expertise is forest economics with a focus on forest valuations and investments.

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