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You
are working at an investment bank as a financial analyst, and in your role,
your manager has asked you to understand more about potential investment
opportunities in a UAE company. You will select which UAE company to assess.
Once you have done so, you will perform a DCF analysis of that company, so that
your investment bank can better understand its valuation. You will provide a
write-up of your findings to your manager. In your write-up of this company,
you will do the following:
- Clearly identify the company
you are assessing - Perform a DCF analysis of the
company, which should include - Calculating the 2018-2022 FCF
- Forecasting the 2023-2028 FCF
- Calculating the TV and NPV of
the company - Based on your DCF analysis,
determine whether or not this company is a worthwhile investment for your
firm and explain your rationale
IMPORTANT
NOTES:
- Choose a public company traded
in the stock market of the country you are residing in right now. - To assist you in selecting a
company, please refer to the listed companies in the Abu Dhabi Securities
Exchange (list) and the Dubai Financial Market (list). You should select a company that has at least 4
years of available data in Bloomberg (please ensure that you can find the
data before selecting the company). - In your DCF analysis, to arrive
at an appropriate valuation: Estimate FCF for 2022 (assume 2022 as Year 0
and include it in your valuation), project it over the next five years
(2023-2028), and estimate a terminal value if you think the store will
continue indefinitely (estimate a reasonable terminal growth rate). - Calculate your own WACC. Use
CAPM to calculate the cost of capital. Assume a beta based on the
systematic risk by looking up betas of public companies that are in the
same industry and geography (Yahoo Finance shows equity betas which you
will need to adjust by using Hamada’s Equation to account for the public
companies’ debt; this is because you need an asset beta for your store
given the assumption of no debt) or estimate your own beta using market
data. - Be sure you justify the key
assumptions (revenue growth rate, working capital changes, terminal growth
rate etc.). - For your write-up, focus on
stating and justifying your assumptions, discussing each valuation result,
comparing the results across the techniques, and comparing them with
recommendation(s) made by the financial analyst(s) (if available). - Your valuation techniques and
estimation approach could be explained further in an Appendix. - Your models and calculations
should be submitted as a google sheet. The assumptions and given values
should be colored blue and your calculations should be in black. Leave the
formulas and links as is. The grader should be able to follow your
calculations. - You will need to attach your
Bloomberg Lab data download as part of your submission. - The course-related LO’s that
are #valuation (x2) and #bizstrategy (x1) will be graded based on your
answers to the questions above, with each corresponding to a specific LO
as described below. - In addition to this, use and
tag the following GLO’s wherever appropriate: #modeling and #estimation
If
you have any questions about this assignment, contact the Professors
immediately.
Campus
resources you have available to you:
- Bloomberg Finance Labs
Web Sources
you may find useful (you do not have to use them):
- Prof Damadoran’s Website
- Market-risk-premia
- Yahoo Finance
- Global Corporate Tax Rates
- Statistica.com
- Ministry of Economy of UAE
- Ministry of Finance of UAE
- Central Bank of UAE
- Abu Dhabi Securities
Exchange - Dubai Financial Market
- Annual financial reports of the
company of your choice. The company must be a public company. Every public
company must announce its financial statements with transparency. So you
should be able to find these statements on their website under their
investors’ relations page.
Be sure to
follow these guidelines:
-** Do not
put your name anywhere **on the assignment or on shared exhibits (Forum will
track your submission). Your assignment will be graded blindly.
- Be sure you submit a
single PDF on Forum (do NOT submit Zip files). - Assume your audience is
knowledgeable about the
accounting/finance concepts we’ve covered in class and is familiar with
the case facts. Don’t waste words explaining what financial concepts or
terms mean from the course. - Go deep. When formulating a
response, ask why. Then ask why again and
justify your explanation. Back up your explanations with evidence.
Integrate numbers into your arguments. - **Use no more than two
significant digits **for all numbers in the text and exhibits (12%, 3.5%,
or 0.46%, not .12480294). Less is more. Displaying too many digits makes
numbers hard to read and actually obscures its value and intuition. - All exhibits you create
yourself and referenced in your write-up must be included in the write-up
itself and be properly
formatted. You must also include a link to all your exhibits so
that your calculations can be seen and checked (only those exhibits that
appear in the write-up and are explicitly discussed will be assessed).
Place your link at the very beginning of the write-up and be sure to grant
your professor viewing privileges. Follow these guidelines (e.g. avoid including numbers in a calculation
cell but instead, reference inputs/assumptions cells that do contain
numbers; use black text for calculations and blue text for inputs). - Check your spelling and grammar. Poor writing conveys carelessness and
unprofessionalism. - The course-related LO’s that
are #valuation (x2) and #bizfunctions (x1) will be graded based on your
answers to the 3 questions above, with each corresponding to a specific LO
as described below. - In addition to this, use and
tag the following GLO’s wherever appropriate: #modeling and #estimation. - Add a word count at the end of the assignment (exclude exhibits,
footnotes, and the bibliography). - For assignment deadline
extensions please refer to the policies section written at the end of the
course syllabus.
Assignment
Information
Length:
1000
to 1250 words
Weight:
15%
Learning
Outcomes Added
- Valuation:
Calculate the value of a financial asset. - BizStrategy:
Formulate and analyze business strategy.