Certified Company Valuation Modeler Training

Introduction

In real life, the main challenge in valuing different entities is the ability to understand and quantify the various inputs. If the inputs are nonsensical, the valuation output will unquestionably be nonsensical. For this reason, a large section of this course is devoted to understanding and modeling valuation inputs including adjustments to financial statements. This intensive five-days’ workshop offers in-depth and practical analysis of the different valuation techniques that can be used to value different entities. It will also examine the use of real options modeling that are used to value patents, contracts, natural resources and for various other applications. The workshop will focus on the framework that can be used to pick the right model for any task and it will also extensively expose delegates to the modeling of various real life valuation cases. Companies are valued for the purposes of investment, mergers and acquisitions or as part of internal measures of financial control. There are many different approaches to the valuation of companies and it is paramount to know when and how to apply what method. It is also essential to understand that company valuation is not an absolute science but also based on interpretation and judgment. In the broadest possible terms, firms or assets can be valued in one of four ways: asset based valuation approaches, discounted cash flow valuation approaches, relative valuation approaches and option pricing approaches. The concepts and models taught are designed to be of practical benefit to attendees and are immediately usable in the workplace. This highly practical course will lead you quickly from the basics through the more advanced valuation methodologies and modeling techniques. The hundreds of participants who attended this course in different parts of the world indicate that they gained valuable knowledge and experience that will greatly assist them in their careers. Due to the outstanding success of this course, the presenter was asked to develop Valuation II to show more applications. Only the participants who attended Valuation I will be allowed to participate in Valuation II.

Objectives

• Understand all inputs into the various valuation models
• Build your own sensitivity analysis within your models
• Evaluate the outcome of different valuation techniques
• Discover the difference in treatment between valuing companies, properties and patents
• Structure your models according to your specifications and work through the 25 Excel exercises and 5 case studies

Training Methodology

Participants will receive a copy of the comprehensive course notes. The presenter will outline and discuss the topics using PowerPoint displays and videos. The course is designed to have an interactive format, to maximize delegate participation. Questions and answers are encouraged throughout and at the daily roundup sessions. Needs-based case-studies and examples will be introduced and discussed, in problem solving workshop sessions.

Who Should Attend?

All porfessional who are interesed in company valuation process.

Course Outline

REAL ESTATE INVESTMENT: BASIC CONCEPTS

• Two General Classifications of Estates
• Estates Not Yet in Possession (Future Estates)
• Examples of Leasehold Estates
• Interests, Encumbrances, and Easements
• Methods of Title Assurance
• Abstract and Opinion Method
• The Title Insurance Method
• Limitations on Property Rights
• Notes and mortgages
• Seller financing
• Reconstructing a mortgage loan

INTRODUCTION TO VALUATION

• The five myths about valuation
• The principles and practice of time value for money
• Exercise 1: modeling a straight bond valuation
• Benjamin Graham’s safety margin
• Introduction to DCF
• Some useful Excel modeling tips

RISK PARAMETERS AND EXPECTED RETURN

• What is risk and how to measure it?
• Models of default risk and CAPM
• Market risk premium meaning and measurement.
• Risk free rates and market risk premium around the world
• How often to review assumptions
• Estimating risk parameters and cost of financing
• After all, what is beta?
• Exercise 2: modeling regression beta calculation of a listed company
• Exercise 3: modeling bottom up beta calculation of the same company
• Using published betas
• Equity risk and expected returns
• Reviewing the country risk premium of various countries worldwide
• Exercise 4: modeling the cost of equity of a local and a foreign company
• The three ways of calculating cost of debt
• Book value or market value of debt and equity?
• Exercise 5: modeling synthetic rating for a listed and a private company
• Cost of capital modeling
• The explicit and implicit costs of financing. Meaning and importance
• What happens practically when companies don’t meet their cost of capital?
• The practice of changing assumptions in the stable growth period
• Some analysts don’t use CAPM. Practical alternatives?
• What does Warren Buffet use as cost of capital?
• Case study 1: calculating the cost of capital of Marriott Financial Statements adjustment
• The reasons for adjusting financial statements
• Capitalizing operating leases
• The capitalization rate
• Exercise 6: modeling the adjustment to EBIT and adjustment to total debt
• Capitalizing R&D
• Nature of industry and how many years to look back
• Exercise 7: modeling the tax effect of R&D adjustment and final effect on EBIT
• Case study: capitalizing operating leases and R&D at Boeing

FINANCIAL STATEMENTS ADJUSTMENT

• The reasons for adjusting financial statements
• Capitalizing operating leases
• The capitalization rate
• Exercise 6: modeling the adjustment to EBIT and adjustment to total debt
• Capitalizing R&D
• Nature of industry and how many years to look back
• Exercise 7: modeling the tax effect of R&D adjustment and final effect on EBIT
• Case study: capitalizing operating leases and R&D at Boeing

FREE CASH FLOW TO EQUITY (FCFE) VS FREE CASH FLOW TO FIRM (FCFF)

• Meaning, measurement and modeling
• Which one to use? Why?
• Normalizing EBIT, capex and working capital
• What does and doesn’t capex include?
• Why we need the non-cash, non-debt working capital?
• Adjustments required if firms have negative working capital
• Marginal vs. effective tax rate
• Stable debt policy and FCFE
• FCFE and leverage. Is there a free lunch?
• Exercise 8: calculating FCFF of a listed company
• Calculation of terminal value
• Case study 2: modeling the FCFF of Boeing

ESTIMATING GROWTH

• The three ways of estimating growth rates
• Extrapolation and its danger
• High growth period vs. stable growth period
• Length of the high growth period
• Fundamental growth rate
• Effect of ROC and Reinvestment rate on growth rate
• Exercise 9: calculating the fundamental growth rate of a listed company
• High growth rate estimation vs. stable growth rate assumption
• Real vs. nominal growth rates
• The three growth patterns and which to use
• Exercise 10: modeling the three growth patterns

TYING UP LOOSE ENDS

• Effect of management options on valuation
• Exercise 11: valuing management options of a listed company
• Effect of minority interest on valuation
• Exercise 12: applying relative valuation to minority interest
• Valuing operating and non-operating assets
• Effect of contingent claims

PUTTING IT ALL TOGETHER

• Case study 3: full valuation of a cement company covering all the previous topics