RB内部估值模型教程(PPT,307页)

1、document number1 content executive summary 执行摘要执行摘要 a.introduction to valuation b.discount cash flow (dcf) b1. cash flow b2. discount rate and wacc （ weighted average cost of capital的缩写。wacc代表公司整体平均资金成本，可 用来衡量一个项目是否值得投资；项目的回报必须不低于wacc） b3. terminal value 终值 b4. common dcf q p/s; revenues/ebit, etc.

2、real options model dynamic value components of investments and acquisitions based on black/scholes model used for weighting risky projects asset based method “the divestment view” valuing assets outside their operating use (not as going concern) replacement values versus book values value indication

3、s: comparable assets; independent appraises dcf method -“the strategic view” discounted cash flow of future periods estimation of synergies alternative approaches: discounted dividends, discounted incomes, etc. document number16 a combination of different approaches must be used to calculate a valua

4、tion range comparable companies method dcf methodcomparable transactions method asset based method identification of comparable listed companies free cash flow planning identification of comparable transactions stand alone valuation of individual assets outside the operating environment selection of

5、 multiples calculation of wacc, terminal value selection of multiples selection of comparable assets or transactions or appraisers application of multiple- ranges to target company sensitivity analysis application of multiple- ranges to target transaction alternative valuations given different sales

6、 channels valuation-range for target company valuation-range for target company valuation-range for target transaction valuation range for single assets or portfolio of assets valuation range change to real options document number17 b.discount cash flow (dcf) b1. cash flow b2. discount rate and wacc

7、 b3. terminal value b4. common dcf q better to have a “market-driven” justification do not take account of probability distribution of potential outcomes document number40 nonetheless do not ignore hurdle rates can account for risk by running base, upside, and downside cases and attaching probabilit

8、y to each outcome to ease “political issues” high level decisions can limit availability of capital to disfavored businesses; such an approach is common there is a tendency not to make risk adjustments document number41 typical chinese hurdle rates nominal: 10-16% real: 6-12% note high rates are typ

9、ical and compensate for “hockey-stick” projections often made by divisional management these rates are higher than market-driven waccs and would tend to cause companies to under-invest these rates imply high inflation companies keep their rates for a long time without change need to check document n

10、umber42 discount rate can be calculated use weight average cost of capital (wacc) discount rate used in dcf is the costs of different type of financing, debt and equity, and proportionally weighted discount ratewacckd(1-t) (d/v)ke (e/v) cost of debt cost of equity proportion of debt proportion of eq

11、uity document number43 cost of debt is relatively simple 7-10 year maturity non-convertible fixed rate use boc capital markets update on costs of debt for how to calculate the pre-tax cost of debt, and spreads document number44 as is the weighting of debt and equity - usually wacc should use market

12、value weights for each financing element because market values, unlike accounting values, reflect the true economic claim of each type of financing generally use net debt, not gross, except where cash on the balance sheet is needed for the every day running of the business and could not be used to r

13、educe gross debt (very judgmental) using gross debt could be seen as more conservative, but nb would raise leverage in wacc calculation and hence reduce wacc i.e. a trade-off the share of net debt should be the current weighting unless the company is explicitly targeting a different capital structur

14、e. check also your forecast gives rise to a future capital structure that is compatible with your wacc assumption typically 10-20% debt in the china check document number45 cost of equity is harder to define uncertain payment stream in china, use long-term government high coupon fixed interest index

15、, less market risk adjustment for continental europe we use benchmark 10-year government bond (less relevant market risk adjustment) capm i.e. cost of equity is some premium over a risk-free rate is widely-used and accepted document number46 cost of equity can be calculated wit capital asset pricing

16、 model (capm) cost of equity can be represented as that investors need to be compensated in two ways time value of the money: risk-free rate of return risk: premium by holding the company stock companys cost of equity investors expected return investing in a companys stock risk-free rate of return r

17、isk premium for companys stock capm rf (umrf) document number47 beta measures the sensitivity of a companys stock to movements in the market as a whole. since the only risk in the marker is systematic risk, the marker risk premium rewards the investor in the market for assuming systematic risk. the

18、investor in a companys stock should only be compensated for holding the systematic risk of his investment a companys beta = level of systematic risk in its stock document number48 company risk premium are determine by market risk premium and beta : measures the sensitivity of the firms stock returns

19、 to the returns of the market market risk premium: premium associated with risk from holding the market company to holding risk free investment company risk premiummarket risk premium document number49 selecting the “right” beta may lead to heated discussions when available, use barra-alacra prospec

20、tive s (if not historical ), and use comparables for unquoted entities always check beta against those of comparables, remembering to adjust for leverage by comparing unlevered betas. if very different use those of comparables remember to check if betas are levered or unlevered betas. to unlever use

21、 the formula: u=i/(1+(d/e(1-t) and relever at the target capital structure using the same formula rearranged: i=u(1+(d/e(1-t) document number50 in order to choose the proper beta to put into the capm equation, we must incorporate the effect of debt, or financial leverage as a firm takes on more debt

22、, and therefore higher fixed costs, the profitability of the firm becomes more variable this is likely to make the company stocks price, and return of the equity, more volatile more debt in a firms capital structure, the returns of the firms stock tend to be more sensitive to the return of the marke

23、t to accurately calculate a firms cost of equity at any given capital structure, you must choose a beta reflecting the amount of risk in the companys stock at that amount of leverage, therefore: beta, levered = beta, unlevered x 1 + ( d/e x (1 t) or beta, unlevered = beta, levered / 1 + ( d/e x (1 t

24、) document number51 despite widespread use of capm there is much debate over the expected market return 2 main approaches historical/fundamental generally higher, thus higher wacc forward-looking generally lower, thus lower wacc document number52 historical approach how it works long-term market ret

25、urn on equity less return on government long-term debt a market risk premium (mrp) of about 5% based on historical data, market expectations and a review of literature is generally accepted (see article the wacc user guide) document number53 historical approach pros and cons pros covers broadest ran

26、ge of economic events 20 year rolling average takes long-term view consistent with long-term investment objectives recognizes that current relationship between bond yields and equity returns may not be tenable cons equity prices are driven by expectations of future cash flows, not past ones premium

27、is driven by historic bond return which tells you nothing a bout todays bond yield unlikely to reconcile a companys projected free cash flows with its share price which is best test for a “market-driven” rate document number54 forward-looking approach pros and cons pros forward-looking, just like st

28、ock prices reflects current market conditions which is appropriate when asking “what would equity cost me now”? cons current premium may not be tenable. indeed occasionally it is negative, and it varies considerably (nb bond yields are more volatile than the market cost of equity) less conservative

29、than historic approach should be used as a minimum rate of return for a company in its capital budgeting document number55 a derivative of the forward-looking approach take irr of companys own projected cash flows with the current share price should be used when trying to determine the market value

30、of a cash flow stream but, beware of “hockey stick” projections you may not have the projections only possible for quoted companies document number56 when to use which approach use market-based approach, but make sure premium is sensible always cross-check that dcf is in line with trading multiples

31、valuation, and if not be able to explain why (often difficult) on sell-side if transaction multiplesdcf/trading multiples then equity market is best route i.e. ipo/spin-off remember dcf value is full, fair value. buyer can add synergies to cash flows but does not create shareholder value if dcf valu

32、e (including synergies) is paid always step back and ask, how synergies will best be realized? document number57 be wary of cash rich companies in such cases use a different formula, but be wary of whether clients will like this: (1) wacc=kd(1-t)(d/v)+ke(e/v) - cc(c) where, kd=pre-tax market expecte

33、d yield-to-maturity of fixed rate debt t=marginal tax rate d=market value of gross interest-bearing debt e=market value of equity c=cash v=market value of entity being valued, where v=d+e-c ke=cost of equity cc=“cost of cash”=govt. long bond some companies have negative net debt (i.e. excess cash) n

34、.b unlevering and relevering beta needs to be done with net debt not gross this does not work for very extreme levels of leverage, wither positive or negative document number58 multi-currency issues where does the company generate its cash flows? where does the company raise its capital? use local t

35、ax rates? document number59 there are some general rules of thumb discount each business/capital proposal in local currency, then translate dcf value to parent company currency if necessary use a local cost of capital-general businesses fund themselves locally use local tax rates but bear in mind th

36、e likely duration of tax differentials between jurisdictions document number60 but its not mechanistic 1.boc bought x% of icbc (prc); funded with debt (assumption) solution: use debt cost, equity cost 2.witco bought a german business from schering; funded entirely with $ debt solution: use debt cost

37、, equity cost what components should be used in wacc calculation moral: always ask, where are the cash flows being realized document number61 other issues to bear in mind we use local cost of capital because if you raise acquisition finance in hk to fund a brazilian investment you still expect brazi

38、lian returns its consistent to discount cash flows in (say) hk$, with a hk$ based wacc if acquiring us company and $/ changes, value in $ is the same; only value changes be careful if acquisition is being funded by a rights issue which is at discount to share price and thus raises cost of equity doc

39、ument number62 conclusion wacc is not mechanistic and can be very complex; aim to simplify is as much as possible focus on the balance between the issues behind wacc; the balance between where cash flows are generated and what returns are expected bear in mind that wacc is frequently an issue during

40、 negotiations on value use different discount rates for different tasks always cross-check with multiples document number63 b.discount cash flow (dcf) b1. cash flow b2. discount rate and wacc b3. terminal value b4. common dcf q straight line usually works. the remaining unamortized r thus firms that

41、 need to raise fresh capital to cover cash flow needs do not have any trouble doing so. the other is that real asset markets are liquid. in other words, a company that ceases operations will still get the present value of the expected cash flows from its assets in a sale. in reality, capital markets

42、 sometimes shut down and distress sales are at discounted prices while adherents to dcf valuation will claim that the discount rates (costs of equity and capital) can be adjusted to reflect the likelihood and consequences of distress, discount rates are blunt instruments that are more suited for dea

43、ling with volatility risk (that earnings and cash flows will be volatile) than for truncation risk (i.e., that the firm will not be around in 3 years) a better way to deal with the risk of truncation would be to do the following. first, assume that your firm will be a going concern and do a discount

44、ed cash flow valuation of it. second, assess the probability that your firm will not be a going concern; a good place to look would be the bond market if the company has bonds outstanding. third, estimate the distress sale value of the assets in the event of bankruptcy. finally, compute the expected

45、 value of the firm = probability of going concern * dcf value + probability of distress * distress sale value dcf q for publicly traded firms, it takes the form of a bid-ask spread and for private firms it takes the form of a discount on estimated value. the key is to be discriminating. not all priv

46、ate companies are equally illiquid. applying a rule of thumb (25-30% is widely used) strikes us as inappropriate dcf q a company should not go from being over valued in one currency to under valued in another currency at the same point in time. for this proposition to hold, though, your forecasts of

47、 future exchange rates (which you will need to convert your cash flows into a base currency) have to be consistent with your interest rate assumptions. put simply, valuation will be invariant to currency choices only if you assume purchasing power parity dcf q as a consequence, the premium you get w

48、ill be too high as a forward-looking estimate. a more reasonable estimate would require you to look across a number of different equity markets over the twentieth century and compute an average premium over the markets markets are priced based upon investor assessments of how risky stocks are and ho

49、w much of a premium they should charge for investing in stocks. in bullish times, stock prices rise as investors become more optimistic about the future and reduce their required risk premiums. as stock prices rise and deliver high positive returns, historical risk premiums go up. in other words, hi

50、storical risk premiums rise just as investors expected risk premiums decrease there is an alternative to historical premiums. based upon how stocks are priced collectively (looking at a broad equity index) and the expected cash flows you would get from buying these stocks (present value of expected

51、dividends), you can back out the risk premium that investors are demanding. this risk premium is called an implied equity risk premium. the historical risk premium form 1928-2002 in the united states was 4.53%. the implied equity risk premium declined to 2% at the height of the bull market in 1999 a

52、nd has averaged about 4% over the last 40 years dcf q however, the company will make decisions directed toward achieving the target capital structure. therefore, in calculating wacc, the target capital structure, rather than the current capital structure, should be used o current capital structure i

53、s the combination of debt and equity that a company has at any given time o target capital structure is the combination of debt and equity that a company plans to move toward and maintain in the future historical cost or todays cost of debt? the cost of debt component of wacc should reflect the retu

54、rn that debt holders in target company require if the company is financed at the target capital structure acquiring companys or target companys cost of equity? since we are going to calculating target companys wacc, we need the cost of equity for target company, together with the target capital stru

55、cture and the cost of debt of target dcf q with real growth rates, it would be a real growth rate for the economy the growth rate can be 0% or negative. in fact, given what we know about firm life cycles where firms peak and then become smaller over time, you can argue that assuming a negative growt

56、h rate is more realistic than assuming that your firm will keep getting larger over time dcf q when comparing and using multiples, it is critical to understand how the multiples have been defined. consistency and uniformity are important 2 describe the multiple having a large benchmark sample size b

57、y industry help to use multiple to identify under or over valued firms it is always useful to have sense of what a high, low or typical value for that multiple is in the market. 3 analyze the multiple it is critical to understand the fundamentals that drive each multiple, and the nature of the relat

58、ionship between the multiple and each variable. document number140 and one need to ask questions at each steps source: roland berger analysis 4 application questions 1 definitional questions 2 descriptive questions 3 analytical questions given the firm that we are valuing, what is a comparable firm?

59、 given the comparable firms, how do we adjust for differences across firms on the fundamentals? is the multiple consistently defined? is the same multiple definition? what is the average and standard deviation for this multiple, across the market? what is the industry median for this multiple? how l

60、arge are the outliers to the distribution, and how do we deal with the outliners? how has this multiple changed over time? what are the fundamentals that determine and drive these multiples? how do changes in these fundamentals change the multiples? selected questions to ask about comparable multipl