基本面分析：模型冲击与复苏

1、Global Research1 May 2020Fundamental AnalyticsModelling shocks and recovery; where should a company fundamentally trade?Whats the right multiple when earnings drop then recoverWe extend our previous 2-stage multiples model to accommodate a third stage. This gives us an efficient structure to model a

2、 near-term shock, followed by a recovery period, before reaching a stable terminal phase.Recasting a traditional DCF in terms of ROIC and reinvestmentFree cash flow is dependent on a vast number of variables. We redefine the traditional DCF model to express cash flows using ROIC and reinvestment dri

3、vers. These high-level drivers allow us to efficiently model a variety of scenarios.Use our interactive model to run your own scenariosOpen the model using this link. The model is pre-populated with data for over 1,800 companies from UBS Research global coverage of non-financial companies.Valuation

4、scenarios expressed as fundamental multiplesFor each 3-stage scenario we show the associated enterprise value, equity value, and common valuation multiples. This note builds on our note published on 4 March 2020, Lifting the lid on multiples: Where should a company fundamentally trade?Source: UBSFun

5、damental AnalyticsGlobalEquitiesCourtney Cook, CFAAnalyst HYPERLINK mailto:courtney.cook courtney.cook+44-20-7567 4871Geoff Robinson, CFM, FCAAnalyst HYPERLINK mailto:geoff.robinson geoff.robinson+44-20-7567 1706Yiding Lu, CFAAnalyst HYPERLINK mailto:yiding.lu yiding.lu+44-20-7568 9091Renier Swanepo

6、el, ACA, CA(SA)Analyst HYPERLINK mailto:renier.swanepoel renier.swanepoel+44-20-7568 9025 HYPERLINK /investmentresearch /investmentresearchThis report has been prepared by UBS AG London Branch. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 18. UBS does and seeks to do business with co

7、mpanies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.What is in a multiple?A va

8、luation multiple is simply an expression of relative value to a related key statistic. This statistic whether earnings, cash flow or some other measure must bear a close enough relationship to the observed value that it could be considered a driver of market value. There are two distinct ways to app

9、roach multiples:Fundamental approachBy modelling a company and forecasting its cash flows we can estimate the value of the firm and derive a fair fundamental multiple. This will help us to communicate why we think a stock is mispriced and what we think the multiple should be.In this note and the ass

10、ociated formulas we provide a framework for deriving multiples based on fundamental assumptions of returns and reinvestment. This is still a shortcut approach to a full DCF model but provides a useful perspective.Market approach (or Whats priced-in approach)Trading multiples are much more likely to

11、capture the impact of market sentiment than a discounted cash flow valuation. Using a trading multiple, we can work backwards to understand whats priced in to current valuation.Why use a 3-stage model?In our previous work on multiples, we used a 2-stage fundamentally-driven DCF model to efficiently

12、value companies and derive common valuation multiples. This approach allows us to apply a defined period of superior growth and profitability, before settling to a sustainable long-term trend.More: Lifting the lid on multiples: Where should a company fundamentally trade?The dislocations caused by th

13、e COVID-19 pandemic force us to take a more customised approach to forecasting. For many companies there is likely to be a period of reduced revenues, margin pressure and changes to investment plans.As the direct impact of the pandemic recedes, companies enter a second phase as economic recovery pic

14、ks up. There is considerable uncertainty about the timing, strength and duration of this phase. Taking a scenario approach we can model levels of returns and get a better understanding of the range of valuation outcomes.The third stage (also known as terminal period) is similar to the previous 2-sta

15、ge model. However, we need to consider whether long-term effects of the pandemic might have shifted the long-term sustainable ROIC structure or cost of capital assumptions.Some useful definitionsBefore we expand the cash flow analysis to a returns-based framework, we need to define the necessary fin

16、ancial items. The important ingredients are defined in the list below.FCFF = free cash flow to the firmAssets produce profits minus a certain amount of cash that must be reinvested in the business for it to continue operations. The residual cash flow claimed on by all providers of cash flow is free

17、cash flow.NOPAT = net operating profit after taxThis is a firm-level measure of profitability. It is often derived as EBIT x (1 effective tax rate).IC = invested capitalInvested capital is the cumulative amount of capital the business has invested in its operations. This is the capital base generati

18、ng free cash flow and NOPAT. Assets not contributing to free cash flow and NOPAT are excluded from invested capital.Rr = reinvestment rateAny company needs to invest to generate profit. Profit can be temporarily high or low relative to investment, but over the long run, some level of investment must

19、 occur for a company to grow profit. Reinvestment relates to working capital and growth capital expenditure reinvestment.g = growth of invested capitalCompanies can control the amount of capital to reinvest in the business and consequently the growth of invested capital. However, free cash flow grow

20、th is dependent on market and operating uncertainties.The link between cash flows and ROICTo explain DCF-based valuation in terms of ROIC and growth, we need to establish a few key relationships. Free cash flow to firm is net operating profit (post-tax) (NOPAT) minus net reinvestment. So we have:Fig

21、ure 1: Free cash flow is net operating profit after reinvestmentFCFF = NOPAT (1 reinvestment rate)Source: UBSAt the enterprise level we assume growth is derived from the return on reinvested capital (growth capex and change in working capital). Therefore, we need to calculate the change in invested

22、capital. This is expressed as:g = ROIC reinvestment rateRearranging this formula we have an expression for reinvestment rate:Figure 2: Reinvestment rate (Rr) definitionReinvestment rate =gROICSource: UBSThe reinvestment rate is the amount of operating profit required to achieve the desired growth ra

23、te, for a given level of return. If the reinvestment rate is 100%, then all of the profit will drive growth. For example, a company generating 15% return on invested capital can reinvest all of that and increase its invested capital by 15%. This investment can take the form of capital expenditures o

24、r increases in working capital.Given the direct link between reinvestment and capital growth we can choose whether it makes more sense to drive reinvestment or growth and infer the other variable.Constructing a 3-stage formula for EVIn our previous note we established a 2-stage formula for EV using

25、ROIC and growth of invested capital. In this formula the subscript VP refers to the visible period (stage 1), and TV refers to the terminal value (stage 2). NOPAT1 is the value in year 1, the first year of the visible period. For this example in HYPERLINK l _bookmark2 Figure 3, we assume the visible

26、 period lasts five years.Figure 3: EV multiples for 2-stage model based on ROIC and growthEV = NOPAT1 11 gVP/ROICVPWACCVP gVP1 + gVP 51 + WACCVP 5 1 3+NOPAT1 21 + gVP5 ROICTV gTV ROICVP11WACCTV gTV1 + WACCVP 54567Source: UBSPayout ratio = 1 - reinvestment rate (see HYPERLINK l _bookmark1 Figure 2)Gr

27、owing perpetuity formulaAnnuity factor (limits perpetuity to length of visible period)NOPAT in terminal yearPayout ratio in terminal yearPerpetuity formula with capital growing at constant rate gTVPerpetuity value discounted from terminal year to presentTo create a 3-stage enterprise value calculati

28、on, we adapt the formula in HYPERLINK l _bookmark2 Figure 3 to add an intermediate annuity for stage 2. Conceptually, we have the following components of the 3-stage EV calculation:Annuity starting today lasting for length of stage 1Annuity starting at end of stage 1, lasting for length of stage 2Pe

29、rpetuity starting at end of stage 2The stage 1 annuity is a growing perpetuity that is cancelled out by an equal and opposite perpetuity at the end of stage 1 (see HYPERLINK l _bookmark17 Appendix for a graphical illustration of these cash flows). This is the function of the annuity factor. So, stag

30、e 1 contribution to EV can be written as shown HYPERLINK l _bookmark3 below.Figure 4: Stage 1 contribution to EV as a free cash flow annuity FCFF1 annuity factor(WACC g1) 1Source: UBSWe know that FCFF is NOPAT after reinvestment, and that reinvestment can be represented as g / ROIC (see HYPERLINK l

31、_bookmark0 Figure 1 and HYPERLINK l _bookmark1 Figure 2). Therefore we can express stage 1 contribution to EV as:Figure 5: Stage 1 contribution to EV in terms of NOPAT, ROIC and gNOPAT 1 g1 1 annuity factor1ROIC1(WACC g1) 1Source: UBSThe next step is to add the contributions from stages 1 and 2. We

32、use a similar structure, starting with the initial NOPAT for each stage, applying the payout ratio (1 g / ROIC) and adjusting for the different levels of ROIC in each stge. This gives us the full structure of the 3-stage model for EV in terms of our preferred fundamental drivers (see HYPERLINK l _bo

33、okmark4 Figure 6).To keep the notation simple we use subscripts to refer to the stage number so NOPAT2 refers to the value of NOPAT in the first year of stage 2.Figure 6: EV as the sum of stage 1, 2 and 3 contributionsEV = NOPAT 1 g1 1 annuity factor1ROIC1(WACC g1) 1+ NOPAT 1 g2 ROIC2 1 annuity fact

34、or discount factorROIC2ROIC1(WACC g2)2 2+ NOPAT 1 g3 ROIC3 1 discount factorROIC3ROIC2(WACC g3) 3Source: UBSThe remaining steps to produce a 3-stage EV formula that we can apply are:define the annuity factor for stages 1 and 2define the discount factor for stages 2 and 3express NOPAT2 and NOPAT3 in

35、known termsCalculating the annuity factorsFirst we address the annuity factors. The annuity factor truncates the perpetuity growth formula to the length of the stage. For example, if stage 2 lasts 5 years, we would express the annuity factor as shown in HYPERLINK l _bookmark5 Figure 7. The annuity f

36、actor for stage 1 takes a similar form.Figure 7: Annuity factor example for a 5-year long stage 2(1 + g2)5annuity factor 2 = 1 (1 + WACC)5Source: UBSCalculating the discount factorsThe discount factor adjusts the value of stage 2 and stage 3 contributions calculate the present value. Stage 2 annuity

37、 value is discounted by (1 + WACC) (years in stage 1). The stage 3 contribution needs to be discounted by the length of stage 2 and stage 1. Because we allow for different WACC assumptions in each stage, we need to do the stage-3 adjustment in two parts (see HYPERLINK l _bookmark6 Figure 8). For thi

38、s example, lets assume stage 1 lasts for two years.Figure 8: Discount factor for stage 3discount factor3=1(1 + WACC1)21(1 + WACC2)5Source: UBSCalculating the NOPAT values for each stageThe final step is calculation of the NPOAT values at the start of stage 2 (NOPAT2) and stage 3 (NOPAT3). Using the

39、definition of ROIC = NOPAT / IC we can rearrange the terms and calculate the necessary ingredients. We already have the ROIC for each stage, as those are key model assumptions. The beginning balance of invested capital can be calculated using the growth rate (g), which is derived from the reinvestme

40、nt rate. So NOPAT takes the form shown HYPERLINK l _bookmark7 Figure 9, where n1 is the length of stage 1.Figure 9: Calculating stage 2 NOPATNOPAT2 NOPAT2= ROIC2IC at end of stage 1= ROIC2IC0 (1 + g1)n1Source: UBSWe take a similar approach to calculate the NOPAT value for the start of stage 3, the t

41、erminal period. In this case we need to grow the initial invested capital (IC0) byg1 for the length of stage 1, then by g2 for the length of stage 2. This gives us the formula shown in HYPERLINK l _bookmark8 Figure 10, where n2 is the length of stage 2.Figure 10: Calculating stage 3 NOPATNOPAT3= ROI

42、C3IC0 (1 + g1)n1 (1 + g2)n2Source: UBSApplying the 3-stage formula for EVIn the previous section we derived all the terms for the EV formula using explicit assumptions. Therefore, we could replace the various annuity factor, discount factor and NOPAT terms with the corresponding formulas and write o

43、ut the full EV formula from HYPERLINK l _bookmark4 Figure 6.However, this would be an unwieldy formula that would be hard to audit and would not provide transparency into the dynamics of each stage. Instead we provide a compact application of these formulas in the associated interactive tool which c

44、an be opened here.Note the formulas in the interactive Excel model also contain a constant iota. This constant is set as 0.000000001 that is small enough to be insignificant, but should prevent #DIV/0! errors.The next section contains an overview of the interactive tool and a guide to the various sc

45、reen components.Getting to equity valueIn the analysis and calculations above we have assumed the free cash flows, profits and investments were in the companys core operations. We limit the analysis to the business where the following conditions apply:Core operationsControlling stakeContinuingThe no

46、n-continuing, non-recurring and non-core valuation components should be captured in the transition from enterprise to equity value (the so-called equity bridge).The 3-stage model gives us an implied measure of enterprise value for the core business. However, this includes minority interests and leav

47、es out other assets, joint ventures and other investments. Adjusting for these items gives us an implied equity value for the full business. HYPERLINK l _bookmark10 Figure 11 provides a graphical illustration of this process.Figure 11: From 3-stage EV model to share value via the equity bridgeSource

48、: UBSAssumptions to drive 3-stage modelModel-implied EV for core, controlled businessEquity bridge adjustments to get from core EV to equity valueImplied value per share after adjustmentsInteractive 3-stage Valuation MultiplesThis is a guide to the major features and inputs to the UBS 3-stage valuat

49、ion multiples model. HYPERLINK l _bookmark11 Figure 12 shows a screenshot of the main page which is a compact set of inputs and summary outputs. In the following sections we step through the major features.Figure 12: Screenshot of the 3-stage interactive valuation multiples modelSource: UBSChoosing

50、a companyThe interactive is pre-populated with over 1,800 companies taken from UBS Research global coverage of non-financial companies. There are a couple of methods to find a company to analyse.Figure 13: Filter the company list by Region or GICS SectorSource: UBSUsing the dropdown boxes enables th

51、e list of companies to be filtered by region and/or GICS Sector. The filters should reduce the list of companies to a manageable size. The list of companies is sorted alphabetically.To search for a specific company enter a few letters of the ticker or company name in the yellow-highlighted text sear

52、ch box to find all matches. Press ENTER to run the search. If no companies are found try a less specific search text. Searching for specific text resets any Region or Sector filters.In HYPERLINK l _bookmark12 Figure 14 we see the results of searching for matches of the text aa. This retrieves compan

53、ies with aa in their name or ticker symbol.Figure 14: Searching for specific text matchesSource: UBSLoading prior year financials and assumptionsAfter selecting a company from the list, the last actual fiscal year financials are loaded. These are current as of the date of publication of the interact

54、ive but will not update post-publication. These values (in blue) can be overwritten if desired.Figure 15: Last actual fiscal year financialsSource: UBSThe Revenue, EBITDA, EBIT, NOPAT and Net income values (see HYPERLINK l _bookmark13 Figure 15) are used to calculate valuation multiples at the botto

55、m of the interactive screen. These values do not affect the enterprise value generated by the model.The Invested capital (IC) value is a key ingredient in the calculation of EV. This is the starting value that future period ROIC are based on.Several other values are loaded initially, including marke

56、t cap, shares outstanding, and line items in the Equity Bridge which we will address later.Model valuation drivers and scenariosThis tool is scalable framework for performing efficient high-level valuation analysis. As such, the initial assumptions are the same for all companies. The assumptions are

57、 generic placeholders for the user to enter their own assumptions and build custom scenarios.The major drivers of the EV valuation in this 3-stage model are: reinvestment rate, terminal growth rate, ROIC and WACC. They are shown in HYPERLINK l _bookmark14 Figure 16. The yellow- shaded cells with blu

58、e font are intended for users to enter company-specific assumptions. The other numeric cells are unlocked and provide transparency into the calculations and driver dependencies.Figure 16: Model valuation drivers for the 3 stagesSource: UBSNote that higher reinvestment rates reduce free cash flow in

59、that period, but may generate value if ROIC exceeds WACC in subsequent stages.The model allows for different WACC assumptions over time as capital structure and funding conditions may vary in each stage.After making changes to the assumptions, clicking the Save scenario button will save the values i

60、n the yellow-shaded blue-font input cells. Next time that company is selected, these saved values will load by default.Enterprise value decomposition HYPERLINK l _bookmark15 Figure 17 shows how EV is calculated in this 3-stage model. As model drivers are adjusted, it is informative to see how the EV