Advanced Valuation and Modelling

Course Overview:

This advanced valuation and modelling course builds on basic concepts by developing DCF techniques and taking a fundamental approach to multiple analysis.

Financial forecasting techniques are developed to incorporate more complex forecasting issues including provisions, off balance sheet finance, JV/associates, minorities, tax losses/deferred tax, and stock options.

More advanced analysis techniques are then used to develop a basic DCF approach including APV and EVA analysis, cost of capital for hybrid instruments and calculating a cost of capital for emerging market stocks. Each are explained in relation to the calculation of capital and return and the impact on modelling cashflows from a company.

Examples are provided to illustrate each issue.

Participants will be required to bring a laptop to the course.

Course Content:

The Value Driver Approach to DCF

• What return is implied by a two stage DCF model?
• Developing DCF techniques to cope with growth and fade
• Importance of ROCE and key drivers
• Three stage DCF models with fade, why this will produce a more accurate valuation

Fundamental Multiples

• Formula’s for fundamental multiples
• Identifying key drivers of the following multiples:
  • EV/EBITDA: ROCE is key
  • EV/Sales: is margin important?
  • PEG: misleading numbers?
  • Price/Book: good or bad predictor of value?
  • Price/sales: when is it useful?
  • Valuation matrix

Developing the cost of capital

• WACC revisited
• Leveraged and re-leveraged betas
• Dealing with hybrids:
  • Calculating equity and debt components
  • The approach to hybrid betas
  • Calculating the cost of a hybrid
• Dealing with cost of capital in emerging markets
  • Calculating the equity risk premium
  • What is the cost of debt?
  • Default rate and relative standard deviation approach
  • Dealing with local or global betas

Further DCF analysis

• APV analysis – how much value is created by leverage?
• EVA analysis – how much value is created in the future?
• Comparison with DCF and conditions for equivalence with DCF

Modelling Course Content:

Modelling more complex DCF analysis

• Explicit forecast period issues
• Terminal value issues
• How adjustments affect valuation
• Adjusting the cost of capital for hybrids
• Adjusting the cost of capital in emerging markets

Modelling APV and EVA

• APV under static and constant growth
• APV and DCF equivalence – required conditions
• Modelling EVA valuation
• EVA and DCF equivalence – required conditions

Modelling extra’s – dealing with

• Tax losses and deferred tax
• Stock options - expenses & dilution
• JV/Associates: cost or valuation?
• Dividends
• Minorities – forthcoming changes to Non Controlling Interest
• Provisions

What our clients are saying about the course

“Workable exercises on all topics allowed me to immediately understand the content and its applicability”

“Brought to life the easy mistakes made in valuation models as well as tricks & shortcomings”

“A very good bank model was provided and the trainer’s real life experience was used to put practical application and theory into context”